Opinion
Civil Action No. 3:01-CV-1722-L
September 30, 2002
MEMORANDUM OPINION AND ORDER
Before the court is Hill Gilstrap's, Frank Hill's and Frank Gilstrap's Motion to Dismiss or, in the Alternative, Motion for More Definite Statement, filed September 27, 2001; Chris Harris', Robert Bodoin's, Salvador Espino's, Steppes Apartments, Ltd.'s, John Feece's, and Rosalie Feece's Motion to Dismiss, filed September 27, 2001; and Trustee Kenneth A. Rushton's Motion for Substitution of Parties, Motion for Judicial Notice, and Notice to Dismiss with Prejudice, filed April 4, 2002. After careful consideration of the parties' motions, Plaintiffs response, Plaintiffs complaint, and the applicable law, the court grants Hill Gilstrap's, Frank Hill's and Frank Gilstrap's Motion to Dismiss or, in the Alternative, Motion for More Definite Statement and Chris Harris', Robert Bodoin's, Salvador Espino's, Steppes Apartments, Ltd.'s, John Feece's, and Rosalie Feece's Motion to Dismiss; and denies as moot Trustee Kenneth A. Rushton's Motion for Substitution of Parties, Motion for Judicial Notice, and Notice to Dismiss with Prejudice.
I. Factual and Procedural Background
Donald E. Armstrong ("Armstrong") is a debtor in a bankruptcy proceeding. He individually filed for voluntary Chapter 11 bankruptcy on March 10, 2000 in the United States Bankruptcy Court for the Southern District of California. Armstrong's case was transferred to the District of Utah, where the case is active and pending as Case No. 00-26592, In re Donald E. Armstrong. Upon motion by creditors, the Utah court, on September 15, 2000, appointed Kenneth A. Rushton ("Rushton") as the Chapter 11 trustee for the Armstrong estate.
On August 31, 2001, Armstrong instituted the present suit against Chris Harris, Robert Bodoin, Salvadore Espino, Steppes Apartments, Ltd., John L. Feece, Rosalie Feece, Frank Hill, Frank Gilstrap, and Hill Gilstrap (collectively "Defendants"), seeking a declaration that an earlier Texas state court judgment in favor of Steppes Apartments, Ltd. and John L. Feece is void and an injunction permanently enjoining Defendants from using the judgment against him in the pending bankruptcy proceedings or in any capacity. Armstrong also asserts claims for conspiracy, fraud, violation of civil rights under 42 U.S.C. § 1983, wrongful injunction, abuse of process, and malicious prosecution, all of which relate to Defendants' actions in obtaining and attempting to enforce the Texas state court judgment.
On November 17, 1994, Steppes Apartments, Ltd., the purchaser of an apartment complex located in Fort Worth, filed a declaratory judgment action against the seller and lender of the apartment complex, Donald E. Armstrong, Trustee of the Donald E. Armstrong Charitable Remainder Unitrust and the Donald E. Armstrong Family Trust, seeking a declaration that it was not in default under the loan documents securing the purchase. Armstrong, filed a counterclaim, and John L. Feece intervened. After a bench trial, the trial court rendered judgment in favor of Steppes on it claims for double usury, assessed statutory penalties against Armstrong, voided the two notes involved, and awarded attorney's fees to Steppes. It also entered a take nothing judgment in favor of Steppes and Feece on all of Armstrong's counterclaims. Armstrong appealed the trial court'sjudgment and the Fort Worth Court of Appeals affirmed the judgment, holding that (1) evidence was legally and factually sufficient to find that Steppes was not in default; (2) imposition of a seven percent late charge in addition to 13.5 percent interest rate did not protect lender from finding of usury; and (3) Steppes was not obligated to pay lender under personal guarantee. See generally Armstrong v. Steppes Apartments, Ltd., No. 2-97-250-CV, 2001 WL 755104 (Tex.App. — Fort Worth, July 6, 2001).
On September 27, 2001 Defendants Frank Hill, Frank Gilstrap, and Hill Gilstrap filed their Motion to Dismiss or, in the Alternative, Motion for More Definite Statement. On the same day, Defendants Chris Harris, Robert Bodoin, Salvador Espino, Steppes Apartments, Ltd., John Feece, and Rosalie Feece filed a Rule 12(b)(1) and 12(b)(6) motion to dismiss. The parties then filed a joint motion, which the court granted on October 1, 2001, to stay the proceedings pending the court's resolution of Defendants' two motions to dismiss. Subsequently, on April 4, 2002, Rushton filed a Motion for Substitution of Parties, Motion for Judicial Notice, and Notice to Dismiss with Prejudice. Armstrong filed a response to Rushton's motion but did not respond to Defendants' motions to dismiss.
II. Rule 12(b)(1) Motion to Dismiss Standard
A motion to dismiss filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure challenges the subject matter jurisdiction of a federal district court. See Fed.R.Civ.P. 12(b)(1). A claim is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the claim. See Home Builders Assoc., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998). Federal courts are courts of limited jurisdiction, and absent jurisdiction conferred by statute, they lack the power to adjudicate claims. See e.g., Stockman v. Federal Election Comm'n, 138 F.3d 144, 151 (5th Cir. 1998) (citing Veldhoen v. United States Coast Guard, 35 F.3d 222, 225 (5th Cir. 1994)). Thus, a federal court must dismiss an action whenever it appears that subject matter jurisdiction is lacking. Stockman, 138 F.3d at 151.
In considering a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, "a court may evaluate (1) the complaint alone, (2) the complaint supplemented by undisputed facts evidenced in the record, or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Den Norske Stats Oljeselskap As v. HeereMac Vof, 241 F.3d 420, 424 (5th Cir.), cert. denied, 122 S.Ct. 1059 (2002); see also Ynclan v. Dep't of Air Force, 943 F.2d 1388, 1390 (5th Cir. 1991). Thus, unlike a Rule 12(b)(6) motion to dismiss for failure to state a claim, the district court is entitled to consider disputed facts as well as undisputed facts in the record. See Clark v. Tarrant County, 798 F.2d 736, 741 (5th Cir. 1986). Uncontroverted allegations of the complaint, however, must be accepted as true. Den Norske Stats Oljeselskap As, 241 F.3d at 424.
III. Analysis
Defendants contend that Armstrong is not entitled to bring the present action because he is not the real party in interest to the action. Rushton argues the same basis for dismissal in his motion and supporting affidavit. The court agrees.
Standing is a jurisdictional issue, and "an inquiry into the existence of a party's standing usually should be governed by the standards controlling explorations into a court's subject matter jurisdiction." Barrett Computer Servs. v. PDA, Inc., 884 F.2d 214, 219 (5th Cir. 1989). "[A] cause of action belonging to a debtor that existed at the time of the filing of a bankruptcy petition becomes property of the bankruptcy estate and may only be prosecuted by the trustee of the bankruptcy estate, the real party in interest under Rule 17(a) of the Federal Rules of Civil Procedure." Lawrence v. Jackson Mack Sales, Inc., 837 F. Supp. 771, 779 (S.D. Miss. 1992), aff'd, 43 F.3d 642 (5th Cir. 1994). The issue to be decided, therefore, is whether some or all of Armstrong's claims that are related to the Texas state court judgment existed at the time Armstrong filed for bankruptcy under Chapter 11. Those which did are property of the bankruptcy estate and may only be prosecuted by the bankruptcy trustee.
Armstrong alleges in his complaint that he filed for Chapter 11 bankruptcy on March 10, 2000. By this time, a judgment in the state court action had already been entered against Armstrong, and an appeal was pending with the Fort Worth Court of Appeals. A subsequently modified judgment was entered on May 8, 1997. Thus, any claims related to this action occurred before Armstrong filed his bankruptcy petition and are property of the bankruptcy estate. As such, the claims may only be prosecuted by Rushton, the trustee of the bankruptcy estate. Because Armstrong does not allege that the bankruptcy trustee abandoned these claims and the affidavit of Rushton indicates that he had no intention of abandoning the claims, the court holds that Rushton, not Armstrong, is the only real party in interest, who has standing to pursue the claims asserted by Armstrong. Thus, the court lacks subject matter jurisdiction and must dismiss Armstrong's claims in this action for injunction, declaratory judgment, conspiracy, fraud, violation of civil rights under 42 U.S.C. § 1983, wrongful injunction, abuse of process, and malicious prosecution, all of which relate to Defendants' actions in obtaining and attempting to enforce the Texas state court judgment.
IV. Conclusion
Because the court concludes that this action must be dismissed for lack of subject matter jurisdiction, it need not address the parties' remaining arguments. Accordingly, Hill Gilstrap' s, Frank Hill's and Frank Gilstrap's Motion to Dismiss or, in the Alternative, Motion for More Definite Statement is granted; Chris Harris', Robert Bodoin's, Salvador Espino's, Steppes Apartments, Ltd.'s, John Feece's, and Rosalie Feece's Motion to Dismiss is granted; Trustee Kenneth A. Rushton's Motion for Substitution of Parties, Motion for Judicial Notice, and Notice to Dismiss with Prejudice is denied as moot; and this action is dismissed with prejudice. A judgment will issue by separate document as required by Fed.R.Civ.P. 58.
Although dismissals pursuant to Rule 12(b)(1) are normally dismissed withoutprejudice, in this case as Armstrong is not the real party in interest, he is not entitled to bring the law suit; there is nothing he can do to maintain a cause of action. Therefore, the court dismisses the action with prejudice. Even if the court had subject matter jurisdiction over the action, dismissal would still be appropriate under Fed.R.Civ.P. 12(b)(6), because Armstrong is not a proper party, and therefore he can allege no set of facts against these Defendants that would entitle him to relief.