United States District Court, W.D. Missouri, Central Division
NANETTE K. LAUGHREY UNITED STATES DISTRICT JUDGE.
case is before the Court on Defendants Bruce Cole and Nanette
Cole's Motion for Withdrawal of the Reference Pursuant to
28 U.S.C. § 157(d). Doc. 1. The United States Bankruptcy
Judge has filed a Report and Recommendation, Doc. 6, which
the Coles move to strike, Doc. 9, and to which they have also
filed objections, Doc. 10.
underlying case at issue is an adversary proceeding filed by
the Trustee in May 2012 in the U.S. Bankruptcy Court for the
Western District of Missouri, Strauss v. Cole, no.
12-02009-drd, against the Coles. In that case, the Trustee
sought among other things to avoid fraudulent and
preferential transfers, and now seeks to apply the proceeds
of the sale of the Coles' California residence to the
judgment that the Trustee obtained.
Coles ask for withdrawal of the reference of their claim to a
homestead exemption in the proceeds of the sale of their
residence, and for which they have demanded a jury trial, and
withdrawal of their claim that they are entitled to have
their Federal and State tax liabilities paid from the
proceeds of the sale. They ask in the alternative for
withdrawal of the reference of the entire proceeding. The
United States Bankruptcy Judge, the Hon. Dennis Dow, has
recommended denying the motion for withdrawal, and the
Trustee objects to withdrawal.
reasons discussed below, the Motion for Withdrawal of the
Reference, Doc. 1, is denied. The Motion to Strike, Doc. 10,
the Report and Recommendation is denied. The Court has
reviewed the Report and Recommendation de novo and
adopts it, consistent with the discussion herein.
2012, with the Coles' and the Trustee's consent, the
Bankruptcy Court entered two orders in the adversary
proceeding. Specifically, on June 15, 2012 the Bankruptcy
Court entered a temporary restraining order which provided
that the proceeds of the sale of the Coles' California
residence were to be paid to a California escrow company
pending further order of the Bankruptcy Court. On June 18,
2012 the Bankruptcy Court entered an order providing that the
June 15 order would remain in effect until final judgment was
entered in the adversary proceeding, and that the escrow
agent would retain the proceeds until entry of final
judgment, at which time the Bankruptcy Court would enter an
order directing the disposition of the proceeds. See
Doc. 3-1 (Stipulated Order of 6/18/2012).
Trustee was subsequently granted summary judgment on his
claims for fraudulent and preferential transfer. See
Strauss v. Cole, 608 F. App'x 438 (8th
Cir. 2015) (affirming summary judgment in favor of the
Trustee). In February 2016, the Bankruptcy Court granted the
Trustee's motion to voluntarily dismiss the remaining
counts in the adversary proceeding.
Coles then filed motions to alter or amend the order of
dismissal, or clarify the process by which they could seek an
order directing the disbursement of the proceeds of the sale
of their California residence to pay state and federal taxes,
which the Bankruptcy Court denied. The Bankruptcy Court
ordered the Coles to file a motion containing all supporting
factual and legal bases for their argument that the taxes
should be paid from the proceeds. See Strauss v.
Cole, W.D. Mo. Bankr., case no. 12-2009-DRD (Doc. 239).
The Coles did not file such a motion. They instead appealed
the dismissal order and other orders to this Court, which
this Court affirmed. See Strauss v. Cole, U.S.
District Court, W.D. Mo., case no. 2:16-cv-04143-NKL. The
Coles appealed to the Eighth Circuit and that appeal is
pending. See Strauss v. Cole, Eighth Circuit Court
of Appeals, case no. 17-3126.
January 31, 2017, Bruce Cole filed a motion in the Bankruptcy
Court requesting a ruling that he was entitled to a homestead
exemption of $175, 000 in the proceeds from the sale of the
residence, and directing the Trustee to pay that amount. Doc.
3-2. He asked the Bankruptcy Court to grant the motion based
upon the argument and law cited, and he requested a hearing.
Nanette Cole joined the motion on February 17, 2017. Doc.
3-3. The Coles filed reply suggestions in support of their
motion in March 2017. The Bankruptcy Court entered an order
setting a telephonic hearing for May 8, 2017 and directing
the parties to be prepared to discuss evidentiary, legal, and
procedural issues. On April 24, 2017, the Coles filed a
motion for a continuance. The Bankruptcy Court subsequently
held the telephonic hearing on May 15, 2017. After the
hearing, the Bankruptcy Court ordered the parties to file
stipulations of fact no later than June 14, 2017. On June 14,
2017, Bruce Cole moved for an extension of the deadline for
filing stipulations. On July 13, 2017, the Bankruptcy Court
set an October 5, 2017 bench trial on the claim for a
homestead exemption. On August 16, 2017, Bruce Cole filed a
motion requesting the issuance of blank subpoenas duces
tecum. At no time from January through August 2017 did the
Coles demand a jury trial on their claim for a homestead
exemption in the proceeds, whether in any of their filings in
the Bankruptcy Court, or during the telephonic May 2017
September 13, 2017, Bruce Cole filed a demand for a jury
trial on the homestead exemption claim. Doc. 7-1. The
Bankruptcy Court denied the demand on September 28, 2017,
holding that it was untimely and a jury trial had been
waived. See Strauss v. Cole, W.D. Mo. Bankr., case
no. 12-2009-DRD (Doc. 394) (citing Fed.R.Civ.P. 38,
Fed.R.Bankr.P. 9015, and W.D. Local Rule of Bankr. P.
9015-1.C). Cole also filed a motion requesting a continuance
of the October 5, 2017 bench trial, Doc. 7, pp. 12-16, which
the Bankruptcy Court granted.
Bankruptcy Court's Report and Recommendation focused on
the Coles' request to withdraw the reference with respect
to the disputes surrounding their claim to a homestead
exemption and disbursement of the proceeds to pay their
taxes. Doc. 6, p. 4. The Bankruptcy Court stated that issues
concerning the disposition of the proceeds of the sale of the
residence are non-core issues, related to the bankruptcy
proceedings, in that disposition of the proceeds will affect
the distribution made to the Debtor's estate, and that
the Coles had consented to its jurisdiction over the
disposition of the proceeds. Id., pp. 5-6. It
further stated that the Coles had waived their request for a
jury trial by failing to timely demand one; it would be
inefficient to withdraw the reference; the motion constituted
forum shopping; and the motion was generally untimely.
Id., pp. 6-9.
Coles argue that their claim to a homestead exemption is a
non-core, state law matter and that the reference should be
withdrawn because they have timely demanded a jury trial on
the exemption and do not consent to a jury trial in the
Bankruptcy Court. They further argue that the issue of
payment of the taxes is a non-core matter and the issue
should be decided together with the homestead exemption. Doc.
7. With respect to the Report and Recommendation, the Coles
move to strike it on the basis that it “advocate[s] for
the Trustee” and that 28 U.S.C. § 157(d) does not
explicitly refer to reports and recommendations. Doc. 9. The
Coles also filed written objections to the Report and
Recommendation on the same bases stated in their motion to
withdraw the reference. Doc. 10.