Susan Mary Nevitt

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/11/06
Susan Mary Nevitt
04-12346
Memorandum Opinion re: [81-1] Motion To Take Judicial Notice by David Derringer,
[75-1] Motion For Extreme Sanctions to be imposed on Chapels and Attorney Joseph
Manges by David Derringer, [74-1] Motion For Order to Show Cause why the Chapels
and Joseph Manges should not be held in contempt of Court
Received on: 2004-10-04 08:32:06.000
2004-10-04 00:00:00.000
2004-10-04 00:00:00.000
James Burke
Case 04-12346-s7 Doc 83 Filed 10/04/04 Entered 10/04/04 13:06:00 Page 1 of 17

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
SUSAN MARY NEVITT,
Debtor. NO. 7-04-12346 SA
MEMORANDUM OPINION ON PENDING MOTIONS
FILED BY DAVID DERRINGER
In this bankruptcy case Debtor received her discharge
(Doc. 62, July 7, 2004) and the Chapter 7 Trustee filed a
Report of No Distribution and Notice of Abandonment of Assets
(Doc. 79, August 31, 2004). The case is therefore ready to
close. However, the docket reflects several motions filed by
David Derringer that the Court will address before closing the
case.
Before turning to the Motions, the Court will point out
relevant facts gleaned from the various pleadings and hearings
in this case. Debtor filed her voluntary Chapter 7 petition
on March 31, 2004 (Doc. 1). Debtor’s Schedule A states that
she owns no real property. Debtor’s Schedule B lists as an
asset “Claim for Fraudulent Transfer 40 Acres” with a value of
$500,000. Debtor did not claim the fraudulent transfer asset
as exempt. The Chapels are listed as secured creditors on
Schedule D in the amount of $158,000, holding a judgment lien
against the claim for fraudulent transfer. Her Schedule H
lists David Derringer as a codebtor on most, if not all, her
debts, including the debt to the Chapels. Schedule I states
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her marital status as “single.” The Statement of Financial
Affairs, question 10, lists the transfer of a ranch worth
$500,000 to David Derringer, “ex-husband”, on September 12,
2003. With her petition Debtor filed her Statement Pursuant
to NM LBR 1002-1 Certifying that Individual Debtor has no
Spouse (Doc. 3).
On April 23, 2004, the Chapels filed a Motion for Relief
from Automatic Stay (Doc. 12) in order to pursue foreclosure
of their judgment lien on the ranch, which had been deeded to
David Derringer. By agreement of the parties the final
hearing on the Stay Motion was continued to a date to be
determined after October 8, 2004. The Court never had to rule
on modification or applicability of the stay since Debtor
received her discharge on July 7, 2004 and the Chapter 7
Trustee filed her Report of No Distribution and Abandonment of
Assets on August 31, 2004.
Next, the Court will explain several legal concepts about
bankruptcy that Mr. Derringer may be unaware of. First, a
discharge of a debtor affects only that debtor’s personal
liability on the debt; the discharge does not extinguish the
debt or affect the creditor’s rights to pursue any other party
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1 11 U.S.C. § 524(e) provides: “Except as provided in
subsection (a)(3) of this section [regarding reaffirmation
agreements], discharge of a debt of the debtor does not affect
the liability of any other entity on, or the property of any
other entity for, such debt.”
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that is liable on the debt or to pursue any collateral
supporting the debt1.
While section 524(a) thus affords broad benefits
to the debtor, “discharge of a debt of the debtor
does not affect the liability of any other entity
on, or the property of any other entity for, such
debt.” 11 U.S.C. § 524(e). Obviously, it is the
debtor, who has invoked and submitted to the
bankruptcy process, that is entitled to its
protections; Congress did not intend to extend such
benefits to third-party bystanders. See 3 Collier
on Bankruptcy par. 524.01[3] at 524-16 (1st ed.
1990)(citing S.Rep. No. 989, 95th Cong., 2d Sess, 80-
81, reprinted in 1978 U.S.Code Cong. & Admin. News
5787, 5866-67); see also In re Bracy, 449 F.Supp.
70, 71 (D. Mont. 1978)(“it is the policy of the law
to discharge the bankrupt but not to release from
liability those who are liable with him”). “What is
important to keep in mind is that a discharge in
bankruptcy does not extinguish the debt itself but
merely releases the debtor from personal
liability... The debt still exists, however, and can
be collected from any other entity that may be
liable.” In re Lembke, 93 B.R. 701, 702 (Bankr. D.
N.D. 1988). The courts have reconfirmed this basic
principle in case after case permitting creditors
whose claims have been discharged vis-a-vis the
bankrupt to recover on the same claims from third
parties in a variety of settings.
Landsing Diversified Properties-II v. First Nat’l Bank and
Trust Co. of Tulsa (In re Western Real Estate Fund, Inc.), 922
F.2d 592, 600-01 (10th Cir. 1990)(footnote omitted). See also
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Johnson v. Home State Bank, 501 U.S. 78, 83 (1991)(“[A]
discharge extinguishes only “the personal liability of the
debtor.” 11 U.S.C. § 524(a)(1). Codifying the rule of Long
v. Bullard, 117 U.S. 617, 6 S.Ct. 917, 29 L.Ed. 1004 (1886),
the Code provides that a creditor’s right to foreclose on the
mortgage survives or passes through the bankruptcy.”)(Emphasis
in original); Houston v. Edgeworth (In re Edgeworth), 993 F.2d
51, 53 (5th Cir. 1993)(“A discharge in bankruptcy does not
extinguish the debt itself, but merely releases the debtor
from personal liability for the debt. Section 524(e)
specifies that the debt still exists and can be collected from
any other entity that might be liable.”)(footnote omitted.)
In other words, Ms. Nevitt’s discharge does not discharge Mr.
Derringer’s liability to the Chapels and does not prevent the
Chapels from pursuing Mr. Derringer or the real estate that is
subject to their judgment lien.
Second, the ranch property was not property of the
estate. Property of the estate consists of “all legal or
equitable interests of the debtor in property as of the
commencement of the case.” 11 U.S.C. § 541(a)(1). Ms. Nevitt
transferred the ranch to Mr. Derringer on September 12, 2003.
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2 However, if the Trustee recovered the ranch as a
fraudulent transfer, see 11 U.S.C. §§ 548 and 550, it would
then become estate property. See 11 U.S.C. § 541(a)(3). The
Trustee has decided not to pursue any such action, as
evidenced by her No Distribution Report.
3 11 U.S.C. § 362 provides that a bankruptcy petition
operates as a stay of:
“(1) the commencement or continuation ... of a
judicial, administrative, or other action or
proceeding against the debtor [for a prepetition
claim]...;
(2) the enforcement, against the debtor or against
property of the estate, of a [prepetition] judgment
...;
(3) any act to obtain possession of property of the
estate or property from the estate or to exercise
control over property of the estate;
(4) any act to create, perfect, or enforce any lien
against property of the estate;
(5) any act to create, perfect, or enforce against
property of the debtor any [prepetition] lien ...
(6) any act to collect, assess, or recover a
[prepetition] claim against the debtor ...;
(7) the setoff of any debt owing to the debtor ...;
and
(8) the commencement or continuation of a proceeding
before the United States Tax Court concerning the
debtor.
(Emphasis added.)
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She no longer had an interest in the ranch on the date of her
bankruptcy, so it did not become estate property2.
Third, the automatic stay of 11 U.S.C. § 362 protects
only the debtor, debtor’s property and the property of the
estate3. The automatic stay does not stay proceedings against
codebtors. Otoe County Nat’l Bank v. W & P Trucking, Inc.,
754 F.2d 881, 883 (10th Cir. 1985). Nor does it stay lien
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4 In any event, there is no longer an automatic stay in
the case because the discharge entered and the Chapter 7
trustee filed a Report of No Distribution and Abandonment of
Assets. See 11 U.S.C. § 362(c).
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enforcement actions against non-estate property. In re Monroe
Well Service, Inc., 67 B.R. 746, 750 (Bankr. E.D. Pa. 1986).
Therefore, neither Mr. Derringer or his property were
protected by the automatic stay in Ms. Nevitt’s bankruptcy4.
Finally, the bankruptcy court is a court of limited
jurisdiction and empowered to hear only those cases authorized
and defined in the Constitution and entrusted to them by
Congress. Henry v. Office of Thrift Supervision, 43 F.3d 507,
511 (10th Cir. 1994). Parties cannot waive lack of subject
matter jurisdiction. Id. Federal courts are obligated to
examine their own jurisdiction, and subject matter
jurisdiction can be raised at any time, by a party or by the
court sua sponte. May v. Missouri Department of Revenue (In
re May), 251 B.R. 714, 719 (8th Cir. B.A.P. 2000).
Bankruptcy Court jurisdiction is established by 28 U.S.C.
§ 1334, which lists four types of matters over which the
district court has bankruptcy jurisdiction: 1) cases “under”
title 11 (which are the bankruptcy cases themselves, initiated
by the filing of a Chapter 7, Chapter 11, etc. petition), 2)
proceedings “arising under” title 11, 3) proceedings “arising
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in” a case under title 11, and 4) proceedings “related to” a
case under title 11. Wood v. Wood (In re Wood), 825 F.2d 90,
92 (5th Cir. 1987). In the District of New Mexico, all four
types have been referred to the bankruptcy court. See 28
U.S.C. § 157(a); Administrative Order, Misc. No. 84-0324 (D.
N.M. March 19, 1992). Jurisdiction is then further broken
down by 28 U.S.C. § 157, which grants full judicial power to
bankruptcy courts over “core” proceedings, but only limited
judicial power over “related” or “non-core” proceedings.
Wood, 825 F.2d at 91; Personette v. Kennedy (In re Midgard
Corporation), 204 B.R. 764, 771 (10th Cir. B.A.P. 1997).
“Core” proceedings are matters “arising under” and
“arising in” cases under title 11. Wood, 825 F.2d at 96;
Midgard, 204 B.R. at 771. Matters “arise under” title 11 if
they involve a cause of action created or determined by a
statutory provision of title 11. Wood, 825 F.2d at 96;
Midgard, 204 B.R. at 771. Matters “arise in” a bankruptcy if
they concern the admini-stration of the bankruptcy case and
have no existence outside of the bankruptcy. Wood, 825 F.2d
at 97; Midgard, 204 B.R. at 771.
“Non-core” proceedings are those that do not depend on
the bankruptcy laws for their existence and that could proceed
in another court even in the absence of bankruptcy. Wood, 825
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F.2d at 96; Midgard, 204 B.R. at 771. Bankruptcy courts have
jurisdiction over non-core proceedings if they are at least
“related to” a case under title 11. 28 U.S.C. § 157(c)(1)(“A
bankruptcy judge may hear a proceeding that is not a core
proceeding but that is otherwise related to a case under title
11.”) Therefore, unless a matter is at least “related to” a
bankruptcy case, the bankruptcy court lacks jurisdiction.
“[T]he test for determining whether a civil
proceeding is related in bankruptcy is whether the
outcome of that proceeding could conceivably have
any effect on the estate being administered in
bankruptcy.” Pacor, Inc. v. Higgins, 743 F.2d 984,
994 (3rd Cir. 1984)(emphasis omitted.) Although the
proceeding need not be against the debtor or his
property, the proceeding is related to the
bankruptcy if the outcome could alter the debtor’s
rights, liabilities, options, or freedom of action
in any way, thereby impacting on the handling and
administration of the estate. Id. ...
[T]he bankruptcy court lacks related jurisdiction to
resolve controversies between third party creditors
which do not involve the debtor or his property
unless the court cannot complete administrative
duties without resolving the controversy. In re
Shirley Duke Assocs., 611 F.2d 15, 18 (2nd Cir.
1979).
Gardner v. United States (In re Gardner), 913 F.2d 1515, 1518
(10th Cir. 1990).
The subject matter of most of the pending Derringer
motions seek protection for Mr. Derringer and the ranch from
the continuing collection actions by the Chapels. Because Mr.
Derringer is not the debtor and the ranch is not property of
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the estate, the bankruptcy court lacks jurisdiction to award
the relief requested.
The Court now turns to the individual pending motions:
1. Property Owner/Creditor/Intervenor David Derringer’s
Motion for Order to Cease and Desist Against Mick Chapel,
Jennifer Chapel, Joseph Manges and Sheriff Snyder, and
Motion for Order for FBI Investigation of the Criminal
Perjury and Fraud of Mick and Jennifer Chapel and Joseph
Manges Pursuant to Title 18 U.S.C. Section 1621 (docs. 7
& 8)
In this Motion Mr. Derringer seeks an order directing the
listed parties to stop violating the automatic stay, in that
they are taking actions regarding the ranch property. He also
seeks an FBI investigation because the Chapels and their
attorney are attempting to use the bankruptcy process to
illegally take his property. The Court finds that 1) Mr.
Derringer is not a person protected by the automatic stay in
this case, 2) the ranch is not a property protected by the
automatic stay in this case, and 3) the Chapels and their
attorney have not taken any actions in violation of the
bankruptcy code by attempting to collect their debt through
the bankruptcy process. If Mr. Derringer has a problem with
the validity of the Chapel claim, that is a matter to address
in the state court. The Bankruptcy Court does not have
jurisdiction over disputes between third parties to the
bankruptcy. This motion will be denied.
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2. Property Owner/Creditor/Intervenor David Derringer’s
Emergency Motion for Order for Compliance of Creditor
Chapels to the Provisions of Discovery under Rules 26,
30, 31, 33 and 34, and Emergency Motion for Stay Against
the Nevitt/Derringer Real Property Pending Outcome of
Federal Suits Civ-02-0974, Civ-02-1075, Civ-03-0090, Civ-
03-0149 and Civ-03-0804 in Current Litigation (docs. 9 &
10)
In this motion, Mr. Derringer seeks an Order directing
the Chapels to engage in discovery regarding their motives and
claims to the ranch. He also seeks protection of the
automatic stay. First, Mr. Derringer is not a party to the
Motion for Relief from Automatic Stay – that is a dispute
between the Debtor, the Chapter 7 Trustee, and the Chapels as
movants. There is no basis for the Court to award discovery
to a non-party. See Fed. Bankr. R. 7026(b)(1) (Parties may
obtain discovery regarding any matter, not privileged, that is
relevant to the claim or defense of any party...)(Emphasis
added.)
Mr. Derringer’s entitlement to protection of the
automatic stay is discussed above. This motion will be
denied.
3. Motions for Continuance of Final Hearing on the Motion
for Relief from Automatic Stay (docs. 43 & 45)
These motions are moot and should be denied. The parties
settled the final stay matter by agreeing to continue the
automatic stay through October 8, 2004. Since then, the
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automatic stay has expired by operation of law. This motion
will be denied.
4. Motion to Take Judicial Notice (doc. 49)
In this Motion, Mr. Derringer asks that the Court take
judicial notice of his appraisal, to take note that it shows
the ranch is worth “an extreme amount more” than the Chapels’
claim. Fed.R. Evid. 201(b) discusses the types of matters of
which the Court can take judicial notice:
Kinds of facts. A judicially noticed fact must be
one not subject to reasonable dispute in that it is
either (1) generally known within the territorial
jurisdiction of the trial court or (2) capable of
accurate and ready determination by resort to
sources whose accuracy cannot reasonably be
questioned.
An appraisal is not the type of fact that can be judicially
noticed. The only proper way to get an appraisal into
evidence is either through a stipulation of the parties, or
through testimony of the appraiser subject to cross-
examination by opposing parties. This motion will be denied.
5. Motion to Take Judicial Notice (doc. 63)
Although captioned as a Motion to Take Judicial Notice,
in this motion, Mr. Derringer seeks an FBI investigation of
the Chapels and their attorney for attempting to sabotage a
sale of the ranch, and their attorney’s disbarment for
presenting an “unsigned” order to the realtor. First, the
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Bankruptcy Court lacks jurisdiction over any actions attempted
by the Chapels or their attorney to sabotage a sale. This is
a dispute between third parties to the bankruptcy over non-
bankruptcy-estate property. Second, there is nothing
inherently wrong with showing an unsigned, proposed, order to
anyone. Furthermore, no realtor or title company would accept
an unsigned order. There would only be a problem if someone
presented an order signed by forgery. This motion will be
denied.
6. Motion to Take Judicial Notice (doc. 64)
In this motion, Mr. Derringer asks the Court to take
judicial notice that the Chapels are interfering with his
attempts to sell the ranch. He also seeks a declaration that
because the ranch is his sole property it was not included in
the bankruptcy estate; that the Chapel claim was listed in the
bankruptcy and that Debtor received her discharge; and that,
therefore, he is no longer liable for the debt and the Chapel
lien should be removed from his property. As explained above,
the Court cannot take judicial notice of Mr. Derringer’s
exhibits that purport to demonstrate interference with his
attempts to sell the ranch. The only way those documents
would come into evidence is through stipulation or trial.
With regard to his theory of bankruptcy discharge, that is
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simply not the law. See discussion at pages 3-4, above. This
motion will be denied.
7. Motion to Discharge Chapels Claims in No. 7-04-12346-SA
and Not Consider the Derringer Property in the Bankruptcy
of Susan Nevitt (doc. 67)
In this motion, Mr. Derringer again advances his legal
theory that Susan Nevitt’s discharge eliminated the Chapel’s
claims against him and his property. This is simply not the
law. This motion will be denied.
8. David Derringer’s Motion for Order to Show Cause and for
Extreme Sanctions to be Imposed on Chapels and Attorney
Joseph Manges (docs. 74 & 75)
In this motion, Mr. Derringer seeks to hold the Chapels
and their attorney in contempt for filing a notice of sale
that allegedly violated a bankruptcy court stay order and a
Court of Appeals stay order. First, even if there had been a
violation of the stay Mr. Derringer is not a party protected
by the stay and has no standing to file for sanctions.
Second, the Bankruptcy Court does not have jurisdiction over
the dispute between Mr. Derringer and the Chapels, both third-
parties to the bankruptcy and concerning non-estate property.
Third, Mr. Derringer has claimed no damages resulting from the
alleged violation. Fourth, if the Chapels or their attorney
violated a Court of Appeals order, that would be the proper
venue to complain. Finally, the property has not yet been
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5 On September 20, 2004, Mr. Derringer filed a Notice of
Default of any Response from Creditors Chapel to Derringer’s
Motion for Order to Show Cause and Derringer’s Request for
Court Order. He seeks entry of a proposed order that, among
other things, imposes fines of $18,000 each on Mick Chapel,
Jennifer Chapel and their attorney, awards $180,000 in
punitive damages and orders the United States Marshall to
arrest Mick Chapel, Jennifer Chapel and their attorney and
incarcerate them for a period of not less than 18 months.
First, the requested relief was not requested in the motion.
Second, although a defendant may be in default, that does not
automatically entitle a plaintiff to a default judgment. See,
e.g., Riehm v. Park (In re Park) 272 B.R. 323, 328-29 (Bankr.
D. N.J. 2001)(“The court must consider whether the plaintiff’s
allegations are sufficient to state a claim for relief. If
the plaintiff’s claim lacks merit and is unsupported by the
law, the court may deny a motion for default judgment despite
the technical default.”)(quoting In re Wall, 127 B.R. 353, 355
(Bankr. E.D. Va. 1991)). See also Miller v. Kasden (In re
Kasden), 209 B.R. 236, 238 (8th Cir. BAP 1997)(“[A] default
judgment may not be entered on a complaint that fails to
support the claim for relief.”) As discussed in the text, Mr.
Derringer lacks standing, has failed to state a claim, and is
requesting relief outside of this court’s jurisdiction.
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sold and any protection afforded by the automatic stay (which
the Court doubts existed) automatically expired. This motion
will be denied5.
9. David Derringer’s Motion to Take Judicial Notice (doc.
81)
Although captioned as a Motion to Take Judicial Notice,
in this motion, Mr. Derringer only informs the Court that the
Chapels are attempting to confuse the state courts by
misrepresenting the status of the bankruptcy. It is
substantially a rehash of the Motion for Order to Show Cause
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(docs. 74 & 75). As stated above, the Bankruptcy Court lacks
jurisdiction over the Derringer-Chapel dispute. This motion
will be denied.
Conclusion
The Court will enter orders denying the above motions.
The Clerk will also be directed to close this case as fully
administered.
Honorable James S. Starzynski
United States Bankruptcy Judge
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I hereby certify that on October 4, 2004, a true and correct
copy of the foregoing was electronically transmitted, faxed,
delivered, or mailed to the listed counsel and/or parties.
Joseph E Manges
PO Box 669
Santa Fe, NM 87504-0669
Linda S Bloom
PO Box 218
Albuquerque, NM 87103-0218
Ronald E Holmes
2325 San Pedro NE Ste 2I
Albuquerque, NM 87110-4121
David Brian Derringer
Box 157
Quemado, NM 87829
Susan Mary Nevitt
PO Box 129
Veguita, NM 87062
Office of the United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
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