Krishnan v. Ebert
Filing
10
MEMORANDUM OPINION ON APPEAL FROM BANKRUPTCY COURT. IT IS THEREFORE ORDERED that the bankruptcy court's June 8, 2017 Order Discharging Chapter 13 Trustee and Closing Chapter 13 Case is hereby AFFIRMED. Signed by District Judge Ron Clark on 3/20/2019. (daj, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
MURALIDHARAN KRISHNAN, et al.,
Appellant,
v.
CAREY D. EBERT,
Appellee.
§
§
§
§
§
§
§
§
§
CIVIL ACTION NO. 4:17-CV-435
JUDGE RON CLARK
MEMORANDUM OPINION ON APPEAL FROM BANKRUPTCY COURT
Appellant Muralidharan Krishnan (“Appellant”), proceeding pro se, claims that Appellee
Carey D. Ebert (the “Trustee”), the standing Chapter 13 trustee appointed to Appellant’s
bankruptcy estate, ignored fraud perpetrated by his primary creditor JP Morgan Chase Bank (“JP
Morgan”), its attorneys, and other individuals associated with the foreclosure of his home.
Appellant argues that the Trustee committed gross negligence because she did not verify the Proof
of Claim filed by JP Morgan and submitted an inaccurate Final Report and Account (“Final
Report”) in Appellant’s Chapter 13 bankruptcy case. The court finds no error in the bankruptcy
court’s decision to overrule Appellant’s objection, accept the Trustee’s Final Report, or enter the
Order Discharging Chapter 13 Trustee and Closing Chapter 13 Case.
I.
BACKGROUND
Prior to filing for bankruptcy, Appellant and his wife, Indiragandhi Kenthapadi, filed a pro
se suit in state court against his creditor JP Morgan and its agents, alleging that the defendants
improperly attempting to foreclose on their home, engaged in various fraudulent activities, and
committed violations of federal and state law. JP Morgan subsequently removed the suit to federal
court, where it was assigned Cause Number 4:15-CV-632 (“district court case”) and referred to
the United States Magistrate Judge. During the pendency of the case, Appellant and his wife
sought a preliminary injunction on the foreclosure of their home. On February 26, 2016—after
the Magistrate Judge issued a Report and Recommendation recommending that their request be
denied and before the Report was adopted by the district judge—Appellant filed for bankruptcy
(Cause Number 16-40342) under Chapter 13 of the Bankruptcy Code. The Magistrate Judge
stayed the district court case.
On March 31, 2016, in his pending bankruptcy case, Appellant filed an adversary
proceeding (Cause Number 16-4033). Appellant reasserted claims from his district court case and
named additional defendants. On June 21, 2016, the bankruptcy court granted motions to dismiss
submitted by two of the defendants in the adversary proceeding, dismissed additional defendants
for failure to state a claim, and abstained from deciding Appellant’s claims against the remaining
defendants. Then, on June 29, 2016, the bankruptcy court dismissed Appellant’s adversary
proceeding and granted one of the defendants’ request for attorney’s fees. Appellant appealed the
bankruptcy court’s order (Cause Number 4:16-CV-572) to this court on August 1, 2016.
Meanwhile, on the same day that Appellant filed his adversary proceeding, Appellant
submitted his first proposed Chapter 13 plan, which the bankruptcy court denied on May 19, 2016.
Appellant’s second proposed Chapter 13 plan, submitted on June 15, 2016, was also denied by the
bankruptcy court on October 11, 2016. JP Morgan and the Trustee objected to both of Appellant’s
proposed plans because, among other things, neither plan provided a method to pay JP Morgan’s
claims and Appellant’s filings indicated that he would not be able to make the payments required
under the second proposed plan. The bankruptcy court dismissed Appellant’s Chapter 13 case.
Appellant filed his second appeal (Cause Number 4:16-CV-816), on October 26, 2016. This
appeal was consolidated with his former appeal, Cause Number 4:16-CV-572. This court affirmed
2
both of the bankruptcy court’s orders on February 7, 2017 because there was no indication that the
bankruptcy court erred in finding that its failure to confirm a Chapter 13 plan constituted an
unreasonable delay causing prejudice to his creditors. Doc. No. 3-2, at 56-58, ROA at 361-63.
The court further explained that dismissal of an underlying bankruptcy case typically results in
dismissal of all related adversary proceedings, however, Appellant could still proceed with the
same claims against his creditors in the pending district court case. 1 Doc. No. 3-2, at 58-59, ROA
at 363-64.
On April 12, 2017, the Trustee filed her Final Report, and on May 12, 2017, Appellant
filed an objection, insisting that the Final Report was not accurate because JP Morgan’s Proof of
Claim was based on fraud. Doc. No. 3-2, at 72-75, ROA at 377-80. Appellant claimed that “the
amount/payment due to the secured creditors . . . should also be mentioned in the final report so
that it gives the true/correct picture of the reasoning behind the dismissal” (Doc. No. 3-2 at 72,
ROA at 377; Doc. No. 7, at 4 ¶ 2.A), supposedly because “the secured claim amounts of
creditors . . . will prove that they have filed their claims while they have fraud allegations/case
pending in federal court” (Doc. No. 3-2, at 74, ROA at 379). The relief sought by Appellant is
unclear; however, it seems that he asked the bankruptcy court either to (1) order the Trustee to
change her Final Report; (2) wait until the court’s decision in his pending district court case, Cause
Number 4:15-CV-632; or (3) hold a hearing to adjudicate his claims against his creditors. Id.
During a hearing on June 7, 2017, the Trustee addressed Appellant’s objection, explaining that the
Final Report was not required to include all creditors with scheduled claims because Appellant’s
Chapter 13 bankruptcy case was dismissed before confirmation. Doc. No. 3-2, at 111, ROA at
1
On June 7, 2017, the Magistrate Judge entered an order lifting the stay in the district court case. Cause No. 4:15CV-632, Doc. No. 91. On December 1, 2017, this court adopted the Magistrate Judge’s Report and Recommendation,
which recommended granting defendants’ motions to dismiss for failure to state a claim in the district court case, and
entered a final judgment dismissing the district court case. See Doc. Nos. 137, 163.
3
416. Moreover, omitting the information in the Final Report had no legal effect because Appellant
would be able to use his creditors’ filings in his bankruptcy case if he needed to prove that they
filed improper documents. Doc. No. 3-2, at 112, ROA at 417. Instead of responding to the
Trustee’s explanation, Appellant claimed that the omission of the value of the secured claims made
it appear as though there was no basis for his bankruptcy petition. See Doc. No. 3-2, at 107. The
bankruptcy court overruled the objection and accepted the Trustee’s Final Report. See Doc. No.
3-2, at 105-09, ROA at 410-14. This appeal followed.
II.
DISCUSSION
Appellant has accused JP Morgan of fraud and other wrongful conduct in numerous filings
and cases. Appellant’s primary arguments in this appeal are not actually directed at the Trustee or
her Final Report. Instead, he focuses on events surrounding the foreclosure of his home. Without
any evidence, he also claims that the Trustee covered up JP Morgan’s fraudulent conduct.
However, these facts are not before the court. In this appeal, Appellant claims that the Trustee
breached her obligation to verify the Proof of Claim filed by JP Morgan and did not include
necessary information in the Final Report in Appellant’s bankruptcy case and that the bankruptcy
court erred by not allowing Appellant to explain his objection to the Trustee’s Final Report.
A.
Standard of Review
District courts have jurisdiction to hear appeals “from final judgments, orders, and
decrees,” and, “with leave of the court, from other interlocutory orders and decrees” of bankruptcy
judges. 28 U.S.C. § 158(a). The bankruptcy court’s findings of fact are reviewed for clear error,
while its legal conclusions and any mixed questions of law and fact are reviewed de novo. In re
Seven Seas Petroleum, Inc., 522 F.3d 575, 583 (5th Cir. 2008) (citing In re Nat’l Gypsum Co., 208
F.3d 498, 504 (5th Cir. 2000)). Whether a litigant has standing to appeal a bankruptcy court order
4
is a question of fact to be determined by the district court. In re Hawkins, 513 B.R. 634, 638 (D.
Del. 2013), aff’d, 594 F. App’x 71 (3d Cir. 2015); In re HST Gathering Co., 125 B.R. 466, 467
(W.D. Tex. 1991).
B.
Appellant lacks standing to appeal the bankruptcy court’s order.
Standing to prosecute an appeal is a jurisdictional issue that the court must consider
regardless of whether it is an issue raised by the parties. In re United Operating, LLC, 540 F.3d
351, 354 (5th Cir. 2008). “As Article III is inapplicable to bankruptcy courts, standing to appeal
a bankruptcy proceeding derived originally from statute, granting the right to appeal only to
‘persons aggrieved.’” Rohm & Hass Tex., Inc. v. Ortiz Bros. Insulation, Inc., 32 F.3d 205, 210
n.18 (5th Cir. 1994) (internal citations omitted). “Although the applicable statute has since been
repealed, bankruptcy courts still limit appellate standing to those ‘aggrieved.’” Id. (internal
citations omitted); see also In re Coho Energy, Inc., 395 F.3d 198, 202 (5th Cir. 2004). “The
‘person aggrieved’ test is an even more exacting standard than traditional constitutional standing.”
Coho Energy, Inc., 395 F.3d at 202. The test requires that the appellant show that “he was directly
and adversely affected pecuniarily by the order of the bankruptcy court.” In re Prince, 548 F.
App’x 262, 264 (5th Cir. 2013) (citing Coho Energy, Inc., 395 F.3d at 202).
Appellant maintains that the Trustee had a duty to investigate JP Morgan’s Proof of Claim.
The bankruptcy code provides: “the trustee shall . . . if a purpose would be served, examine proofs
of claims and object to the allowance of any claim that is improper.” 11 U.S.C. § 1302(b)(1)
(incorporating id. § 704(a)(5); see Handbook for Chapter 13 Standing Trustees, EXEC. OFFICE FOR
U.S. TR., DEP’T
OF JUSTICE
3-24 (Oct. 1, 2012), https://www.justice.gov/sites/default/files/ust/
legacy/2015/05/05/Handbook_Ch13_Standing_Trustees_2012.pdf. The Trustee submitted the
Final Report on April 12, 2017, almost two months after this court affirmed the bankruptcy court’s
order denying confirmation of Appellant’s second proposed Chapter 13 plan and dismissing his
5
bankruptcy case. Appellant does not explain, nor can the court divine, what purpose would be
served by the Trustee’s verification of a creditor’s Proof of Claim when his bankruptcy case was
dismissed without confirmation of a plan. Thus, there is no indication that Appellant was “directly
and adversely affected pecuniarily by the order of the bankruptcy court.” Prince, 548 F. App’x at
264 (citing Coho Energy, Inc., 395 F.3d at 202).
C.
The bankruptcy court did not deny Plaintiff an opportunity to explain his objection
to the Final Report and did not err by overruling Appellant’s objection.
Alternatively, assuming for the sake of argument that Appellant has standing, the
bankruptcy court did not err by denying him an opportunity to present his arguments during the
hearing on June 7, 2017, or by overruling his objection to the Trustee’s Final Report. Appellant
contends that the bankruptcy court should have allowed him to explain that the Trustee had an
obligation to verify JP Morgan’s Proof of Claim and omitted important information from the Final
Report. But, the record establishes that the bankruptcy court received his arguments in writing,
when he filed a written objection to the Trustee’s Final Report. And, the hearing transcript shows
that Appellant addressed the bankruptcy court, repeating the arguments in his written objection.
Appellant was not denied an opportunity to present his arguments.
Appellant appears to believe that the Trustee had an obligation to investigate his allegations
of fraud against JP Morgan. There is no legal basis to support the existence of such an obligation.
To the extent that Appellant was concerned that the Final Report suggested that he did not have
enough debt to justify bankruptcy, the Trustee explained that the filings in his bankruptcy case
could be used to prove otherwise. Accordingly, the bankruptcy court did not err by overruling his
objection.
6
III.
CONCLUSION
Based on the foregoing analysis, the court AFFIRMS the bankruptcy court’s decision to
overrule Appellant’s objection, accept the Trustee’s Final Report, discharge the Trustee, and close
Appellant’s bankruptcy case.
IT IS THEREFORE ORDERED that the bankruptcy court’s June 8, 2017 Order
Discharging Chapter 13 Trustee and Closing Chapter 13 Case is hereby AFFIRMED.
So ORDERED and SIGNED March 20, 2019.
____________________________
Ron Clark, Senior District Judge
7
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?