Weaver et al v. Everhome Mortgage Company et al

Filing 38

ORDER denying 33 Everbank's Motion to Dismiss. Signed by Judge D. P. Marshall Jr. on 11/19/2015. (jak)

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS
JONESBORO DIVISION

DANNY L. WEAVER, Individually and on
Behalf of His Minor Children; and
STACEY E. WEAVER, Individually and on
Behalf of Her Minor Children

v.

PLAINTIFFS

No. 3:15-cv-83-DPM

EVERBANK

DEFENDANT
ORDER

1. The Weavers filed a Chapter 13 bankruptcy case in May. This case has

been pending here since March. Everbank moves to dismiss, arguing that
their recent bankruptcy deprives the Weavers of standing to keep pursuing
this dispute about insurance proceeds and their home. Everbank' s fall-back
position is that the trustee is the real party in interest and (in any event) the
Weavers haven't gotten bankruptcy court approval to hire their lawyers in
this case.

2. As the parties' briefs demonstrate, the standing issue has divided
courts. The U.S. Court of Appeals for the Eighth Circuit hasn't decided the
issue yet. Other courts disagree. Compare Davis v. Victor Warren Properties, Inc.,
216 B.R. 898, 902-03 (Bankr. N.D. Ga. 1997) (limiting Chapter 13 debtor's
standing to sue), with Olick v. Parker & Parsley Petroleum Company, 145 F.3d

513, 515-16 (2d Cir. 1998) (finding Chapter 13 debtors have standing to
pursue claims). Everbank is correct that a trustee in any kind of bankruptcy
case "has capacity to sue and be sued." 11 U.S.C. § 323(b). But those words
aren't exclusive. They don't answer whether Chapter 13 debtors-in-possession
of their bankruptcy estate, such as the Weavers, have capacity too.
This Court agrees, in general, with the reasoning of Cable v. Ivy Tech
State College, 200 F.3d 467, 472-74 (7th Cir. 1999), overruled on other grounds by

Hill v. Tangherlini, 724 F.3d 965 (7th Cir. 2013). Unlike a Chapter 7 trustee, the

Weavers' Chapter 13 trustee has no power to liquidate their estate. He's
empowered to look over the Weavers' shoulders as they pay their debts. As
the rules provide, "the trustee or a debtor in possession" may prosecute a
pending action by the debtor or for the estate. FED. R. BANKR. P. 6009
(emphasis added). The nature of the Chapter 13 proceeding gives the Weavers
a sufficient stake in the outcome to satisfy Article III' s injury requirement. City
of Los Angeles v. Lyons, 461 U.S. 95, 101-02 (1983). They have standing.

3. Everbank's Rule 17 argument is a variation on the theme. Both the
trustee and the Weavers are real parties in interest. FED. R. Crv. P.17(a)(l)(G).
They' re communicating- and disputing- in the bankruptcy court about who

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will get how much of any recovery here. The Weavers staying on as plaintiffs
doesn't offend Rule 17. Finally, while bankruptcy court approval of counsel
would be appropriate, it isn't to be expected when the trustee and the debtor
are somewhat at odds over potential proceeds. And this Court isn't persuaded
that it's essential. The bankruptcy court will, at the end of this case, have to
approve how any money flows, including any attorney's fees.

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Everbank's motion to dismiss, Ng 33, is denied.

So Ordered.

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