Court Opinion

ID: 9713298
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:13:00.85263+00
Date Added: 2024-06-11T18:23:18.068453
License: Public Domain

ON REHEARING

I respectfully dissent from the majority’s denial of the Pages’ petition for rehearing. Although I joined with the majority in the original opinion, upon reflection and further study prompted by the Pages’ petition for rehearing, I realize that I am prohibited by federal bankruptcy law from joining the majority today.
In our original opinion filed on October 28, 1993, see Hendrix v. Page (1993), Ind.App., 622 N.E.2d 564, we reversed the trial court’s grant of the Pages’ motion for relief from summary judgment. We reasoned that because the Pages’ June 21, 1990 complaint violated the § 362 automatic stay, it was “null and void under Indiana law” from its inception; and therefore, the Pages’ May 28, 1992 motion for relief from judgment could not reinstate their 1990 action against Hendrix. Id. at 567-68. Yet we were quick to acknowledge that “[t]he bankruptcy court has exclusive jurisdiction to interpret the application and scope of the automatic stay” to a state court action brought against a debtor and that we have a strict obligation to follow the bankruptcy court’s determination. Id. at 567. Under federal bankruptcy law, federal district courts, and hence bankruptcy courts as a unit of the district courts, have original and exclusive jurisdiction over all bankruptcy cases. 28 U.S.C.A. § 1334(a).
It is clear that our interpretation of the scope of the § 362 automatic stay to bar the Pages’ complaint is inconsistent with the exclusivity of jurisdiction which federal courts enjoy over all bankruptcy matters. The exclusive jurisdiction of the federal courts precludes our interference or participation in bankruptcy matters. Although clearly without jurisdiction, we attempted to rationalize our trespass into the bankruptcy court’s jurisdiction through a strict reading of In Matter of Hendrix, 986 F.2d 195 (7th Cir.1993), finding that the “court (citation omitted) did not hold that the Pages’ state court action against Hendrix was exempt from the automatic stay.” Id. 622 N.E.2d at 567-58.
In Matter of Hendrix, the U.S. Seventh Circuit Court of Appeals affirmed the bank*1087ruptcy judge’s (1) grant of the Pages’ motion to reopen Hendrix’s bankruptcy proceeding, and (2) modification of Hendrix’s discharge to allow the Pages to proceed against Hendrix’s insurer in state court noting that the applicable law had been misunderstood and the injunction erroneously applied to enjoin the Pages from proceeding against Hendrix’s insurer. The court acknowledged the oddness of the bankruptcy judge’s order purporting to relieve the Pages from the bar of an injunction which did not apply to them, yet recognized the desirability of the judge’s order to thwart any attempt by Hendrix’s insurer to prevent the Pages from proceeding with their action in state court. Id. at 199. Notwithstanding, Hendrix’s insurer has since attempted to do exactly that.
Although the Seventh Circuit spoke in terms of the discharge injunction, and as such, the majority has chosen to stress that the court did not hold that the Pages’ state claim was exempt from the automatic stay, I believe the Seventh Circuit did so because this was the procedural posture of the case at the time it was presented to the court on appeal. Had the appeal reached the Seventh Circuit when the automatic stay was in force, the result would have undoubtedly been the same. This is evident from the Seventh Circuit’s comment on the Bankruptcy Court’s power under 11 U.S.C. §§ 105(a), 350(b), and 727(d), to grant equitable relief in any bankruptcy matter through dissolution or other modification, and its observation that the Pages “could have asked the bankruptcy court to lift the automatic stay before discharge, and need not have waited nine months after discharge to move in the bankruptcy court.” Id. at 198-99. Furthermore, whether the bankruptcy court actually lifted the automatic stay, modified the discharge injunction, or simply determined that the automatic stay never applied to the Pages’ state action against Hendrix’s insurer is not the critical element in our analysis. Because the issues involved here are matters of federal bankruptcy law, the factor conclusive to our decision is the ultimate ruling of the bankruptcy court, and not necessarily which route the court travelled in reaching its final decision.
Thus, the Bankruptcy Court’s and the Seventh Circuit’s determinations that not only did federal bankruptcy law not prohibit the Pages’ state action, but that equitable considerations dictated that the Pages be allowed to proceed in state court with their action against Hendrix’s insurer in Hendrix’s name is dispositive here.5 Because the federal courts have original and exclusive jurisdiction in all bankruptcy matters, we are bound by this determination. See Reich v. Reich (1993), Ind.App., 605 N.E.2d 1178, 1182. Consequently, we cannot now prohibit the Pages from proceeding in state court based upon any bankruptcy matter.
It is now clear to me that our state trial court correctly set aside its summary judgment order in favor of Hendrix pursuant to the Seventh Circuit’s opinion in Matter of Hendrix, and that we erred in reversing the trial court after impermissibly attempting to skirt the federal courts’ holdings by applying our own version of federal bankruptcy law to find that the Pages’ state action was void in violation of the automatic stay, and thus, time barred by Indiana’s two-year statute of limitations.6
*1088If for some reason the majority’s error is not clear to everyone at this juncture, it most definitely should be after the U.S. Bankruptcy Court for the Southern District of Indiana’s March 2,1994 response to our original opinion.7 On November 15, 1998, approximately one month after we issued our original opinion and shortly after the Pages filed this petition for rehearing, the Pages filed a motion with the U.S. Bankruptcy Court to reopen Hendrix’s bankruptcy proceeding. The U.S. Bankruptcy Court responded on March 2, 1994, with an order which undeniably lays to rest any question which may still linger in the mind of the most staunch doubter.
The U.S. Bankruptcy Court’s March 2, 1994 order “GRANTS the [Pages’] request to reopen this case and ORDERS that the automatic stay be lifted nunc pro tunc from the date it arose on the filing of this bankruptcy on June 5, 1990 so that the Pages may proceed with their action in state court, but only against the insurance proceeds of the Debtor [Hendrix].”8 Order, at 4. As the Seventh Circuit did in Matter of Hendrix, the Bankruptcy Court noted in this order that its jurisdiction to enter retroactive orders lies within its 11 U.S.C. § 105 equitable powers.
As there is now no question remaining as to how the Bankruptcy Court reached its decision that the Pages’ state action is not prohibited by federal bankruptcy law, or as to the Bankruptcy Court’s exclusive jurisdiction and power to so hold, the sole remaining issue within our authority to determine is the application of Indiana’s statute of limitations to the Pages’ state claim. As determined by the U.S. Bankruptcy Court, the Pages’ original complaint did not violate the § 362 automatic stay; and therefore, was valid when it was filed on June 21, 1990. The automobile accident causing the Pages’ injuries occurred on April 6, 1990. The Pages filed their complaint within Indiana’s two-year statute of limitations period. Contrary to the majority opinion, the Pages’ state action is neither barred by the § 362 automatic stay or Indiana’s statute of limitations.

. In determining that federal bankruptcy law did not prohibit the Pages' state action, the Bankruptcy Court noted that: (1) the Pages filed their state action against Hendrix on June 21, 1990, in good faith, before they were made parties to Hendrix's bankruptcy proceeding and before they had actual notice of the bankruptcy proceeding; (2) although Hendrix filed for bankruptcy on June 5, 1990, after the April 6, 1990 automobile accident which caused the Pages' injuries, he did not list the Pages as a creditor until July 14, 1990; (3) before his discharge in bankruptcy, Hendrix participated fully in the Pages' action, seeking an enlargement of time in which to answer the Pages' complaint, filing a request for change of venue, and filing a request for production of documents and interrogatories; (4) after his discharge in bankruptcy, Hendrix notified the Pages that his bankruptcy would not prevent the Pages from proceeding against him to the extent of his insurance; (5) for 18 months after his discharge in bankruptcy, Hendrix participated in the Pages’ state action by engaging in discovery, attending depositions, and requesting documents without once raising the issue of the automatic stay.

. The majority views its trespass into the federal courts’ exclusive jurisdiction as an altruistic measure designed to save the U.S. Bankruptcy Court, District Court, and the Seventh Circuit Court of *1088Appeals from ultimate reversal and the parties from additional appeals. The majority sincerely believes that the Pages’ action was void in violation of the § 362 automatic stay; and therefore, the Pages are forever barred from proceeding in state court. I dare not cast judgment on the federal courts’ determination other than in my own mind, for whether the federal courts erred in applying bankruptcy law is not a question which we as state appellate court judges have authority to address, notwithstanding even the best of motives. As we will see from the Bankruptcy Court’s most recent order (which is discussed below), the majority would have been well served by likewise abstaining from overreaching its authority.

. I cannot participate in the majority's conscious decision to ignore the U.S. Bankruptcy Court’s March 4, 1994 order directly responding to our original opinion. Although the Pages failed to follow proper procedures to supplement the record to include this order, I believe that it is in the interest of justice and judicial economy that we consider it, for: (1) there has been no challenge to the authenticity of the bankruptcy court’s order, (2) Hendrix was granted leave to file a brief in response to the Pages’ filing of the order, and (3) the order is dispositive and will eliminate the necessity of further proceedings on this particular issue. Moreover, Indiana courts are bound to construe all pleadings so as to do substantial justice, lead to disposition on the merits, and avoid litigation of procedural points. See Ind. Trial Rule 8(F).

. This result is consistent with the two main purposes of bankruptcy law, that is, to give the debtor a fresh start and to provide for a fair and orderly distribution of the debtor’s assets among creditors. Bankruptcy is not intended to protect a debtor's insurer from liability or discharge the liability of any entity other than the debtor on the debtor’s debt. See Matter of Hendrix, at 197 (citing Matter of Shondel, 950 F.2d 1301, 1306-09 (7th Cir.1991); Green v. Welsh, 956 F.2d 30 (2d Cir.1992); In re Jet Florida Systems, Inc., 883 F.2d 970 (11th Cir.1989); In re Western Real Estate Fund, Inc., 922 F.2d 592, 601, n. 7 (10th Cir.1990); In re Femstrom Storage & Van Co., 938 F.2d 731, 733-34 (7th Cir.1991).