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In re Moore

United States Bankruptcy Court, D. South Carolina
Dec 14, 2005
Case No. 04-15363-B (Bankr. D.S.C. Dec. 14, 2005)

Summary

finding the Rooker-Feldman doctrine precluded the bankruptcy court's review of the appealable master-inequity's order

Summary of this case from In re Lee

Opinion

Case No. 04-15363-B.

December 14, 2005


ORDER


This matter comes before the Court upon the motion of Bruce F. Johnson (Johnson or Purchaser) for relief from the automatic stay in order to pursue a state court appeal on an expedited basis and upon Debtors' motion for deposit of funds into this Court. Based on the arguments and briefs of counsel as well as the supporting documentation submitted by counsel, this Court makes the following Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52, made applicable in bankruptcy proceedings by Fed.R.Bankr.P. 7052.

FINDINGS OF FACT

1. The Moore Family Trust was the owner of certain real property on Lake Murray located at 10 Leitner Point (the Property). The Property was subject to a first mortgage held by Bank of America, N.A. (Bank), a mechanic's lien held by Lyn-Rich Contracting Company, Inc., (Lyn-Rich), and a Richland County tax lien in the amount of $229,138.37. By Consent Order dated March 18, 2005, this Court granted the Bank relief from the automatic stay effective May 18, 2005 to complete its foreclosure in accordance with state law. Johnson purchased the Property at the deficiency sale on July 6, 2005 for $2.2 million. The purchase price resulted in surplus funds.

2. On August 12, 2005, prior to the surplus funds hearing, Johnson filed a motion pursuant to S.C. Code Ann. § 12-49-60 (1976, as amended) for an order requiring that all taxes, assessments and penalties charged as a lien on the property be paid out of the proceeds of the sale prior to all other claims against the surplus funds. A hearing was held before the Honorable Joseph M. Strickland, Master-in-Equity for Richland County on August 15, 2005. Judge Strickland denied Johnson's motion by order dated August 29, 2005 and served on September 7, 2005.

3. Under the provisions of Judge Strickland's order, the Bank and Lyn-Rich were paid, and $244,230.90 in surplus proceeds were to be paid to the Clerk of the Bankruptcy Court. Johnson served his notice of intent to appeal and then filed the motion seeking relief from the automatic stay to pursue the appeal. Johnson filed a motion with the South Carolina Court of Appeals requesting an extension of time within which to file the notice of appeal until after this Court rules on the motion for relief from stay.

4. The surplus funds check was returned by the Clerk of the Bankruptcy Court to the Master and it remains with him. Debtors' motion for deposit of funds into this Court has been held in abeyance pending the ruling on Johnson's stay relief motion.

CONCLUSIONS OF LAW

11 U.S.C. § 362(d)(1) provides that the court shall grant relief from the automatic stay "for cause, including the lack of adequate protection of an interest in property of such party in interest." The Bankruptcy Code provides no guidance as to what constitutes "cause;" therefore such determination is left to the discretion of the bankruptcy judge. See Robbins v. Robbins (In re Robbins), 964 F.2d 342, 245 (4th Cir. 1992) ("Because the Code provides no definition of what constitutes `cause,', courts must determine when discretionary relief is appropriate on a case-by-case basis.").

In this case "cause" exists to lift the automatic stay because Johnson's state court appeal is the only method available for judicial review of the Master's order denying Johnson's motion pursuant to S.C. Code Ann. § 12-49-60 (1976, as amended) and ordering the payment of surplus funds to the Clerk of the Bankruptcy Court. The Rooker-Feldman doctrine precludes review of the Master's order in this Court.

Under the Rooker-Feldman doctrine, lower federal courts generally do not have jurisdiction to review state court decisions; rather, jurisdiction to review such decisions lies exclusively with superior state courts and, ultimately, the United States Supreme Court. See Leonard v. Suthard, 927 F.2d 168, 169-70 (4th Cir. 1991); Young v. Murphy, 90 F.3d 1225, 1230 (7th Cir. 1996).

In In re Wilson, 116 F.3d 87 (3rd Cir. 1997), the court of appeals reversed the district court and the bankruptcy court for refusing to lift the stay under similar circumstances. The court held as follows:

As demonstrated, Baldino cannot relitigate the adverse trial court judgment in bankruptcy court. If she is denied relief from the automatic stay, she will have no opportunity to challenge the adverse judgment before the bankruptcy proceedings are complete. If Baldino is not afforded an opportunity to pursue her appeal in state court, she will have no forum to litigate her cause. Accordingly, we believe it is necessary to lift the stay to permit prosecution of her appeal to the state appellate courts.

In re Wilson, 116 F.3d ate House Report on § 362(d)(1) also supports lifting the stay in this case:

The lack of adequate protection of an interest in property of the party requesting relief from the stay is on cause for relief, but it is not the only cause . . . a desire to permit an action to proceed to completion in another tribunal may provide another cause.

House Report No. 95-595, 95th Cong., 1st Sess. 343-4 (1977).

Other courts have also granted relief from the automatic stay to pursue state court appeals. See In re Morris, 153 B.R. 588 (M.D. Fla. 1993) (bankruptcy judge did not abuse his discretion in allowing state court appeal to proceed and noting party opposing relief had burden of proof since debtor's equity was not an issue); Grant v. Thurston Group, Inc., 186 B.R. 659 (N.D. Ill. 1995) (affirming bankruptcy judge's granting relief from stay so creditor could perfect appeal). This Court agrees with the reasoning set forth in these cases and in the legislative history.

Debtors assert that the surplus funds are necessary to fund the plan of reorganization. However, it appears that there may be other assets available to fund the plan. The parties' relative interests in the surplus funds may be determined more economically in the state court system, and it appears that Johnson intends to file a motion to expedite consideration of the appeal, so that these interests may be determined quickly.

Debtors have also asserted that Johnson violated the automatic stay by filing his motion regarding the surplus funds in the foreclosure proceeding. This counterclaim is without merit. This Court granted the Bank relief from the automatic stay to complete the foreclosure proceedings in accordance with state law. South Carolina law (S.C. Code Ann. § 12-49-60 (1976, as amended) permits any interested party to file a motion such as the one Johnson filed regarding surplus funds. Whether these funds ultimately constitute property of the estate may be determined once the appeal is completed. In the meantime, the funds, which have been returned to the Master to hold pending the outcome of these proceedings, are protected. Therefore, Debtors' motion to deposit these funds with this Court is denied at this time.

Based on the foregoing, it is

ORDERED, that Johnson's motion for relief from the automatic stay be and it hereby is granted to allow him to pursue his state court appeal on an expedited basis. It is further ordered that the Debtors' counterclaim against Johnson for alleged violation of the automatic stay be and it hereby is denied. Debtors' motion for deposit of funds with this Court is also denied.


Summaries of

In re Moore

United States Bankruptcy Court, D. South Carolina
Dec 14, 2005
Case No. 04-15363-B (Bankr. D.S.C. Dec. 14, 2005)

finding the Rooker-Feldman doctrine precluded the bankruptcy court's review of the appealable master-inequity's order

Summary of this case from In re Lee

finding cause existed to lift the automatic stay because the movant's state court appeal was the only method available for judicial review of the state court order

Summary of this case from In re Lee
Case details for

In re Moore

Case Details

Full title:In re: Schuyler Lansing Moore and Yvonne Chapter 11 Ridings Moore, Moore…

Court:United States Bankruptcy Court, D. South Carolina

Date published: Dec 14, 2005

Citations

Case No. 04-15363-B (Bankr. D.S.C. Dec. 14, 2005)

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