United States District Court, D. Massachusetts
IN RE THOMAS R. BATEMAN and KATHERINE E. BATEMAN, Debtors.
ROBERT E. BATEMAN, LESLIE A. BATEMAN, and TOWN OF SEBAGO, MAINE, Defendants. JOSEPH G. BUTLER, Trustee, Plaintiff,
MEMORANDUM OF DECISION
WILLIAM G. YOUNG, DISTRICT JUDGE
Town of Sebago, Maine (“Sebago”) moved to dismiss
a bankruptcy trustee's complaint alleging that Sebago
benefited from a fraudulent transfer of real property.
Sebago's Mot. Dismiss Verified Compl. Avoid & Recover
Fraudulent Transfer & Inj. Relief Incorporated Mem. Law.
(“Mot. Dismiss”), ECF No. 18. Sebago contended
that the Court lacks subject matter jurisdiction because
Sebago received the real property through a state court
judgment, which it asserts that a federal court cannot
review. Id. at 2. Sebago also pressed that, were the
Court to exercise jurisdiction, the statute of limitations
and the bankruptcy debtors' release barred the complaint
against it. Id. Finally, Sebago suggested that the
complaint does not include enough factual material to support
fraudulent transfer claims. Id. at 2-3.
Court DENIED the motion to dismiss, ECF No. 30. Federal
district courts lack jurisdiction when state court losers
attempt to question the state court's decision in a later
federal action, but here the bankruptcy trustee acts on
behalf of creditors, who were not parties to the state court
suit. See Lance v. Dennis, 546 U.S. 459,
466 & n.2 (2006) (per curiam). Upon exercising
jurisdiction, the Court concluded that the complaint states
timely, unreleased, and plausible claims for relief.
R. and Katherine E. Bateman (collectively, the
“Batemans”) filed a Chapter 11 bankruptcy
petition in the United States Bankruptcy Court for the
District of Massachusetts (the “Bankruptcy
Court”) on April 5, 2017. Pet., In re Bateman,
Ch. 7 No. 17-11217-FJB (Bankr. D. Mass.) (“In re
Bateman”), ECF No. 1. Pursuant to the United
States Trustee and the Batemans' stipulation, the
Bankruptcy Court converted the case into a Chapter 7
proceeding on February 5, 2018, Proceeding Mem./Order, In
re Bateman, ECF No. 134, and appointed Joseph G. Butler
(“Butler”) as Chapter 7 Trustee the next day,
Certificate of Appointment, In re Bateman, ECF No.
January 2, 2019, Butler filed a verified adversary complaint
against the Batemans' son, their daughter-in-law, and
Sebago. Bankr. R. 7-91, Verified Adversary Compl. Avoid &
Recover Fraudulent Transfer & Inj. Relief
(“Compl.”), ECF No. 14. The complaint alleges that
the Batemans fraudulently transferred their Sebago vacation
home to the Town of Sebago, which then fraudulently
transferred the vacation home (the “Property”) to
their son and daughter-in-law. Compl. 1. On March 1, 2019,
Sebago moved to dismiss the complaint in the Bankruptcy
Court. Mot. Dismiss 1. Butler opposed Sebago's motion on
March 22, 2019. Bankr. R. 271-302, Pl.'s Opp'n
Sebago's Mot. Dismiss Verified Compl. Avoid & Recover
Fraudulent Transfer & Inj. Relief
(“Opp'n”), ECF No. 14.
Court granted the Batemans' son and daughter-in-law's
motion to withdraw the reference on March 25, 2019. ECF Nos.
8, 21. After withdrawal of the reference, Sebago and Butler
further briefed the motion to dismiss in this Court.
Sebago's Reply Trustee's Opp'n Mot. Dismiss
Verified Compl. (“Reply”), ECF No. 19; Pl.'s
Sur-Reply (“Surreply”), ECF No. 17. The Court
heard argument on the motion to dismiss on July 8, 2019, took
the matter under advisement, and allowed Butler to file a
supplemental memorandum. See Electronic Clerk's
Notes, ECF No. 26; Pl.'s Post-Hr'g Mem. Re Additional
Authorities (“Suppl. Mem.”), ECF No. 24.
Court issued an order on September 4, 2019 denying the motion
to dismiss, ECF No. 30. This memorandum of decision explains
Batemans acquired the Property, located on Sebago Lake, in
1980. Compl. ¶¶ 7, 13. In 2011, 2012, and 2013,
Sebago recorded tax lien certificates amounting to about $56,
000 against the Property in the local registry of deeds.
Compl. ¶¶ 9-11. Though the Batemans held a joint
tenancy in the Property, the tax lien certificates lacked
Katherine E. Bateman's name on them. Compl. ¶¶
7, 9-11. In February 2015, Sebago instituted suit against the
Batemans to cure or confirm its rights to the Property in
Cumberland County, Maine Superior Court (the “Superior
Court”). Compl. ¶ 12. Although the Batemans
initially answered Sebago's complaint by raising
purported “defects” in the tax lien certificates,
they did not oppose Sebago's motion for summary judgment.
Compl. ¶¶ 13-14.
the Superior Court granted summary judgment placing title in
Sebago, the Batemans moved to reconsider on the ground that
they had not received notice of Sebago's motion. Compl.
¶¶ 15-16. The Superior Court denied the
Batemans' motion on June 15, 2015, and Sebago recorded
the Superior Court's order in the registry of deeds on
July 23, 2015. Compl. ¶¶ 17-19.
August 2015, Sebago's Board of Selectmen agreed to
“explore [a] possible negotiated resolution in the
dispute as related to the recently tax acquired
[Property].” Compl. ¶ 20. About a week later,
Sebago's Board of Selectmen voted to allow the
Batemans' son and daughter-in-law (Sebago's
codefendants in this suit) to purchase the Property for $300,
000 even though Sebago had previously assessed the Property
at $1, 358, 610. Compl. ¶¶ 21-22. Sebago reassessed
the Property at $1, 140, 696 after completing the sale.
Compl. ¶ 26.
Batemans declared bankruptcy on April 5, 2017. Compl. ¶
28. Their initial bankruptcy filings did not report that they
had transferred their interest in the Property to their son
and daughter-in-law via Sebago. Compl. ¶ 29. Yet at
their creditors' meeting, Thomas R. Bateman disclosed
that he recorded a quitclaim deed of the Property to his son
in the registry of deeds “[b]ecause, uh, negotiated
with my son for him to purchase it back from the town.”
Compl. ¶ 52. Thomas R. Bateman also revealed at the
meeting that an appraiser valued the Property at $1, 800, 000
in 2015. Compl. ¶ 53. After the creditors' meeting,
the Batemans amended their bankruptcy filings to include the
transfer of the Property. Compl. ¶ 30.
SUBJECT MATTER JURISDICTION
Court has subject matter jurisdiction to entertain this
action. Sebago submits that this Court lacks subject matter
jurisdiction because Butler's action amounts to an appeal
of a prior state court judgment. Mot. Dismiss 6-10. The
parties focus their dispute on whether a win for Butler would
undo or interfere with the state court decision. See
Mot. Dismiss 6-10; Opp'n 7-10; see also Tyler v.
Supreme Judicial Court of Mass., 914 F.3d 47, 51
(1st Cir. 2019) (observing that the
Rooker-Feldman doctrine bars jurisdiction
even when plaintiff presents different arguments to federal
court than raised in state court (quoting Klimowicz v.
Deutsche Bank Nat'l Tr. Co., 907 F.3d 61, 66 (1st
the parties overlooked the issue in their briefs, Butler
argued at the hearing that he is neither formally nor
functionally a state court loser. See Suppl. Mem. 1
(citing Ingalls v. Erlewine (In re
Erlewine), 349 F.3d 205 (5th Cir. 2003));
Lance, 546 U.S. at 466 & n.2. The Court agrees
with Butler. As bankruptcy trustee, Butler brings this
fraudulent transfer suit on behalf of the Batemans'
creditors, not the Batemans. See 11 U.S.C.
§ 544(b); see also 3 Collier on
Bankruptcy ¶ 323.03; 5 Collier on
Bankruptcy ¶ 548.02(1)(b). Ergo, this Court has
authority to rule on Butler's claims.
1257 of chapter 28 of the United States Code to vest federal
appellate jurisdiction over state court judgments exclusively
in the Supreme Court. See District of Columbia Court of
Appeals v. Feldman, 460 U.S. 462, 482 (1983);
Rooker v. Fidelity Tr. Co., 263 U.S. 413,
415-16 (1923). As a consequence, federal district courts lack
jurisdiction to “consider cases brought by state-court
losers complaining of injuries caused by state-court
judgments rendered before the district court proceedings
commenced and inviting district court review and rejection of
those judgments.” Exxon Mobil Corp. v.
Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005).
this doctrine, which the Supreme Court refers to as
“Rooker-Feldman, ” appears
similar to claim and issue preclusion, the Supreme Court has
emphasized that it “is not simply preclusion by another
name” and “applies only in ‘limited
circumstances.'” Lance, 546 U.S. at 466
(quoting Exxon, 544 U.S. at 291). In Lance,
the Supreme Court held that state privity rules do not apply
in the Rooker-Feldman context but did not
reach “whether there are any circumstances,
however limited, in which Rooker-Feldman
may be applied against a party not named in an earlier state
proceeding.” Id. at 466 & n.2. The Supreme
Court speculated that Rooker-Feldman might
apply “where an estate takes a de facto appeal
in a district court of an earlier state decision involving
the decedent.” Id.; see also Goldsmith v.
Massad (In re Fiorillo), 494 B.R. 119, 142 (Bankr. D.
Mass. 2013) (Hoffman, Bankr. J.) (ruling that whether
Rooker-Feldman forbids jurisdiction over
bankruptcy trustee's claim depends on whose behalf that
the trustee sues). Still, the Court has not found __ and
Sebago does not identify __ an instance in which either the
Supreme Court or the First Circuit have used
Rooker-Feldman to dismiss the claims of a
nonparty to a state court suit.
extends further than preclusion in at least one respect as it
prohibits federal district court jurisdiction regardless of
the “issues actually litigated in the prior state-court
proceedings and the issues proffered in the subsequent
federal suit.” Tyler, 914 F.3d at 51 (quoting
Klimowicz, 907 F.3d at 66). Conversely, if the
plaintiff raised the “same or related question”
in the state court suit, a federal district court has
jurisdiction over his later case if it involves an
independent claim. See Skinner v.Switzer,
562 U.S. 521, 532 (2011) (quoting Exxon, 544 U.S. at
292-93). A claim is independent, however, only when a
favorable ruling on it will ...