In re: Peter F. Bronson and Sherri L. Bronson
AZ-16-1050-JuFL
| 9th Cir. BAP | Oct 12, 2016Background
- Debtors Peter and Sherri Bronson defaulted on a loan secured by commercial property; creditor Thomas M. Thompson (TMT) credit-bid at a post-petition trustee’s sale and sought a deficiency judgment.
- TMT obtained a 2011 bankruptcy judgment awarding attorney’s fees and a deficiency; the court later vacated the deficiency portion pending a fair-market-value determination.
- Debtors asserted a state-law claim under A.R.S. § 33-814(A) that the property’s fair market value exceeded the debt and thus TMT owed them money after foreclosure.
- The chapter 11 case converted to chapter 7; the chapter 7 trustee formally abandoned Debtors’ asserted state-law claims and declined to prosecute them.
- Debtors moved for summary judgment on fair market value; the bankruptcy court denied it as disputed fact, found the estate fully administered and discharged, and sua sponte dismissed the remaining state-law claim for lack of jurisdiction and closed the adversary.
- The Bankruptcy Appellate Panel affirmed, concluding the bankruptcy court did not abuse its discretion in dismissing the state-law claim and closing the adversary.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether bankruptcy court abused discretion by dismissing Debtors’ state-law claim and closing the adversary | Bronson: The claim under A.R.S. § 33-814(A) entitles them to a fair-market-value determination and possible recovery against TMT; trustee abandoned the claim so Debtors may pursue it | TMT: Estate no longer has an interest; deficiency determination became irrelevant after conversion and trustee abandonment; factual disputes exist on value | Court: No abuse of discretion — dismissal affirmed (jurisdictional and comity grounds; Carraher factors support dismissal) |
| Whether summary judgment on fair market value was appropriate | Bronson: Value exceeded debt; no deficiency | TMT: Value is disputed; factual issues preclude summary judgment | Court: Denied MSJ — factual issues remain |
| Whether the bankruptcy court retained jurisdiction after estate administration and discharge | Bronson: Bankruptcy court previously had core jurisdiction and should decide claim | TMT: With estate fully administered and trustee abandoning claim, bankruptcy court lacks interest to justify jurisdiction | Court: Bankruptcy court may decline jurisdiction; full administration supports dismissal under discretionary factors |
| Whether abstention was proper basis for dismissal | Bronson: N/A | TMT/Bnkrtcy ct: Court suggested abstention to send matter to state court | Court: Ninth Circuit abstention doctrine requires parallel state proceeding, so formal abstention was not available; dismissal affirmed on Carraher factors/comity instead |
Key Cases Cited
- In re Carraher, 971 F.2d 327 (9th Cir. 1992) (bankruptcy court may retain or dismiss related state-law claims; weigh economy, convenience, fairness, comity)
- TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011) (abuse of discretion standard and review outlines)
- United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (standards for abuse of discretion and factual-findings review)
- Marshall v. Stern (In re Marshall), 600 F.3d 1037 (9th Cir. 2010) (bankruptcy courts may enter final orders in core proceedings even if state law affects outcome)
- Helvering v. Gowran, 302 U.S. 238 (U.S. 1937) (appellate courts may affirm on any correct ground supported by the record)
- ASARCO, LLC v. Union Pac. R.R. Co., 765 F.3d 999 (9th Cir. 2014) (appellate affirmation on alternative grounds)
- Lazar v. California (In re Lazar), 237 F.3d 967 (9th Cir. 2001) (parallel-proceeding requirement for abstention)
- Sec. Farms v. Int’l Bhd. of Teamsters, 124 F.3d 999 (9th Cir. 1997) (abstention framework in bankruptcy context)