Williamson v. Peters et al
MEMORANDUM AND ORDER granting 8 Motion to Dismiss for Lack of Jurisdiction. Signed by District Judge Carlos Murguia on 2/7/18. (hw)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
DARCY D. WILLIAMSON,
Case No. 17-2356-CM
TYLER PETERS, et al.,
MEMORANDUM AND ORDER
Plaintiff Darcy D. Williamson, Trustee for the Bankruptcy Estate of McCorkendale
Construction, Inc. (“McCorkendale”) filed an Adversary Complaint for Professional Negligence in the
United States Bankruptcy Court for the District of Kansas. United States Bankruptcy Judge Dale L.
Sommers recommended the professional negligence matter be transferred to this court and this court
adopted that recommendation on June 20, 2017. (Doc. 3.) The matter is now before this court on
defendants Tyler Peters and Payne & Jones, Chartered’s Motion to Dismiss for Lack of Subject Matter
Jurisdiction (Doc. 8).
For the reasons set forth below, the court finds it lacks subject matter
jurisdiction over the adversary complaint and grants defendants’ motion.
According to the adversary complaint filed April 21, 2017, McCorkendale retained defendants
to represent them in an action in Johnson County, Kansas District Court against Duggan Homes, Inc.,
in which McCorkendale obtained a judgment in the amount of $438,197.36. According to the journal
entry of judgment dated April 28, 2010, this judgment could only be a judgment lien on the real
property that was specifically identified in Exhibit A, which was attached to the journal entry of
judgment. Defendants assisted McCorkendale in obtaining an amended judgment against Duggan
Homes, Inc., in which the restrictions set out in the first journal entry were removed.
On March 10, 2011, defendants registered this judgment as a foreign judgment in Clay County,
Missouri Circuit Court.
Defendants, however, mistakenly registered the first journal entry of
judgment. This first journal entry did not create a judgment lien on a 12-acre parcel of land owned by
Duggan Homes, Inc. in Clay County because this parcel was not expressly listed in the Exhibit A
attached to the first journal entry.
On March 14, 2014, North American Savings Bank, F.S.B. (“NASB”) filed an action against
McCorkendale to quiet title to the 12-acre parcel of land in Clay County.
NASB argued that
McCorkendale’s foreign judgment did not create a valid lien on the 12-acre parcel because the wrong
Kansas judgment was registered. On January 20, 2015 the Clay County Circuit Court held a bench
trial and found in favor of McCorkendale. NASB appealed the decision to the Missouri Court of
McCorkendale filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for
the District of Kansas on March 20, 2015. McCorkendale did not disclose any potential lawsuits in its
On March 8, 2016, the Missouri Court of Appeals reversed the decision of the Clay County
Circuit Court and entered judgment in favor of NASB to quiet title to the 12-acre parcel. The Missouri
Court of Appeals found that because the first journal entry, and not the second, was registered as a
foreign judgment, McCorkendale did not have a lien on the disputed property. In her Adversary
Complaint for Professional Negligence, filed April 21, 2017, plaintiff alleges that as a result of
defendants’ negligence in registering the wrong journal entry of judgment, McCorkendale sustained
damages in excess of $75,000. Plaintiff claims this action arose prior to the Chapter 7 bankruptcy
petition and therefore constitutes property of the bankruptcy estate pursuant to 11 U.S.C. § 541.
Dismissal pursuant to Federal Rule of Civil Procedure 12(b)(1) is appropriate when the court
lacks subject matter jurisdiction over a claim. Plaintiff claims that subject matter jurisdiction exists
and has the burden of establishing it. Port City Props. v. Union Pac. R.R. Co., 518 F.3d 1186, 1189
(10th Cir. 2008). Because federal courts are courts of limited jurisdiction, there is a strong
presumption against federal jurisdiction. Sobel v. United States, 571 F. Supp. 2d 1222, 1226 (D. Kan.
Plaintiff claims that she discovered the existence of a professional negligence claim following
the filing of McCorkendale’s Chapter 7 bankruptcy petition, but that the action arose prior to the filing
of the petition. Plaintiff therefore considers this claim property of the bankruptcy estate and maintains
this court has jurisdiction over the matter under 28 U.S.C. § 1334(a), 28 U.S.C. § 157, and 11 U.S.C. §
542(b). Plaintiff has not alleged federal question jurisdiction under 28 U.S.C. § 1331 or diversity
jurisdiction under 28 U.S.C. § 1332; therefore, if the court finds this action is not the property of the
bankruptcy estate, it no longer has subject matter jurisdiction over the case. See In re Gardner, 913
F.2d 1515, 1518 (10th Cir. 1990) (“When property leaves the bankruptcy estate, however, the
bankruptcy court’s jurisdiction typically lapses . . . .”).
In their motion to dismiss, defendants argue the court lacks subject matter jurisdiction because
McCorkendale’s professional negligence claim is not property of the bankruptcy estate. Defendants
allege that the legal malpractice cause of action did not accrue until after the bankruptcy petition was
The property included in an estate created by the filing of a bankruptcy petition is broadly
defined in 11 U.S.C. § 541(a)(1) to include “all legal or equitable interests of the debtor in property as
of the commencement of the case.” State law defines what assets are considered property of the
bankruptcy estate. Butner v. United States, 440 U.S. 48, 55 (1979) (“Property interests are created and
defined by state law.”). Contingent interests that exist upon filing but do not fully materialize until
after filing have been considered property of the estate. See Segal v. Rochelle, 382 U.S. 375, 380
(1966) (finding a debtor’s tax return that was received postpetition was property of the bankruptcy
estate because it was for business losses suffered prepetition and was “sufficiently rooted in the prebankruptcy past.”). Whether a debtor’s cause of action is property of the estate, however, depends on
if the cause of action accrued prior to the commencement of the bankruptcy case. See In re Smith, 293
B.R. 786, 788 (Bankr. D. Kan. 2003). Because state law defines property rights, courts must look to
state law to determine whether a cause of action accrued prior to the filing of the bankruptcy petition in
order to consider it property of the estate. Id. (“The court assumes that the question here—when did a
cause of action for personal injury accrue?—is controlled by Kansas law.”).
It is unclear what state law applies in the present case. The defendants’ law firm is physically
located in Kansas and defendant Peters is licensed to practice law in Kansas and Missouri. The alleged
malpractice occurred as a result of a foreign judgment registered in Missouri. Regardless, the law
governing when a cause of action for legal malpractice accrues is substantially similar in both states.
See Mo. Ann. Stat. § 516.100 (“[T]he cause of action shall not be deemed to accrue when the wrong is
done or the technical breach of contract or duty occurs, but when the damage resulting therefrom is
sustained and is capable of ascertainment . . . .”); Wright v. Campbell, 277 S.W. 3d 771, 774 (Mo. Ct.
App. 2009) (“[T]he mere occurrence of an injury itself does not necessarily coincide with the accrual
of a cause of action[.]”) (citing Martin v. Crowley, Wade & Milstead, Inc., 702 S.W. 2d 57, 58 (Mo.
banc 1985))); see also K.S.A. § 60–513(b) (“[T]he causes of action listed in subsection (a) shall not be
deemed to have accrued until the act giving rise to the cause of action first causes substantial injury . . .
.”); Dearborn Animal Clinic, P.A. v. Wilson, 806 P.2d 997, 1006 (Kan. 1991) (“The rule applied in
Davies is consistent with the requirement of K.S.A. 60–513(b) that the statute of limitations does not
begin to run until it is reasonably ascertainable that the injury suffered was the result of the defendants’
Defendants argue it is clear from both Kansas and Missouri law that plaintiff’s legal
malpractice cause of action did not accrue until the Missouri Court of Appeals reversed the Clay
County Circuit Court and entered judgment in favor of NASB. Because the judgment was entered
after the bankruptcy petition was filed, defendants claim the legal malpractice action is not property of
the estate and therefore the court lacks subject matter jurisdiction over the case.
Plaintiff argues the claim is property of the estate because it is “sufficiently rooted” in
prepetition conduct. Plaintiff maintains that this court should apply the Tenth Circuit’s “conduct
theory” when determining whether the claim is sufficiently rooted in prepetition conduct. In In re
Parker, the Tenth Circuit adopted and utilized the conduct theory to determine whether a cause of
action against the bankruptcy estate accrued pre or post-bankruptcy petition. 313 F.3d 1267, 1269–70
(10th Cir. 2002). Under the conduct theory—as opposed to the accrual theory—the court must look to
the date of the conduct giving rise to the claim, rather than when the claim accrued under state law.
Plaintiff argues based on Parker, this court should consider the date the malpractice occurred—when
defendants filed the wrong judgment—to determine whether the cause of action is property of the
estate. As the United States Bankruptcy Court for the District of Kansas pointed out, however,
plaintiff’s argument is misguided. In In re Smith, the court distinguished claims against the estate and
claims that bring property into the estate under § 541(a)(1), noting that claims against the estate are
governed by federal law and claims by the estate are considered property as defined by state law. 293
B.R. at 789. The Bankruptcy Court also noted that the Tenth Circuit’s adoption of the conduct theory
in Parker applied only to claims against the estate. See In re Purcell, 573 B.R. 859, 864–65 (Bankr. D.
Kan. 2017) (“At no point in its decision did the Tenth Circuit discuss, let alone differentiate, between
cases involving claims against a bankruptcy estate as opposed to claims a debtor or his estate might
have that would bring assets into the estate. And this Court has found no Tenth Circuit case deciding
that precise issue. As a result, the Court finds that Parker’s analysis is inapposite to the facts of this
case and elects not to adopt the ‘conduct theory’ under these facts.”).
Because the present case involves a claim of the debtor rather than a claim against the estate,
the court declines to utilize the conduct theory and instead looks to state law to determine when the
legal malpractice claim accrued.
Plaintiff also cites this court’s decision in Shields v. U.S. Bank Nat. Ass’n, ND, 05-2073-CM,
2006 WL 3791320 (D. Kan. Dec. 22, 2006), to argue that defendants’ conduct was sufficiently rooted
in prepetition conduct as to consider the cause of action accrued prior to the filing of the bankruptcy
case. In Shields, this court found that under the “unique circumstances of the case” all of the debtor’s
claims, including some that did not mature until after the filing of the bankruptcy case, were property
of the estate because they were sufficiently rooted in prepetition conduct. The facts of Shields,
however, are distinguishable from those in the present case. As noted in Purcell, in order for a claim
to be sufficiently rooted in the debtor’s pre-bankruptcy past, the claim must first exist. 573 B.R. at
867–68. Here, McCorkendale did not have a claim for legal malpractice against defendants until after
the Missouri Court of Appeals reversed the Clay County Circuit Court and entered judgment in favor
of NASB. Although plaintiff wants the court to consider the date defendants registered the incorrect
judgment as the date the claim accrued, it wasn’t until the Missouri Court of Appeals found that
McCorkendale’s foreign judgment did not create a valid lien due to the registration of the wrong
Kansas judgment that McCorkendale was actually damaged.
Therefore, under either Kansas or
Missouri law, McCorkendale’s legal malpractice claim accrued after the bankruptcy petition was filed
and is not property of the bankruptcy estate. Because the claim is not property of the estate, this court
does not have jurisdiction over the legal malpractice case.
For these reasons, the court grants
defendants’ motion and dismisses the case without prejudice.
IT IS THEREFORE ORDERED that defendants’ Motion to Dismiss for Lack of Subject
Matter Jurisdiction (Doc. 8) is granted.
This case is closed.
Dated February 7, 2018, at Kansas City, Kansas.
s/ Carlos Murguia
United States District Judge
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