DAVIS et al v. WEST
Filing
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MEMORANDUM OPINION AND ORDER signed by CHIEF JUDGE WILLIAM L. OSTEEN, JR., on 9/30/2013, that for the foregoing reasons, this court AFFIRMS the Bankruptcy Court's Order Denying Motion to Dismiss Bankruptcy Case, Motion to Intervene and Motion to Stay Proceedings. (Lloyd, Donna)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
MARY ELLEN BRANNON THOMPSON,
Debtor,
CAROLYN DAVIS and CALVIN
BRANNON,
Appellants,
v.
MICHAEL D. WEST,
Appellee.
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1:12CV380
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
Presently before this court is the appeal of Calvin Brannon
and Carolyn Davis (“Appellants”) from the Order Denying Motion
to Dismiss Bankruptcy Case, Motion to Intervene and Motion to
Stay Proceedings entered by the Honorable United States
Bankruptcy Judge Catherine R. Aron on February 15, 2012.
The
parties have both briefed the issues on appeal (Appellants‟
Brief (Doc. 8); Appellee‟s Brief (Doc. 10).
This matter is now
ripe for resolution, and for the reasons set forth herein, the
Bankruptcy Court‟s order will be affirmed.
I.
BACKGROUND
Appellants are siblings of the Debtor, Mary Ellen Brannon
Thompson.
On February 8, 2012, Appellants – and three of their
siblings – filed motions to intervene, to dismiss the voluntary
bankruptcy petition, and to stay the sale of certain assets.
Those motions were opposed by the trustee, the bankruptcy
administrator, and Bryan C. Thompson, the guardian of the
Debtor‟s estate.
The Bankruptcy Court held a hearing on
February 14, 2012, to address the motions.
Judge Aron denied
each motion by written order the following day.1
Appellants appeal from the Bankruptcy Court‟s order denying
their motions based on collateral estoppel, the Rooker-Feldman
doctrine, and their failure to demonstrate standing.
Their
principal argument is that the Bankruptcy Court erred in finding
that Bryan C. Thompson had authority to file the voluntary
bankruptcy petition on their sister‟s behalf.2
The following
facts are relevant to Bryan C. Thompson‟s appointment as
guardian of the Debtor‟s estate.
On April 4, 2007, Leslie Poe Parker (“Ms. Parker”), the
Debtor‟s niece, filed a Petition for Adjudication of
1
The motion to intervene was granted only to extent
required to permit Appellants to present their contentions
before the Bankruptcy Court.
2
Bryan C. Thompson, the guardian of the estate, is not
related to Mary Ellen Brannon Thompson, the Debtor.
-2-
Incompetence and Application for Appointment of Guardian with
the Superior Court of Forsyth County, North Carolina.
(Doc. 2-6) at 1-3.)3
(See
In addition to other required information,
the petition included the names and addresses of the Debtor‟s
siblings, including both Appellants.
Gen. Stat. § 35A-1106.
See id.; see also N.C.
Ms. Parker recommended that she be
appointed as the Debtor‟s general guardian.
The Superior Court
scheduled a hearing on the petition for April 26, 2007, and
informed each of the individuals listed in the petition of that
hearing.
(See (Doc. 2-6) at 11 (“Notice of Incompetency Hearing
for Appointment of a Guardian”).)
Attorney Fred Flynt was
appointed guardian ad litem for the Debtor.4
Assistant Clerk of Superior Court Theresa Hinshaw held the
scheduled hearing on April 26 after due and proper notice.5
A
number of people attended that hearing, including both
Appellants.
The Debtor was ultimately adjudicated incompetent.
3
All citations in this Order to documents filed with the
court refer to the page numbers located at the bottom right-hand
corner of the documents as they appear on CM/ECF.
4
Under North Carolina law, an attorney is appointed as
guardian ad litem for the respondent in an incompetency
proceeding upon the filing of the petition. N.C. Gen. Stat.
§ 35A-1107.
5
The clerk of superior court has original jurisdiction over
incompetency proceedings. N.C. Gen. Stat. § 35A-1103.
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The parties dispute the date of adjudication.
Assistant
Clerk Hinshaw‟s notes indicate that the Debtor was adjudicated
incompetent on April 26 and that the parties were in agreement
that a disinterested person should be appointed guardian.6
2-6 at 12.)
(Doc.
Appellants contend that the Debtor was not
adjudicated incompetent until May 3.
On May 1, 2007, the Superior Court of Forsyth County
appointed Bryan C. Thompson guardian of the Debtor‟s estate.
(Doc. 3-5.)
Although the formal incompetency order was not
issued until May 3, the letters of appointment list April 26,
2007, as the date of adjudication.
(Docs. 3-2, 3-4.)
Each
letter is signed by a deputy clerk of the Superior Court under
that court‟s seal.
Pursuant to his appointment, Bryan C.
Thompson was “fully authorized and entitled under the laws of
North Carolina to receive, manage and administer the property,
estate and business affairs of [the Debtor].”
(Docs. 3-2, 3-4.)
Assistant Clerk Hinshaw issued the Order on Petition for
Adjudication of Incompetence on May 3, 2007, in which she found
by clear, cogent, and convincing evidence that the Debtor was
incompetent.
(Doc. 3-6.)
Under North Carolina law, an order
adjudicating incompetence may first be appealed to the
6
Appellants contend, without explanation, that the
statement regarding the disinterested guardian is “evidence that
the decision was not neutral and detached.” (Appellants‟ Brief
(Doc. 8) at 15.) This court is not sure why that would be true.
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appropriate superior court for a de novo hearing and then to the
state court of appeals.
N.C. Gen. Stat. § 35A-1115.
The record
includes no evidence that the May 3 order was ever appealed.
On September 11, 2011, Bryan C. Thompson filed a voluntary
bankruptcy petition on behalf of the Debtor in his role as
guardian of her estate.
The bankruptcy petition listed a number
of secured and unsecured creditors as well as the Debtor‟s real
estate holdings.
The bankruptcy case was converted from a
Chapter 11 proceeding to a Chapter 7 proceeding on November 18,
2011.
II.
STANDARD OF REVIEW
This court reviews a bankruptcy court‟s legal
determinations de novo and factual determinations for clear
error.
See Terry v. Meredith (In re Stephen S. Meredith, CPA,
P.C.), 527 F.3d 372, 375 (4th Cir. 2008).
III. ANALYSIS
Appellants challenge the state-court proceedings through
which the Debtor was adjudicated incompetent and Bryan C.
Thompson was appointed guardian of her estate.
For the reasons
that follow, this court finds that the Bankruptcy Court
appropriately denied each of Appellants‟ motions.
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(1)
Standing
The Bankruptcy Court found that Appellants did not have
standing to pursue their motions.
Appellants do not address
this finding in their brief on appeal.
To establish standing, a
party must demonstrate three elements: (1) an “injury in fact,”
(2) a “causal connection between the injury and the conduct
complained of,” and (3) a likelihood that the injury would be
redressed by a favorable decision.
Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-61 (1992).
“The party invoking
federal jurisdiction bears the burden of establishing these
elements.”
Id. at 561.
These elements apply to the same extent
in bankruptcy cases as in other federal cases.
See In re Deist
Forest Prods., Inc., 850 F.2d 340, 341 (7th Cir. 1988); In re
Mann, No. 09-80494C-7D, 2011 WL 766944, at *1-2 (Bankr. M.D.N.C.
2011).
An individual‟s “desire to protect the rights of others
does not permit a court to adjudicate the claim.”
Forest Prods., 850 F.2d at 341.
In re Deist
Instead, a party “must assert
his own legal rights and interests and cannot rest [his or her]
claim or motion on the legal rights or interests of third
parties.”
In re Mann, 2011 WL 766944, at *2.
In essence, Appellants seek to dismiss or stay the
voluntary bankruptcy petition on behalf of their sister, the
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Debtor, by challenging the incompetency and guardianship
proceedings that led to the appointment of Bryan C. Thompson as
the guardian of her estate.
They have presented no evidence of
any interest they may have in the bankruptcy estate other than
as presumptive heirs of the Debtor under North Carolina law.7
Neither Appellant is listed as a creditor, nor has either
Appellant filed a proof of claim.
This court agrees with the
Bankruptcy Court that Appellants‟ status as siblings and
presumptive heirs of the Debtor is insufficient to confer
standing to pursue their motions to dismiss, stay, and intervene
in their sister‟s bankruptcy case.
Although not directly on point, this conclusion is
reinforced by the standing requirements imposed on those who
seek to appeal from a bankruptcy court‟s order that did not
arise from their own motion.
Such appellants do not have
standing unless they have been “directly and adversely affected
pecuniarily by the order.”
Fid. Bank, Nat‟l Ass‟n v. M.M. Grp.,
Inc., 77 F.3d 880, 882 (6th Cir. 1996).
“Only when the order
directly diminishes a person‟s property, increases his burdens,
or impairs his rights will he have standing to appeal.”
7
Id.;
Appellants suggest that they have either “a direct
ownership interest in part of the real property affect[ed] by
the proposed sale” or “an interest in the property by virtue of
being next of kin and presumptive heirs” of the Debtor. (Doc.
2-5 at 7.) Neither Appellant has presented any evidence of a
direct ownership interest in any of the Debtor‟s property.
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see also Travelers Ins. Co. v. H.K. Porter Co., 45 F.3d 737, 741
(3d Cir. 1995) (noting that the standing requirement in
bankruptcy appeals is “more restrictive” than Article III
standing).
Here, as previously noted, Appellants have presented
no evidence or argument that the Bankruptcy Court‟s order
denying their motions has diminished their property, increased
their burdens, or impaired their rights.
(2)
Rooker-Feldman Doctrine
The Bankruptcy Court also held that Appellants‟ arguments
are barred by the Rooker-Feldman doctrine.
To the extent – if
any – Appellants have standing to pursue their motions, this
court agrees.
Under the Rooker-Feldman doctrine, “lower federal
courts generally do not have jurisdiction to review state-court
decisions; rather, jurisdiction to review such decisions lies
exclusively with superior state courts and, ultimately, the
United States Supreme Court.”
Plyler v. Moore, 129 F.3d 728,
731 (4th Cir. 1997); see also Stratton v. Mecklenburg Cnty.
Dep‟t of Soc. Servs., No. 11-2131, 2013 WL 2364587, at *8 (4th
Cir. May 31, 2013) (per curiam) (“Except in limited
circumstances not applicable here, the only federal court with
the authority to reverse or modify the judgments of state courts
is the Supreme Court itself.”); Washington v. Wilmore, 407 F.3d
274, 279 (4th Cir. 2005) (“The doctrine preserves federalism by
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ensuring respect for the finality of state court judgments, and
it preserves the separation of powers by ensuring that federal
district courts exercise only original jurisdiction and that
review of state court judgments is conducted only by the United
States Supreme Court, as Congress has instructed.”).
The
doctrine “bars not only direct review of issues actually decided
by the state court, but also consideration of those claims which
are „inextricably intertwined‟ with state court decisions.”
Brown & Root, Inc. v. Breckenridge, 211 F.3d 194, 198 (4th Cir.
2000).
Its application is confined to cases “brought by state-
court losers complaining of injuries caused by state-court
judgments rendered before the district court proceedings
commenced and inviting district court review and rejection of
those judgments.”
Exxon Mobil Corp. v. Saudi Basic Indus.
Corp., 544 U.S. 280, 284 (2005); see also Davani v. Va. Dep‟t of
Transp., 434 F.3d 712, 718-19 (4th Cir. 2006).
The Superior Court of Forsyth County appointed Bryan C.
Thompson guardian of the Debtor‟s estate on May 1, 2007.
Based
on the record before this court, that appointment was never
challenged in the state court.8
As guardian of the estate, he
8
In addition to appeals from orders adjudicating
incompetence, see N.C. Gen. Stat. § 35A-1115, the guardian, ward,
or any other interested person “may petition for restoration of
the ward to competency by filing a motion.” N.C. Gen. Stat.
§ 35A-1130.
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had standing to file a voluntary bankruptcy petition under 11
U.S.C. § 301 on behalf of the Debtor.
See Fed. R. Bankr. P.
1004.1.
Appellants seek to avoid this conclusion by attacking the
validity of the incompetency and guardianship proceedings on a
number of grounds.
The issues presented by their arguments can
be categorized as follows: (1) whether Ms. Parker had standing
to file the petition for incompetency; (2) whether the petition
should have been barred by Ms. Parker‟s alleged intentional
misrepresentations; (3) whether the Superior Court acquired
jurisdiction over the Debtor, including whether Mr. Flynt was
appropriately appointed as her guardian ad litem; (4) whether
Bryan C. Thompson could be appointed guardian of the estate when
he was not listed in the petition; (5) whether his appointment
was otherwise improper because the incompetence order was not
entered until May 3; (6) whether sufficient evidence was
presented at the hearing to support a finding of incompetence;
and (7) whether Assistant Clerk Hinshaw otherwise adhered to the
appropriate state law procedures.
This court finds that the Rooker-Feldman doctrine bars
consideration of all such arguments.
Before the Bankruptcy
Court could have granted Appellants the relief they seek, it
would have had to find that the Superior Court of Forsyth
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County‟s appointment of Bryan C. Thompson as guardian of the
estate was improper.
This court also finds that any procedural
irregularity resulting from the issuance of the order
adjudicating the Debtor incompetent two days after the
appointment of Bryan C. Thompson is insufficient to permit a
federal court to set aside or ignore that appointment.
Accordingly, the Bankruptcy Court appropriately determined
that it did not have jurisdiction to consider Appellants‟
arguments related to the incompetency and guardianship
proceedings.
“If the decision was wrong, that did not make the
judgment void, but merely left it open to reversal or
modification in an appropriate and timely appellate proceeding.
Unless and until so reversed or modified, it would be an
effective and conclusive adjudication.”
Rooker v. Fid. Trust
Co., 263 U.S. 413, 415 (1923); see also Mann v. Boatright, 477
F.3d 1140, 1146 (10th Cir. 2007) (“Even if the probate court‟s
decision was wrong, that does not make its judgment void, but
merely leaves it „open to reversal or modification in an
appropriate and timely appellate proceeding.‟” (quoting Exxon
Mobil Corp., 544 U.S. at 284)); Freeze v. Veterans Admin., No.
1:00CV00963, 2001 WL 34013619, at *4 (M.D.N.C. Mar. 30, 2001)
(“The gist of the action is that the state courts of North
Carolina have issued allegedly erroneous orders in determining a
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proper guardian for plaintiff‟s father . . . . It is well
established, however, that the federal courts lack subject
matter jurisdiction over cases that merely seek review of state
court decisions.”), aff‟d, 20 F. App‟x 137 (4th Cir. 2001).9
IV.
CONCLUSION
For the foregoing reasons, this court AFFIRMS the
Bankruptcy Court‟s Order Denying Motion to Dismiss Bankruptcy
Case, Motion to Intervene and Motion to Stay Proceedings.
This the 30th day of September, 2013.
________________________________________
United States District Judge
9
Because this court finds that Appellants‟ arguments are
barred by the Rooker-Feldman doctrine, it does not address
whether those same arguments would also be barred by collateral
estoppel.
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