- Case Type:
- Case Status:
- Affirmed in part and Reversed in part
- 17-4046 (10th Circuit, Jan 26,2018) Published
- Sua sponte, the court found that Mrs. Lee, who was not a party to the underlying state court action, did not have Article III standing to bring suit and vacated judgment as to Mrs. Lee with directions to dismiss her case. With respect to Mr. Lee, the court found that the two claims brought by Mr. Lee fell outside the "zone of interests" protected by the automatic stay, and therefore upheld the lower court's granting of summary judgment against Mr. Lee. The stay in section 362(a) did not automatically stay the state-court lawsuit nor did section 362(k) stay the collection efforts of appellee.
- Procedural context:
- On appeal from the decision of the United States District Court for the District of Utah affirming the decision of the United States Bankruptcy Court for the District of Utah that the automatic stay in the debtors' did not apply to the state court lawsuit between a creditor of the debtor and a trustee of a trust in which the debtor was a beneficiary.
- Appellant Mr. Lee obtained two pre-petition judgments against the debtors. Mr. Lee then sought to garnish Appellee Mr. McCardle as trustee of a trust for the debtors. When Mr. McCardle returned a response of no garnishable funds, Mr. Lee sued Mr. McCardle personally and in his representative capacity in state court. The state court issued a judgment in favor of Mr. McCardle and awarded attorneys' fees. While the state court was calculating the amount of attorneys' fees, the debtors filed a chapter 13 petition. Appellants filed a complaint in the debtors' bankruptcy seeking to declare that the debtors' automatic stay applied to the lawsuit between Appellants and Appellee, and that such stay also prohibited Appellee from seeking to collect the state court-ordered attorneys' fee award. The bankruptcy and district courts found that the automatic stay did not apply to the state court lawsuit and granted summary judgment to Mr. McCardle.
- Lucero, Bacharach, and Mortiz
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