United States District Court, E.D. Michigan, Northern Division
In re Michael B. White and Darla Kay White, Debtors,
COLLENE K. CORCORAN, United States Trustee, Frankenmuth Credit Union Appellees. MICHAEL B. WHITE, and DARLA KAY WHITE, Appellants,
ORDER AFFIRMING BANKRUPTCY COURT
L. LUDINGTON UNITED STATES DISTRICT JUDGE
November 27, 2017, Debtor Michael B. White (Debtor) initiated
this appeal of the Bankruptcy Court's orders denying his
motion to set aside dismissal of the state court action, and
denying his motion for reconsideration of that order (Bkr.
Dkt. 729, 763). Debtor filed his brief on March 8, 2018. ECF
No. 6. Appellees Colleen K. Corcoran, Chapter 7 trustee, and
Frankenmuth Credit Union (FCU) filed their briefs on March
27, 2018. ECF Nos. 8, 9. Debtor replied on April 11, 2018.
ECF No. 13.
factual summary of the Bankruptcy proceedings was set forth
in the Court's November 29, 2016, order denying
Debtor's motion to strike and granting in part Attorney
Budzynski's motion to dismiss. ECF No. 14 (16-cv-11188)
(the facts below relate only to the current appeal).
the mortgage foreclosure of his residence at 11085 Block Rd,
Birch Run, Michigan, Debtor appealed the decision of the
Saginaw County Circuit Court. The appeal was pending before
the Michigan Court of Appeals when the instant bankruptcy
action was filed. The Trustee sold the real estate, and
reached a settlement agreement with FCU, who agreed to accept
less than what was owed from the sale in exchange for the
Trustee dismissing the state court action, which was
dismissed with prejudice. The Bankruptcy Court entered an
order abandoning certain property back to the debtor,
including the state court cause of action against FCU. Debtor
moved for the Bankruptcy Court to set aside the order of
dismissal entered by the Michigan Court of Appeals. The
Bankruptcy Court denied the motion because: 1) “the
Court does not have the authority to set aside the dismissal
of the State Court Action under the Rooker-Feldman
doctrine” and no exception to the doctrine was
applicable; and 2) that abandonment of the state court cause
of action to Debtor was meaningless because the state court
action had been dismissed. Bkr. Dkt. 727 at 5-6. The
Bankruptcy Court denied Debtor's motion for
reconsideration on the same grounds, finding that he had
identified no palpable error. Bkr. Dkt. 763.
Court has jurisdiction to hear this appeal pursuant to 28
U.S.C. § 158(a). In re Gourlay, 496 B.R. 857,
859 (E.D. Mich. 2013). “Th[is] Court reviews a
bankruptcy court's findings of fact for clear error and
its conclusions of law de novo.” Id. (citing
AMC Mortg. Co. v. Tenn. Dep't of Revenue, 213
F.3d 917, 920 (6th Cir.2000)).
the Bankruptcy Court's conclusions of law are at issue.
First, the Bankruptcy Court correctly concluded that the
Rooker-Feldman doctrine precluded the Bankruptcy Court from
setting aside the dismissal of the State Court action.
Pursuant to the Supreme Court's Rooker/Feldman abstention
doctrine “a party losing in state court is barred from
seeking what in substance would be appellate review of the
state judgment in a United States district court, based on
the losing party's claim that the state judgment itself
violates the loser's federal rights.” Johnson
v. Grandy, 512 U.S. 997, 1005-06 (1994) (citing
District of Columbia Court of Appeals v. Feldman,
460 U.S. 462, 482 (1983); Rooker v. Fidelity Trust
Co., 263 U.S. 413, 416 (1923)). “[T]he
Rooker-Feldman doctrine applies even where a state court
judgment may be in error.” Audre, Inc. v. Casey (In
re Audre, Inc.), 216 B.R. 19, 29 (B.A.P. 9th Cir. 1997).
There are other exceptions to application of the doctrine.
The Sixth Circuit Court of Appeals recognizes an exception
when the state court judgment was “procured through
fraud, deception, accident, or mistake . . . .” Sun
Valley Foods Co. v. Detroit Marine Terminals, Inc. (In re Sun
Valley Foods Co.), 801 F.2d 186, 189 (6th Cir.1986)
(quotation marks and citation omitted). There is no evidence
that the state court judgment was procured through fraud,
deception, accident or mistake.
Bankruptcy Court also correctly concluded that the
abandonment order did not revive the state court claim. The
state court claim was not an asset of the debtor. “All
legal or equitable interests of the debtor in property as of
the commencement of the case: are considered property of the
bankruptcy estate.” 11 U.S.C. §541(a)(1). The
Trustee therefore had the authority to settle the claim with
FCU and stipulate to dismissal of the action with prejudice,
which the Trustee did. The fact that the Bankruptcy
Court's order abandoning certain property to the Debtor
(Bkr. Dkt. 567) mentioned “cause of action against
Frankenmuth Credit Union” did not revive the claim,
which had already been dismissed with prejudice.
it is ORDERED that the Bankruptcy Court
Orders, (Bkr. Dkt. 729, 763) are AFFIRMED.
 Matter Not Available.