Court Opinion

ID: 2976309
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:49:52.299303+00
Date Added: 2024-06-11T08:37:23.729871
License: Public Domain

ELECTRONIC CITATION: 2008 FED App. 0004P (6th Cir.)
                                File Name: 08b0004p.06

              BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

In re:

MICHAEL L. STERBA                                     )
and SANDRA L. STERBA,                                 )
                                                      )
                  Debtors.                            )               No. 07-8043
_____________________________________                 )
                                                      )
                                                      )
MARVIN A. SICHERMAN, TRUSTEE                          )
                                                      )
         Plaintiff - Appellee,                        )
                                                      )
         v.                                           )
                                                      )
MBNA AMERICA BANK, N.A.                               )
                                                      )
         Defendant - Appellant.                       )
                                                      )

                          Appeal from the United States Bankruptcy Court
                         for the Northern District of Ohio, Eastern Division.
                               No. 06-13322, Adversary No. 06-2037.

                                      Argued: February 6, 2008

                                 Decided and Filed: February 29, 2008

          Before: FULTON, RHODES, and SCOTT, Bankruptcy Appellate Panel Judges.

                                       ____________________

                                             COUNSEL

ARGUED: Lawrence G. Reinhold, WEINSTEIN & RILEY, P.S., Huntington Woods, Michigan,
for Appellant. Richard A. Baumgart, DETTELBACH, SICHERMAN & BAUMGART, Cleveland,
Ohio, for Appellee. ON BRIEF: Lawrence G. Reinhold, WEINSTEIN & RILEY, P.S., Huntington
Woods, Michigan, for Appellant. Robert D. Barr, Marvin A. Sicherman, DETTELBACH,
SICHERMAN & BAUMGART, Cleveland, Ohio, for Appellee.
                                      ____________________

                                            OPINION
                                      ____________________

        JOSEPH M. SCOTT, JR., Bankruptcy Appellate Panel Judge. The chapter 7 trustee filed an
adversary proceeding in the debtors’ chapter 7 case pending in the Northern District of Ohio seeking
to avoid preferential transfers from MBNA America Bank, N.A. (“Appellant”) in the amount of
$8,206 under 11 U.S.C. §§ 544, 547, and 551 and Ohio Revised Code § 1313.56. The Appellant
appeals an order of the bankruptcy court denying its motion to dismiss the adversary proceeding for
improper venue pursuant to 28 U.S.C. § 1409(b).

                                      I. ISSUE ON APPEAL

        The issue raised by the parties in this appeal is whether 28 U.S.C. § 1409(b) requires a trustee
to bring a preference action to recover a prepetition transfer only in the district where the defendant
in the action resides. Because we conclude that the appeal is moot, however, we do not reach the
merits of this issue.

                        II. JURISDICTION AND STANDARD OF REVIEW

        The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal.
The United States District Court for the Northern District of Ohio has authorized appeals to the Panel
and a final order of the bankruptcy court may be appealed as of right. 28 U.S.C. § 158(a)(1). For
purposes of appeal, a final order “ends the litigation on the merits and leaves nothing for the court
to do but execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109
S. Ct. 1494, 1497 (1989) (citations omitted). While venue orders such at the one at issue here are
not ordinarily final, the bankruptcy court’s further judgment in favor of the Trustee on the preference
action has left the court with nothing more to do. United States Trustee v. Sorrells (In re Sorrells),
218 B.R. 580 (B.A.P. 10th Cir. 1998) (venue orders are not final under 28 U.S.C. § 158(a)); see
generally Millers Cove Energy Co. v. Moore (In re Millers Cove Energy Co.), 128 F.3d 449, 451
(6th Cir. 1997) (“The concept of finality applied to appeals in bankruptcy is broader and more
flexible than the concept applied in ordinary civil litigation.”).

                                                  -2-
       Because the parties stipulated to the facts, this appeal presents a discrete legal question. The
bankruptcy court’s conclusions of law are reviewed de novo. Riverview Trenton Railroad Co. v.
DSC, Ltd. (In re DSC, Ltd.), 486 F.3d 940 (6th Cir. 2007). “Under a de novo standard of review, the
reviewing court decides an issue independently of, and without deference to, the trial court’s
determination.” Menninger v. Accredited Home Lenders (In re Morgeson), 371 B.R. 798, 800
(B.A.P. 6th Cir. 2007).

                                            III.   FACTS

       Michael and Sandra Sterba (“Debtors”) filed a voluntary petition for relief under chapter 7
of the Bankruptcy Code on July 31, 2006. Prior to the commencement of their bankruptcy case, the
Debtors had at least three credit card accounts with MBNA America Bank, N.A. Within the ninety
days prior to filing their petition for relief, the Debtors transferred $8,206 to the Appellant.

       The chapter 7 trustee (“Trustee”) filed an adversary proceeding in the Debtor’s case to avoid
the $8,206 as a preferential transfer under 11 U.S.C. §§ 544, 547, and 551 and Ohio Revised Code
§ 1313.56. The Trustee and the Appellant then stipulated that the transfers were indeed preferential
and that the Appellant has no defense. They further stipulated that “[i]f the [bankruptcy court]
determines that venue in the Northern District of Ohio is proper, then the parties consent to an
affirmative monetary judgment in this proceeding in favor of the Plaintiff and against the [Appellant]
in the amount of $8,206.00. . . .” (Appellee’s App. at 23.)

       The Appellant filed a motion to dismiss for improper venue pursuant to 28 U.S.C. § 1409(b).
The motion asserted that 28 U.S.C. § 1409(b) requires a trustee to bring a preference action to
recover a prepetition transfer only in the district where the defendant in the action resides. For the
purposes of the motion, the parties stipulated that the Appellant resides in the Western District of
North Carolina.

       On July 10, 2007, the bankruptcy court issued a memorandum of opinion and judgment
denying the Appellant’s motion to dismiss for improper venue. Additionally, pursuant to the
stipulations of the parties, the court entered a judgment in favor of the Trustee in the amount of
$8,206, plus interest and costs. The Appellant then timely filed this appeal of the bankruptcy court’s
order denying the motion to dismiss for improper venue.

                                                   -3-
                                               IV.     DISCUSSION

         We first address the threshold question of mootness because an actual controversy between
the parties no longer exists. Neither party addressed the issue in briefing. However, we raised the
issue sua sponte, and asked counsel to be prepared to address the issue at oral argument.1 Questions
of jurisdiction are fundamental matters which we are compelled to raise sua sponte and address on
our own motion. Berger v. Cuyahoga County Bar Assoc., 983 F.2d 718, 721 (6th Cir. 1993). Under
Article III of the United States Constitution, we may only adjudicate actual, ongoing cases or
controversies. Lewis v. Cont’l Bank Corp., 494 U.S. 472, 477, 110 S. Ct. 1249 (1990).

         [F]ederal courts have ‘no authority to render a decision upon moot questions or to
         declare rules of law that cannot affect the matter at issue.’ NAACP v. City of Parma,
         263 F.3d 513, 530 (6th Cir. 2001) (citing Church of Scientology v. United States, 506
U.S. 9, 12, 113 S. Ct. 447, 121 L. Ed. 2d 313 (1992)). ‘Simply stated, a case is moot
         when the issues presented are no longer ‘live’ or the parties lack a legally cognizable
         interest in the outcome.” County of Los Angeles v. Davis, 440 U.S. 625, 631, 99 S.
         Ct. 1379, 1383, 59 L. Ed. 2d 642 (1979) (quoting Powell v. McCormack, 395 U.S.
486, 496, 89 S. Ct. 1944, 1951, 23 L. Ed. 2d 491 (1969)); see also Carras v. Williams,
         807 F.2d 1286, 1289 (6th Cir. 1986) (“Mootness results when events occur during
         the pendency of a litigation which render the court unable to grant the requested
         relief.”). This court determined mootness ‘by examining whether an actual
         controversy between the parties exists in light of intervening circumstances.’ Fleet
         Aerospace Corp. v. Holderman, 848 F.2d 720, 723 (6th Cir. 1988).
Hood v. Keller, 229 F. App’x 393 (6th Cir. 2007).

         At oral arguments before this Panel, counsel for the parties argued that although the
underlying preference action is moot, venue under 28 U.S.C. § 1409(b) is an issue which has arisen
numerous times, but has been evading review, and should, therefore, be excepted from the mootness
doctrine. In an attempt to simplify the issue and preserve it for appeal, they stipulated to the facts
necessary for a judgment in favor of the Trustee.

         There is indeed an exception to the mootness doctrine in cases that are “capable of repetition,
yet evading review.” Speer v. City of Oregon, 847 F.2d 310, 311 (6th Cir. 1988) (citing S. Pac.
Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S. Ct. 279, 283 (1911)). The exception is narrow and
limited, however, to exceptional situations where “‘(1) the challenged action was in its duration too

         1
          W e also afforded the parties the opportunity to address the issue of mootness in supplemental briefs following
oral argument which they declined.

                                                           -4-
short to be fully litigated prior to its cessation or expiration, and (2) there was a reasonable
expectation that the same complaining party would be subjected to the same action again.’” Id.
(quoting Weinstein v. Bradford, 423 U.S. 147, 149, 96 S. Ct. 347, 348 (1975)). The parties did not
demonstrate that this case meets the requirements of this exception to the mootness doctrine. Rather,
they simply asserted that the exception applies. In particular, the Appellant must establish a
demonstrated probability that the same controversy will recur involving these same litigants. Lee
v. Schmidt-Wenzel, 766 F.2d 1387, 1390 (9th Cir. 1985) (citing Murphy v. Hunt, 455 U.S. 478, 482,
102 S. Ct. 1181, 1183 (1982)). The Appellant did not establish such a probability. At best, it
speculated that there was such a probability. Speculation, however, is insufficient to find the
existence of a continuing controversy between the litigants as required by article III. Id. (citing
DeFunis v. Odegaard, 416 U.S. 312, 320 n.5, 94 S. Ct. 1704, 1707 n.5 (1974)).2 The “capable of
repetition, yet evading review” principle does not apply in these circumstances.

         The underlying controversy in this appeal is a preference action. After the bankruptcy court
dismissed the Appellant’s objection to venue, it entered a judgment against the Appellant based upon
the parties’ stipulations, which included “consent to an affirmative monetary judgment . . . in favor
of the Plaintiff and against the [Appellant] in the amount of $8,206.00 . . . .” (Appellee’s App. at
23.) Therefore, there is no longer an actual controversy between these parties. The issues are no
longer “live,” and nothing remains to be determined. The appropriate case for the Appellant to raise
this venue issue is in a case where it has a defense to the preference action.3

                                               V. CONCLUSION

         For the foregoing reasons, we conclude that this case is MOOT. Accordingly, we DISMISS
the appeal.

         2
            Additionally, as explained by the Ninth Circuit Court of Appeals in Lee v. Schmidt-Wenzel, the “capable of
repetition” exception is typically applied in situations involving governmental action. To apply the exception to private
parties, the court must consider whether the possible future litigation will involve the same defending party as well as
the same complaining party. 766 F.2d at 1390. “[T]he possibility of a future controversy between a complaining party
and some other person, not a party to the current lawsuit, does not fulfill the case or controversy requirement of article
III.” Id.
         3
          In a case such as this, where the Appellant admits it has no defense to the preference action, the Appellant
should simply turnover the funds to the Trustee.

                                                           -5-