Court Opinion

ID: 3035796
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:53:13.661307+00
Date Added: 2024-06-11T11:48:39.599724
License: Public Domain

United States Bankruptcy Appellate Panel
                           FOR THE EIGHTH CIRCUIT

                                     _________

                                    No. 04-6019SI
                                     _________

In re:                                    *
                                          *
Patreka Harrison and                      *
Larry Harrison,                           *
                                          *
         Debtors.                         *
                                          *
Patreka Harrison and                      *     Appeal from the United States
Larry Harrison,                           *     Bankruptcy Court for the
                                          *     Southern District of Iowa
         Plaintiffs-Appellants.           *
                                          *
               v.                         *
                                          *
Singer Asset Finance Company, LLC,        *
                                          *
         Defendant-Appellee.              *

                                        _____

                              Submitted: August 26, 2004
                               Filed: September 30, 2004
                                         _____

Before MAHONEY, VENTERS and McDONALD1, Bankruptcy Judges.
                            _____

Mahoney, Bankruptcy Judge.

       The Honorable David P. McDonald, United States Bankruptcy Judge for the
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Eastern District of Missouri, sitting by designation.
       Patreka Harrison (“Harrison”), the debtor in the underlying bankruptcy case,
appeals from the final order of the bankruptcy court2 dismissing her adversary
proceeding against Singer Asset Finance Company, LLC. The bankruptcy court
determined that the adversary proceeding complaint dealt with pre-petition causes of
action which belonged to the estate and which should be administered by the Chapter
7 trustee. The bankruptcy court determined that the debtor did not have standing to
bring the action and dismissed the case. We affirm.

                                         I.

       Harrison was involved in pre-petition litigation which resulted in a settlement
agreement that provided for periodic payments from an annuity. Several years after
the periodic annuity payments began, Harrison entered into four separate contracts
with Singer Asset Finance Company, LLC (“Singer”). By such contracts she sold all
or part of her right to receive the periodic payments. However, shortly after entering
into the contracts, a dispute arose between Harrison and Singer with regard to the
terms of the contracts.

      Singer brought suit in state court in New York to enforce the terms of the
contracts. Singer obtained a default judgment in New York and transcribed the
judgment to the State of California, the location of the annuity company, and began
garnishment proceedings against the monthly annuity payments.

       Harrison filed the underlying Chapter 7 bankruptcy case and listed an ownership
interest in the annuity. She scheduled the interest of Singer as an unsecured claim.
Singer moved for relief from the automatic stay to continue and complete its actions
in New York and California. The trustee entered into a stipulation for relief from the

      2
       The Honorable Lee Jackwig, United States Bankruptcy Judge for the Southern
District of Iowa.

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automatic stay to permit Singer to proceed in the other venues, reserving all rights
with regard to the estate and the debtor to contest the position of Singer.

       In the underlying Chapter 7 case, the Chapter 7 trustee obtained permission of
the bankruptcy court to employ the services of an attorney in New York. Through the
work of that attorney, the Chapter 7 trustee was successful in obtaining an order
setting aside the default judgment in New York.

      Harrison filed the adversary proceeding from which this appeal arose. The
adversary proceeding complaint alleges fraud on behalf of Singer with regard to the
origination of the contracts, and alleges that Singer breached a fiduciary duty to
Harrison. Singer moved to dismiss on the theory that the claims in the adversary
proceeding dealt with an alleged asset of the bankruptcy estate, which only the trustee
could assert.

      Prior to a ruling on the motion to dismiss, the annuity company, Aurora
National Life Insurance Company (“Aurora”) filed a complaint in the underlying
Chapter 7 bankruptcy case, naming Harrison, the trustee, Singer and a purported
assignee, F.L. Assignments, as defendants. Aurora requests a determination of
ownership of the stream of payments under the annuity and an order directing payment
of the same. The payments are currently being deposited with and are under the
authority of the bankruptcy court.

      The bankruptcy court granted Singer’s motion to dismiss for lack of standing.
Harrison appeals the dismissal of her lawsuit on the theory that she has derivative
standing under Eighth Circuit precedent because the trustee failed to act to assert her
claims.

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                                            II.

      The issue of whether a party has standing to bring an adversary proceeding is
a question of law, subject to de novo review. Korte v. United States (In re Korte) , 262
B.R. 464, 470 (B.A.P. 8th Cir. 2001).

                                           III.

      The position of Harrison is that the debtor has the right to proceed to administer
a pre-petition asset which is property of the bankruptcy estate, that is, the cause of
action alleged by Harrison against Singer, if the trustee unjustly refuses to act on
behalf of the estate for the benefit of the estate. Nangle v. Lauer (In re Lauer), 98 F.3d
378 (8th Cir. 1996) and In re Newcorn Enter., Ltd., 287 B.R. 744 (Bankr. E.D. Mo.
2002). The proposition is premised upon the inactivity of the trustee and the unjust
refusal of the trustee to act on behalf of the debtor or the estate.

        In this case, the trustee has acted on behalf of the debtor and the estate. The
trustee entered into a stipulation for relief from the automatic stay but reserved all
rights of the debtor and the trustee to contest the claims of Singer. The trustee, with
the approval of the bankruptcy court, employed the services of legal counsel in New
York and was successful in setting aside the default judgment in New York. That
activity eliminated the right of Singer to enforce the judgment in either New York or
California. The trustee, as well as Harrison, is now a party to the litigation brought by
Aurora in the bankruptcy court which concerns the rights in and ownership of the
stream of annuity payments.

       There was no evidence presented to the bankruptcy court that the trustee had
failed to perform her duties. As mentioned above, it is clear that the trustee has
performed her duties and that all rights of the estate and the debtor in the annuity

                                            4
and/or in the contracts with Singer have been preserved and are before the bankruptcy
court.

      The bankruptcy judge correctly applied the law. The debtor has no standing to
bring this action independently of the trustee. Mixon v. Anderson (In re Ozark
Restaurant Equip. Co.), 816 F.2d 1222, 1225 (8th Cir.) (causes of action belonging to
debtor at commencement of case pass to trustee to assert), cert. denied sub nom.
Jacoway v. Anderson, 484 U.S. 848 (1987); Cable v. Ivy Tech State College, 200 F.3d
467, 472 (7th Cir. 1999) (in liquidation proceedings, only the trustee has standing to
prosecute or defend claim belonging to estate). The trustee has performed her duties
appropriately and the case, with all of the issues that Harrison desires to raise, is now
before the bankruptcy court.

                                    CONCLUSION

      The order dismissing the adversary proceeding brought by the debtor
concerning pre-petition causes of action, for lack of standing, is affirmed.

                               ____________________

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