Court Opinion

ID: 2997810
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:39:02.570701+00
Date Added: 2024-06-11T11:45:34.862728
License: Public Domain

UNPUBLISHED ORDER
                          Not to be cited per Circuit Rule 53

              United States Court of Appeals
                             For the Seventh Circuit
                             Chicago, Illinois 60604

                              Submitted June 29, 2005*
                               Decided June 29, 2005

                                       Before

                     Hon. FRANK H. EASTERBROOK, Circuit Judge

                     Hon. KENNETH F. RIPPLE, Circuit Judge

                     Hon. ANN CLAIRE WILLIAMS, Circuit Judge

No. 04-1222

IN RE: DONNA S. RING,                         Appeal from the United States District
     Debtor-Appellant.                        Court for the Western District of
                                              Wisconsin

                                              No. 03-C-470-S

                                              John C. Shabaz,
                                              Judge.

                                     ORDER

       After Donna Ring filed for bankruptcy, the trustee proposed to settle a suit
that she had pending in Wisconsin state court. Ring objected, but the bankruptcy
court approved the settlement. The district court affirmed that decision, as do we.

      *
        After an examination of the briefs and the record, we have concluded that
oral argument is unnecessary. Thus, the appeal is submitted on the briefs and the
record. See Fed. R. App. P. 34(a)(2).
No. 04-1222                                                                        Page 2

       In February 2002, Ring petitioned a Wisconsin court to award her a share of
Ralph Wrezic’s estate; she claimed to be a nonmarital daughter mistakenly omitted
from his will. See Wis. Stat. § 853.25(2). The court granted summary judgment for
the estate and interested parties, including Wrezic’s widow, reasoning that Ring, who
is over 50, had missed a statute of limitations requiring paternity suits to be brought
before the plaintiff’s nineteenth birthday. See Wis. Stat. § 893.88. The court also
concluded that Ring, who was pro se, had failed to meet her evidentiary burden
because she never responded to the motion for summary judgment. Ring appealed to
the Wisconsin Court of Appeals.

       That appeal was still pending when Ring filed for bankruptcy in October 2002.
Ring listed the state litigation on her Chapter 7 property schedules but valued it at
zero. She objected, however, when the trustee sought approval to settle the matter
for $12,000. After the settlement was proposed, she also amended her bankruptcy
schedules to list the inheritance claim as exempt property, which she now valued at
$7,374. Ring chose that amount because it was the remainder available to her under
the “wild card” exemption of 11 U.S.C. § 522(d)(5).

       Before approving the settlement in January 2003, the bankruptcy court heard
testimony from the trustee, who characterized the inheritance claim as frivolous
based on his understanding of the statute of limitations and his reading of the trial
court’s decision and the pro se brief Ring had filed with the appellate court. Counsel
for Wrezic’s widow testified, too, adding that at summary judgment Ring produced no
evidence of paternity anyway. The court agreed with the trustee that the
bankruptcy estate should not be squandered on “long shot” litigation, a conclusion
shared by the district court when Ring appealed. Ring received a discharge in
January 2003 immediately after the bankruptcy court approved the settlement. The
state appeal, she says, is stayed pending the outcome of her appeal to this court.

       Bankruptcy courts may approve a trustee’s proposal to compromise claims of
the estate, including legal claims, see 28 U.S.C. § 157(b)(2); W.J. Servs. v.
Commercial State Bank of El Campo, 990 F.2d 233, 234 (5th Cir. 1993) (per curiam);
In re Holywell Corp., 913 F.2d 873, 881 (11th Cir. 1990), subject to review by the
district court and, in turn, this court, 28 U.S.C. § 158(a), (d); see In re Weinhoeft, 275
F.3d 604, 604 (7th Cir. 2001). Ring argues, however, that the bankruptcy court
lacked jurisdiction to approve the settlement due to the “probate exception” to federal
jurisdiction and the Rooker-Feldman doctrine. The latter theory is groundless since
Rooker-Feldman, see Rooker v. Fid. Trust Co., 263 U.S. 413 (1923); Dist. of Columbia
Court of Appeals v. Feldman, 460 U.S. 462 (1983), precludes lower federal courts
from reviewing state-court civil judgments, Exxon Mobil Corp. v. Saudi Basic Indus.
No. 04-1222                                                                     Page 3

Corp., 125 S. Ct. 1517, 1521–22 (2005); Holt v. Lake County Bd. of Comm’rs, 408
F.3d 335, 336 (7th Cir. 2005) (per curiam), which is not what the bankruptcy court
did.

       Nor is the probate exception relevant. That rule precludes a federal court
from administering a decedent’s estate or probating a will, see Markham v. Allen,
326 U.S. 490, 494 (1946); Storm v. Storm, 328 F.3d 941, 943–44 (7th Cir. 2003), or
interfering with probate proceedings by contradicting a state court’s judgment,
Golden ex rel. Golden v. Golden, 382 F.3d 348, 358–59 & n.10 (3d Cir. 2004). We
have not decided whether the exception applies in bankruptcy cases, although that
question divides our sister circuits. Compare Goerg v. Parungao, 844 F.2d 1562,
1565 (11th Cir. 1988) (explaining that probate exception applies only to diversity
jurisdiction) with In re Marshall, 392 F.3d 1118, 1131–32 (9th Cir. 2004) (applying
exception to bankruptcy proceedings that resulted in conflicting state and federal
judgments). And we need not answer the question here because the exception has no
possible relevance to this appeal. The bankruptcy court did not interfere with the
probate matter; all the bankruptcy court did was decide that the inheritance claim
belonged to the bankruptcy estate, and that the trustee’s proposed settlement was in
that estate’s best interests.

       Alternatively, Ring argues that her inheritance claim was not property of the
bankruptcy estate. A debtor’s legal claims are presumptively part of the bankruptcy
estate administered by the Chapter 7 trustee. In re Polis, 217 F.3d 899, 901 (7th Cir.
2000); Cable v. Ivy Tech State Coll., 200 F.3d 467, 472–73 (7th Cir. 1999); see Martin
v. Monumental Life Ins. Co., 240 F.3d 223, 232 (3d Cir. 2001) (right to appeal
adverse judgment legal cause of action belonging to bankruptcy estate). Like other
property, though, a legal claim may remain outside the estate if the debtor utilizes
an available exemption, 11 U.S.C. § 522, or the claim may revert back to the debtor if
the trustee chooses to abandon it as estate property, id. § 554. Ring insists that the
trustee abandoned her inheritance claim by promising not to pursue it during a
telephone conversation with her bankruptcy lawyer, but Ring waived this contention
by not asserting it in the bankruptcy court, see In re Kroner, 953 F.2d 317, 319 (7th
Cir. 1992). Regardless, a trustee cannot abandon property of the estate without
notice to creditors, which was not given here. See Fed. R. Bankr. P. 6007(a). Ring
also contends that the inheritance claim was exempt property. Ring successfully
exempted $7,374 of the settlement proceeds because no one objected, Taylor v.
Freeland & Kronz, 503 U.S. 638 (1992), but to the extent the value of the inheritance
claim exceeded that amount it remained estate property under the trustee’s control.
Polis, 217 F.3d at 903; In re Salzer, 52 F.3d 708, 712 (7th Cir. 1995); Cable, 200 F.3d
at 473.
No. 04-1222                                                                   Page 4

       Last, Ring maintains that even if the claim was part of the bankruptcy estate,
the bankruptcy court abused its discretion by confirming the settlement based on the
trustee’s mistaken belief that the action was time-barred. She explains—citing a
Wisconsin case decided after the hearing—that the statute of limitations for
paternity suits would not have prevented her from establishing in the probate
proceedings that Wrezic was her father. See Wis. Stat. § 893.88; In re Estate of
Thompson, 661 N.W.2d 869, 881 (Wis. Ct. App. 2003). In a bankruptcy case, a court
measures the value of settlement by asking whether it was in the estate’s best
interests. In re Energy Coop., 886 F.2d 921, 927 (7th Cir. 1989); In re Am. Reserve
Corp., 841 F.2d 159, 161–62 (7th Cir. 1987). This inquiry requires the court to weigh
the advantages of settlement, the probable costs and benefits of pursuing litigation,
and the likelihood of wasting assets. Depoister v. Mary M. Holloway Found., 36 F.3d
582, 585–88 (7th Cir. 1994); In re Energy Coop., Inc., 886 F.2d at 927. Here, the
bankruptcy court concluded that the inheritance claim had a negligible chance of
success and that settlement was a good deal for the estate, and we agree. Even if we
assume that Ring is correct about the statute of limitations, she has pointed to no
admissible evidence of her purported relation to Wrezic. In the state court she
offered only her aunt’s unsworn statement claiming that Ring’s mother had said
Ring was Wrezic’s daughter, along with DNA evidence that by Ring’s own account
shows only that she and her brother are half-siblings. The bankruptcy court did not
abuse its discretion, and the judgment of the district court is AFFIRMED.