Lee v. Anasti (In re Lee)

Summarized by Elizabeth Gunn , United States Bankruptcy Court, District of Columbia
14 years 1 month ago

Citation:

No. 10-1772; No. 10-1774 (4th Cir. Jan. 6, 2012) (Unpublished)

Tag(s):

Ruling:

The bankruptcy court and district court properly applied the relevant Robbins factors and provided a reasoned basis for finding that each factor had been met, and therefore did not abuse its discretion in granting Anasti relief from stay pursuant to 11 U.S.C. § 362(d)(1). Lee's argument that the bankruptcy estate was not a party to the state court action was not persuasive, as the interest of the bankruptcy estate is derived from a debtor's right in property and is not greater than a debtor's claim. The district court's order affirming the bankruptcy court's order granting Anasti relief from stay is affirmed. The final ruling by the South Carolina state courts in favor of Anasti is final and binding and Lee is collaterally estopped from challenging that ruling. As a result of the ruling, Lee had no interest in the property at the time of the filing and therefore there is nothing to avoid and the bankruptcy court's dismissal Lee's avoidance action under 11 U.S.C. § 544 is affirmed. With respect to the dismissal of the remaining state-law claims, abstention pursuant to 28 U.S.C. § 1334 is limited to mandatory abstention. The Fourth Circuit therefore lacked jurisdiction to consider whether permissive abstention was correct and Lee's appeal is dismissed to the extent it seeks review of permissive abstention.

Procedural context:

Appeal from decisions of the United States District Court for the District of South Carolina affirming decisions of the United States Bankruptcy Court for the District of South Carolina granting motion for relief from the automatic stay pursuant to 11 U.S.C. § 362(d)(1) and dismissal of related adversary proceeding brought by debtor against movant.

Facts:

Both appeals arose from issues stemming from pre-petition litigation between siblings to determine ownership of a parcel of real property. The state court held Anasti (non-debtor sibling) was sole owner of the relevant property. Debtor Lee appealed the decision to the South Carolina Court of Appeals, which remanded to the trial court for a determination of timeliness of appeal. Before a final decision was reached regarding the timeliness of appeal, Lee filed a Chapter 7 petition. The Chapter 7 Trustee issued a No Distribution Report, after which Lee converted the case to Chapter 13. In the Chapter 13 case, Anasti filed a motion for relief from stay to allow the state court appeals process to continue. At the same time, Lee filed an adversary proceeding against Anasti seeking to recover the property in question asserting three state-law causes of action and a claim under 11 U.S.C. § 544(a). Applying the standard set in In re Robbins, 964 F.2d 342 (4th Cir. 1992), the bankruptcy court lifted the automatic stay to allow the state court appeals process to continue. The district court affirmed this decision. The bankruptcy court dismissed Lee's claims under § 544(a) for lack of standing and dismissed the other state-law claims based on comity and judicial economy. The district court affirmed the bankruptcy court's dismissal of the § 544(a) claim and noted that the dismissal of the state-law claims appeared to be based on 28 U.S.C. § 1334 abstention principles. Prior to the case being considered by the Fourth Circuit, the South Carolina Court of Appeals ruled that Lee's appeal was not timely and the state supreme court denied a writ of certiorari. Thus, the state court judgment in favor of Anasti was final and binding on Lee.

Judge(s):

Shedd and Duncan, Circuit Judges, and Osteen (M.D.N.C.) sitting by designation.

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