IN RE ALTERNATE FUELS, INC. (Bankr.D.Kan. 8-26-2010)

o determine the validity, priority, or extent of a lien, and a proceeding to object to or revoke discharge. As to subsection (9), Collier on Bankruptcy states:

Clause (9) of Rule 7001 requires that an adversary proceeding be brought in order to obtain a declaratory judgment relating to the types of relief covered by clauses (1) through (8) inclusive of Rule 7001.

If declaratory relief falls outside of the types covered by those specified clauses, an adversary proceeding is unnecessary.

Federal Rule of Bankruptcy Procedure 7001 provides in full as follows:

An adversary proceeding is governed by the rules of this Part VII. The following are adversary proceedings:

(1) a proceeding to recover money or property, other than a proceeding to compel the debtor to deliver property to the trustee, or a proceeding under § 554(b) or § 725 of the Code, Rule 2017, or Rule 6002;

(2) a proceeding to determine the validity, priority, or extent of a lien or other interest in property, other than a proceeding under Rule 4003(d);

(3) a proceeding to obtain approval under § 363(h) for the sale of both the interest of the estate and of a co-owner in property;

(4) a proceeding to object to or revoke a discharge;

(5) a proceeding to revoke an order of confirmation of a chapter 11, chapter 12, or chapter 13 plan;

(6) a proceeding to determine the dischargeability of a debt;

(7) a proceeding to obtain an injunction or other equitable relief, except when a chapter 9, chapter 11, chapter 12, or chapter 13 plan provides for the relief;

(8) a proceeding to subordinate any allowed claim or interest, except when a chapter 9, chapter 11, chapter 12, or chapter 13 plan provides for subordination;

(9) a proceeding to obtain a declaratory judgment relating to any of the foregoing; or

(10) a proceeding to determine a claim or cause of action removed under 28 U.S.C. § 1452.

In this case, the claims made in the Adversary Complaint do not directly fit into any of the eight enumerated proceedings listed in subsections (1) through (8). Therefore the Trustee's claim for declaratory relief could have been brought by motion as a contested matter in accord with Bankruptcy Rule 9014.

See Keeler v. Academy of Amer. Franciscan History, Inc. (In re Keeler), 257 B.R. 442, 444 (Bankr. D. Md. 2001) (noting that although declaratory judgment is usually sought in an adversary complaint, proceeding by motion is appropriate when the claim is in effect alleging that defendant is violating discharge order).

The Court construes Fowler's argument as urging that the procedural irregularity is grounds for dismissal. The Court disagrees. First, Bankruptcy Rule 7001 is a rule of procedure, not a jurisdictional statute. Noncompliance with the bankruptcy rules is not a basis to dismiss under Federal Rule of Civil Procedure 12.

The Court notes that Federal Rule of Civil Procedure 12 applies to the case only because it was brought as an adversary proceeding. Civil Rule 12 does not apply to contested matters.

Second, the list of proceedings in Bankruptcy Rule 7001 as constituting adversary proceedings is not exclusive. The wording of the rule merely enumerates 10 matters which are adversary proceedings. It does not state that only the 10 matters may be brought as adversary proceedings. A commentator states:

8 William L. Norton, Jr., and William L. Norton III, Norton Bankr. L. Prac. 3d § 160:5 at 160-11 (West, Thomson Reuters 2010) ("Most questions about the distinction [between an adversary proceeding and a contested matter] may be resolved by looking to Rule 7001, which . . . provides the nonexclusive list of adversary proceedings.").

The list of adversary proceedings in the Rules is not exhaustive. "Related to" proceedings that would be litigated as civil actions in other courts may have to be commenced as adversary proceedings. Except when the Rules expressly require you to commence a proceeding by motion, there does not appear to be any prohibition against commencing an adversary proceeding.

Third, the Court finds it appropriate that this declaratory judgment action proceed as an adversary proceeding rather than a contested matter. Normally a request for declaratory relief in a bankruptcy case is brought as an adversary proceeding. Adversary proceedings are governed by nearly the full scope of the Federal Rules of Civil Procedure, which would apply if this action were brought in federal court outside of bankruptcy, whereas if the claim were to proceed as a contested matter, fewer of these rules, particularly relating to discovery, would apply. The rights of the parties, including Fowler, are better protected under the adversary procedures. This Court agrees with the statement that "where the rights of the affected parties have been adequately protected and the parties have had an opportunity to be heard, form will not be elevated over substance, and the matter will be allowed to proceed on the merits as originally filed."

In re Keeler, 257 B.R. at 444.

In re Friedman, 184 B.R. 883, 887 (Bankr. N.D.N.Y. 1994).

CONCLUSION.

For the foregoing reasons, Fowler's Motion to Dismiss lack of jurisdiction pursuant to Rule 7012 is denied.

IT IS SO ORDERED.

SO ORDERED.