MEMORANDUM DECISION ON MOTION FOR PARTIAL SUMMARY JUDGMENT BY DEFENDANTS DENNIS AND STANLEY NARVAES
Re: Dkt. No. 111.
ROBERT J. FARIS, Bankruptcy Judge.
The question presented is whether the bankruptcy court should adjudicate the rights of certain beneficiaries in a trust, even though the court has decided that the bankruptcy estate of one of the beneficiaries has no claim against the trust. I conclude that the answer is no.
Antonio Narvaes is the late husband of Ah Mei Chun, the debtor in the main chapter 7 proceeding. Antonio had three sons by a prior marriage, Anthony, Dennis, and Stanley. Anthony is married to Lan Le Narvaes and has two sons, Aaron Mark and Antonio Michael Narvaes.
Antonio established the Antonio Narvaes Irrevocable Trust.
Anthony, as trustee of the Trust, sold the North Shore property and purchased certain property on Azores Street. He and his wife and sons argue that the Azores Street property should be treated the same as the North Shore property which it replaced and that the Azores Street property should be placed in first bucket of assets for the benefit of Antonio's grandsons. Dennis and Stanley argue that the Azores Street property should be covered by the contingent disposition provisions of the trust and distributed to Antonio's heirs at law, including Dennis and Stanley.
The chapter 7 trustee of Antonio's widow (his second wife) commenced this adversary proceeding seeking to avoid certain transfers of Trust property and to sell property of the Trust pursuant to section 363(h).
On July 11, 2016, defendants Dennis and Stanley brought a crossclaim against their brother, Anthony, individually and as trustee of the Trust, and his wife and sons, alleging that Dennis and Stanley were entitled to recover the proceeds of the Azores Street property of the Trust.
Anthony, his wife, and his sons filed a motion for summary judgment on all counts of the adversary complaint.
Counts 1 through 3 of the crossclaim seek avoidance of certain transfers under sections 548 and 549 of the Bankruptcy Code and under H.R.S. § § 651C-4(a)(1) and (2). Dennis and Stanley concede that only the trustee can bring claims under the section 548 and 549.
Bankruptcy courts have subject matter jurisdiction over proceedings "arising under title 11, or arising in or related to cases under title 11."
To ascertain the court's subject matter jurisdiction, the court must separately analyze each claim stated in the crossclaim.
The remaining claims under Counts 1 through 8 of the crossclaim are based entirely on state law and do not "arise under" the Bankruptcy Code. Counts 1 through 3 are based on Hawaii's version of the Uniform Fraudulent Transfers Act; Counts 4 through 6 are for constructive trust, breach of fiduciary duty, and unjust enrichment; and Counts 7 through 8 are brought under H.R.S. § § 668-1 and 668-7 for sale or partition and equitable adjustment and equalization.
None of the claims in the crossclaim "arise in" the bankruptcy case because none are peculiar to the bankruptcy process; all of the claims could be asserted even if the debtor had never sought bankruptcy relief.
The claims do not fall under "related to" jurisdiction. Now that the trustee is not a party, the only issues remaining concern the rights of the debtor, Dennis and Stanley, and Anthony, his wife and his sons in the Trust. The bankruptcy estate will be unaffected by a ruling on any of the claims.
Anthony, his wife, and his sons argue that the bankruptcy court had "related to" jurisdiction when Dennis and Stanley filed their crossclaim and therefore the Carraher
Carraher is not directly applicable because the underlying bankruptcy case in Carraher was dismissed, while in this case the bankruptcy case has not been dismissed. But Carraher is analogous to the general rule that, once a federal court dismisses all claims arising under federal law, the court has discretion, but is not required, to retain jurisdiction over any pendent state law claims.
First, retention of the adversary proceeding would not serve judicial economy. A state court could decide the purely state law issues remaining in the crossclaim just as easily as the bankruptcy court.
Second, it is not more efficient or convenient for this court to resolve the remaining claims in the crossclaim rather than send them to the state court.
Third, state court proceedings to resolve the remainder of the crossclaim would be just as fair as proceedings in this court.
Finally, comity requires a bankruptcy court to consider whether the state laws involved are complex such that they ought to be construed and applied by state trial courts and reviewed by state appellate courts.
For these reasons, the crossclaim is dismissed, without prejudice. Because this disposition resolves all remaining claims in this adversary proceeding, Dennis and Stanley's counsel shall submit a proposed separate judgment.