In re Franklin Harris, Jr.

Case Type:
Case Status:
No. 19-4081; File Name: 20a0219p.06 (6th Circuit, Jul 17,2020) Published
Sixth Circuit affirmed the district court's holding that the bankruptcy court did not abuse its discretion when it decided to abstain from hearing an adversary proceeding brought by the Chapter 13 debtors against their neighbors. The neighbors had filed an adverse possession case against the debtors in state court, after the petition was filed, seeking to remove a privacy fence. Debtors claimed the neighbors violated the automatic stay. Bankruptcy court dismissed the adversary proceeding on the grounds that the dispute belonged in state court.
Procedural context:
Debtors filed a Chapter 13 case. Neighbors of the Debtors commenced suit in Ohio state court seeking to remove a privacy fence that allegedly encroached on the neighbors' property. State court stayed that case pending relief in the bankruptcy case. The debtors appealed the bankruptcy court's decision to abstain under 28 U.S.C. Section 1334(c)(1). District court adopted a magistrate's report and affirmed the bankruptcy court.
Sixth circuit had never addressed the proper standard of review for a bankruptcy court's decision to abstain under Section 1334(c)(1). Sixth circuit adopted the "abuse of discretion" standard. The court stated that adverse possession under Ohio law was disfavored and the claims belonged in state court. The court saw no basis for the argument that the property was part of the estate. The Court also rejected the Debtors'argument that abstention was not proper since the adversary proceeding was "core". The court found abstention could be invoked in a core proceeding. The court said that the neighbors actions were not void. The Debtors' did not argue they were injured by the neighbors' actions. No willful violation of the stay was present as the state court case had been stayed.
Cole (Chief Judge), Guy and Bush, Circuit Judges.

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