Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-15-00014/USCOURTS-ca10-15-00014-0/pdf.json

Parties Involved:
Lisa Kay Brumfiel
Appellant
David E. Lewis
Appellee
U.S. Bank, N.A.
Appellee

Document Text:

FILED

U.S. Bankruptcy Appellate Panel

of the Tenth Circuit

October 8, 2015

Blaine F. Bates

Clerk NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE TENTH CIRCUIT

IN RE LISA KAY BRUMFIEL, aka

Sarah Lisa Brumfiel,

Debtor.

BAP No. CO-15-014

LISA KAY BRUMFIEL,

Appellant,

Bankr. No. 11-39881

Chapter 7

v. OPINION*

DAVID E. LEWIS, Chapter 7 Trustee,

and U.S. BANK, N.A., as Successor

Trustee to Bank of America, N.A., as

Successor Trustee to LaSalle Bank,

N.A., as Trustee for the Holders of the

Merrill Lynch First Franklin Mortgage

Loan Trust, Mortgage Loan

Asset-Backed Certificates, Series

2007-FF1, and its predecessors,

successors and assigns,

Appellees.

Before KARLIN, Chief Judge, CORNISH and MICHAEL, Bankruptcy Judges.

KARLIN, Chief Bankruptcy Judge.

The debtor appeals the bankruptcy court’s order approving a settlement

agreement in the Chapter 7 case she reopened about two years after receiving her

discharge. She challenges the trustee’s compromise of her alleged claims against

the creditor that foreclosed the note and deed of trust on her residence. Having

* This unpublished opinion may be cited for its persuasive value, but is not

precedential, except under the doctrines of law of the case, claim preclusion, and

issue preclusion. 10th Cir. BAP L.R. 8026-6.

BAP Appeal No. 15-14 Docket No. 52 Filed: 10/08/2015 Page: 1 of 16
reviewed the record and applicable law, we affirm the bankruptcy court’s order

approving the settlement agreement. 

I. BACKGROUND1

In 2006, debtor Lisa Kay Brumfiel (“Debtor”) executed a note and deed of

trust as security for a loan to purchase a residence in Aurora, Colorado

(“Property”). Although the original lender was First Franklin, the note and deed

of trust were subsequently transferred to the current holder, U.S. Bank, N.A.

(“Creditor”).2

 Debtor defaulted on the note in 2010, but claims she was not

required to pay it because of her allegation that the note and deed of trust were

improperly assigned from the original lender to Creditor. As a result of her

default, Creditor began a Colorado non-judicial foreclosure proceeding3

 against

the Property in October 2011. 

Debtor filed her petition for Chapter 7 bankruptcy relief in December 2011. 

David E. Lewis was appointed Chapter 7 trustee (“Trustee”). After Trustee’s

administration of the no-asset case, Debtor received a discharge and her case was

closed in May 2012. Creditor then continued its non-judicial foreclosure

proceeding against the Property. 

In October 2012, Debtor filed a wrongful foreclosure action in federal

district court against Creditor,4

 asserting among other things, civil rights

deprivations under 42 U.S.C. §§ 1983, 1985, and 1988. Debtor claimed that

1 Unless otherwise indicated, this factual description is taken from the

bankruptcy court’s Order on Motion to Approve Settlement (“Order Approving

Settlement”), in Appellant’s App. at 119. This order may be found at In re

Brumfiel, No. 11-39881, 2015 WL 1339837 (Bankr. D. Colo. Mar. 20, 2015).

2 Creditor holds the note and deed of trust as trustee of a Merrill Lynch

mortgage loan trust. 

3 Colo. R. Civ. P. 120.

4 The assignment of the note and deed of trust was accomplished through

Mortgage Electronic Registrations Systems (a division of MERSCorp.)

(“MERS”), and thus Debtor also named MERS as a defendant in the suit.

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BAP Appeal No. 15-14 Docket No. 52 Filed: 10/08/2015 Page: 2 of 16
Colorado’s non-judicial foreclosure proceeding violated her constitutional right of 

due process, and challenged a Colorado statute5

 that allowed the holder of a debt

to seek foreclosure without producing the original evidence of debt or original

deed of trust.6

 When the federal district court temporarily enjoined execution in

the non-judicial foreclosure proceeding, Creditor voluntarily elected to instead

file a judicial foreclosure action in Colorado state court in May 2013, and the

federal district court granted Debtor’s then-unopposed motion for preliminary

injunction.

In October 2013, the federal district court then dismissed Debtor’s

remaining claims against Creditor, finding Debtor was not a party in interest with

the right to pursue them. Instead, the federal district court determined that

because Debtor’s claims against Creditor accrued prepetition and she had failed to

schedule those claims in her bankruptcy filings, they still belonged to the

bankruptcy estate.7

 As a result, the Trustee of Debtor’s estate was the only party

with standing to pursue them.8

 Debtor’s motion to reconsider that dismissal was

denied, and she then appealed the dismissal to the United States Court of Appeals

for the Tenth Circuit. 

Debtor also pursued Creditor and its attorneys on the same theories by

filing counterclaims in the state court judicial foreclosure action. But the state

court dismissed Debtor’s claims against Creditor in January 2014 for the same

5 Colo. Rev. Stat. Ann. § 38-38-101(1)(b)(II) (West 2015).

6 See Brumfiel v. U.S. Bank, No. 12-02716, 2013 WL 5495543, at *1 (D.

Colo. Oct. 2, 2013), aff’d, Brumfiel v. U.S. Bank, No. 14-1421, 2015 WL 4496197

(10th Cir. July 24, 2015) (summarizing Debtor’s federal district court complaint). 

Debtor’s other claims against Creditor were for fraud, common law conspiracy,

and intentional and negligent infliction of emotional distress.

7 Id. at *4-5.

8 Id. at *5.

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BAP Appeal No. 15-14 Docket No. 52 Filed: 10/08/2015 Page: 3 of 16
reasons—she was not the real party in interest.9

 The state court also granted

Creditor’s motion for summary judgment, which sought to foreclose the deed of

trust, finding that Debtor was in default and that Creditor was the holder of the

original promissory note and the deed of trust,10 and concluding Debtor’s

numerous defenses were unavailing.11 Debtor appealed to the Colorado Court of

Appeals.

While Debtor’s appeals to the Tenth Circuit and Colorado Court of Appeals

were pending, she reopened her bankruptcy case, and Trustee was reappointed. 

Trustee then filed a notice pursuant to Bankruptcy Rule 6007(a) stating his intent

to abandon:

any claim for avoidance, recovery, fraud, or other basis, asserted by

the debtor against purported lienholders, or their successors, assigns

or affiliates claiming an interest in the real property owned by the

debtor and claimed as her homestead, whether currently asserted or

asserted as some future date.12

 

Creditor filed an objection to the Trustee’s notice of intent to abandon these

claims, contending “the Claims may only have value and benefit to the estate

resulting in potential proceeds available for distribution to the estate’s

9 Additionally, the state court dismissed Debtor’s affirmative claims for

failure to state a claim and failure to bring the claims within the applicable statute

of limitations. 

10 U.S. Bank v. Brumfiel, No. 13CV825 (Dist. Ct., Arapahoe County, Colo.

January 14, 2014), in Appellee U.S. Bank’s App. of Doc. Subject to Judicial

Notice Under Fed. R. Evid. 201(b) at 17, BAP. ECF No. 32 (adopting the

reasoning of the Colorado federal district court decision).

11 The state court rejected Debtor’s defenses, concluding that 1) Creditor was

not required to prove it was a holder in due course, U.S. Bank v. Brumfiel, No.

14CA0464 (Colo. App. May 21, 2015) at 15, in Appellee U.S. Bank’s App. of

Doc. Subject to Judicial Notice Under Fed. R. Evid. 201(b) at 53, BAP. ECF No.

32; 2) Creditor had standing to foreclose because it was the holder of a negotiable

instrument under which Debtor had defaulted, id. at 16-17; 3) amendments made

to the Colorado foreclosure statutes in 2006 that Debtor claimed were

unconstitutional were not applicable, id. at 17-18; and 4) Colorado’s Civil Access

Pilot Project rules were applicable, and even if they were not, Debtor did not

demonstrate she was prejudiced by them, id. at 19-21.

12 Order Approving Settlement at 3, in Appellant’s App. at 121.

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BAP Appeal No. 15-14 Docket No. 52 Filed: 10/08/2015 Page: 4 of 16
creditors if [Creditor] and Trustee reach a compromise on those Claims.”13

In August 2014, Trustee and Creditor reached a proposed settlement

agreement (“Settlement Agreement”); it called for Creditor to pay Trustee

$10,000 (the alleged nuisance value) to acquire any claims the estate may have

against Creditor. The Settlement Agreement also provided that Creditor would be

permitted to file a general unsecured claim in Debtor’s case for any deficiency

that may exist following foreclosure. Trustee filed a motion to approve the

Settlement Agreement; only Debtor and Debtor’s father (who is a creditor of the

bankruptcy estate) objected.14

The bankruptcy court conducted an evidentiary hearing on that motion in

January 2015, which included testimony from both Trustee and Debtor. The

bankruptcy court concluded that the Settlement Agreement was in the best

interests of the creditors as a whole, and granted the Trustee’s motion (“Order

Approving Settlement”). Debtor timely filed a motion to alter or amend that

order. She argued the bankruptcy court lacked jurisdiction because of the

pendency of her appeals in both the Tenth Circuit and the state appellate court.15

The bankruptcy court concluded it had jurisdiction over the Property as it

belonged to the bankruptcy estate, and denied Debtor’s motion to alter or

amend.16

13 Motion to Approve Settlement Agreement at 5, in Appellee’s App. at 32.

14 Around the same time, the bankruptcy court entered an order concluding

there was no automatic stay in place with respect to the Property. Order on

Motion for Relief from Stay, in Appellee’s App. at 53. As a result, Creditor

pursued foreclosure and purchased the Property at a foreclosure sale. The

bankruptcy court’s order indicates Creditor then evicted Debtor. Order Approving

Settlement at 4, in Appellant’s App. at 122. 

15 Debtor’s Motion to Alter and Amend the Court’s Order Approving the

Settlement Agreement, in Appellant’s App. at 170.

16 Order on Motion to Alter and Amend, in Appellee’s App. at 273.

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Debtor timely appealed that decision, and also filed a motion to stay the

Order Approving Settlement pending appeal (which the bankruptcy court denied). 

Subsequent to Debtor’s appeal of the bankruptcy court’s Order Approving

Settlement to this Court, both the Tenth Circuit and the Colorado Court of

Appeals issued unpublished decisions affirming the federal district court and state

court dismissals of Debtor’s claims against Creditor.17 Debtor thus had four

opportunities to persuade courts that her claims against Creditor accrued

postpetition, and failed. As a result, it is clear that the claims against Creditor that

are the subject of the Settlement Agreement belonged to the bankruptcy estate.

II. APPELLATE JURISDICTION

This Court has jurisdiction to hear timely filed appeals from “final

judgments, orders, and decrees” of bankruptcy courts within the Tenth Circuit,

unless one of the parties elects to have the district court hear the appeal.18

Neither party elected to have this appeal heard by the United States District Court

for the District of Colorado. The parties have therefore consented to appellate

review by this Court.

A decision is considered final “if it ‘ends the litigation on the merits and

leaves nothing for the court to do but execute the judgment.’”19 Here, the

bankruptcy court’s Order Approving Settlement is final for purposes of review.20

17 Brumfiel v. U.S. Bank, No. 14-1421, 2015 WL 4496197 (10th Cir. July 24,

2015); U.S. Bank v. Brumfiel, No. 14CA0464 (Colo. App. May 21, 2015), in

Appellee U.S. Bank’s App. of Doc. Subject to Judicial Notice Under Fed. R.

Evid. 201(b) at 37, BAP. ECF No. 32.. 

18 28 U.S.C. § 158(a)(1), (b)(1), and (c)(1); Fed. R. Bankr. P. 8005; 10th Cir.

BAP L.R. 8005-1. 

19 Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712 (1996) (quoting Catlin

v. United States, 324 U.S. 229, 233 (1945)).

20 See In re The Bennett Funding Group, Inc., 439 F.3d 155, 160 (2d Cir.

2006) (a bankruptcy court order approving a settlement that brings litigation

between the parties to an end is a final order). 

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BAP Appeal No. 15-14 Docket No. 52 Filed: 10/08/2015 Page: 6 of 16
III. STANDARD OF REVIEW

For purposes of standard of review, decisions by trial courts are

traditionally divided into three categories, denominated: 1) questions of law,

which are reviewable de novo; 2) questions of fact, which are reviewable for clear

error; and, 3) matters of discretion, which are reviewable for abuse of discretion.21

On appeal, Debtor takes issue with the bankruptcy court’s exercise of jurisdiction

for a number of reasons. She alleges the claims against Creditor are not property

of the estate, that the pending appeals in other courts prevent the bankruptcy court

from acting, and that the bankruptcy court should have abstained. These are all

legal issues that are subject to de novo review.22 De novo review requires an

independent determination of the issues, giving no special weight to the

bankruptcy court’s decision.23 To the extent Debtor disputes the propriety of the

bankruptcy court’s decision to approve the Settlement Agreement, we review such

decision for abuse of discretion.24 “Under the abuse of discretion standard: ‘a

trial court’s decision will not be disturbed unless the appellate court has a definite

21 Pierce v. Underwood, 487 U.S. 552, 558 (1988); Fowler Bros. v. Young (In

re Young), 91 F.3d 1367, 1370 (10th Cir. 1996).

22 See In re Wise, 346 F.3d 1239, 1241 (10th Cir. 2003) (whether an asset is

property of the estate is a legal question subject to de novo review); Henry v.

Office of Thrift Supervision, 43 F.3d 507, 511 (10th Cir. 1994) (determination of a

court’s subject matter jurisdiction is a question of law that we review de novo);

Telluride Asset Resolution, LLC v. Telluride Glob. Dev., LLC (In re Telluride

Income Growth LP), 364 B.R. 390, 398 (10th Cir. BAP 2007) (decisions

regarding abstention pursuant to 28 U.S.C. § 1334(c)(2) are reviewed de novo)

(citing Personette v. Kennedy (In re Midgard Corp.), 204 B.R. 764, 770 (10th Cir.

BAP 1997)).

23 Salve Regina Coll. v. Russell, 499 U.S. 225, 238 (1991).

24 See Reiss v. Hagmann, 881 F.2d 890, 891-2 (10th Cir. 1989) (a bankruptcy

court’s approval of a settlement “may be disturbed only when it achieves an

unjust result amounting to a clear abuse of discretion.”); In re Kopexa Realty

Venture Co., 213 B.R. 1020, 1022 (10th Cir. BAP 1997) (approval of settlement is 

reversible only when it amounts to clear abuse of discretion). See also Fed. R.

Bankr. P. 9019(a)(“On motion by the trustee and after notice and a hearing, the

court may approve a compromise or settlement.”).

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BAP Appeal No. 15-14 Docket No. 52 Filed: 10/08/2015 Page: 7 of 16
and firm conviction that the lower court made a clear error of judgment or

exceeded the bounds of permissible choice in the circumstances.’”25

IV. ANALYSIS

A. Jurisdiction of the Bankruptcy Court

1. Claims Against Creditor Are Property of the Bankruptcy Estate

On appeal, Debtor argues that her wrongful foreclosure claims against

Creditor are not property of the bankruptcy estate, and therefore the bankruptcy

court was without jurisdiction to approve the Settlement Agreement. Debtor’s

argument has no merit.

Section 541(a) of the Bankruptcy Code includes in a bankruptcy estate all

types of property, legal and equitable, tangible or intangible, and is interpreted

very broadly.26 The Tenth Circuit has held that “[e]very conceivable interest of

the debtor, future, nonpossessory, contingent, speculative, and derivative is within

the reach of 11 U.S.C. § 541.”27 Legal claims and causes of action, pending or

potential, that a debtor may possess as of the petition date are clearly within the

scope of § 541.28 When Debtor filed her Chapter 7 petition, she was obligated

under § 521 to disclose all of her assets, including contingent and unliquidated

claims.29 This obligation included disclosure of all legal claims and causes of

25 Moothart v. Bell, 21 F.3d 1499, 1504 (10th Cir. 1994) (quoting McEwen v.

City of Norman, 926 F.2d 1539, 1553-54 (10th Cir. 1991)).

26 11 U.S.C. § 541(a). Unless otherwise indicated, all future statutory

references in text are to the Bankruptcy Code, Title 11 of the United States Code. 

27 In re Dittmar, 618 F.3d 1199, 1207 (10th Cir. 2010) (quoting In re Yonikus, 996 F.2d 866, 869 (7th Cir. 1993)).

28 See, e.g., Sender v. Buchanan (In re Hedged-Invs. Assocs.), 84 F.3d 1281,

1285 (10th Cir. 1996) (causes of action belonging to a debtor fall within § 541).

29 Section 521(a)(1) imposes a duty upon each debtor to file a schedule of all

assets and liabilities.

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BAP Appeal No. 15-14 Docket No. 52 Filed: 10/08/2015 Page: 8 of 16
action, pending or potential, that she may have had against Creditor as of the

petition date.30 Debtor did not comply with this duty.

Debtor disclosed Creditor’s pending non-judicial foreclosure proceeding

against the Property in response to Question 4 on the Statement of Financial

Affairs.31 However, she did not disclose the existence of any claims or potential

claims she might have then had against Creditor arising out of the alleged

improper assignment of the note and deed of trust, Creditor’s attempts to collect

payments under that note, or Creditor’s institution of the non-judicial foreclosure

proceeding—all of which occurred prior to her bankruptcy filing. 

When a bankruptcy case is closed, § 554(c) provides that property

scheduled under § 521(a)(1), but not administered, is abandoned to the debtor. 

But because Debtor failed to disclose her alleged claims against Creditor in her

bankruptcy filings, they were not abandoned to Debtor when her case was closed.

Instead, the claims remained property of the estate pursuant to § 554(d),32 and

upon reopening of the case and reappointment of Trustee, Trustee became the

30 Eastman v. Union Pac. R.R. Co., 493 F.3d 1151, 1159 (10th Cir. 2007)

(“The bankruptcy code imposes a duty upon a debtor to disclose all assets,

including contingent and unliquidated claims. That duty encompasses disclosure

of all legal claims and causes of action, pending or potential, which a debtor

might have.” (internal citations omitted)).

31 Order Approving Settlement at 2, in Appellant’s App. at 120.

32 See U.S. ex rel. Spicer v. Westbrook, 751 F.3d 354, 364 n.13 (5th Cir.

2014) (noting that “a trustee does not abandon a claim that the debtor has failed to

disclose”); Tyler v. DH Capital Mgmt., Inc. 736 F.3d 455, 465 (6th Cir. 2013)

(“Property not administered at the closing of a bankruptcy case is ordinarily

considered abandoned. However, if the property was never scheduled, it remains

property of the estate.”(internal citations omitted)); Parker v. Wendy’s Int’l, Inc., 365 F.3d 1268, 1272 (11th Cir. 2004) (“Once an asset becomes part of the

bankruptcy estate, all rights held by the debtor in the asset are extinguished unless

the asset is abandoned back to the debtor pursuant to § 554 of the Bankruptcy

Code. At the close of the bankruptcy case, property of the estate that is not

abandoned under § 554 and that is not administered in the bankruptcy proceedings

remains the property of the estate. Failure to list an interest on a bankruptcy

schedule leaves that interest in the bankruptcy estate.” (internal citations

omitted)).

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proper representative of the estate with the capacity to sue and be sued on its

behalf pursuant to § 323.33 When the federal district court and the Colorado state

court considered Debtor’s claims against Creditor, they both agreed that the

claims against Creditor belonged to the bankruptcy estate.34 As a result, they

refused to assume jurisdiction and dismissed the claims Debtor brought against

Creditor because she was not the real party in interest. Both those decisions have

been recently affirmed, by the Tenth Circuit and the Colorado Court of Appeals,

respectively, and both agree that these claims belonged to the bankruptcy estate

when they denied her appeals.35

Debtor persists in arguing here that the claims against Creditor were not

property interests she was required to disclose on her schedules or Statement of

Financial Affairs, claiming they did not arise prior to the filing of her Chapter 7

petition.36 Specifically, she argues that because no order authorizing the sale of

the Property had been issued in the foreclosure proceeding prior to the date she

filed her bankruptcy petition—and thus she was not yet harmed by those acts, the

claims must have arisen post-petition. But the record is clear that two months

33 Mauerhan v. Wagner Corp., 649 F.3d 1180, 1184 n.3 (10th Cir. 2011)

(citing § 323(b) for the proposition that the trustee of a bankruptcy estate “has the

sole capacity to sue and be sued over assets of the estate”).

34 Brumfiel v. U.S. Bank, No. 12-02716, 2013 WL 5495543, at *5 (D. Colo.

Oct. 2, 2013) (because Debtor’s claims against Creditor accrued prior to her

bankruptcy and she did not disclose them, Trustee was real party in interest and

Debtor lacked standing); U.S. Bank v. Brumfiel, No. 13CV825, at 6 (Dist. Ct.,

Arapahoe County, Colo. January 14, 2014), in Appellee U.S. Bank’s App. of Doc.

Subject to Judicial Notice Under Fed. R. Evid. 201(b) at 22, BAP. ECF No. 32

(adopting the reasoning of the Colorado federal district court decision).

35 Brumfiel v. U.S. Bank, No. 14-1421, 2015 WL 4496197 at *4-5 (10th Cir.

July 24, 2015) (district court properly considered claims to be part of bankruptcy

estate so Debtor was not real party in interest); U.S. Bank v. Brumfiel, No.

14CA0464 (Colo. App. May 21, 2015) at 11, in Appellee U.S. Bank’s App. of

Doc. Subject to Judicial Notice Under Fed. R. Evid. 201(b) at 49, at 11, BAP.

ECF No. 32 (claims against Creditor remained part of bankruptcy estate so only

Trustee, as the real party in interest, had standing to assert them). 

36 Appellant’s Reply Br. at 16.

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prior to her bankruptcy, Creditor had filed the foreclosure proceedings that

Debtor claims were wrongful due to the purported improper assignment of the

note and deed of trust. Further, Debtor’s argument that these claims accrued postpetition has already been rejected by the federal district court, the Colorado state

court, the Tenth Circuit Court of Appeals and the Colorado Court of Appeals. 

Debtor’s argument that the claims against Creditor were not property of the

bankruptcy estate and, therefore, that the bankruptcy court had no jurisdiction to

approve the Settlement Agreement is unfounded. 

2. Pendency of Appeals in Other Courts

Debtor next argues the Order Approving Settlement is void ab initio and of

no force and effect because the bankruptcy court “wrongly assumed jurisdiction

during the pendency of [appeals] of the real party in interest issue first filed in the

federal and state courts.”37 Debtor is again incorrect.38 

After the bankruptcy court entered its Order Approving Settlement, Debtor

filed a motion to alter or amend the order. In that motion, Debtor argued, as she

does now on appeal to this Court, that her then pending appeals before the Tenth

Circuit and the Colorado Court of Appeals prevented the bankruptcy court from

exercising jurisdiction. While it is true that filing a notice of appeal has 

jurisdictional consequences, conferring jurisdiction on the appellate court and

divesting the trial court of control over those aspects of the case involved in the

appeal,39 the appeals pending before the other courts were not appeals of an order

37 Appellant’s Opening Br. at 8.

38 As support for this argument, Debtor invokes the first to file rule, the rule

against claim splitting, and judicial estoppel. Appellant’s Opening Br. at 8-10. 

But as Creditor points out, none of these legal principles are applicable here. 

Appellee’s Response Brief at 15-17. Therefore, we feel it unnecessary to

elaborate on them further.

39 See Griggs v. Provident Consumer Disc. Co., 459 U.S. 56, 58-61 (1982)

(summarizing the historical development of this legal cannon).

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BAP Appeal No. 15-14 Docket No. 52 Filed: 10/08/2015 Page: 11 of 16
entered in Debtor’s bankruptcy case. Moreover, by statute, the bankruptcy court

has “exclusive jurisdiction of all the property, wherever located, of the debtor as

of the commencement of [the] case, and of property of the estate.”40 Once Debtor

filed her Chapter 7 petition, she could not divest the bankruptcy court of

jurisdiction over property of the bankruptcy estate simply by filing claims against

Creditor in other courts.

Additionally, subsequent to Debtor’s appeal to this Court of the bankruptcy

court’s Order Approving Settlement Agreement, both the appeal pending before

the Colorado Court of Appeals and the appeal pending before the Tenth Circuit

were decided. The Colorado Court of Appeals issued an unpublished opinion on

May 21, 2015, affirming the state trial court’s dismissal of Debtor’s claims

against Creditor because she was not the real party in interest.41 The Tenth

Circuit entered an unpublished order and judgment on July 24, 2015, affirming

the federal district court’s dismissal of Debtor’s complaint against Creditor, again

because she was not the real party in interest and therefore lacked prudential

standing.42

3. Abstention

Debtor also argues the bankruptcy court should have abstained from

hearing Trustee’s motion to approve the settlement reached with Creditor based

40 28 U.S.C. § 1334(e)(1).

41 U.S. Bank v. Brumfiel, No. 14CA0464 (Colo. App. May 21, 2015), in

Appellee U.S. Bank’s App. of Doc. Subject to Judicial Notice Under Fed. R.

Evid. 201(b) at 37, BAP. ECF No. 32. Debtor filed a petition for rehearing,

which the Colorado Court of Appeals denied on July 16, 2015. Debtor then filed

a petition for writ of certiorari with the Colorado Supreme Court. It remains

pending. 

42 Brumfiel v. U.S. Bank, No. 14-1421, 2015 WL 4496197 (10th Cir. July 24,

2015). Debtor filed a petition for rehearing, which the Tenth Circuit denied and

its mandate issued on August 21, 2015.

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on either the Younger abstention doctrine,43 or the mandatory abstention provision

of 28 U.S.C. § 1334. Neither of these abstention principles is applicable here.

Generally speaking, the Younger abstention doctrine holds that in absence

of unusual circumstances, a federal court cannot interfere with a state criminal

prosecution.44 The doctrine has been narrowly extended to other exceptional

circumstances such as “civil enforcement proceedings, and civil proceedings

involving certain orders that are uniquely in furtherance of the state courts’

ability to perform their judicial functions.”45 But absent such exceptional

circumstances, the pendency of a state court action is no bar to federal court

proceedings regarding the same matter.46 This case presents no such exceptional

circumstances and the Younger abstention doctrine simply does not apply. 

Debtor’s mandatory abstention argument also misses the mark. The

mandatory abstention provision of 28 U.S.C. § 1334(c)(2) requires a federal court

to abstain from hearing a case based upon a state-law claim related to a title 11

bankruptcy case but not arising under title 11, if certain requirements are met.47

One of these requirements is that a party make a timely motion seeking

43 Younger v. Harris, 401 U.S. 37 (1971). 

44 17B Charles Allen Wright & Arthur R. Miller, Federal Practice and

Procedure § 4252 (3d ed. 2015).

45 Sprint Commc’ns, Inc. v. Jacobs, ___ U.S. ___, 134 S.Ct. 584, 588 (2013)

(internal quotation marks and citation omitted).

46 Id.

47 28 U.S.C. § 1334(c)(2) provides as follows:

Upon timely motion of a party in a proceeding based upon a State

law claim or State law cause of action, related to a case under title 11

but not arising under title 11 or arising in a case under title 11, with

respect to which an action could not have been commenced in a court

of the United States absent jurisdiction under this section, the district

court shall abstain from hearing such proceeding if an action is

commenced, and can be timely adjudicated, in a State forum of

appropriate jurisdiction.

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abstention. In other words, mandatory abstention is not jurisdictional, and it can

be waived by a party who does not make a timely motion.48 Assuming for the

sake of argument that the proceeding appealed here falls under the bankruptcy

court’s “related to” jurisdiction because it involves causes of action owned by the

Debtor that became property of the estate pursuant to § 541,49 Debtor neglected to

file any motion with the bankruptcy court seeking abstention, much less a timely

one. Debtor has waived abstention and cannot now raise it on appeal.

Additionally, as Creditor points out, it was Debtor who invoked the bankruptcy

court’s jurisdiction by reopening her Chapter 7 case hoping to require the alleged

causes of action against Creditor to be abandoned to her.50 Debtor will not be

permitted to invoke the bankruptcy court’s jurisdiction for her benefit and then

argue that the same court has no jurisdiction when Creditor agrees to purchase

those causes of action from the estate. Debtor’s abstention theories are not

persuasive. 

B. Approval of Settlement Agreement

The bankruptcy court may approve a settlement agreement if it is fair and

equitable, and in the best interests of the estate.51 The settlement agreement need

not be the “best result obtainable.”52 The bankruptcy court’s charge is not to

second guess a trustee, but instead to ensure the trustee exercised sound business

judgment in reaching the compromise.53 

48 Personette v. Kennedy (In re Midgard Corp.), 204 B.R. 764, 776 (10th Cir.

BAP 1997).

49 Celotex Corp. v. Edwards, 514 U.S. 300, 308 n.5 (1995).

50 Appellee’s Response Br. at 21.

51 In re Kaiser Steel Corp., 105 B.R. 971, 976 (D. Colo. 1989).

52 Ritchie Capital Mgmt., L.L.C. v. Kelley, 785 F.3d 273, 278 (8th Cir. 2015).

53 United States v. Sterling Consulting Corp. (In re Indian Motocycle Co.),

(continued...)

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In the Tenth Circuit, the standard for determining whether a settlement in a

bankruptcy case should be approved is a four part test articulated by this Court in

In re Kopexa Realty Venture Co.54 Pursuant to Kopexa Realty, Trustee has the

burden of proving the proposed settlement should be approved based on these

factors: 1) the probable success of the underlying litigation on the merits; 2) the

possible difficulty in collection of a judgment; 3) the complexity and expense of

the litigation; and 4) the interests of creditors in deference to their reasonable

views.55 Here, the bankruptcy court applied those factors and concluded:

Three of the factors favor the Trustee’s settlement of the Debtor’s

claims. The claims have a low probability of success, asserting the

claims would be complex and expensive, and the Settlement Agreement

meets the best interests of creditors as a whole. One factor, the possible

difficulty in collection of any judgment, is either inapplicable or weighs

against approval of the Settlement Agreement, but that one factor has

little weight, in the Court’s opinion. Considering all the evidence

before the Court, the Court finds that the Settlement Agreement

sufficiently satisfies the Kopexa Realty factors.56

Settlements are looked upon with favor in bankruptcy proceedings.57 A

bankruptcy court’s order approving a negotiated settlement is entitled to

deferential review, and this Court can only reverse the Order Approving

Settlement if there has been an abuse of discretion.58 Debtor points to no specific

53 (...continued)

289 B.R. 269, 282-83 (1st Cir. BAP 2003).

54 213 B.R. 1020, 1023 (10th Cir. BAP 1997). See also Protective Comm. for

Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424-25

(1968). 

55 Kopexa Realty, 213 B.R. at 1022.

56 Order Approving Settlement at 8, in Appellant’s App. at 126.

57 See Anderson, 390 U.S. at 424; In re Jevic Holding Corp., 787 F.3d 173,

184 (3d Cir. 2015); Korngold v. Loyd (In re S. Med. Arts Co.), 343 B.R. 250, 255

(10th Cir. BAP 2006).

58 City Sanitation, LLC v. Allied Waste Servs. of Mass., LLC (In re Am.

Cartage, Inc.), 656 F.3d 82, 91 (1st Cir. 2011).

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finding or conclusion in the bankruptcy court’s analysis that constitutes error, and

we see none. In fact, the record firmly supports its findings. 

Trustee testified that in his opinion Debtor’s claims had no merit and

Creditor’s proposed payment of $10,000 represented the nuisance value of the

claims. This seems likely true, given that the Colorado state trial court has

already determined that Creditor had standing to pursue foreclosure and was

entitled and allowed to foreclose on the Property, and the Colorado Court of

Appeals has affirmed that decision. Further, the bankruptcy court found that the

estate had no resources with which to pursue the claims, regardless of their merit. 

Therefore, we conclude the bankruptcy court did not abuse its discretion in

approving the Settlement Agreement.

V. CONCLUSION

Contrary to Debtor’s contentions, there were no impediments to the

bankruptcy court’s exercise of jurisdiction over the proposed compromise under

which Trustee sold Debtor’s causes of action against Creditor to Creditor for their

alleged nuisance value of $10,000. Further, the bankruptcy court did not abuse its

discretion in approving the Trustee’s Settlement Agreement. Therefore, the

bankruptcy court’s Order Approving Settlement is hereby AFFIRMED.59

59 Creditor filed two motions for this Court to take judicial notice of various

state court and federal court orders and pleadings. Judicial notice of public

records is appropriate, and Creditor’s requests for judicial notice are GRANTED. 

See State Farm Mut. Auto Ins. Co. v. Boellstorff, 540 F.3d 1223, 1226 n.7 (10th

Cir. 2008) (permitting judicial notice of “documents from the public record”). To

the extent that Debtor’s response to Creditor’s second request for judicial notice

seeks a stay of this appeal, that request is DENIED.

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