Decision and Order on Motion to Dismiss
Came on for consideration the motion of defendant to dismiss for failure to state a claim, for lack of personal jurisdiction and for lack of subject matter jurisdiction. Other issues are also raised in the motion. For the reasons set out herein, the court rules that the motion to dismiss for lack of subject matter jurisdiction — to wit, stand *631 ing — must be granted. The court does not need to reach the remaining issues raised in the motion.
Background
The relevant background facts are found in Wells Fargo’s motion and include the following: On May 18, 2010, Michael J. Rhinesmith and Colleen K. Rhinesmith (the “Debtors”) filed for relief under Chapter 7 of the Bankruptcy Code. On November 16, 2010, Randolph N. Osherow, in his capacity as Chapter 7 Trustee for the Bankruptcy Estate of Michael J. Rhines-mith and Colleen K. Rhinesmith and on behalf of all others similarly situated (the “Trustee”), filed this Complaint against WFHM [“Wells Fargo”], seeking damagеs for alleged breaches of the Federal Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. 1692 et seq., and seeking damages, temporary and permanent injunctive relief for alleged breaches of the Texas Debt Collection Act (“TDCA”), Tex. Fin. Code § 892.001 et seq.
On April 11, 2006, the Debtors entered into a Fixed Rate Note (the “Note”) by and between Michael and Colleen Rhines-mith and Wells Fargo Bank, N.A. in the principal amount of $17,000.00. The Note is scheduled to mature on April 11, 2016. On the same date, the Debtors executed a Deed of Trust (the “Deed of Trust”) in favor of Wells Fargo Bank, N.A., wherein the Debtors granted a security interest in real property located at 105 Alambre Drive, Del Rio, Texas 78840. The loan in question was, under Texas law, a home equity loan.
In connection with their Chapter 7 petition, the Debtors executed their statement of intentions, indicating an intent to reaffirm with Wеlls Fargo. Prior to the Debtors’ receiving their discharge, Wells Fargo and the Debtors entered into a reaffirmation agreement affecting the home equity loan, which was signed by the Debtors on July 28, 2010 and by their counsel on August 2, 2010 (“Reaffirmation Agreement”). As set forth on page 6 of the Reaffirmation Agreement, none of the loan’s repayment terms were altered or amended. The Reaffirmation Agreement was filed with the court on August 17, 2010 [Dоcket No. 12], but was denied by the court on August 30, 2010 [Docket No. 14]. The Reaffirmation Agreement was not final. The court’s August 30, 2010 Order expressly authorized Wells Fargo to enforce the Debtors’ in rem obligations. On August 31, 2010, the Debtors received a discharge and the case was closed on September 1, 2010.
Analysis
The issue of the Trustee’s standing must be addressed out the outset. Standing is a species of subject matter jurisdiction, in that, if a party lacks standing, the court lacks subject matter jurisdiction to hear the matter, and it must be dismissed.
See Cadle Co. v. Neubauer,
Wells Fargo maintains that the Trustee lacks standing to bring this suit because the Debtors’ cause of action arose post-petition (based on Wells Fargo’s post-petition conduct in connection with the reaffirmation agreements it sent to debtors) and thus does nоt constitute property of the estate. The Trustee responded by pointing to section 541(a)(7) of the Bankruptcy Code, which provides that property of the estate includes “[a]ny interest in property that the estate acquires after the commencement of the ease.” 11 U.S.C. § 541(a)(7). The Trustee’s argument simply assumes, without any discussion of the issue, that the Debtors’ FDCPA and TDCA claims were acquired by the estate such that they should be considered after-acquired property of the estate under sec
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tion 541(a)(7). However, “[a]fter the commencement of [a chapter 7 bankruptcy] case, the bankruptcy estate has an existence that is completely separate from that of the debtor, and section 541(a)(7) covers only property that the
estate itself
acquires after the commencement of the bankruptcy prоceeding.”
Wade v. Bailey (In re Wade),
The conduct giving rise to the Debtors’ cause of action occurred post-petition. “Unlike pre-petition claims, claims which accrue to the debtor post-petition generally will not adhere to the estate, and remain actionable by the debt- or.”
Stanley v. Comm. Bank, N.A.,
There is an exception to this general rule when “the operative events for a cause of action straddle the petition date.”
In re Patterson,
Other courts take a less restrictive approach to examining whether post-petition causes of action constitute prоperty of the estate. These courts will find a cause of action to be property of the estate if “the events giving rise to the claim are sufficiently rooted in the pre-bankruptcy past.”
Id.
at *5, 2008 Bankr.LEXIS 1778 at *12 (citing cases).
1
This test is no longer ap
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plicable in the Fifth Circuit, after the
en banc
decision in
In re Burgess,
[t]he injury alleged in the [second malpractice action] is that [the debtor] suffered a diminished recovery in the [first malpractice action] as result [sic] of her former attorney’s negligence. Put differently, the misconduct of [the debtor’s] former bankruptcy attorneys reduced the value of her malpractice lawsuit against [the attorney defendant in the first malpractice suit]. While we acknowledge that the conduct giving rise to the malpractice claim occurred post-petition, we find it conceptually impossible to sever the [second malpractice action] from the underlying [prior malpractice action].
Id. The Third Circuit further supported its conclusion by noting thаt, contrary to the cases that had found post-petition causes of action to constitute property of the debtor as opposed to property of the estate, here, only the estate would be affected by any alleged malpractice on the part of the second set of attorneys in connection with the first malpractice case because such malpractice would have reduced the value of the first malpractice case. In other words, the debtor, personally, would not suffer any harm (because the diminution of the value of the first lawsuit would affect only the estate that now owned that cause of action, and not the debtor, who no longer owned that cause of action). Id. at 204. Concluded the Third Circuit, “because the [first malpractice action] belonged to the estate, including the claims that could have been but were not asserted, a malpractice suit [the second malpractice suit] in connection with those omitted claims likewise belongs to the estate and the estate’s creditors.” Id.
Similarly, in
Stanley v. Comm. Bank, N.A.,
[t]he claims against these defendants аrise solely out of their alleged complicity in [the debtor’s husband’s] fraudulent conduct[,] ... [which] acts and omissions occurred well before [the debtor] filed her bankruptcy petition in February of 2006. Thus, claims stemming from such events are clearly ‘rooted in [the debtor’s] pre-bankruptcy past.’
Id.
at *3,
Here, no such argument can be made. All of the conduct at issue arose post-petition, and has no “roots” in pre-bankruptcy cоnduct. Accordingly, the FDCPA and TDCA claims belong to the Debtors and not the bankruptcy estate.
See Witko v. Menotte (In re Witko),
merely because a connection can be drawn between a cause of action and a pre-petition event does not mean that the claim has substantial roots in the pre-bankruptcy past. To hold otherwise, and allow, as the Trustee seeks to do, any connection with the pre-bank-ruptcy past to warrant a claim’s inclusion in the estate simply opens the door too wide. As with any human affair, all events involving a debtor may be traced to an earlier event. In sum, we are all products of our past.
Id. at *5-6, 2008 Bankr.LEXIS 1778 at *16.
In
Wade v. Bailey (In re Bailey),
Were this a chapter 11 case, the argument could be made that the cause of action might be traceable to or arise out of a pre-petition property interest already included in the estate, under section 541(a)(7), or on grоunds that “ ‘[clauses of action arising after the debtor files for bankruptcy generally become part of the estate.’ ”
Correll,
While it is true that the Debtors would have no claim against Wells Fargo “but for” the existence of their bankruptcy case, thаt alone is insufficient to make their claims property of the estate. Furthermore, just as the creditor’s' proof of claim in
Patterson,
which was based entirely on pre-petition services rendered, failed to establish the required connection between the debtors’ post-petition cause of action and the debtors’ pre-bankruptcy past, Wells Fargo’s reaffirmation agreement and subsequent letter, while based on a pre-petition home equity transaction, likewise does not thereby make the cause of action property in which the Debtors had a legal or equitable interest as of the commencement of the case.
See In re Burgess,
As a final note, public policy also supports the conclusion that an individual debtor’s post-petition claim arising from post-petition conduct should not be considered property of the estate in chapter 7 cases. An individual debtor’s ability to obtain a fresh start could be severely impacted by the inclusion of post-petition claims, resulting from personal harm suffered by the debtor post-petition, in property of the estate. This becomes particularly clear in personal injury cases.
See, e.g., In re Doemling,
Conclusion
The court is of course quite sensitive to the potential for abuse whеn creditors try to convince debtors to execute reaffirmation agreements on home equity loans. But the court cannot ignore the most basic rules of subject matter jurisdiction. Indeed, doing so only imperils the possibility of obtaining an effective solution. If there is a basis for an action against this, or any other, creditor engaging in the sort of conduct alleged here, then that action must be initiated and pursued by somеone with standing. That is not the chapter 7 panel Trustee. The motion to dismiss is granted, without prejudice to re-filing by a party with standing.
Notes
. This court does not endorse the continuing facile references in the case law to the "sufficiently rooted in the bankruptcy past” lan
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guage from
Segal v. Rochelle,
The court [in Burgess ] held that, with the enactment of an explicit statutory definition for "property of the estate" in the Bankruptcy Reform Act of 1978, “Segal’s 'sufficiently rooted’ test did not survive the enactment of the Bankruptcy Code." Burgess v. Sikes (In re Burgess),438 F.3d 493 , 498 (5th Cir.2006) (en banc). This conclusion is consistent with the actual holding in Barow-sky, though it more explicitly (and correctly) rejects the notion that “sufficiently rooted in thе pre-bankruptcy past” describes the scope of the estate's interest in property.... The language was employed by the Supreme Court in Segal to determine whether the debtor’s "fresh start” would be impaired were the property in question incorporated into the estate. This was a live issue under the Act. Because any alienable or leviable property could become property of the estate, a debtor’s future wages in perpetuity could conceivably be swept up— because many states in 1966 permitted full wage garnishment, a species of alienation or levy. By limiting the reach of property to that "sufficiently rooted in the pre-bank-ruptcy past," the debtor’s future wages (which are, by definition, not "rooted in the pre-bankruptcy past” of the debtor) would thereby be insulated from estate administratiоn. The Bankruptcy Code has no need for this limitation. Instead, the statute itself de facto excludes certain assets from inclusion in the estate, first by changing the reach of estate property from “any alienable or leviable property” (the scope under the Act, according to Segal) to "all legal or equitable interests in property as of the commencement of the case” (the scope under the Code). Secondly, section 541 itself contains specific statutoiy exclusions from the reach of section 541(a)(1), including the "except” clause in section 541(a)(6) for post-petition earnings, and the various exclusions in section 541(b). This is what the Fifth Circuit meant when it ruled that Se-gal's "sufficiently rooted” test did not survive the enactment of the Code.
In re Donnell,