United States District Court, D. Kansas
DARCY D. WILLIAMSON, Plaintiff,
TYLER PETERS, et al., Defendants.
MEMORANDUM AND ORDER
MURGUIA UNITED STATES DISTRICT JUDGE
Darcy D. Williamson, Trustee for the Bankruptcy Estate of
McCorkendale Construction, Inc. (“McCorkendale”)
filed an Adversary Complaint for Professional Negligence in
the United States Bankruptcy Court for the District of
Kansas. United States Bankruptcy Judge Dale L. Sommers
recommended the professional negligence matter be transferred
to this court and this court adopted that recommendation on
June 20, 2017. (Doc. 3.) The matter is now before this court
on defendants Tyler Peters and Payne & Jones,
Chartered's Motion to Dismiss for Lack of Subject Matter
Jurisdiction (Doc. 8). For the reasons set forth below, the
court finds it lacks subject matter jurisdiction over the
adversary complaint and grants defendants' motion.
to the adversary complaint filed April 21, 2017, McCorkendale
retained defendants to represent them in an action in Johnson
County, Kansas District Court against Duggan Homes, Inc., in
which McCorkendale obtained a judgment in the amount of $438,
197.36. According to the journal entry of judgment dated
April 28, 2010, this judgment could only be a judgment lien
on the real property that was specifically identified in
Exhibit A, which was attached to the journal entry of
judgment. Defendants assisted McCorkendale in obtaining an
amended judgment against Duggan Homes, Inc., in which the
restrictions set out in the first journal entry were removed.
March 10, 2011, defendants registered this judgment as a
foreign judgment in Clay County, Missouri Circuit Court.
Defendants, however, mistakenly registered the first journal
entry of judgment. This first journal entry did not create a
judgment lien on a 12-acre parcel of land owned by Duggan
Homes, Inc. in Clay County because this parcel was not
expressly listed in the Exhibit A attached to the first
March 14, 2014, North American Savings Bank, F.S.B.
(“NASB”) filed an action against McCorkendale to
quiet title to the 12-acre parcel of land in Clay County.
NASB argued that McCorkendale's foreign judgment did not
create a valid lien on the 12-acre parcel because the wrong
Kansas judgment was registered. On January 20, 2015 the Clay
County Circuit Court held a bench trial and found in favor of
McCorkendale. NASB appealed the decision to the Missouri
Court of Appeals.
filed a Chapter 7 bankruptcy petition in the United States
Bankruptcy Court for the District of Kansas on March 20,
2015. McCorkendale did not disclose any potential lawsuits in
March 8, 2016, the Missouri Court of Appeals reversed the
decision of the Clay County Circuit Court and entered
judgment in favor of NASB to quiet title to the 12-acre
parcel. The Missouri Court of Appeals found that because the
first journal entry, and not the second, was registered as a
foreign judgment, McCorkendale did not have a lien on the
disputed property. In her Adversary Complaint for
Professional Negligence, filed April 21, 2017, plaintiff
alleges that as a result of defendants' negligence in
registering the wrong journal entry of judgment, McCorkendale
sustained damages in excess of $75, 000. Plaintiff claims
this action arose prior to the Chapter 7 bankruptcy petition
and therefore constitutes property of the bankruptcy estate
pursuant to 11 U.S.C. § 541.
pursuant to Federal Rule of Civil Procedure 12(b)(1) is
appropriate when the court lacks subject matter jurisdiction
over a claim. Plaintiff claims that subject matter
jurisdiction exists and has the burden of establishing it.
Port City Props. v. Union Pac. R.R. Co., 518 F.3d
1186, 1189 (10th Cir. 2008). Because federal courts are
courts of limited jurisdiction, there is a strong presumption
against federal jurisdiction. Sobel v. United
States, 571 F.Supp.2d 1222, 1226 (D. Kan. 2008).
claims that she discovered the existence of a professional
negligence claim following the filing of McCorkendale's
Chapter 7 bankruptcy petition, but that the action arose
prior to the filing of the petition. Plaintiff therefore
considers this claim property of the bankruptcy estate and
maintains this court has jurisdiction over the matter under
28 U.S.C. § 1334(a), 28 U.S.C. § 157, and 11 U.S.C.
§ 542(b). Plaintiff has not alleged federal question
jurisdiction under 28 U.S.C. § 1331 or diversity
jurisdiction under 28 U.S.C. § 1332; therefore, if the
court finds this action is not the property of the bankruptcy
estate, it no longer has subject matter jurisdiction over the
case. See In re Gardner, 913 F.2d 1515, 1518 (10th
Cir. 1990) (“When property leaves the bankruptcy
estate, however, the bankruptcy court's jurisdiction
typically lapses . . . .”).
their motion to dismiss, defendants argue the court lacks
subject matter jurisdiction because McCorkendale's
professional negligence claim is not property of the
bankruptcy estate. Defendants allege that the legal
malpractice cause of action did not accrue until after the
bankruptcy petition was filed.
property included in an estate created by the filing of a
bankruptcy petition is broadly defined in 11 U.S.C. §
541(a)(1) to include “all legal or equitable interests
of the debtor in property as of the commencement of the
case.” State law defines what assets are considered
property of the bankruptcy estate. Butner v. United
States, 440 U.S. 48, 55 (1979) (“Property
interests are created and defined by state law.”).
Contingent interests that exist upon filing but do not fully
materialize until after filing have been considered property
of the estate. See Segal v. Rochelle, 382 U.S. 375,
380 (1966) (finding a debtor's tax return that was
received postpetition was property of the bankruptcy estate
because it was for business losses suffered prepetition and
was “sufficiently rooted in the pre-bankruptcy
past.”). Whether a debtor's cause of action is
property of the estate, however, depends on if the cause of
action accrued prior to the commencement of the bankruptcy
case. See In re Smith, 293 B.R. 786, 788 (Bankr. D.
Kan. 2003). Because state law defines property rights, courts
must look ...