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In re Brinton

United States District Court, D. Utah, Central Division

February 14, 2018

In re RALPH DAVID BRINTON, Petitioner.

          Judge Joel T. Marker

          MEMORANDUM DECISION AND ORDER

          Dee Benson United States District Judge

         Before the Court is Petitioner Ralph David Brinton (Brinton)'s Motion to Withdraw Reference of Bankruptcy No. 16-27945. [Dkt. 2]. The United States Trustee, as well as Creditors James Wulfenstein, Wulfenstein Construction, Inc., and Wade Frey (collectively “the Wulfenstein Group”), filed objections to the motion. [Dkt. 8, 9, 12]. Brinton filed a response to the objections. [Dkt. 10]. A hearing was held before the Court on February 5, 2018 at which Brinton was represented by Paul Toscano. The United States Trustee was represented by Paul Kuhn and the Wulfenstein Group was represented by James Anderson. Having considered the parties' written and oral arguments and the relevant facts and the law, the Court hereby enters this Memorandum Decision and Order.

         BACKGROUND

         Brinton, acting pro se, filed a chapter 13 bankruptcy petition on September 8, 2016 (the petition date).[1] [Dkt. 2 ¶6]. He voluntarily filed the petition to prevent an imminent foreclosure on his home. [Dkt. 10 ¶2]. Brinton alleges that he was not aware of the debt limits set forth in 11 U.S.C. §109(e) which a petitioner must meet to qualify for bankruptcy protection under chapter 13. [Dkt. 2 ¶6]. It is undisputed that on the petition date, Brinton's debts exceeded the §109(e) limits. [Id.]

         On December 7, 2016, the chapter 13 trustee filed a motion to dismiss or convert to chapter 7, alleging both excessive debts and bad faith on the part of Brinton. [Bankr.Dkt. 27]. Brinton did not file an objection to the chapter 13 trustee's motion. On January 4, 2017, a hearing was held before the bankruptcy court, at which Brinton did not appear. [Bankr.Dkt. 33]. The Bankruptcy Court found that Brinton had failed to disclose all of his creditors; that his “case was not filed in good faith;” and that cause existed under §1307(c) to convert his petition to a chapter 7 case. [Dkt. 3-5]. On January 5, 2017, the bankruptcy court entered its order converting Brinton's chapter 13 petition to one under chapter 7. [Bankr.Dkt. 35].

         Brinton thereafter hired Paul Toscano as his bankruptcy counsel, who on August 28, 2017, filed a motion to dismiss for lack of jurisdiction. [Bankr.Dkt.107; Dkt. 2 ¶6]. The United States Trustee and the Wulfenstein Group each filed objections to the motion. [Bankr.Dkt. 113 & 114]. A hearing was held on September 27, 2017. [Bankr.Dkt. 117]. The bankruptcy court found that 11 U.S.C. §109(e) is not a jurisdictional provision but rather one governing the eligibility of an individual to file a petition under chapter 13. [Id.] Accordingly, it ruled that while Brinton's petition failed to meet the requirements of chapter 13, it was sufficient to invoke the court's jurisdiction and reference under 28 U.S.C. §1334(b) and 28 U.S.C. §157(a) and (b) and therefore the conversion to a chapter 7 petition was proper. [Id.]

         Brinton has now filed this motion seeking a ruling from this Court on whether or not the bankruptcy court had jurisdiction to convert his voluntary chapter 13 petition to an involuntary chapter 7 petition. Brinton contends this constitutes a question of first impression in this district.

         PROCEDURAL POSTURE

         An initial question is presented as to whether Brinton's argument should be fashioned as a motion to withdraw reference addressed directly to this Court as he has done, or whether he should have filed it as an appeal of the bankruptcy court's order denying his motion to dismiss. Brinton asserts that because his position is that this Court and the bankruptcy court lack jurisdiction over this matter, it would be inconsistent for him to file an appeal under 28 U.S.C. §158. Additionally, he contends that a motion before this Court is mandatory under 28 U.S.C. §157(d) because the issue presented requires consideration of both Title 11 and other laws allegedly affecting interstate commerce, specifically Title 28 U.S.C. §§157 (a) & (b), 1331 & Title 28 U.S.C. §157(d) provides:

The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.

         For mandatory withdrawal of a matter, one must prove that its resolution requires a court's consideration of non-bankruptcy statutes that affect interstate commerce. The trustee argues that the non-bankruptcy statutes involved here are jurisdictional and not of the type contemplated in §157(d). Title 28, entitled “Judiciary and Judicial Procedure” governs the federal judicial system rather than being directed toward interstate commerce. The trustee also asserts that the Tenth Circuit Court of Appeals has consistently found that a court has the threshold jurisdiction to determine whether it has jurisdiction over a matter. Therefore, the trustee argues that the bankruptcy court can properly determine whether it has jurisdiction over the issue presented and it therefore need not be mandatorily withdrawn to this Court under §157(d).

         Brinton alleges that even if withdrawal of the issue presented in this motion to this Court is not mandatory, it should be permitted because: (1) it raises a question of first impression that relates to this Court's authority over and reference of bankruptcy cases to the bankruptcy court; and (2) it seeks an order of dismissal without a discharge of Brinton's chapter 13 filing which will effect his position and rights going forward.

         The Court agrees and finds that cause exists to permissively withdraw the issue pursuant to §157(d) for consideration by this Court as a motion to withdraw the reference. However, whether the Court were to consider it as a motion or as an appeal, ...


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