Simms Building, Inc. v. New Mexico Real Estate Advisors, Inc.

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
JTS/SIMMS, LLC,
Debtor. 	No. 7-07-12153 SA
SIMMS BUILDING, INC.
Plaintiff,
v.
NEW MEXICO REAL ESTATE ADVISORS, INC.
dba Grubb & Ellis/New Mexico,
Defendant. 	Adv. No. 07-1180 S
MEMORANDUM OPINION RECONSIDERING
ORDER DENYING MOTION TO REMAND
On December 19, 2007, Defendant New Mexico Real Estate
Advisors, Inc. ("NMREA") removed this adversary proceeding from
the Second Judicial District Court, Bernalillo County, New
Mexico. 	On January 7, 2008, Plaintiffs filed a Motion to Remand
the case. 	Doc 13. 	On January 28, 2008, NMREA filed its answer
and a Motion to Dismiss. 	Docs 16, 17. 	The Court conducted a
hearing on the Motion to Remand on February 20, 2008 at which
Plaintiff's attorney failed to appear. 	As a sanction, the Court
denied the Motion to Remand. 	Doc 23. 	Now, however, while
working on the Motion to Dismiss the Court has come to the
realization that it lacks jurisdiction over the case and should
have remanded it. 	Therefore, the Court will sua sponte
reconsider the Order Denying Motion to Remand.
This adversary proceeding concerns rents collected by NMREA
from a time period before the Debtor purchased the real property
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on which the rents were collected. 	Simms Building, Inc. claims
ownership to the rents; NMREA claims the Debtor owns the rents.
In the Chapter 11 case, Debtor reached a settlement with its
largest creditor, Silar Special Opportunities Fund, LP ("Silar").
As part of the settlement, the automatic stay terminated with
respect to Silar's collateral, including cash collateral, and
such collateral was abandoned from the estate. 	See Main case,
docs 209 (Joint Motion) and 218 (Order granting joint motion).
The rents that are the subject of this adversary proceeding would
have been cash collateral, and therefore have been abandoned.
A bankruptcy court has jurisdiction over disputes
regarding alleged property of the bankruptcy estate at
the outset of the case. 	In re Xonics, Inc., 813 F.2d
127, 131 (7th Cir. 1987). 	When property leaves the
bankruptcy estate, however, the bankruptcy court's
jurisdiction typically lapses, In re Hall's Motor
Transit Co., 889 F.2d 520, 523 (3d Cir. 1989); In re
Xonics, Inc., 813 F.2d at 131; In re Muller, 72 B.R.
280, 284 (C.D. Ill. 1987), aff'd, 851 F.2d 916 (7th
Cir. 1988), cert. denied, 490 U.S. 1007, 109 S.Ct.
1645, 104 L.Ed.2d 160 (1989), and the property's
relationship to the bankruptcy proceeding comes to an
end. 	See In re Hall's Motor Transit Co., 889 F.2d at
523. Thus, the 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 (2d Cir. 1979).
Gardner v. United States (In re Gardner), 915 F.2d 1515, 1518
(10th Cir. 1990). 	Therefore, the Court finds that it lost
jurisdiction over the issue of ownership of the rents when the
cash collateral, including rents, was abandoned.
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Furthermore, for a bankruptcy court to have jurisdiction
over a matter, it must at least be "related to" the bankruptcy.
28 U.S.C. § 157(c)(1). 	A proceeding is related to a bankruptcy
if the outcome could conceivably have an effect on the estate
being administered in the case. 	Oakwood Acceptance Corp. v.
Tsinigini (In re Oakwood Acceptance Corp.), 308 B.R. 81, 85
(Bankr. D. N.M. 2004). 	The outcome of this proceeding will not
have an impact on the estate because the property has been
abandoned.
The Court will enter an Order setting aside the Order
Denying Motion to Remand and enter an Order Granting the Motion
to Remand.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	April 15, 2009
copies to:
Jennie D Behles
PO Box 7070
Albuquerque, NM 87194-7070
Paul M Kienzle, III
PO Box 587
Albuquerque, NM 87103-0587
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