Opinion
No. 98 C 1808.
February 22, 2001.
MEMORANDUM OPINION AND ORDER
Pending is defendant Getaways, Inc.'s ("Getaways") renewed motion to dismiss plaintiff Mary L. Polis's ("Polis") complaint pursuant to Fed. R's. Civ. Proc. 12(b)(l) for lack of subject matter jurisdietion. For the reasons set forth below this motion is granted (#40-1).
BACKGROUND FACTS
On June 18, 1997 Polis bought a travel package from Getaways. Shortly after, on December 8, 1997, Polis flied a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On February 13, 1998, Polis amended her bankruptcy schedules, identifying potential consumer credit causes of action against Getaways arising out of the pre-petition purchase, and trying to exempt the causes of action in full under the $2,000 Illinois wildcard exemption. However, on April 29, 1998, the bankruptcy court ruled that the amended schedules were defective and that the amended schedules would be deemed filed as of April 29, 1998.
On March 24, 1998, Polis filed suit against Getaways without waiting for the approval of the bankruptcy court on the claimed exemptions, alleging violations of the Truth in Lending Act, 15 U.S.C. § 1601, and the Illinois Consumer Fraud Act, 815 ILCS 505/1, arising out of the purchase of the travel package. Getaways and the bankruptcy trustee then filed timely objections to Polis's claimed exemption. The bankruptcy court sustained Getaways' and the bankruptcy trustee's objections to Polis's claimed exemption, and the district court affirmed the bankruptcy court's ruling.
Polis appealed the district court's ruling in the bankruptcy matter to the Seventh Circuit, in addition with, the district court's dismissal of Polis's claim under rule 12(b)(1) for lack of subject matter jurisdiction (holing the claims were the bankruptcy estate's property at the time Polis filed the lawsuit).
The Seventh Circuit recognized the standing issues present in this case, but did not rule upon it and left it to be "sorted out on remand." However, the Seventh Circuit reversed both the bankruptcy court and the district court dismissal of the lawsuit noting that the dismissal was based on erroneous valuation.
DISCUSSION
Getaways argues that Polis's complaint must be dismissed pursuant to Fed.R.Civ.Proc. 12(b)(1) for lack of subject matter jurisdiction. Because this motion challenges the sufficiency of the allegations of subject matter jurisdiction, the court must accept as true all well-pleaded factual allegations and draw all reasonable inferences. See Freiburger v. Emery Air Charter, Inc., 795 F. Supp. 253, 256 (N.D.Ill. 1992).
Standing is a threshold issue and is fundamental to this Court's subject matter jurisdiction. Lewis v. Continental Bank Corp., 110 5. Ct. 1249, 1253-54 (1990). Standing is indispensable and must exist when the complaint is filed and even if the plaintiff later acquires an interest sufficient to support standing the case must be dismissed. See Friends of the Earth, Inc. v. Laidlaw Env. Servs., Inc., 120 S.Ct. 693, 704 (2000); Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 2136 (1992).
At the time a bankruptcy petition is filed, all the debtor's pre-petition property, including any legal claims, automatically becomes the property of the bankruptcy estate. 11 U.S.C. § 541 (a)(1); Ball v. Nationscredit, 207 B.R. 869, 872 (N.D. Ill. 1997). Accordingly, any claim of Polis against Getaways became property of the bankruptcy estate when Polis filed for bankruptcy on December 8, 1997.
Additionally, once the bankruptcy petition is filed, the debtor no longer has standing to prosecute pre-petition claims and, thereafter, only the trustee can evaluate and administer the property. 11 U.S.C. § 323 (b); Erickson v. Baxter, 94 F. Supp.2d 907, 914 (N.D.Ill. 2000). At this time, the debtor can claim certain property as exempt. However, the property is not automatically exempt and does not automatically revert to the debtor simply by filing an exemption. In fact, the creditors and trustee have thirty days to object to a claimed exemption. 11 U.S.C. § 522 (1); Bankruptcy Rule 4003(b). If no one objects during the thirty days, any later objections are waived. Bankruptcy Rule 4003(b). If there is an objection, the bankruptcy court must rule on the validity of the objection.
The debtor cannot re-claim the property during the intervening period since the exemption does not become final until the time for objecting has passed without any objections or the court rules on any objections. Ball, 207 B.R. at 872; Salzer, 52 F.3d at 711.
Getaways and the trustee filed timely objection to Polis's exemption claim, therefore, the earliest possible date that Polis had the right to file this suit was July 8, 1998, the day of the bankruptcy court ruled on the objections. On March 24, 1998, when in fact, Polis filed the claim she did not have standing to do so.
The Seventh Circuit decision appears to confirm the above finding. Judge Posner states, "The suit was filed before Polis's claim was exempted and thereby taken out of the debtor's estate, which is in the trustee's control, not hers. If the district court therefore had no jurisdiction over her suit when it was filed, then, since the statute of limitations has now run on her claim, barring her from refiling her complaint, she may be blocked from continuing with the suit." See Polis, 217 F.3d. at 901. Even though, the preceding is not the holding of the case, the above suggestions by the Seventh Circuit clearly calls into question Polis's standing to proceed with this case.
Polis maintains that she had to file the suit when she did in order to preserve the cause of action because the statute of limitations would run almost six months later on June 18, 1998. This argument is unconvincing. If Polis had provided proper notice when she filed the amended schedule to claim the exemption on February 13, 1998 then the bankruptcy court could have ruled on the objections by the defendants within the statute of limitations period.
Further, the filing of a bankruptcy petition extends that statute of limitations for the bankruptcy trustee to file an action for up to two years after the voluntary petition is filed. 11 U.S.C. § 108. This extension gave the trustee until December 8, 1999 to file suit under this cause of action. Moreover, if Polis believed that the trustee was not properly administering the claim as an asset of the estate, Polis could have petitioned the bankruptcy court to order the trustee to file suit or abandon the claim. 11 U.S.C. § 105 (a), 554(b); Bankruptcy Rule 6007. Upon the trustee's abandonment of the claim, Polis would have standing to file suit. See Koch Refining v. Farmers Union Cent. Exchange, Inc., 831 F.2d 1339, 1347 n. 9 (7th Cir. 1987). Polis, however, opted not to avail herself of these available remedies under the law. She is bound by her own inaction and this court cannot now afford Polis any relief.
CONCLUSION
For the foregoing reasons, the Defendants motion to dismiss Plaintiff's complaint pursuant to FRCP 12(b)(1) for the lack of subject matter jurisdiction is granted (#40-1). Judgment is entered in favor of the Defendants and against Plaintiff. The captioned cause is hereby ordered terminated upon the docket records of the United States District Court for the Northern District of Illinois, Eastern Division.
SO ORDERED.