In re DEBRA A. CHARLES
- Summarized by Jaden Banks , Nyemaster Goode P.C.
- 1 year 2 months ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- 22-3261 (7th Circuit, Oct 17,2023) Not Published
- Tag(s):
-
- Ruling:
- Unscheduled legal claims remain property of the bankruptcy estate after discharge and cannot be considered abandoned, therefore a debtor lacks standing to pursue the claim through subsequent litigation.
- Procedural context:
- In 2014, Debra Charles and her late husband filed for relief under Chapter 11 of the bankruptcy Code. That case was converted to Chapter 7 and the bankruptcy court entered its order of discharge in June 2016, and closed the case with a final decree in September 2017.
In 2022, Ms. Charles filed a complaint, raising claims relating to assets listed on her bankruptcy schedules, which the district court dismissed without prejudice because Ms. Charles lacked standing to assert claims that belonged to her bankruptcy estate. Ms. Charles then filed a second emended complaint. The defendants moved to dismiss the complaint with prejudice under Federal Rule of Civil Procedure 12(b)(6), which the Court granted and Ms. Charles then appealed.
The Seventh Circuit Court of Appeals affirmed the U.S. District Court for the Southern District of Illinois's dismissal of the Plaintiff's second amended complaint. The Court of Appeals observed that Ms. Charles' second amended complaint failed to set forth claims showing she was the real party in interest because most of her claims involved conduct that occurred prior to her bankruptcy petition, and though she may have discussed potential claims with the bankruptcy trustee, she failed to properly schedule them which precluded any argument that those claims were abandoned by the bankruptcy estate. Because those claims properly belonged to the bankruptcy estate, Ms. Charles lacked standing to pursue them. The Court of Appeals also explained that Ms. Charles's other claims involved a claim that attempted to attack a state court judgment, which meant the district court lacked jurisdiction to hear that issue under the Rooker-Feldman doctrine. The Court of Appeals further explained that despite Ms. Charles's arguments to the contrary, nothing in her cited criminal statutes created a private right of action.
- Facts:
- Ms. Charles and her late husband operated several businesses and owned property in southern Illinois. They signed a series of promissory notes between 2003 and 2013 with Anna-Jonesboro National Bank (AJ Bank) and First State Bank of Olmsted (Olmsted Bank). Then in 2014, the Charleses filed a petition under Chapter 11 and submitted schedules listing their businesses and properties as asserts, but without listing any legal claims as assets. The bankruptcy court subsequently converted the Charleses case to one under Chapter 7, entered a discharge order in June of 2016, and closed the case by entry of a final decree in September 2017.
In 2022, Ms. Charles sued AJ Bank and Olmsted Bank, First State Bank of Dongola (Dongola Bank), and several employees and officers of the banks. Ms. Charles, amended her complaint, to allege that AJ Bank and Olmsted Bank breached their fiduciary duty and committed common-law fraud. She also alleged that Dongola Bank fraudulently filed a quiet title action against one of her properties after her bankruptcy. The District court dismissed the first amended complaint without prejudice, after concluding that Ms. Charles lacked standing because her claims comprised assets of the bankruptcy estate and so she was not the real party in interest. The Court also concluded that many of Ms. Charles's claims, originating between 2003 and 2013, were time barred by the statute of limitations and the court further concluded the complaint failed to comply with the pleading requirements of Federal Rules of Civil Procedure 8(a) and 9(b).
Ms. Charles filed a second amended complaint reiterating many of the same claims, adding new parties, and citing to multiple criminal statutes to support her claims. The defendants moved to dismiss the complaint under Rule 12(b)(6). The district court granted the motion and dismissed the complaint with prejudice. The Court of Appeals affirmed.
- Judge(s):
- Easterbrook, St. Eve, Kirsch II
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