Wilmington Savings Fund Society, FSB v. Ofstad

Filing 12

MEMORANDUM OPINION AND ORDER. Signed by U.S. District Judge Lawrence L. Piersol on 5/31/2022. (JLS)

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UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION

JEFFREY DOYLE OFSTAD,

Appellant

5:21-cv-5071

vs.

WILMINGTON SAVINGS FUND

MEMORANDUM OPINION
AND ORDER

SOCIETY,

Appellee

Appellant, Jeffrey Doyle Ofstad, has appealed the Order ofthe United States

Bankruptcy Court for the District of South Dakota'(Doc, 1)denying
reconsideration of an order abstaining from jurisdiction in an adversarial

proceeding (Bankr. Doc.,5:21-ap-5003), and dismissing Appellant's bankruptcy
case.(Bankr. Doc.,5:21-bk-50044). In Appellant's statement ofthe issues on

appeal, he characterizes them as(1)the court should have entered a default
judgment when Wilmington Savings Fund Society(WSFS)failed to answer, and
then should have "made a decree respecting the equities and the law," and(2)the

bankruptcy court made an "unfortunate error in discretion to abstain from the
case."(Doc. 6). In his brief. Appellant appears to ask for a quiet title action.(Doc.
11). Appellant, who is proceeding pro se, elected to pursue his appeal in the

The Honorable Charles L. Nail, Jr.

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District Court pursuant to 28 U.S.C. § 158(c)(1). WSFS filed no response to the

appeal. Having considered the record and all filings in the case, the Court affirms
the bankruptcy court's decision.
I

BACKGROUND

Appellant filed his petition for Chapter 7 bankruptcy on April 21, 2021,

(5:21-bk-50044, Doc.l), claiming assets of $50,000 or less, and "illegal fiduciary
claims" as his debts. (Id.). He listed as landlord WSFS,stated the property was the

subject of an eviction action in state court, and claimed no funds were owing.(Id.,
Doc. 3). Ofstad and WSFS had some difficulties concerning service of documents

and other procedural issues. Ofstad initiated an Adversary Proceeding, an Action
to Quiet Title by Jeffrey D. Ofstad (id.. Doc. 43), setting forth his theories about
why he holds certain real property by adverse possession.
After numerous proceedings, the Bankruptcy Court elected to dismiss

Ofstad's petition sua sponte.(Id., Doc. 75). The court stated there were no assets to
distribute and no creditors in the bankruptcy case, and there was a pending state

court proceeding in which WSFS endeavored to evict Ofstad.(Id.). The court
dismissed the bankruptcy case on September 9, 2021. On the same date, the court
ruled that it should abstain in the adversary proceeding.(5:21-ap-5003, Doc. 32).
Ofstad filed a motion for reconsideration and the bankruptcy court denied relief on

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October 5,2021.(Doc. 10-1). Ofstad's appeal followed. This Court will address

the underlying actions before discussing the motion for reconsideration.
LEGAL ANALYSIS

As the Eighth Circuit has explained,"When a bankruptcy court's judgment is

appealed to the district court, the district court acts as an appellate court and
reviews the bankruptcy court's legal determinations de novo and findings offact
for clear error." Knudsen v. I.R.S., 581 F.3d 696, 704(8th Cir. 2009)(quoting Fix

V. First State Bank ofRoscoe, 559 F.3d 803, 808(8th Cir. 2009)). See also
Vucurevich v. First Midwest State Bank,2015 WL 632101, *1 (D.S.D. 2015);
Nesson v. Lovald, 2012 WL 911325, *2(D. S.D. 2012).

The district court sitting as an appellate court reviews the grant or denial of a

motion seeking relieffrom a judgment using the abuse of discretion standard.
Vucurevich at *1 (citing City ofDuluth v. Fond du Lac Band ofLake Superior

Chippewa,702 F.3d 1147, 1152(8th Cir. 2013)). As the Eighth Circuit explained
in City ofDuluth:
A court abuses its discretion when a relevant factor that should have been

given significant weight is not considered; when an irrelevant or improper
factor is considered and given significant weight; or when all proper factors
and no improper ones are considered, but the court commits a clear error of
judgment in weighing those factors.

Id.(citing Thatcher v. Hanover Ins. Grp., Inc., 659 F.3d 1212, 1213 (8th Cir. 2011)
quoting Kern v. TXO Prod. Corp., 738 F.2d 968,970(8th Cir. 1984)).

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1. Dismissal ofBankruptcy case

Dismissal of a bankruptcy case is addressed by 11 U.S.C. § 305(a)(1) which
provides:

(a)The court, after notice and a hearing, may dismiss a case under this
title, or may suspend all proceedings in a case under this title, at any
time if—

(1)the interests of creditors and the debtor would be better served
by such dismissal or suspension[.]
11 U.S.C. § 305(a)(1).

The Eighth Circuit has set forth the factors pertinent in the context of
dismissal of a bankruptcy case as follows:
The factors a court considers before dismissing a case under

§ 305(a)(1) are:(1)whether the case is a two-party dispute;(2)the economy
and efficiency of administration;(3)the availability of another case or forum
to protect the interests ofthe parties;(4)the alternative means of achieving
equitable distribution of assets; and (5)the purpose for which bankruptcy
jurisdiction has been sought.
Pennine v. Evergreen Presbyterian Ministries (In re Pennine), 299 B.R. 536, 539
(B.A.P. 8th Cir. 2003).

In addressing Ofstad's claims in the bankruptcy proceeding, the court
analyzed the factors from Pennine in detail.(5:21-bk-50044, Doc. 75). The first
factor is whether the case is a two-party dispute, and the bankruptcy court
concluded it was. The debtor listed only one creditor, WSFS,and on the mailing
list included both WSFS and one of its attorneys. The case appears to be a dispute

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over an eviction, as the court found, and not over distribution of assets to creditors.

(Id.) The second factor is the economy of administration, and as the court
concluded, this case is not really a bankruptcy case to be administered, and
therefore should be dismissed.(Id.). The third factor, availability of another

forum, is particularly striking, given that the parties' dispute over the eviction is a

pending state court action addressing the eviction. (Id.). As the bankruptcy court
noted, the fourth factor from Pennino does not apply. That factor calls for an

assessment of equitable distribution of assets, and this case has neither creditors
nor assets to be distributed.(Id.). The fifth factor requires an assessment of why

the bankruptcy action has been brought. As the bankruptcy court noted, the reason
for this action apparently was "solely to create a new forum to litigate his

[Ofstad's] disputes with WSFS." (Id., p. 9). The court added that Ofstad's
adversary complaint relies solely on state law and given that no relief under the
bankruptcy code is available, there is "no purpose" in continuing the bankruptcy
case.(Id.).

As Thatcher directs, the bankruptcy court considered relevant factors, did
not consider irrelevant factors, and did not commit a clear error in judgment in

weighing the factors. 659 F.3d at 1213. The dismissal ofthe case is in accordance
with 11 U.S.C. § 305(a)(1). The Court discerns no abuse of discretion in the
dismissal of Ofstad's bankruptcy case.

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2. Abstention

The standard for abstention pertinent to this case appears at 28 U.S.C. §
1334(c)(1) which provides as follows:

(c)(1) Except with respect to a case under chapter 15 of title 11, nothing in
this section prevents a district court in the interest ofjustice, or in the
interest of comity with State courts or respect for State law,from
abstaining from hearing a particular proceeding arising under title 11 or
arising in or related to a case under title 11.
28 U.S.C. § 1334(c)(1).

In analyzing whether to abstain in Ofstad's adversary proceeding, the
bankruptcy court cited the above statute and then set forth the factors governing
abstention from Foss v. F[all County Child Support Office (In re Foss), 328 B.R.

780, 783 (B.A.P. 8th Cir. 2005). In addition to these factors, the court noted, the

bankruptcy court considers whether the pending state court proceeding sounds in
state law and bears only a limited connection to the debtor's bankruptcy case. Loos

V. Koperski (In re Koperski), 540 B.R. 394,401-02(Bankr. D. Minn. 2015). If so,
the bankruptcy court's "abstention is particularly compelling." Nat. Union Fire Ins.
Co. ofPittsburgh, PA v. Titan Energy, Inc. (In re Titan Energy, Inc.), 837 F.2d
325, 332(8th Cir. 1988)(quoting Koperski, 540 B.R at 402).

In applying the above standards to Ofstad's case, the bankruptcy court stated
it is important that the parties' state court dispute is grounded in state law, as is the
substance ofthe adversary proceeding, leading to the conclusion "abstention is

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particularly compelling" under Nat. Union, 837 F.2d at 332. The court then
analyzed the factors set out in Pass, concluding nine weighed in favor of
abstention, one was neutral, and two weighed against. (5:21-ap-5003, Doc. 32,Pg.

10). Among the factors the court considered are the following, as summarized:
abstention would have no effect on the bankruptcy case, as it was dismissed; state

law issues and a state court proceeding militate in favor of abstention; Ofstad
sought a forum in the bankruptcy court as an alternative to the state court

proceeding; the adversary proceeding is not a core proceeding under the
bankruptcy code. (Id., pp. 10-14). In the court's words,"When all twelve factors
are considered, a hefty majority weighs in favor of abstention." (Id., p. 14).

As the bankruptcy court concluded,the parties' dispute appears to be one
that should be resolved under state property law. The bankruptcy court carefully

considered the record and pertinent legal authority in resolving to abstain. This
court has examined the pertinent documents and legal authority, and concludes the

bankruptcy judge did not abuse discretion in abstaining in the adversary
proceeding.
3. Motionfor Reconsideration
Ofstad filed a Motion for Reconsideration ofthe bankruptcy court's order of

abstention and the dismissal ofthe bankruptcy case.(Doc. 1-1). In his decision

denying relief, the court described the adversary proceeding and bankruptcy case

I

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in detail. (Id., PgID 2-3). He noted that Ofstad had not set forth any grounds

justifying reversal ofthe court's order, but because it appeared to the court that
Ofstad was seeking reconsideration under Bank. R. Bank. P. 9023 and FRCP 59(e),
the court endeavored to ascertain whether there were any errors to be corrected. Id.
The court found none. The court added an explanation, apparently for Ofstad's

benefit, that the ruling did not transfer the case back to state court, but merely lifted

the stay, thus placing the parties in the position in which they were when the
bankruptcy case was filed. (Id., PgID 5). The court clarified that Ofstad had raised
no bankruptcy issues in the adversary proceeding, and therefore, there were no

bankruptcy issues now in state court. (Id.,PgID 6). Based on these factors, the
bankruptcy court denied relief on reconsideration.
When addressing a motion under Rule 59(e)the court has "broad discretion

in determining whether to alter or amend judgment, and [we] will not reverse

absent a clear abuse of discretion." Uradnik v. Inter Faculty Org., 2 F.4^'^ 722, 727

(8th Cir. 2021)(citing Briehl v. Gen. Motors Corp., 172 F.3d 623,629(8^^ Cir.
1999){qpoiing Innovative Home Health Care v. P.T.-O.T. Assocs., 141 F.3d 1284,
1286 (8th Cir. 1998)). This Court concludes the bankruptcy court did not abuse
discretion in determining there were no errors to be corrected on reconsideration
based both on its finding that Ofstad's case did not raise bankruptcy issues

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properly addressed by a bankruptcy court, and in concluding abstention was
proper.

CONCLUSION

The bankruptcy court did not abuse its discretion in abstaining from the

adversary proceeding, dismissing the bankruptcy case, and denying the motion for
reconsideration under FRCP 59(e).

Accordingly,IT IS ORDERED that the bankruptcy court's denial ofthe
motion for reconsideration is affirmed.

Dated this

day of May,2022.

BY THE COURT;

Il^uhjujiu U( K^SCu^
Lawrence L. Piersol

United States District Judge
ATTEST:

MATTHEW. W.THELEN,CLERK