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noting conflict between Sikes and Continental Casing
Summary of this case from Roccaforte v. Jefferson CountyOpinion
No. 04-06-00504-CV
Delivered and Filed: May 23, 2007.
Appeal from the 224th Judicial District Court, Bexar County, Texas, Trial Court No. 2002-CI-17346, Honorable Joe Frazier Brown, Jr., Judge Presiding.
Sitting: ALMA L. LóPEZ, Chief Justice, CATHERINE STONE, Justice, PHYLIS J. SPEEDLIN, Justice.
MEMORANDUM OPINION
REVERSED AND REMANDED
Qi Chisholm appeals the trial court's denial of her motion to set aside appointment of a receiver to sell the marital residence pursuant to a decree of divorce. Because we hold that the order appointing the receiver was void because it was entered while a bankruptcy stay was in effect, and further, because the order has been rendered moot by the Supreme Court's reversal of the decree's property division, we reverse and remand the cause to the trial court for further proceedings.
Factual and Procedural Background
Qi and Gary Chisholm were divorced in October 2003. An agreed final divorce decree was entered which provided for the sale of the marital residence as part of the property division. Qi appealed the property division, claiming that she did not fully understand and agree to the terms of the property division. This court affirmed the trial court's judgment, but on December 1, 2006 the Supreme Court reversed, holding that the agreed judgment was rendered without Qi's consent to the property division and without strict compliance with the terms of the parties' agreement. Chisholm v. Chisholm, 209 S.W.3d 96, 98 (Tex. 2006) (reversing the entire property division and remanding to the trial court for further proceedings).
While Qi's appeal of the divorce decree was pending, Gary Chisholm filed a Chapter 7 bankruptcy petition on or about February 20, 2004. Upon the filing of the bankruptcy petition, an automatic stay became effective which prohibits the commencement or continuation of any judicial action or proceeding against the debtor and any property within the debtor's bankruptcy estate. See 11 U.S.C.A. § 362(a) (West 2006). On May 20, 2004, Gary filed a petition to enforce the divorce decree's property division and requested appointment of a receiver to sell the marital residence because he alleged Qi refused to sign the sales contract. On May 28, 2004, the trial court signed an order appointing a receiver to sell the marital residence for fair market value and providing that Qi bear the cost of the receiver out of her portion of the sale proceeds. A month or so later, Qi filed a "Suggestion of Bankruptcy" in the trial court notifying it that Gary had filed bankruptcy on February 20, 2004, and requesting that the proceedings in the divorce case be stayed until termination of the bankruptcy. Approximately one year later, on June 15, 2005, Qi obtained a bankruptcy court order lifting the automatic stay for purposes of "any and all issues surrounding" the pending divorce proceedings and appeal in state court. The record shows that Gary's bankruptcy proceeding was dismissed in late 2005. The record further reflects that the receiver was unable to complete the sale of the marital residence.
The record indicates that Gary Chisholm listed the marital residence as "exempt property."
On January 3, 2006, Qi filed a "Motion to Void Order Appointing Receiver for Sale of Residence." After two hearings on the matter, the trial court signed an order denying Qi's motion on March 14, 2006. The court subsequently entered written findings of fact and conclusions of law in which it stated that although the order appointing the receiver was entered while Gary's bankruptcy proceedings were pending and the automatic stay was in effect, it was "not a void order but merely voidable." Qi now appeals the denial of her motion to void appointment of the receiver.
The trial court subsequently amended its findings to delete a finding of fact that the residence was "exempt property," concluding that the designation of the residence within the context of the bankruptcy proceeding was not a proper matter for it to determine. See In re Bowen, No. 02-03-00338-CV, 2004 WL 541174, at *1 (Tex.App. — Fort Worth Mar. 18, 2004, orig. proceeding) (citing In re Schock, 37 B.R. 399, 400 (Bankr. N.D. Tex. 1984) (order), and noting that a state court may not make a determination or disposition of property included in the bankruptcy estate).
Analysis
On appeal, Qi argues that because the order appointing the receiver was entered while her former husband's bankruptcy petition was pending, it violated the section 362 automatic stay and was thus void under Texas law; therefore, she asserts the order appointing the receiver should be set aside. We agree. Once a debtor files a bankruptcy petition and the section 362 automatic stay becomes effective, the Texas Supreme Court has held that "[a]n action taken in violation of the automatic stay is void, not merely voidable." Continental Casing Corp. v. Samedan Oil Corp., 751 S.W.2d 499, 501 (Tex. 1988) (citing Kalb v. Feuerstein, 308 U.S. 433, 439 (1940)) (holding offset of invoice against debt conducted in violation of bankruptcy stay was void); Howell v. Thompson, 839 S.W.2d 92, 92 (Tex. 1992) (order) (holding court of appeals' issuance of its opinion and judgment was void because it occurred after petitioner filed bankruptcy and during pendency of automatic stay). The subsequent termination or modification of the automatic stay by the bankruptcy court does not itself validate actions taken in violation of the stay. In re Sensitive Care Inc., 28 S.W.3d 35, 39 (Tex.App.-Fort Worth 2000, orig. proceeding).
In the trial court, Gary argued that, based on Fifth Circuit caselaw, the order appointing the receiver was merely voidable, not void, and the trial court agreed. See In re Coho Resources, Inc., 345 F.3d 338, 344 (5th Cir. 2003) (actions in violation of the automatic bankruptcy stay are merely voidable, not void ab initio, and are subject to discretionary "cure"); see also Sikes v. Global Marine, Inc., 881 F.2d 176, 178-79, n. 2 (5th Cir. 1989) (distinguishing Kalb based on current power of bankruptcy court to retroactively annul the automatic stay, and thereby validate an act that would otherwise have violated the stay); see also In re Abusaad, 309 B.R. 895, 898-99 (Bankr. N.D. Tex. 2004) (discussing Fifth Circuit's position and the possibility that the Texas Supreme Court will reconsider the issue of voidness). As an intermediate state appellate court, however, in a civil matter we are bound by the precedent established by the Texas Supreme Court and the United States Supreme Court, not by Fifth Circuit precedent, although we may consider it. Penrod Drilling Corp. v. Williams, 868 S.W.2d 294, 296 (Tex. 1993). Therefore, we are bound to follow the Texas Supreme Court's current precedent holding that once a debtor files a bankruptcy petition, the automatic stay abates any state judicial proceeding against the debtor and any action taken in violation of the stay is void. Samedan, 751 S.W.2d at 501; In re Southwestern Bell Tel. Co., 35 S.W.3d 602, 604 (Tex. 2000) (orig. proceeding). The automatic bankruptcy stay deprives state courts of jurisdiction over the debtor and the debtor's property until the stay is lifted or modified. See Houston Pipeline Co. LP v. Bank of America, N.A., 213 S.W.3d 418, 428-29 (Tex.App.-Houston [1st Dist.] 2006, no pet.); see also Burrhus v. M S Mach. Supply Co., Inc., 897 S.W.2d 871, 872-73 (Tex.App.-San Antonio 1995), disp. on merits, 933 S.W.2d 635 (Tex.App.-San Antonio 1996, writ denied) (analogizing the effect of an automatic stay under the Insurance Code to an automatic bankruptcy stay pursuant to which "all actions taken while the bankruptcy stay is in effect are void").
Accordingly, we hold that the trial court's action in appointing a receiver to sell the marital residence while the bankruptcy stay was in effect was void. See In re Bowen, 2004 WL 541174, at *1 (trial court's mediation and pretrial scheduling orders entered in former wife's post-divorce action were void because entered after former husband filed notice of pending federal bankruptcy action, which should have stayed post-divorce action as a matter of law); see also Stephens v. Hemyari, 216 S.W.3d 526, 529 (Tex.App.-Dallas 2007, pet. filed) (foreclosure sale that occurs during the automatic bankruptcy stay is void and passes no title); see also Lannie v. Harvey, No. 14-02-01326-CV, 2004 WL 1171720, at *2 (Tex.App.-Houston [14th Dist.] May 27, 2004, no pet.) (per curiam) (trial court's order granting judgment creditors' application for appointment of receiver to take possession of and sell judgment debtor's assets was void where it was entered after debtor filed for bankruptcy and stay went into effect, and creditors' judgment did not fall under exception to stay); see also Oles v. Curl, 65 S.W.3d 129, 132 (Tex.App.-Amarillo 2001, no pet.) (creditors' foreclosure on deed of trust was void where debtor filed bankruptcy the day before, thus invoking automatic stay; and nothing in record indicated stay was lifted or annulled when foreclosure occurred).
In addition, even if the trial court's order was not void, but merely voidable, the matter has become effectively moot now that the divorce decree's division of the marital estate, of which the marital residence was a part, has been reversed and remanded. See Chisholm, 209 S.W.3d at 98; see also, e.g., Waite v. Waite, 76 S.W.3d 222, 223 (Tex.App. — Houston [14th Dist.] 2002, no pet.) (dismissing interlocutory appeal challenging trial court's appointment of receiver in divorce proceeding because receivership had been dissolved). Here, there is no longer a property division to enforce through appointment of a receiver to sell the marital residence.
Based on the foregoing reasons, the trial court's order appointing a receiver for the sale of the parties' marital residence is set aside, and the cause is remanded to the trial court for further proceedings consistent with this opinion.