Opinion
Case No. 95-13669-AM, Adversary Proceeding No. 96-1245
August 12, 1996
Charles Edgar Newton, Janet Newton, Brookneal, VA, for Debtors pro se
Robert O. Tyler, Esquire, Alexandria, VA, for Chapter 7 trustee
Bryan K. Selz, Esquire, Overby, Hawkins Selz, Rustburg, VA, for Defendant
William Berry, Esquire, Bedford, VA, Defendant
MEMORANDUM OPINION AND ORDER
Before the court is a pleading filed by the debtors pro se on August 9, 1996 entitled "Emergency Injunction" in which they request this court to issue an order to stop a commissioner's sale of Woodburn Farm scheduled for August 14, 1996. They also request that the court "compel Robert Tyler [the chapter 7 trustee] to finish what he started by helping finish all of our law suits and straighten up the environmental problems on Woodburn Farm." The issue before the court is whether to issue a temporary restraining order, to set the matter for an expedited hearing on issuance of a preliminary injunction, to reserve all issues for a trial on the merits, or to dismiss the adversary proceeding.
Although the pleading does not contain an adversary caption or otherwise comply with the pleading requirements of F.R.Bankr.P. 7008, the clerk has correctly treated the pleading as one commencing an adversary proceeding. The identification of the defendants in the caption of this order is taken from the adversary proceeding cover sheet. The pleading itself does not contain a certificate of service evidencing service either upon the chapter 7 trustee or upon the parties sought to be enjoined.
The court has been furnished by the chapter 7 trustee with a copy of an order entered August 12, 1996, by the Circuit Court of Charlotte County enjoining the sale of Woodburn Farm until the pending appeal of the decree of sale is decided by the Supreme Court of Virginia.
Facts
The debtors filed a joint voluntary petition under chapter 7 of the Bankruptcy Code in this court on August 18, 1995, and received a discharge on December 15, 1995. The trustee initially filed a report of no distribution but on January 1, 1996, withdrew the report, and the estate is still open. As set forth in a prior memorandum opinion of this court dated February 29, 1996, the trustee represented to the court at a hearing on February 27, 1996, that he was contemplating whether to bring an action to avoid, as a fraudulent conveyance, the debtors' 1991 transfer of their farm in Charlotte County, Virginia, known as Woodburn Dairy Farm, to their son, Gary Edgar Newton. It appears, however, that no such action has been brought at this time.
Gary Edgar Newton filed a chapter 12 petition in this court on October 27, 1995. His case was dismissed on March 6, 1996 for failure to file a timely plan.
Woodburn Farm, as explained in the prior memorandum opinion, was the subject of a judgment creditor's suit in the Circuit Court of Charlotte County to enforce two judgments that had been entered against the debtor's son in favor of Brookneal Milling Co., Inc. and Mays Farmer Service Co., Inc. The debtors were originally defendants in the two suits giving rise to the judgments, but were nonsuited after they filed for bankruptcy protection. On September 19, 1995, the Circuit Court entered a decree ordering the property to be sold at public auction to satisfy the judgment liens against the property. The sale was of course stayed during the pendency of the son's chapter 12 case in this court, but the automatic stay dissolved once the son's case was dismissed.
Conclusions of Law and Discussion
Under Federal Rule of Bankruptcy Procedure 7001, a proceeding to obtain an injunction is an adversary proceeding. Such a proceeding is commenced by the filing of a complaint. F.R.Bankr.P. 7003. The complaint, together with a summons issued by the clerk, must be served on the defendants in the manner prescribed by F.R.Bankr.P. 7004. The complaint must contain "a short and plain statement of the grounds upon which the court's jurisdiction depends," including "a reference to the name, number and chapter of the case under the Code to which the adversary proceeding relates and to the district and division where the case under the Code is pending." F.R.Bankr.P. 7008(a). In addition, the complaint must state whether the proceeding is "core" or "non-core," and, if the latter, that the pleader does or does not consent to the entry of final orders or judgments by the bankruptcy judge. Id. Finally, the complaint and all other pleadings must contain an adversary caption. F.R.Bankr.P. 7010. Although the clerk has correctly treated the debtors' pleading — because of the relief it seeks — as a complaint, it nevertheless fails to comply with any of the formal requirements of an adversary complaint.
Even if the court were to excuse the want of form and to treat the papers as the equivalent of a complaint for an injunction, however, no sufficient basis appears for the issuance of a temporary restraining order. First, under Rule 65(b)(1), Federal Rules of Civil Procedure, which is made applicable to bankruptcy cases by Federal Rule of Bankruptcy Procedure 7065, a temporary restraining order may be granted without notice to the adverse party "only if it clearly appears from specific facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or that party's attorney can be heard in opposition." The papers before the court are not verified or supported by affidavit. More importantly, even if the allegations of the motion were verified, they simply do not satisfy the standard for issuance of a preliminary injunction in this Circuit, as succinctly set forth in Darr v. Massinga, 838 F.2d 118, 120 (4th Cir. 1988):
[In Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189 (4th Cir. 1977)] we held that four factors are to be considered: (1) the likelihood of irreparable harm to the plaintiff if the preliminary injunction is denied, (2) the likelihood of harm to the defendant if the requested relief is granted, (3) the likelihood that the plaintiff will succeed on the merits, and (4) the public interest. . . . As Blackwelder set forth, the two most important factors are the likelihood of irreparable harm to the plaintiff if interim relief is not granted and the likelihood of irreparable harm to the defendant if interim relief is granted. The two factors should be weighed against one another, and if the balance is in favor of the plaintiff, it is proper to grant interim injunctive relief if grave or serious questions are presented for ultimate decision.
Here, the property to be sold, although potentially recoverable by the trustee under § 548, Bankruptcy Code, as a fraudulent conveyance, is not presently part of the debtors' bankruptcy estate, having been voluntarily transferred by them to their son several years prior to the bankruptcy filing. Furthermore, it is by no means clear that the chapter 7 trustee intends to bring an avoidance action, particularly as the debtors allege that environmental contamination exists on the property. In addition, since the debtors conveyed their interest in Woodburn Farm to their son prior to their chapter 7 filing, they have no standing before this court to seek to enjoin its sale. Only the trustee, who potentially has the right to recover the property for the benefit of the bankruptcy estate, would have standing to object to the commissioner's sale. And, finally, since the Circuit Court of Charlotte County has now acted to enjoin the sale, no action is required by this court in order to preserve the status quo.
The debtors also ask this court to declare null and void a commissioner's deed to Glover D. Gilliam of a one-half undivided interest in Woodburn Farm. The debtors and their son were parties to a written contract dated October 29, 1992, for the sale of an undivided one-half interest in Woodburn Farm to Gilliam. Apparently as part of the judgment creditors' suit, the Charlotte County Circuit Court decreed specific enforcement of the contract and appointed special commissioners to sign a deed on behalf of the debtors and their son. The deed was dated April 25, 1996, was signed by the commissioners on behalf of the debtors and their son, and was recorded the same date in the Clerk's Office of the Circuit Court of Charlotte County in Deed Book No. 283, Page 672. Since the debtors received their discharge on December 14, 1995, the automatic stay had terminated with respect to their interest in the property. § 362(C)(2)(c), Bankruptcy Code. The automatic stay still exists with respect to acts against property of the debtors' bankruptcy estate, but, as noted above, Woodburn Farm is not presently property of the estate, even though it is potentially recoverable by the trustee. Accordingly, no legal basis appears at this time for a determination that the commissioners' deed of April 25, 1996, is void as an act taken in violation of the automatic stay. This court does not rule upon, and expresses no opinion concerning, the various defenses asserted by the debtors with respect to the decree for specific performance.
ORDER
For the foregoing reasons, it is
ORDERED:
1. The debtors' pleading entitled "Emergency Injunction," which the court treats as a complaint and motion for a temporary restraining order or, in the alternative, for an expedited hearing on a motion for a preliminary injunction, is DENIED, and the adversary proceeding is DISMISSED without prejudice by the court on its own motion under F.R.Bankr.P. 7012 for failure to state a claim upon which relief can be granted based on the debtors' lack of standing.
2. The clerk will mail a copy of this memorandum opinion and order to the debtors, to the chapter 7 trustee, and to the defendants.