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In re Hall

United States Bankruptcy Appellate Panel of the Tenth Circuit

July 22, 2013

In re Mark Paul HALL, Debtor.
North American Mortgage Company, and State Street Bank and Trust Company, as Custodian Trustee, Defendants-Appellees, Mark Paul Hall and Christi Anne Hall, Plaintiffs-Appellants, and JP Morgan Chase Bank, N.A., Successor in Interest from the Federal Deposit Insurance Corporation, as receiver for Washington Mutual Bank, F.A., Appellee, and U.S. Bank National Association, As Trustee, Successor in Interest to State Street Bank and Trust, as Trustee for Washington Mutual MSC Mortgage Pass Thru Certificates Series 2002-MS7, Washington Mutual Home Loans, Inc., Litton Loan Servicing, LP, and U.S. Bancorp, Defendants. Bankruptcy No. 11-13797. Adversary No. 11-01169.

Editorial Note:

This decision has been designated as "United States Bankruptcy Appellate Panel for the Tenth Circuit Decisions Without Reported Opinions" table appearing in the Bankruptcy Reporter. Use FI CTA10 BAP Rule 8018-6 for rules regarding the citation of unpublished opinions.

Appeal from the United States Bankruptcy Court for the Western District of Oklahoma.

Before CORNISH, NUGENT, and ROMERO, Bankruptcy Judges.


ROMERO, Bankruptcy Judge.

Mark and Christi Hall (collectively " the Halls" ) appeal the bankruptcy court's order abstaining from hearing their adversary complaint for wrongful foreclosure, negligence, wantonness, unjust enrichment, slander of title, and civil conspiracy. The bankruptcy court abstained because every claim asserted in the adversary complaint was based on facts and issues previously determined against the Halls in state court. The Halls argue the bankruptcy court erred in abstaining based on the Rooker-Feldman doctrine because the party that obtained the state foreclosure judgment was not the party who filed a proof of claim on the underlying note. Finding no abuse of discretion, we AFFIRM.[1]

I. Factual Background

The Halls purchased a home on Bartlett Drive in Oklahoma City, Oklahoma (the " Property" ) in 2001. To fund the purchase, Mark borrowed money from North American Mortgage Company (" NAMC" ) and executed a promissory note to NAMC (the " Note" ). Contemporaneously, the Halls granted NAMC a mortgage on their home (the " Mortgage" ).

NAMC was acquired by Washington Mutual Bank FA (" WaMu" ) in 2002. In March 2002, WaMu assigned the Mortgage to State Street Bank and Trust as Custodian Trustee (" State Street" ).[2]

In February 2007, State Street filed a foreclosure action against the Halls in state court. On March 10, 2009, the state court granted summary judgment in favor of State Street (the " Judgment" ) .[3] The Halls appealed the Judgment to the Oklahoma Court of Civil Appeals (" OCOCA" ). On October 9, 2009, the OCOCA affirmed the Judgment.[4] The Halls raised two issues before the OCOCA: (1) they disputed default on the Note, arguing State Street miscalculated their payment obligation, and (2) they disputed State Street's standing to enforce the Note because it was not indorsed in its favor.[5] The OCOCA rejected both arguments, concluding (1) the record undisputedly supported a finding that the Halls were in default on their monthly payment obligation under the Note and Mortgage, and (2) because neither the validity of the assignment of the Mortgage nor the intent to transfer all rights to State Street was disputed, State Street, being in lawful possession of the Note, was a secured party entitled to foreclose on it.[6]

Mark Hall filed his Chapter 13 petition on July 13, 2011, and his Plan on July 14, 2011.[7] On November 21, 2011, JP Morgan Chase Bank, NA (" Chase" ) filed a proof of claim based on the Mortgage and objected to confirmation of the Debtor's Plan, alleging the Plan did not provide for the curing of prepetition defaults and tried to avoid its lien.[8] That same day, the Halls filed an adversary complaint against NAMC, U.S. Bank National Association (" US Bank" ),[9] State Street, WaMu, Litton Loan Servicing LP, and U.S. Bancorp, asserting claims for negligence, wantonness, unjust enrichment, wrongful foreclosure, slander of title, and civil conspiracy (the " Complaint" ).[10] Chase was not a listed defendant, but it filed an answer as " Successor In Interest From The FDIC, as Receiver For WaMu." [11] State Street, Chase, and NAMC (collectively " the Defendants" ) filed a motion to dismiss the adversary complaint on June 29, 2012. The motion sought dismissal of the Complaint under the Rooker-Feldman doctrine, res judicata or collateral estoppel, as well as for failing to meet applicable pleading standards. The Halls objected to dismissal, arguing (1) Chase did not have standing to file its proof of claim and (2) the Rooker-Feldman doctrine did not apply to bar the bankruptcy court from examining which of the defendants had an interest in the property.[12]

On September 17, 2012, the bankruptcy court held a scheduling conference, and according to the Halls, asked for argument on the motion to dismiss without any warning. The bankruptcy court ruled it would abstain from the adversary in its entirety.[13] On September 24, 2012, the bankruptcy court entered the Abstention Order.[14]

II. Appellate Jurisdiction and Standard of Review

We have jurisdiction over this appeal. Although § 1334(d) of Title 28 of the United States Code prohibits appeals from orders of abstention by courts of appeals,[15] we nonetheless have jurisdiction to review the Abstention Order because (1) this Court is not the court of appeals referred to in § 1334(d) and (2) the Abstention Order is a final order as it fits within the criteria of the collateral order doctrine.[16] Moreover, the Halls timely filed a notice of appeal, and the parties have not elected to have the appeal heard by the United States District Court for the Western District of Oklahoma. [17]

We review a bankruptcy court's order abstaining under § 1334(c)(1) for abuse of discretion.[18] Under the abuse of discretion standard, the appellate court will not disturb the trial court's decision unless it has a definite and firm conviction that the lower court made a clear error of judgment or exceeded the bounds of permissible choice.[19]

III. Discussion

Section 1334(c)(1) of Title 28 of the United States Code grants discretion to a bankruptcy court to abstain from hearing a case " in the interest of justice, or in the interest of comity with State courts or respect for State law." [20] In examining whether to abstain under that provision, courts typically examine twelve non-exclusive factors to determine whether abstention is appropriate:

(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 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 court's] docket, (10) the likelihood that the ...

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