The HONORABLE ANDREW W. BOGUE, Senior United States *

District Judge for the Western Division of the District of South

Dakota, sitting by designation.

 

No. 95-3470

 

In re: JAMES O. GOETZMAN; *

GEORGIANN GOETZMAN *

*

Debtors *

* Appeal from the United States

-------------------- * District Court for the 

* District of Minnesota

JAMES O. GOETZMAN; GEORGIANN *

GOETZMAN *

*

Plaintiffs - Appellants *

*

 v. *

*

AGRIBANK, FCB; formerly known *

as Federal Land Bank of St. *

Paul, formerly known as Farm *

Credit Bank of St. Paul *

*

Defendant - Appellee *

 

Submitted: June 11, 1996

 Filed: August 7, 1996 

 

Before BEAM and HEANEY, Circuit Judges, and BOGUE, Senior District *

Judge.

 

BOGUE, Senior District Judge.
 Honorable James M. Rosenbaum, United States District Court 1

Judge for the District of Minnesota.

 Appellee's motion to dismiss the appeal, ordered taken with 2

the case, is denied.

2

James and Georgiann Goetzman (Goetzmans) appeal the district court's1

order affirming the Bankruptcy Court's dismissal of the Goetzmans'

adversary complaint. Because we find the bankruptcy court was without

subject matter jurisdiction to hear the matter, we affirm.2

I. BACKGROUND

The Goetzmans owned a farm in Renville County, Minnesota. In 1983,

they signed a promissory note secured by a mortgage on the farm in favor

of Agribank, FCB, f/k/a/ Federal Land Bank of St. Paul, f/k/a Farm Credit

Bank of St. Paul (Agribank). In February, 1987, the Goetzmans submitted

a plan of reorganization under Chapter 12 of the Bankruptcy Code. The loan

obligation was renegotiated and the parties executed a stipulation in June

12, 1987, which was made part of the Goetzmans' plan of reorganization.

The stipulation divided the mortgage debt into two separate loans: Loan No.

1 with a principal amount of $365,000.00, and Loan No. 2 with a principal

amount of $216,387.00. The stipulation provided both loans were secured

by the mortgage previously given on the farm. 

Agribank forgave the remaining amount of Goetzmans' debt and the

stipulation included a provision that allowed the Goetzmans to reduce the

amount due on Loan No. 2 by making payments for Loan No. 1 on or before the

dates the payments were due. Regarding the debt owed by the Goetzmans to

AgriBank, the reorganization plan provided as follows:

[AgriBank] has a total claim for principal and interest through

May 31, 1987 of $760,615.00 The claim is secured by a

perfected interest in Debtor's real property, ... . 
 The narrower issue presented to the jury was whether a 3

particular installment payment submitted to AgriBank by the

Goetzmans was made on or before a specific date, thereby

rendering the payment timely pursuant to the terms of the

stipulation. The

jury found against the Goetzmans on this question.

3

[AgriBank's] claim will be paid in accordance with the attached

Stipulation and Addendum to Stipulation. The value of

collateral ... securing the ... claim is $370,000.00.

[AgriBank] will have an unsecured claim for the balance of

their claim. Any payments received by [AgriBank] on account of

its unsecured claim will be applied towards the principal

balance of Loan No. 1 as described in the attached stipulation

... .

The reorganization plan was confirmed by order of the bankruptcy

court on June 18, 1987. On March 13, 1991, the bankruptcy judge ordered

the Chapter 12 case closed and dismissed the trustee, thereby concluding

the bankruptcy. The bankruptcy court's order, inter alia, discharged "all

debts dischargeable under 11 U.S.C. § 1228(a)," rendered void any judgment

thereafter obtained determining the personal liability of the debtors with

respect to any discharged debt, and enjoined creditors from commencing any

action to collect or recover any discharged debt. 

A dispute subsequently arose between the Goetzmans and Agribank as

to the amount owed under the mortgage and stipulation. In June 1992, the

Goetzmans tendered a check to Agribank for $339,994.40 which they claimed

satisfied the entirety of their obligation. Agribank rejected the tender

because it claimed the amount the Goetzmans were offering was not

sufficient to satisfy the mortgage debt under the terms of the stipulation.

The Goetzmans then filed a lawsuit in Minnesota state court for specific

performance of the stipulation terms and sought an order directing AgriBank

to accept the tendered payment as payment in full. Agribank, in turn,

filed its own state court action seeking to foreclose the mortgage. The

cases were consolidated for trial with the essential disputed issue being

the amount the Goetzmans owed under the mortgage. 

3
4

The bankruptcy issue was brought up on the eve of the state court

trial by way of a motion in limine filed by the Goetzmans asking the trial

court to stay the proceedings pending an interpretation by the bankruptcy

court of its order discharging the Goetzmans' personal indebtedness. The

trial court denied the motion, apparently finding the matter irrelevant and

proceeded with trial. Following the jury trial, the state court entered

findings and conclusions on February 8, 1994, specifically finding the

total indebtedness at the time of the trial was $741,627.30. Prior to

entry of final judgment, the trial court allowed the Goetzmans thirty days

in which to apply to the United States Bankruptcy Court for an

interpretation of the bankruptcy court's order discharging the unsecured

debt. The state trial court entered judgment in favor of AgriBank on March

10, 1994, apparently without notification from the Goetzmans or the

bankruptcy court that a different course was warranted. 

The Goetzmans appealed the state court judgment to the Minnesota

Court of Appeals, which affirmed the trial court in an unpublished opinion.

The appellate court made reference to the bankruptcy issue by noting that

"[o]n the eve of oral argument, Goetzmans moved this court to stay these

proceedings pending the decision in their declaratory judgment action in

the United States Bankruptcy Court." Appellant's Appendix at 77. The

court denied the belated motion because the "appeal was fully briefed and

AgriBank was ready to present its oral argument." The Goetzmans appealed

their case to the Supreme Court of Minnesota, which declined further

review. 

II. FEDERAL PROCEEDINGS

Following entry of final judgment in state district court, and during

the pendency of the state appeal, the Goetzman's filed an
5

adversary complaint in the United States Bankruptcy Court on August 30,

1994. The complaint ultimately sought a determination regarding "the

amount of the real estate lien represented by the unsecured portion of the

lien and subsequently discharged in the underlying Goetzman bankruptcy

discharge." The bankruptcy court, in an oral disposition, determined it

had subject matter jurisdiction to resolve the issues presented, at least

concurrently with the state court. The bankruptcy court presumed its

jurisdiction was based on 28 U.S.C. § 1334(b), the court feeling that the

action arose under or was related to a case arising under Title 11. 

The bankruptcy court then addressed whether the state court action

"collaterally estopped" the plaintiff's from pursuing its claim in the

federal forum or whether the state court action served as "res judicata"

on the issues presented. Regarding the state court action, the bankruptcy

court noted that "... fundamentally, the issue became what was the amount

of debt and is that secured by the property." Given that the issue in

state court was the amount of the debt, decided against the Goetzmans, the

court dismissed the complaint on the grounds that it failed to state a

claim on which relief can be granted.

The district court reversed in part, holding the bankruptcy court

lacked subject matter jurisdiction. The court determined that regardless

of how the adversary complaint was postured, what the Goetzmans actually

sought was federal review of state court determinations. The district

court dismissed the case on the authority of Rooker v. Fidelity Trust Co.,

236 U.S. 413, 416, 44 S.Ct. 149, 150, 68 L.Ed. 362 (1923), and District of

Columbia Court of Appeals v. Feldman, 460 U.S. 462, 476, 103 S.Ct. 1303,

1311, 75 L.Ed.2d 206 (1983), which direct that lower federal courts do not
 The district court also found subject matter jurisdiction 4

lacking on the basis that the bankruptcy court did not reserve

jurisdiction upon closing of the Chapter 12 case three years

previous. Because we are affirming the district court on the

grounds that the Rooker-Feldman doctrine prohibits the Goetzmans'

claim, we express no opinion on other rationale relied on by the

district court. 

6

have subject matter jurisdiction over challenges to state court decisions

in judicial proceedings.4

III. DISCUSSION

The Goetzmans appeal arguing the district court erred in holding the

bankruptcy court did not have subject matter jurisdiction over their

adversary complaint. The existence of subject matter jurisdiction in

federal court is a question of law that we review de novo. Keene Corp. v.

Cass, 908 F.2d 293, 296 (8th Cir. 1990) citing, Schmidt v. United States,

901 F.2d 680, 683 (8th Cir. 1990). Because we find the Goetzmans' federal

action prohibited under the Rooker-Feldman doctrine, we affirm the district

court.

Initially it should be noted that preclusion (relied on by the

bankruptcy court) and the Rooker-Feldman doctrine (relied upon by the

district court) are closely related legal concepts. Charchenko v. City of

Stillwater, 47 F.3d 981, 983 n.1 (8th Cir. 1995) (noting that "RookerFeldman is broader than claim and issue preclusion because it does not

depend on a final judgment on the merits. Aside from this distinction the

doctrines are extremely similar."); Bryant v. Sylvester, 57 F.3d 308, 312

(3rd Cir. 1995) (discussing rational behind the Rooker-Feldman doctrine,

noting that "[l]ike claim preclusion, Rooker-Feldman is partly concerned

with finality, with ensuring that litigants do not take multiple bites from

the same apple."); Valenti v. Mitchell, 962 F.2d 288, 297 (3rd Cir. 1992)

(noting "close affinity" between the Rooker-Feldman doctrine legal concepts

of claim and issue preclusion). Although the
 At its oral disposition, the bankruptcy court noted: 5

We have a valid state court judgment that says

Agribank gets to foreclose. Anything I say isn't going

to change that at this point and it just sort of leads

me to indicate that either the issues were -- should

have been considered or were considered, or if they

weren't considered it was error but your remedy is to

convince the state appellate courts that the trial

court made a mistake ... . I don't see much point in

coming back here to litigate it so I think there is no

... meaningful relief that I am in a position to grant

you at this point. The state court has given Agribank

the right to foreclose and right or wrong, that is a

valid judgment and I ... have no right to go behind it

and change what it's done.

Appellants' Appendix at 69.

7

bankruptcy court below appeared to base its decision on the grounds of

preclusion, many of the concerns espoused by the court highlight the

reasoning behind the Rooker-Feldman doctrine. 

5

Under the Rooker-Feldman doctrine, lower federal courts lack

jurisdiction to engage in appellate review of state court determinations.

Keene Corp. v. Cass, 908 F.2d 293, 296 (8th Cir. 1990) (citations omitted).

Although the state and federal claims may not be identical, impermissible

appellate review may occur when a federal court is asked to entertain a

claim that is "inextricably intertwined" with the state court judgment.

Id.

[T]he federal claim is inextricably intertwined with the statecourt judgment if the federal claim succeeds only to the extent

that the state court wrongly decided the issues before it.

Where federal relief can only be predicated upon a conviction

that the state court was wrong, it is difficult to conceive the

federal proceeding as, in substance, anything other than a

prohibited appeal of the state-court judgment.

Id. at 296-97, citing Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 25, 107

S.Ct. 1519, 1533, 95 L.Ed.2d 1 (1987) (Marshall, J., concurring).
8

An examination of the Goetzmans' respective claims leads to the

conclusion that the federal claims are inextricably intertwined with the

state court decision. The heart of the state court proceedings was a

determination of the amount the Goetzmans owed to Agribank. The Goetzmans

themselves brought the declaratory judgment action to determine the amount

owed under the mortgage. Although the Goetzmans' adversary complaint and

arguments below cast the issue as whether a portion of their debt to

Agribank was discharged in bankruptcy, it is apparent that what was really

sought was a federal judgment that would change the state court result.

This attempted relief is exactly what is barred by the Rooker-Feldman

doctrine. Postma v. First Fed. Sav. & Loan of Sioux City, 74 F.3d 160, 162

(8th Cir. 1996).

In Postma, this court was faced with an appeal by a couple who,

having lost an agricultural foreclosure action in state court, filed a

complaint in federal court against the foreclosing bank advancing various

causes of action and alleging violations of Iowa and federal law. Id. at

161. The district court dismissed the action on the authority of the

Rooker-Feldman doctrine. Id. at 162. In affirming the district court's

decision, this court concluded that "the current [federal] claims can

succeed only to the extent that the state court wrongly decided the

foreclosure action." Id. A similar conclusion is compelled in the current

case. During their course of dealing a dispute arose between the parties

as to how much the Goetzmans owed Agribank. The Goetzmans filed suit in

state court seeking a determination of the same. What better opportunity

or forum existed for them to raise the issue that $216,387.00 of the debt

in dispute may have been discharged in bankruptcy? Naturally, if the debt

or a substantial portion thereof was discharged, the issue should have been

vigorously raised in the state court action. 

The Goetzmans argue that the Rooker-Feldman doctrine should not be

employed to bar their current action because they contend
 Although we believe that the issue of bankruptcy discharge 6

was in fact raised to a limited extent in the state court

proceedings, we note that the Rooker-Feldman doctrine, like the

doctrine of preclusion, applies to claims which were not brought

before the state court but could have been raised in the state

court action. Feldman, 460 U.S. at 483 n.16.

9

they were not given a fair opportunity to be heard on the merits and that

they have a procedural due process right to the same. We disagree.

Application of the Rooker-Feldman doctrine does not depend on a final

judgment on the merits of an issue, Charchenko, 47 F.3d at 983 n.1, nor is

there a procedural due process exception to the doctrine. Postma, 74 F.3d

at 162 n.3. If the state trial court erred in the extent it addressed the

issue the Goetzmans are now pressing, relief was available in the appellate

courts of Minnesota. None being forthcoming, the Goetzmans cannot now

bring an action in federal court which would effectively reverse the state

court decision or void its ruling. Charchenko, 47 F.3d at 983, citing

Landers Seed Co. v. Champaign Nat'l Bank, 15 F.3d 729, 732 (7th Cir.),

cert. denied, U.S. , 115 S.Ct. 62, 130 L.Ed.2d 20 (1994). 

6

IV. CONCLUSION

For the reasons indicated, the judgment of the district court is

affirmed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.