Frank McIntyre v. Dennis Fangman, et al.
- Case Type:
- Case Status:
- BAP No. CO-22-003 (10th Circuit, Dec 30,2022) Not Published
- Interpleaded funds claimed by a debtor before the filing of a bankruptcy case are not property of the estate, and disbursement of such funds does not violate the automatic stay. As a result of the lack of a legal or equitable interest in the interpleaded funds, a dispute that may affect a determination, under state law, of the ownership of the interpleaded funds may properly be determined by state, not bankruptcy, courts. The bankruptcy court also properly refused to adjudicate the debtor's claims objections to the extent that such objections had been litigated in state court.
- Procedural context:
- The bankruptcy court dismissed the debtor's state law claims that could affect the ownership of funds that had been interpleaded with a state court. The debtor appealed that and other orders.
- Glenwood Clean Energy, LTD (“GCE”) and Dennis Fangman entered into an installation agreement. GCE engaged SoL Energy, LLC (“SoL”), as a subcontractor on the project. Shortly before the project was completed, a contract dispute arose between GCE and McIntyre (the debtor, and together with GCE, the “GCE Parties”) and SoL and its owner Ken Olson (together the “SoL Parties”).
In response to litigation for failure to pay, Fangman initiated an interpleader proceeding in state court (the “State Court Action”) naming, among others, the SoL and GCE Parties as defendants and deposited the remaining amount owed under the Agreement in the state court registry. The parties asserted counter and cross-claims.
The state court granted SoL's motion for judgment on the pleadings for $39,480.78, which was the amount GCE alleged Fangman owed under the agreement. The state court did not release the funds to SoL because other claims were pending in the state court action.
McIntyre then filed a chapter 13 petition and commenced an adversary proceeding against Fangman, the SoL Parties, and others, raising the same issues that were the subject of the state court litigation. McIntyre also objected to the claims of the SoL Parties.
The bankruptcy court dismissed McIntyre's state law claims because it did not have jurisdiction under 28 U.S.C. § 1334 and, even if the claims were related to the bankruptcy case, § 1334(c) supported discretionary abstention.
Upon the SoL Parties' motion, the bankruptcy court subsequently entered an order stating that the bankruptcy estate had no interest in the funds held in the state court action.
- HALL, LOYD, and THURMAN, Bankruptcy Judges
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