Reisinger v. Seneca Speciality Insurance Company

Filing 79

MEMORANDUM and ORDER ADOPTING the Report and Recommendation of MJ Mannion; OVVERULING pltf's objectionss 77 ; GRANTING 44 dft's Motion for Summary Judgment; Clerk of Court is directed to CLOSE case. Signed by Honorable James M. Munley on 6/14/11 (sm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
JOSEPH R. REISINGER,
Plaintiff

:
No. 3:07cv1221
:
:
(Judge Munley)
v.
:(Magistrate Judge Mannion)
:
SENECA SPECIALTY
:
INSURANCE COMPANY,
:
Defendant
:
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
MEMORANDUM
Before the court for disposition is Magistrate Judge Malachy E.
Mannion’s report and recommendation that suggests granting Defendant
Seneca Specialty Insurance Company’s (hereinafter “Seneca” or
“defendant”) motion for summary judgment. Plaintiff Joseph R. Reisinger
objects to the report and recommendation. The matter has been fully
briefed and is ripe for disposition.
Background
The general background facts are largely not at issue in the instant
case. This issue at hand is one of law, that is, whether the plaintiff
possessed standing to bring this suit when it was filed on January 24,
2007.
In January 2005, plaintiff suffered a fire loss at an office/apartment
building located at 448-450 South Franklin Street, Wilkes-Barre,
Pennsylvania. Plaintiff owned the property and had it covered with a
property insurance policy issued by Seneca.
Plaintiff filed a notice of loss with the defendant. The defendant
inspected the property and adjusted the loss. On February 14, 2005,
defendant advanced $25,000 to plaintiff pending the final adjustment. On
April 15, 2005, an adjuster working for the defendant sent plaintiff a
Statement of Loss, Valuation and Co-Insurance Schedule indicating that

the net amount of the claim as adjusted was $155,148.46. Defendant
issued plaintiff a check for $130,148.46 on April 5, 2005. The check
indicated that it was “the final payment of claim.” Plaintiff cashed this
check but sent a letter to the adjuster indicating that he did not accept the
check as final payment.
Plaintiff on April 20, 2005 filed a Chapter 7 Bankruptcy petition.
By orders dated December 29, 2005 and March 15, 2006, the
bankruptcy judge ordered the trustee to abandon all of plaintiff’s real estate
pursuant to 11 U.S.C. § 554 including pre-petition rental properties.
Plaintiff instituted the instant action on January 24, 2007 by filing a
writ of summons in the Court of Common Pleas of Luzerne County,
Pennsylvania. The defendant removed the case to this court on July 6,
2007.
Plaintiff’s complaint asserts that the defendant did not properly adjust
the fire loss claim. It seeks the full value of the fire loss claim and
damages for breach of contract and insurance bad faith. At the time that
the complaint was filed, plaintiff’s bankruptcy was still pending. Defendant
has moved for summary judgment. Magistrate Judge Mannion suggests
that plaintiff did not have standing at the time he filed suit and he
recommends that the court grant the defendant’s summary judgment
motion. The plaintiff filed objections to the report and recommendation
bringing the case to its present posture.
Jurisdiction
This Court has jurisdiction pursuant to the diversity jurisdiction
statute, 28 U.S.C. § 1332. The plaintiff is citizen of Pennsylvania and the
defendant is an Arizona corporation with a principal place of business in

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Phoenix, Arizona. (Doc. 1 - 4, Compl. ¶ 1 - 2). Because we are sitting in
diversity, the substantive law of Pennsylvania shall apply to the instant
case. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing
Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938)).
Standard of review
In disposing of objections to a magistrate judge’s report and
recommendation, the district court must make a de novo determination of
those portions of the report to which objections are made. 28 U.S.C. § 636
(b)(1)(C); see also Henderson v. Carlson, 812 F.2d 874, 877 (3d Cir.
1987). This court may accept, reject, or modify, in whole or in part, the
findings or recommendations made by the magistrate judge. The district
court judge may also receive further evidence or recommit the matter to the
magistrate judge with instructions. Id.
The report and recommendation addresses the defendant’s motion
for summary judgment. Granting summary judgment is proper if the
pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to judgment as a
matter of law. See Knabe v. Boury, 114 F.3d 407, 410 n.4 (3d Cir. 1997)
(citing FED. R. CIV. P. 56(c)). “[T]his standard provides that the mere
existence of some alleged factual dispute between the parties will not
defeat an otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).
In considering a motion for summary judgment, the court must
examine the facts in the light most favorable to the party opposing the

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motion. International Raw Materials, Ltd. v. Stauffer Chemical Co., 898
F.2d 946, 949 (3d Cir. 1990). The burden is on the moving party to
demonstrate that the evidence is such that a reasonable jury could not
return a verdict for the non-moving party. Anderson, 477 U.S. at 248
(1986). A fact is material when it might affect the outcome of the suit
under the governing law. Id. Where the non-moving party will bear the
burden of proof at trial, the party moving for summary judgment may meet
its burden by showing that the evidentiary materials of record, if reduced to
admissible evidence, would be insufficient to carry the non-movant's
burden of proof at trial. Celotex v. Catrett, 477 U.S. 317, 322 (1986).
Once the moving party satisfies its burden, the burden shifts to the
nonmoving party, who must go beyond its pleadings, and designate
specific facts by the use of affidavits, depositions, admissions, or answers
to interrogatories showing that there is a genuine issue for trial. Id. at 324.
Discussion
The controversy involved in this case centers on the plaintiff’s
bankruptcy proceeding, which was commenced with the filing of a
voluntary petition in bankruptcy. Such a filing creates a bankruptcy estate.
11 U.S.C. § 541(a); In re O’Dowd, 233 F.3d 197, 202 (3d Cir. 2000).
Under the Bankruptcy Code, the estate:
“is comprised of all the following property,
wherever located and by whomever held:
(1) except as provided in subsections (b) and
(c)(2) of this section, all legal or equitable interests
of the debtor in property as of the commencement
of the case.
(7) Any interest in property that the estate
acquires after the commencement of the case.
11 U.S.C. § 541(a).
“Accordingly, with limited exceptions, . . . the estate encompasses

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everything that the debtor owns upon filing a petition, as well as any
derivative rights, such as property interest the estate acquires after the
case commences.” In re O’Dowd, 233 F.3d at 202. The definition of
estate property is interpreted broadly and includes tangible and intangible
property including causes of actions. Interated Solutions, Inc. v. Service
Support Specialities, Inc., 124 F.3d 487, 490 - 91 (3d Cir. 1997); see also
Segal v. Rochelle, 382 U.S. 375, 379–80 (1966) (indicating that where the
pre-bankruptcy activities of the debtor give rise to a cause of action, that
cause of action is an asset of the bankruptcy estate.)
Generally, the defendant’s argument is that plaintiff lacks standing to
institute the instant action because the breach of contract and bad faith
insurance claims belong to the bankruptcy estate.1 Where a lawsuit is
property of a bankruptcy estate, the bankruptcy trustee must bring suit,
rather than the debtor. The report and recommendation agrees with the
defendant, and suggests that at the time plaintiff filed this case, he lacked
standing.
Although plaintiff filed a forty-page brief/objection to the report and
recommendation, his position is rather simple. First, he claims that he had
standing to file the suit initially because the insurance policy was not a part
of the bankruptcy estate. He held ownership of the policy in trust for the
benefit of the named mortgagee-loss-payee. Where a debtor holds
property in trust for another, the trust property itself is excluded from the
1

Defendant also asserts that plaintiff never disclosed his assets in the
policy or his rights arising from the policy to the Bankruptcy Court. Thus,
defendant argues that judicial estoppel should apply and bar plaintiff’s
claims. We will not address this issue as we find that the standing issue is
dispositive of the case.
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bankruptcy estate. Second, he claims that, regardless, the bankruptcy
trustee abandoned the “plaintiff’s former interest” in the insurance claim on
March 15, 2006 when the trustee abandoned forty-one real estate
properties, including the property covered by the insurance policy at issue.
This abandonment occurred prior to the filing of the instant lawsuit;
therefore, plaintiff had standing to bring suit. Lastly, plaintiff argues that if
his “former interest” in the insurance claim was not abandoned on March
15, 2006, it was certainly abandoned when the trustee filed his amended
final report on October 7, 2010. Therefore, as of October 2010, plaintiff
argues, he definitely had standing to bring the lawsuit.
We disagree with the plaintiff’s objections, and we will address them
in turn.
I. Plaintiff as trustee
Plaintiff initially argues that the insurance policy lawsuit was never
properly part of the bankruptcy estate. He asserts that he held the
ownership of the policy in trust for the benefit of the named mortgageeloss-payee.2 Where a debtor holds property in trust for another, the trust
property itself is excluded from the debtor’s bankruptcy estate. Thus, the
policy and claim were never part of the plaintiff’s Chapter 7 estate.
We reject plaintiff’s argument. He cites to nothing in the record to
indicate that he sued in his capacity as trustee. In fact, the complaint does
not list the plaintiff as suing as a trustee. (See Doc. 1 - 4, Compl. ¶ 1 (The
Plaintiff, Joseph R. Reisinger, is a Pennsylvania resident, residing at 444
South Franklin Street, Wilkes-Barre, Luzerne County, Pennsylvania.”).

2

Plaintiff’s objections/brief do not reveal the name of the “named
mortgagee-loss-payee.” Presumably, it is some financial institution.
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Additionally, he cites to no law to support his position.
Assuming for the sake of argument that plaintiff would, in fact, hold
the insurance proceeds in trust for the mortgagee-loss-payee, his
argument is, nonetheless, unconvincing. The asset at issue here is more
than the insurance policy itself. It is also the lawsuit connected to the
insurance policy. The complaint seeks an amount in excess of the
insurance proceeds. For example, plaintiff indicates that he was damaged
personally by the breach of contract in an amount in excess of $50,000.
(Id. ¶ 26). These are damages for breach of the insurance contract, not
the proceeds of the insurance policy itself. Plaintiff does not indicate how
these damages for his own injuries would be held in “trust” for the benefit
of anyone but himself. Likewise, the complaint seeks damages for bad
faith under 42 PA. CON. STAT. ANN. § 8371. Damages under this bad faith
statute are awarded to the insured. Here, plaintiff was the insured. He
does not indicate how these bad faith damages would have been held in
trust for any other entity. Plaintiff’s argument that he held these claims in
trust for another entity is thus wholly unavailing and is rejected by the
court.
Accordingly, plaintiff’s objection based on the assertion that he held
the asset at issue in trust will be overruled.
II. Abandonment, March 2006
Much of the parties’ arguments deal with whether the bankruptcy
trustee “abandoned” the property at issue. When an asset is abandoned
title returns to the debtor and, where the asset is a lawsuit, the debtor then
has the right to sue. Krank v. Utica Mut. Ins. Co., 109 B.R. 668, 669
(E.D.Pa.) (citing First Nat'l Bank of Jacksboro v. Lasater, 196 U.S. 115

7

(1905)), aff'd, 908 F.2d 962 (3d Cir.1990).
With regard to “abandonment” the Bankruptcy Code provides as
follows:
(a) After notice and a hearing, the trustee may
abandon any property of the estate that is
burdensome to the estate or that is of
inconsequential value and benefit to the estate.
(b) On request of a party in interest and after notice
and a hearing, the court may order the trustee to
abandon any property of the estate that is
burdensome to the estate or that is of
inconsequential value and benefit to the estate.
(c) Unless the court orders otherwise, any property
scheduled under section 521(1) of this title not
otherwise administered at the time of the closing of
a case is abandoned to the debtor and
administered for purposes of section 350 of this
title.
(d) Unless the court orders otherwise, property of
the estate that is not abandoned under this section
and that is not administered in the case remains
property of the estate.
11 U.S.C. § 554.
By order dated December 29, 2005, the bankruptcy judge ordered
that “the Trustee shall abandon the real estate of the Debtor pursuant to 11
U.S.C. § 554, with the exception of the parcels secured by claims held by
M & T Bank.” (Doc. No. 57, Ex. 1, Report p. 11). Plaintiff argues that this
abandonment included the building involved in the insurance dispute as
well as all assets connected to the property such as appliances and
insurance policies. Plaintiff provides no caselaw in support of this position,
and we are unconvinced.3
The law provides that a debtor’s interest in real property is separate

3

Rather than citing to caselaw or relevant statutory provisions in
support of this portion of his objections, plaintiff relies upon his
“discussions late last week with three attorneys who are frequently in
Bankruptcy Court.” (Doc. 77, Pl. Objections 28).
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from his interest in an insurance proceeds related to damage to the
property. In re CS Associates, 161 B.R. 144, 147 (Bankr. E.D. Pa. 1993)
(citing In re Gorman’s Estate, 184 A. 86, 87 (Pa. 1936) (an insurance
policy is a personal contract that exists between the insurer and insured;
the building itself is not insured). “[I]nsurance contracts are personal
contracts of indemnity and . . . they protect the insured's interest in the
property, but . . . they are not an indemnity on the property itself.” Id. We
agree with the report and recommendation, where the magistrate judge
notes that in the abandonment order “[n]o reference is made . . . to
abandonment of the fire insurance policy which covered the property, the
policy proceeds, or any legal claims related thereto.” (Doc. 73, Report and
Recommendation at 15). The report and recommendation further notes:
“[T]he plaintiff, who made the motion to compel abandonment, failed to
make any request to abandon these assets.” (Id. at n.8). Accordingly, we
find that the insurance proceeds and claims arising from the insurance
policy were not abandoned by the trustee in March 2006, and plaintiff’s
objections on this ground will be overruled.
III. Abandonment October 2010
Finally, plaintiff claims that he had standing as of October 7, 2010
when the trustee filed his amended final report. We find this argument
unpersuasive because we must examine whether standing existed at the
time that the complaint was filed, not whether plaintiff possessed standing
three and three quarters years later.
The United States Supreme Court has explained the importance of
standing as follows: “We begin with the most basic doctrinal principles:
Article III, § 2, of the Constitution restricts the federal ‘judicial Power’ to the

9

resolution of ‘Cases’ and ‘Controversies.’ That case-or-controversy
requirement is satisfied only where a plaintiff has standing.” Sprint
Commc’ns Co., L.P. v. APCC Svcs, Inc., 554 U.S. 269, 273 (2008).
“Standing is determined as of the time the action is brought.” Nova Health
Sys. v. Gandy, 416 F.3d 1149, 1155 (10th Cir. 2005) (citing Smith v.
Sperling, 354 U.S. 91, 93 n. 1 (1957)). “[I]t is commonly said that standing
must exist at the time an action is filed. Post-filing events that supply
standing that did not exist on filing may be disregarded[.]” Wright and
Miller, 13A § 3531, pg. 7-9.; Utah Ass’n of Counties v. Bush, 455 F.3d
1094, 1101 and explanation in n.6 (10th Cir. 2006). Accordingly, whether
the actions of the trustee provided the plaintiff with standing years after the
filing of the complaint is irrelevant to our analysis.4 Plaintiff’s objections on
this ground will be overruled.
Conclusion
For the foregoing reasons, the plaintiff’s objection will be overruled
and the magistrate judge’s report and recommendation will be adopted.
An appropriate order follows.

4

Moreover, “a cause of action that was never scheduled cannot be
abandoned to the debtor.” Anderson v. Acme Mkts., Inc., 287 B.R. 624,
629 (E.D. Pa. 2002). As discussed above in Section I, the plaintiff
discusses the insurance proceeds as it pertains to the bankruptcy, but not
the additional claims raised in the lawsuit. There is no indication that the
lawsuit was ever scheduled.
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IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
JOSEPH R. REISINGER,
Plaintiff

:
No. 3:07cv1221
:
:
(Judge Munley)
v.
:(Magistrate Judge Mannion)
:
SENECA SPECIALTY
:
INSURANCE COMPANY,
:
Defendant
:
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
ORDER
AND NOW, to wit, this 14th day of June 2011, it is hereby ordered as
follows:
1) Magistrate Judge Mannion’s report and recommendation
(Doc. 73) is hereby ADOPTED;
2) Plaintiff’s objections (Doc. 77) are OVERRULED;
3) Defendant’s motion for summary judgment (Doc. 44) is
GRANTED; and
4) The Clerk of Court is directed to close this case.
BY THE COURT:

s/ James M. Munley
JUDGE JAMES M. MUNLEY
United States District Court

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