Court Opinion

ID: 9735759
Source: CourtListenerOpinion
Date Created: 2023-08-26 18:29:40.173309+00
Date Added: 2024-06-11T18:27:01.125378
License: Public Domain

SABERS, Justice
(concurring in part and dissenting in part).
I concur except that I dissent on the second issue regarding Johnsons’ state law counterclaim. The majority refuses to consider Johnsons’ counterclaim because of a claimed inconsistency between it and John-sons’ position in the bankruptcy proceedings. However, the majority misconstrues the counterclaim. In fact, no inconsistency exists and Johnsons should be allowed to assert their counterclaim.
Johnsons are not claiming they were forced to convert from a Chapter 13 to a Chapter 7 filing; rather they are claiming they relied upon representations of FLBO and were injured when FLBO reneged on those representations. This may be a valid claim, see Johansen v. Production Credit Ass’n, 378 N.W.2d 59 (Minn.Ct.App.1985); Prosser and Keeton on Torts § 92 at 658 (5th ed.1984), and it is not inconsistent with Johnsons’ position in the bankruptcy proceedings. Even where a federal court has ruled against a mortgagor on its federal statutory claims against a mortgagee, “[tjhat does not preclude [that party] ... from asserting in a state court common law causes of action....” Johansen, swpra at 62; see also First Nat’l Bank of Volga v. Kleinjan, 418 N.W.2d 326 (S.D.1988) (counterclaims may be asserted even when foreclosure has been granted). Furthermore, whether FLBO made any representation's which warrant reliance is a genuine issue of material fact precluding summary judgment. Groseth Int’l, Inc. v. Tenneco, Inc., 410 N.W.2d 159 (S.D.1987); Bego v. Gordon, 407 N.W.2d 801 (S.D.1987).
The alternative grounds asserted by FLBO for dismissal of Johnsons’ counterclaim are also inadequate.
1. FLBO argues that summary judgment is appropriate because Johnsons’ counterclaim is barred by the doctrine of res judicata. FLBO contends Johnsons should have raised their counterclaim when FLBO moved in bankruptcy court for relief from the automatic stay. The nature of the motion hearing precludes such a conclusion. Although it would have been proper for the bankruptcy court to consider the counterclaim for the purpose of ruling on the motion for relief, a hearing on such a motion is not the proper time or place to fully adjudicate such a counterclaim. In re Tally Well Service, Inc., 45 B.R. 149, 151 (Bankr.E.D.Mich.1984). The legislative history accompanying enactment of the Bankruptcy Reform Act of 1978 makes clear that: “This hearing will not be the appropriate time at which to bring in other issues, such as counterclaims against the creditor_” Id., (quoting H.R.Rep. No. 595, 95th Cong., 1st Sess. 344 (1977), U.S. Code Cong. & Admin.News 1978, pp. 5787, 6300); see also 2 Collier on Bankruptcy 11362.08 at 362-69 (15th ed.1989) (“a res judicata determination of the issues [when considering a motion for relief from an automatic stay] would be inappropriate”). In short, a motion seeking relief from an automatic stay is not the assertion of a claim which creates an obligation to assert a counterclaim. In re Johnson, 756 F.2d 738, 740 (9th Cir.1985), cert, denied, Johnson v. Righetti, 474 U.S. 828, 106 S.Ct. 88, 88 L.Ed.2d 72 (1985). Accordingly, John-sons are not barred by the doctrine of res judicata from raising their counterclaim in this action.
2. FLBO also contends Johnsons’ counterclaim should be dismissed because the trial court does not have subject matter jurisdiction over the counterclaim. FLBO claims only the bankruptcy court could consider Johnsons’ claim. However, since the counterclaim does not arise under Title 11, but instead is merely related to the bank*449ruptcy proceedings, the bankruptcy court does not have exclusive jurisdiction over the claim. As explained by the court in In re Southerton Corp., 17 B.R. 472 (Bankr. M.D.Pa.1981):
Congress did not give bankruptcy courts exclusive jurisdiction over all controversies which in some way affect the debtor’s estate. Jurisdiction of state courts and the bankruptcy court is concurrent as to civil proceedings arising in or related to cases under Title 11.
Id. at 474. Nor is the trial court precluded from considering the counterclaim because, as FLBO argues, the claim was not raised by the trustee. While Johnsons’ claim is part of their bankruptcy estate, the debtor remains in possession of all property of the estate in a Chapter 13 filing, thus Johnsons are free to assert the claim. 11 U.S.C.A. § 1306(b).
Since Johnsons are not precluded from asserting their counterclaim, the trial court erred in granting FLBO’s motion for summary judgment. Groseth, supra; Bego, supra. FLBO has failed to carry its burden of demonstrating the lack of any genuine issue of material fact. Therefore, we should reverse and remand for consideration of Johnsons’ counterclaim.