Raymond Lee Matthews and Sheila LaVerne Matthews

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF WYOMING
In re 	)
)
RAYMOND LEE MATTHEWS 	) 	Case No. 	14-20591
SHEILA LAVERNE MATTHEWS 	) 	Chapter 7
)
Debtors. 	)
OPINION ON THE AMENDED REQUEST FOR DAMAGES
TO BE PAID BY THE TRUSTEE
On March 31, 2015, the Amended Request for Damages to be Paid by the Trustee,
filed by Timothy and Teri Cueva (“Cuevas”), the reply filed by Tracy Zubrod (“Trustee”)
and the objection filed by Raymond Matthews and Sheila Matthews (“Debtors”) came
before the court for an evidentiary hearing. Debtors did not attend the hearing. At the
conclusion of the hearing, the court took the matter under advisement. Having reviewed
the record, testimony and other evidence, and parties’ arguments, the court is prepared to
rule.
Debtors filed for chapter 7 bankruptcy protection on August 5, 2014, listing on
Schedule A, real property described as”Primary Residence - Single Family Home, 202
Main Street. . . Pine Bluffs, WY 82082.” Debtors listed the current value of the real
property as $156,176.00. Debtors also listed “Tim & Teri Cueva” as lienholders of the
property with a claim in the amount of $40,000.00.
Based upon the value and secured debt amount asserted by Debtors, Trustee
proceeded to sell the estate asset by retaining Connie Webb, with the court’s approval, to
market and sell the real property. On September 15, 2014, the Cuevas’ attorney informed
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the Trustee the property was not insured. Ms. Webb’s employment was approved on
September 22, 2015. Thereafter, Ms. Webb marketed the property, obtaining a cash offer
which eventually resulted in the execution of a purchase contract on October 16, 2015.
The purchaser and Trustee agreed to the sale price of $50,500.00. Trustee filed and
served the Notice of Intent to Sell on November 3, 2014.
On November 21, 2014, Ms. Webb notified the Trustee there was extensive water
damage to the property due to the pipes breaking. Unknown to Ms. Webb and the
Trustee, the heat was turned off in September 2014. The electricity was still operating
and paid by the Cuevas.
At the time the water damaged occurred, Mrs. Cueva approved the employment of
Valley Construction of Cheyenne, LLC (“Valley Construction”) to remove the water and
damaged areas in the property. The Cuevas paid Valley Construction $9,043.70 for their
services.
On November 24, 2014, Trustee filed a Notice of Proposed Abandonment of
Property of the Estate. Thereafter, Cuevas filed their “Motion for Trustee to Abandon the
Property . . .” on December 24, 2014. The court entered an Order Granting
Abandonment of Real Property on January 14, 2015.
Discussion
The Cuevas request the Trustee reimburse the cost to have Valley Construction
remove the water and damaged portions to the real property. Upon a review of the
pleading, the court deems the Cuevas’ request as a request to sue the Trustee under the
Barton Doctrine.
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The Barton Doctrine, first applied to a receiver for a railroad, determined a party
had to obtain leave from the court of the receiver’s appointment to bring suit against the
receiver.1 The Tenth Circuit Court of Appeals applied the doctrine to claims arising from
acts done in the bankruptcy trustee’s official capacity and with the trustee’s authority as
an officer of the court.2 Bankruptcy trustees are afforded this protection because, like an
equity receiver, a trustee is, in effect, working for the court that appointed or approved
him/her, administering property that has come under the court’s control by virtue of the
Bankruptcy Code.3 This is commonly referred to as the “leave to sue” factor of the
Barton Doctrine analysis.
The other factor of the analysis requires, before leave to sue a trustee can be
obtained, the claimant must be able to plead a prima facie case against the trustee.4 A
trustee may be “personally liable only for a willful and deliberate violation of his
fiduciary duties.”5 A trustee will generally not be held personally liable for mistakes in
judgment where discretion is allowed to the trustee.6
1 Barton v. Barbour, 104 U.S. 126 (1881).
2 Satterfield v. Malloy, et al., 700 F.3d 1231 (10th Cir. 2012).
3 In re Vaughan Company, Realtors, Case No. 10-10759, Adv. No-12-1139, 2014 Bankr. LEXIS 618,
(Bankr. D.N.M., Feb. 14, 2014).
4 In re Linton, 136 F.3d 544, 545 (7th Cir. 1998) citing Barton v. Barbour, 104 U.S. 126 (1881).
5 In re Chicago Pacific Corp., 773 F.2d 909, 915 (7th Cir. 1985, citing Mosser v. Darrow, 341 U.S. 267,
272 (1951).
6 In re Maros Gurnee Partnership, 182 B.R. 211, 219 (N.D. Ill. 1995), citing In re Hutchinson, 5 F.3d
750, 753 (4th Cir. 1993).
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Using the two-step analysis of the Barton Doctrine, this court must first determine
whether the Cuevas have pleaded a prima facie case against the Trustee. To determine
whether a claimant pleaded a breach of fiduciary duties, the court must consider: (1) what
fiduciary duties were allegedly implicated; (2) whether these fiduciary duties were
allegedly breached; and, (3) whether such breach was alleged to be willful and
deliberate.7
(1) 	Fiduciary duties allegedly implicated
The duties of a chapter 7 trustee are stated in § 704. The first two duties described
are: (1) collect and reduce to money the property of the estate for which the trustee
serves; and, (2) be accountable for all property received. The Chapter 7 Trustee’s
Handbook, states the trustee has the “ duty and responsibility to insure and safeguard all
estate property and property that comes into the trustee’s hands by virtue of his
appointment.”8 Herein, the duty the Cuevas imply was the trustee’s duty to account for
and safeguard the bankruptcy estate’s property.
(2) 	Fiduciary duties allegedly breached
The Cuevas allege they are “requesting to be reimbursed by Tracy L. Zubrod,
Trustee, for the damage done to this property caused by her negligence while the property
was entrusted to her.” The Cuevas presented testimony and evidence that their attorney
7 In re Kids Creek Partners, L.P. 248 B.R. 554, (Bankr. N.D. Ill, 2000).
8 Handbook for Chapter 7 Trustees, Ch. 6, Page 6-3. (Eff. Mar. 1, 2001 with Jan. 1. 2005 technical
amendments; and In re Chicago Art Glass, 155 B.R. 180, 187 (Bankr. N.D. Ill 1993).
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provided notice to the Trustee that the insurance was cancelled on this property as early
as September, 2014. Trustee, her real estate agent, Ms. Webb, and Elaine Quade,
Trustee’s legal assistant, did not investigate whether the heat was turned on in the
building during the period the real property was being held as an asset of the bankruptcy
estate. The water damage occurred on or about November 21, 2014. The court approved
Trustee’s abandonment of the property on January 14, 2015. The court finds the property
was in the “trustee’s hands by virtue of her appointment” as the chapter 7 trustee on the
date the damage occurred. Despite the Trustee’s responsibility to account for and
safeguard the property, the property was uninsured and not heated, causing the damage.
The Cuevas have proved this element in establishing a prima facie case.
(3) 	Was breach willful and deliberate?
Lastly, the court must determine whether the Trustee’s actions were willful and
deliberate. “Willful” is defined as “voluntary and intentional, but not necessarily
malicious.”9 “Deliberate” is defined as “intentional, premeditated, fully considered.”10
Upon review of the Cuevas’ request, the document specifically alleges the actions of the
Trustee were “negligent.” The Cuevas did not plead nor provide evidence or testimony
the Trustee’s actions were willful and deliberate. Trustee’s failure to insure and maintain
the heat in the building was not intentional, or premeditated. The court does not find the
Trustee’s failure to insure the property or verify the heat was on rises to the level of
9 Black’s Law Dictionary, 1593 (7th ed. 1999).
10 Black’s Law Dictionary, 48 (7th ed. 1999).
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willful and deliberate. The actions were negligent. The Cuevas do not meet their burden
of pleading the Trustee’s actions were willful and deliberate under the Barton Doctrine.
In conclusion, the facts alleged are not sufficient to support a prima facia case of a
willful and deliberate breach of fiduciary duty. Therefore, the Cuevas failed to meet the
“leave to sue” part of the Barton Doctrine. The Cuevas may not proceed to sue Trustee
for the asserted damages.
This opinion constitutes the Court’s findings of fact and conclusions of law. A
separate order shall be entered pursuant to Fed. R. Bankr. P. 9021.
By the Court
HONORABLE MICHAEL E. ROMERO
United States Bankruptcy Judge
Service to:
Raymond and Sheila Matthews
Timothy and Teri Cueva
Tracy Zubrod
4/21/2015
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