Opinion
Case No. 00-22852-11; Adversary No. 00-6198
April 5, 2001
MEMORANDUM OPINION AND ORDER
This matter comes before the Court pursuant to the Motion to Dismiss and Motion Requesting Abstention filed by Donnita and David Killingsworth ("Defendants").
FINDINGS OF FACT
Defendants are residents of the State of Missouri. On October 28, 1994, Donnita allegedly sustained injury while on the premises of a Dickinson Theatre located at 3200 East Montclair, Springfield, Greene County, Missouri, which Debtor was operating in the ordinary course of business. Debtor's registered agent was served with summons and a copy of Defendants' petition on October 21, 1998, by the Sheriff's Office of Jackson County, Missouri. A default judgment was entered against Debtor in the amount of $501,000 on June 30, 1999 (the "Killingsworth Judgment"). In Defendants' petition, they prayed for a judgment against Debtor "in a fair and reasonable amount." Damages awarded by the Greene County Circuit Court on June 30, 1999 were $500,000 for Donnita in Count I of her action and $1,000 for David on the consortium claim set forth in Count II of the action.
Debtor alleges that its management did not receive the notice and a copy of the summons and petition that was mailed to it by its registered agent on October 21, 1998. Debtor further alleges that Defendants' counsel had previously had many communications with Debtor's insurer and had ignored several requests from Debtor's insurer to submit a demand package. Debtor alleges that the state court was not notified that Donnita and medical providers received more than $5,000 from Debtor's insurer. Debtor alleges that Defendants failed to provide Debtor with notice of the request for interlocutory judgment, notice of the hearing on damages and notice of the Killingsworth Judgment. Debtor states that it had a meritorious defense on the issue of liability and most certainly had many defenses to the unsupported, speculative and excessive damages awarded to the Defendants. Debtor also alleges that Defendants did not initiate collection efforts until more than a year had passed from the date of entry of the Killingsworth Judgment.
Debtor filed its Chapter 11 bankruptcy on October 2, 2000. Debtor initiated this adversary proceeding by filing a complaint on December 7, 2000. In Count I, Debtor alleges a violation of due process and a basis for the Killingsworth Judgment to be considered void pursuant to Rule 74.06(b)(4) of the Missouri Rules of Civil Procedure ("Mo. R. Civ. P."). In Count II, Debtor alleges that it is no longer equitable that the judgment remain in force pursuant to Mo. R. Civ. P. 74.06(b)(5). Debtor alleges in Count III that it is entitled to relief from the Killingsworth Judgment and is further entitled to have the Judgment set aside due to fraud on the Greene County Circuit Court, all pursuant to Mo. R. Civ. P. 74.06(d). In Count IV, Debtor alleges that it is entitled to have the Killingsworth Judgment set aside pursuant to Mo. R. Civ. P. 74.06(b)(1) through (4) and also 74.06(b)(5) and 74.06(d). In Count V, Debtor seeks to have the Killingsworth Judgment declared void as a fraudulent transfer under V.A.M.S. § 428.024.1 and 11 U.S.C. § 544. In Count VI, Debtor seeks to have a garnishment issued against "Eastglen 16" on September 13, 2000 declared void, alleging that there is no entity known as the "Eastglen 16." In Count VII, Debtor alleges that it is entitled to have the garnishment set aside as a preference because it was entered within 90 days prior to its bankruptcy filing. Defendants filed a Motion to Dismiss the complaint and a Motion Requesting Abstention.
CONCLUSIONS OF LAW
The Court finds that it lacks jurisdiction of Counts I, II, III, IV and VI, under the Rooker-Feldman doctrine. The Rooker-Feldman doctrine bars "a party losing in state court . . . from seeking what in substance would be appellate review of the state judgment in a United States [trial] court." In addition to the statutory appellate-original jurisdiction dichotomy underlying the doctrine, Courts have found other policies served by the Rooker-Feldman doctrine. It maintains respect for state courts, provides a measure of finality, and prevents multiple bites at the apple.
See Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923); District of Columbia Ct. of Appeals v. Feldman, 460 U.S. 462 (1983).
In re Abboud, 237 B.R. 777, 780 (10th Cir. BAP 1999) (citingJohnson v. De Grandy, 512 U.S. 997, 1005-06 (1994)).
Johnson v. State of Kansas, 888 F. Supp. 1073, 1079 (D.Kan. 1995),aff'd 81 F.3d 172 (10th Cir. 1996).
Id. at 1079-80.
"Generally, a federal district court cannot review matters actually decided by a state court, nor can it issue any declaratory relief that is inextricably intertwined with the state court judgment." "A claim is inextricably intertwined if the federal claim succeeds only to the extent that the state court wrongly decided the issues before it." The doctrine precludes federal action if the relief requested would effectively reverse the state court decision or void its holding. The Court finds that Counts I, II, III, IV and VI are inextricably intertwined with the Killingsworth Judgment. Defenses to entry of a default judgment should be presented to the state court. Whether or not summons was properly served and a default judgment properly entered is an issue for the state court.
Kiowa Indian Tribe of Okla. v. Hoover, 150 F.3d 1163, 1169 (10th Cir. 1998) (quotations and citations omitted).
Charchenko v. City of Stillwater, 47 F.3d 981, 983 (8th Cir. 1995).
In re Mitchell, 255 B.R. 97, 107 (Bankr.D.Mass. 2000) (citations omitted).
See Odom v. Columbia University, 906 F. Supp. 188, 196 (S.D.N.Y. 1995); see also In re Robinson, 242 B.R. 380, 388 (Bankr.N.D.Ohio 1999) (noting that pursuant to the Rooker-Feldman doctrine the bankruptcy court could not rectify the potential irregularity in the state court proceeding).
In re Halas, 249 B.R. 182, 187 (Bankr.N.D.Ill. 2000); see also In re Itzler, 247 B.R. 546, 554 (Bankr.S.D.Fla. 2000).
Because the state court has not had an opportunity to address Debtor's allegation that there was fraud on the court, this Court finds that this allegation does not remove Debtor's claims from the ambit of the Rooker-Feldman doctrine. "[E]ven if the state court judgment was wrongly procured, it is effective and conclusive until it is modified or reversed in the appropriate State appellate or collateral proceeding." Even if the Rooker-Feldman doctrine did not apply to this allegation, the Court would be inclined to abstain and defer to the state court. The Court finds that the state court or state appellate court is the proper place to test the validity of the Killingsworth Judgment. The Court will hold Counts V and VII in abeyance pending resolution of Debtor's other claims in state court.
Cf. In re Abboud, 237 B.R. at 781 (citing Pepper v. Litton, 308 U.S. 295 (1939), where the state court found that the judgment was void).
See Dockery v. Cullen Dykman, 90 F. Supp.2d 233 (E.D.N.Y. 2000).
Id. (citations omitted).
Section 1334(c)(1) provides for the Court to exercise discretion in abstaining from hearing a particular proceeding arising under Title 11 or arising in or related to a case under Title 11 "in the interest of justice, or in the interest of comity with State courts or respect for State law." In In re Republic Reader's Service, Inc., 81 B.R. 422, 429 (Bankr.S.D.Tex. 1987), the court set forth factors to consider in determining whether to exercise discretionary abstention as follows:
(1) the effect or lack thereof on the efficient administration of the estate if a Court recommends abstention, (2) the extent to which state law issues predominate over bankruptcy issues, (3) the difficulty or unsettled nature of the applicable state law, (4) the presence of a related proceeding commenced in state court or other nonbankruptcy court, (5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334, (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case, (7) the substance rather than form of an asserted "core" proceeding, (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court, (9) the burden of [the bankruptcy judge's] docket, (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties, (11) the existence of a right to a jury trial, and (12) the presence in the proceeding of nondebtor parties.
The Court notes that a timely motion is not an express requirement for discretionary abstention, and some courts have indicated that the abstention question can be raised by the court sua sponte. InIn re Terracor, 86 B.R. 671, 677 (D.Utah 1988), the court states that:
For the court to harbor doubts regarding the propriety of continuing this proceeding, pending the parties raising the abstention issue, would be inconsistent with judicial responsibility. Matters involving abstention come within the general context of subject matter jurisdiction. Questions involving subject matter jurisdiction may be asserted by any party at any time or raised by a court sua sponte. (citations omitted).
The court goes on to cite several cases standing for the proposition that abstention may be raised by the court sua sponte. Id. at n. 15.
IT IS THEREFORE ORDERED BY THE COURT that Defendants' Motion to Dismiss and Motion Requesting Abstention shall be GRANTED as to Counts I, II, III, IV and VI.
IT IS FURTHER ORDERED BY THE COURT that Counts V and VII of Debtor's Complaint shall be held in abeyance.
This Memorandum shall constitute findings of fact and conclusions of law under Rule 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52(a) of the Federal Rules of Civil Procedure. A judgment based on this ruling will be entered on a separate document as required by Rule 9021 of the Federal Rules of Bankruptcy Procedure and Rule 58 of the Federal Rules of Civil Procedure.
IT IS SO ORDERED.