In re: Vistacare Group, LLC, et al.

Citation: 
In re Vistacare Group, LLC, et. al., No. 11-2695 (May 4, 2012 3d Cir.) (Precedential)
Ruling: 
The Third Circuit Court of Appeals held that the Barton doctrine, which requires a party seeking to sue a court-appointed receiver, to first obtain leave of the appointing court, applies to bankruptcy trustees in light of the changes to the Bankruptcy Code in 1978.
Procedural context: 
The Third Circuit Court of Appeals affirmed the Middle District of Pennsylvania's affirmance of the Bankruptcy Court's decision to grant leave to sue the Chapter 7 trustee.
Facts: 
William Schwab (the "Trustee") was appointed as the Chapter 7 Trustee of the bankruptcy estate of Vistacare Group, LLC, which included Parkside Manor Retirement Community ("Parkside"). Parkside consisted of 45 lots on the property which were subdivided and zoned for mobile homes. The lots were subject to a subdivision plan that contained various restrictions ("Restriction No. 1"). Restriction No. 1 provided that "fee title to the Lot shown on this plan will not be transferred to the parties having residencies constructed upon said Lots, but title will remain in the developer, his heirs and assigns." The subdivision plan was approved by the East Cocalico Township (the "Township"). After selling one of the lots to CGL, LLC ("CGL"), the Trustee decided to liquidate the other 44 lots on Parkside. Some of the residents constructed the mobile homes to the land and as a result, the Trustee commenced adversary proceedings against the residents because they violated Restriction No. 1's prohibition on sales to individuals having residences constructed on land. The Trustee and the Township entered into an agreement abrogating Restriction No. 1 as to the 44 individual lots (the "Agreement"). CGL was not a party to the Agreement. CGL filed a motion in the Bankruptcy Court for the Middle District of Pennsylvania for leave to file suit against the Trustee in Lancaster County, Pennsylvania, Court of Common Pleas, alleging that sales of the 44 lots were unlawful and damaged its property interests in the 45th lot. CGL also alleged that the Trustee and Township entered into the Agreement that deprived CGL of its property rights without notice and due process.
Judge(s): 
McKee, Fisher, Greenaway