2017 U.S. Dist. LEXIS 64402
D. Md.2017Background
- Debtors Henrietta and Cyriacus Okoro filed a civil RESPA-based suit in district court against Wells Fargo concerning mortgage on real property before filing Chapter 7 bankruptcy; that district case was later dismissed for failure to state a claim.
- Debtors filed a Chapter 7 petition (Feb 16, 2016) and listed the district-court claims and the real property as estate assets; the Chapter 7 trustee filed a Report of No Distribution.
- Debtors opened an adversary proceeding in bankruptcy court (Apr 8, 2016) asserting RESPA, fraud, and seeking declaratory relief (including a conclusory request that the mortgage debt be determined dischargeable).
- The bankruptcy court ordered show-cause, then granted Debtors’ motion to abandon the district-court claims (June 28, 2016); the trustee’s report and abandonment left no assets to administer.
- The bankruptcy court dismissed the adversary proceeding for lack of subject-matter jurisdiction (Aug 8, 2016) and denied reconsideration (Oct 18, 2016); Debtors appealed and the district court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the adversary “arises under” the Bankruptcy Code | Okoro: proceeding seeks determination of dischargeability of mortgage debt, so it arises under the Code | Appellees: claims are RESPA/declaratory law claims, not §523 dischargeability actions | Held: No. Complaint does not plead a proper §523 claim; RESPA claims do not arise under the Code |
| Whether bankruptcy court had “related to” jurisdiction at filing and later | Okoro: related jurisdiction existed because outcome could affect estate and lien validity | Appellees: trustee abandoned claims and property; estate fully administered so no continuing effect | Held: At filing there was possible effect, but after trustee’s abandonment and issuance of discharge the estate was fully administered and court properly dismissed the adversary |
| Whether the adversary was a “core” proceeding mandating adjudication | Okoro: proceeding concerns mortgage and bankruptcy-adjacent issues and is core | Appellees: claims neither arise under nor arise in bankruptcy and are only related at best | Held: Not core. Because claims do not arise under or in the Code, they are only related (and were appropriately dismissed after abandonment) |
Key Cases Cited
- Freeport-McMoRan, Inc. v. KN Energy, 498 U.S. 426 (jurisdiction at commencement cannot be divested by later events)
- In re Celotex Corp., 124 F.3d 619 (related-to jurisdiction depends on conceivable effect on estate)
- Cypher Chiropractic Ctr. v. Runksi, 102 F.3d 744 (district court reviews bankruptcy court legal conclusions de novo)
- SEC v. Chenery Corp., 318 U.S. 80 (affirm if result correct even on different ground)
- Helvering v. Gowran, 302 U.S. 238 (same principle as Chenery)
- Cty. Fuel Co. v. Equitable Bank Corp., 832 F.2d 290 (appellate courts may affirm on any ground supported by record)
- In re Kirkland, 600 F.3d 310 (defining arise-under/relate-to jurisdiction in bankruptcy context)
- In re A.H. Robins Co., 86 F.3d 364 (defining ‘‘arising in’’ proceedings)
- Pacor, Inc. v. Higgins, 743 F.2d 984 (test for related-to jurisdiction)
- In re Porges, 44 F.3d 159 (districts should dismiss related proceedings after bankruptcy case termination)