Case Type:
Case Status:
Reversed and Remanded
BAP No. EC-21-1140-TBG (9th Circuit, Mar 10,2022) Not Published
A contract to sell real property is no longer executory, regardless of what performance has not been completed, if a state court has entered an order compelling specific performance. Because a state court had entered an order compelling the sellers to perform their obligations under a real estate purchase contract, the contract was no longer executory and the bankruptcy court was directed to determine whether there was cause to grant the purchasers relief from the automatic stay.
Procedural context:
Parties to a contract to purchase the debtors' residence failed to object to the debtors' Chapter 13 plan, but subsequently moved for relief from the automatic stay so that it could enforce a state-court specific performance order. The debtors objected, principally arguing that the purchase contract was executory and had been rejected in the Chapter 13 plan. The purchasers appealed.
The debtors entered into a contract to sell their house after they fell behind on their mortgages. Upon the debtors' execution of the agreement, the purchaser paid the mortgage arrearages and stopped the foreclosure on the debtors' residence. The purchaser then paid the debtors a $22,000 down payment. The debtors, however, refused to execute a deed to the property, sign escrow instructions, or to vacate the property. The purchasers initiated a state court action to compel specific performance. The debtors never participated in the state court action, and the court entered a judgment directing specific performance by the debtors to convey the house to the purchasers. Four months later, the debtors filed a Chapter 13 petition. The debtors did not identify the purchasers as creditors or as parties with an interest in the debtors' house. The debtors also did not list the purchase contract as an executory contract on their Schedule G. While the purchasers did receive notice of the debtors' bankruptcy through their state-court attorney, they did not object to confirmation of the debtors' Chapter 13 plan. Instead, they filed a motion for relief from stay, for enforcement of the state court specific performance order, the day before the confirmation order was entered.
TAYLOR, BRAND, and GAN, Bankruptcy Judges

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