Opinion ID: 2976922
Heading Depth: 3
Heading Rank: 3

Heading: Bob Fitzner Became Involved in the Lawsuit

Text: On January 17, 2005, BFI assigned the Mark to Fitzner for $1.00. The assignment was to be effective March 8, 2002. Fitzner turned around and licensed the Mark to HMC on January 26, 2005, for $10,000. On July 5, 2005, HMC filed an answer and countercomplaint in this lawsuit. Fitzner, d/b/a Homestead Mortgage Co., was added as a Counterplaintiff, in his individual capacity. BFI was not added and is not a party to this lawsuit. -3- Nos. 07-1773/07-1815 Guaranty Residential Lending, Inc. v. Homestead Mortgage Co., LLC D. The District Court Concluded that Neither HMC nor Bob Fitzner Had the Capacity to Sue GRL and AssuraFirst (collectively, the “Counterdefendants”) moved to dismiss the counterclaims for lack of standing to sue. (Their own claims against HMC are not germane to this appeal.) The counterclaims were all premised on the rights of HMC and Fitzner (collectively, the “Counterplaintiffs”) to the Mark. The district court found that, under Texas law, BFI had legal title to the Mark and, therefore, could pass such title to Fitzner, who could then license such title to HMC. Guar. Residential Lending, Inc. v. Homestead Mortgage Co., LLC, 463 F. Supp. 2d 651, 661-62 (E.D. Mich. 2006) (“GRL I”). The district court held that legal title was sufficient to confer standing on the Counterplaintiffs. Id. at 662. The district court went on to address the related question of capacity to sue. Id. at 661-62. Section 521 of the Bankruptcy Code requires that a debtor list his “assets and liabilities” on a schedule attached to the bankruptcy application. 11 U.S.C. § 521(a)(1)(B)(i). Even if a particular interest in property is not scheduled, it still is considered part of the debtor’s estate. See id. § 541(a). If the debtor has an interest in property properly considered part of the estate, but not listed on the schedule, that unscheduled interest is not automatically abandoned back to the debtor when the case is closed, but instead remains part of the bankruptcy estate. Id. § 554(c),(d). Fitzner did not schedule his beneficial title to the Mark when he filed his bankruptcy petition. Accordingly, when the bankruptcy court closed Fitzner’s case, beneficial title to the Mark was not abandoned back to Fitzner but instead remained part of the estate. GRL I, 463 F. Supp. 2d at 661. -4- Nos. 07-1773/07-1815 Guaranty Residential Lending, Inc. v. Homestead Mortgage Co., LLC Thus, the district court concluded, Fitzner did not hold beneficial title to the Mark when he licensed it to HMC. Id. at 662. Without beneficial title, neither HMC nor Fitzner had the capacity to sue on the Mark. Id. E. Two Avenues to Regain Capacity Fitzner then took two separate avenues to regain capacity. Fitzner first moved to reopen his bankruptcy case. He asked that the bankruptcy court order the trustee to abandon beneficial title to the Mark back to him. The bankruptcy court denied his request because, among other things: (1) the estate and creditors would receive little benefit from the reopening; (2) Fitzner had profited from the Mark, even though the Mark “belongs to the bankruptcy estate”; and (3) he took inconsistent positions during litigation as to who had title to the Mark. In re Bobbie Fitzner, No. 01-70668, order at 2 (Bankr. N.D. Tex. Dec. 22, 2006). Fitzner did not appeal the denial of his motion to reopen. Upon being denied relief in bankruptcy court, Fitzner paid the past-due corporate fees for BFI. Pursuant to Texas Tax Code § 171.312, the Texas Secretary of State reinstated BFI’s corporate privileges and charter on January 23, 2007. Counterplaintiffs maintained that the reinstatement was retroactive under Texas law. The reinstatement was intended to make whole the transfer of the Mark from BFI to Fitzner as well as the license from Fitzner to HMC. F. The Counterdefendants’ Second Motion to Dismiss The Counterdefendants took a second pass at dismissing the counterclaims, this time explicitly attacking the Counterplaintiffs’ capacity to sue. The district court noted that the -5- Nos. 07-1773/07-1815 Guaranty Residential Lending, Inc. v. Homestead Mortgage Co., LLC bankruptcy court rejected Fitzner’s attempt to reopen his bankruptcy case, and thus capacity was not regained through that avenue. Guar. Residential Lending, Inc. v. Homestead Mortgage Co., LLC, No. 04-74842, 2007 WL 1140917, at -6 (E.D. Mich. Apr. 17, 2007) (“GRL II”). The district court further held that it would read the bankruptcy court’s statement that the estate “owns” the Mark as it was written, and would not consider the Counterplaintiffs’ argument that, at most, the estate held beneficial title to the Mark. Id. at . The district court further pointed out that BFI was not a party to the lawsuit, and, therefore, even if Texas Tax Code § 171.252(1) did not preclude BFI from suing in a court outside of Texas, the company did not do so here. Id. at . Finally, the district court rejected the argument that the reinstatement of BFI’s privileges and charter cured the lack of capacity; it found that “Fitzner lack[ed] the authority to reinstate the charter in order to free assets from the bankruptcy estate.” Id. at . Concluding that the Counterplaintiffs’ attempts at curing capacity failed, the district court granted the Counterdefendants’ motion to dismiss. Id. at . The Counterplaintiffs appealed the district court’s dismissal of their counterclaims. For their part, the Counterdefendants filed a conditional appeal, pursuing their argument that the counterclaims could have been dismissed on judicial estoppel grounds, an argument rejected by the district court. GRL I, 463 F. Supp. 2d at 662.