Lee v. Anasti

Filing 19

ORDER finding as moot 5 Motion to Stay Orders of BR Court pursuant to BR Rule 8005, finding that the bankruptcy court did not abuse its discretion, and affirming the decision of the bankruptcy court as expressed in the Stay Order. Signed by Honorable Joseph F Anderson, Jr on 05/06/2010.(bshr, )

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF SOUTH CAROLINA C O L U M B IA DIVISION IN RE: G in a Anasti Lee, D eb tor. ) ) ) ) ) ) C /A No.: 3:10-196 ORDER

T h is matter comes before the court on the appeal of appellant Gina Anasti Lee (the " D e b to r" ) from the bankruptcy court's order (the "Stay Order") lifting the automatic stay p ro v is io n s imposed by 11 U.S.C. § 362(a). The Stay Order allowed a state court case to go f o rw a rd then and currently pending before the South Carolina Court of Appeals (the "Stay A p p e a l") . Debtor has filed a motion to have this court stay the Stay Order. The parties fully b rie f ed the motion and the appeal and presented argument to the court at a May 4, 2010 h e a rin g . At the hearing, the parties agreed that the motion to stay the Stay Order is moot in lig h t of the stage of the proceedings, and the court took the Stay Appeal under advisement. T h is order serves to announce the ruling of the court as to the Stay Appeal. I. B a c k g ro u n d T h is case arises out of a tortured factual and procedural background and concerns the e f f o rts of the Debtor to bring real property, located at 2325 Two Notch Road, Columbia, S o u th Carolina (the "Property"), into her bankruptcy estate. In 1978, Albert Anasti, Debtor's f a th e r, jointly deeded the Property in the name of himself and his son, appellee James Anasti (" A n a sti" ). Albert Anasti died in 1995, and left the property to Debtor in his will. The will w a s probated in the Richland County Probate Court and Debtor secured a Deed of

D is trib u tio n to the Property, which was filed in the Richard County Register of Deeds, then k n o w n as the Richland County Register of Mesne Conveyances. Debtor then successfully re n te d the property for use as a restaurant until 1999, when she sold the Property to her c o m m e rc ia l tenants, Goodwin and Wilson. The property sold for $177,000, with a $50,000 c a s h down payment, and owner financing in the amount of $122,000. In December 2003, Debtor, Anasti, Goodwin, and Wilson were named as defendants i n a lawsuit filed by the South Carolina Department of Transportation ("SCDOT"), which s o u g h t to condemn a portion of the Property. During the pendency of the 2003 SCDOT law su it, it came to light that the law firm charged with performing the title search in c o n n e ctio n with the sale to Goodwin and Wilson failed to discover Anasti's interest in the p ro p e rty. Thereafter, Goodwin and Wilson promptly stopped making payments on the m o rtg a g e . On January 28, 2007, Anasti filed an action to quiet title to the property in the R ic h la n d County Court of Common Pleas, and the court entered partial summary judgment in his favor on October 26, 2007 (the "Quiet Title Action"), finding Anasti owned the P rop erty. After some procedural wrangling, the Quiet Title Action is now properly before th e court of appeals, with merits briefing to begin shortly. O n April 16, 2009, Debtor filed a petition for relief under Chapter 7 of the Bankruptcy C o d e , and listed the Property as an asset with a value of $167,000. Debtor's filing effected a stay of the Quiet Title Action pursuant to 11 U.S.C. § 362. On June 22, 2009, the Chapter 7 Trustee filed a report of no distribution, finding no property available for distribution from

2

th e estate. The Debtor then moved to convert her Chapter 7 case to Chapter 13. On August 2 0 , 2009, Debtor initiated a Chapter 13 adversary proceeding against Anasti in bankruptcy c o u rt concerning the ownership of the Property. Anasti thereafter moved to lift the § 362 stay for the purpose of allowing the Quiet Title Action to proceed. The bankruptcy court g ra n ted Anasti's motion and Debtor appealed. Debtor's appeal is currently before the court. II. S ta n d a rd of Review T h e decision of the bankruptcy court to lift the § 362 automatic stay is within the d is c re tio n of the bankruptcy court and may be overturned on appeal only for abuse of d is c re tio n . In re Robbins, 964 F.2d 342, 345 (4th Cir. 1992). The automatic stay provisions ac t to give the bankruptcy court an opportunity to harmonize interests and preserve a debtor's a ss e ts , however, § 362(d)(1) allows for a bankruptcy court to terminate, modify, or condition a stay for cause. 11 U.S.C. § 362(d)(1). When determining the existence of cause for the p u rp o se s of § 362, the Fourth Circuit requires a court to consider: (1) whether the issues in th e pending litigation involve only state law, so that the expertise of the bankruptcy court is u n n e c es s a ry; (2) whether modifying the stay will promote judicial economy and whether th e re would be greater interference with the bankruptcy case if the stay were not lifted b e c a u s e matters would have to be litigated in bankruptcy court; and (3) whether the estate c a n be protected properly by a requirement that creditors seek enforcement of any judgment th ro u g h the bankruptcy court. In re Robbins, 964 F.2d at 345.

3

III.

D is c u ss io n A p p lyin g the factors listed above, the court finds that the bankruptcy court did not

a b u se its discretion in lifting the stay. Here, the bankruptcy court rightly deferred to the c o u r ts of South Carolina in abstaining, on grounds of comity, from a state-law adverse p o s s e ss io n action on appeal in the South Carolina Court of Appeals. First, South Carolina c o u rts possess particular expertise in interpreting South Carolina property law. See, e.g., C ra w f o rd v. Courtney, 451 F.2d 489 (4th Cir. 1971) (recognizing appropriate application of c o m ity where state court of prior jurisdiction considers state property law issue). Because th e Quiet Title Action only involves questions of state law, it could not be said to benefit f ro m the special expertise of the bankruptcy court. Second, the Quiet Title Action has p ro g re s s e d to the appeals stage, where it is currently pending awaiting merits briefing. To a llo w debtor to pursue identical litigation in the bankruptcy court would be highly d u p lic a tiv e . This is true especially where the state-court action is nearly complete, and the b a n k ru p tc y action remains in its infancy. Third, the bankruptcy court conditioned the c o n t i n u a t io n of the stay on the conclusion of the Quiet Title Action, which should act to p ro te c t any interest the bankruptcy estate may come to possess in the Property should the c o u rt of appeals determine the Debtor possesses an interest in the Property. IV. C o n c lu s io n A s set forth above, the bankruptcy court's decision to lift the stay is reviewed for a b u se of discretion. Here, the bankruptcy court was asked to collaterally attack the judgment

4

o f a state circuit court on a matter in which the state enjoys expertise, and to initiate e ss e n tia lly identical litigation in an alternate forum. Based on the foregoing, the court finds t h a t the bankruptcy court did not abuse its discretion, that the Debtor's motion to stay is m o o t, and affirms the decision of the bankruptcy court as expressed in the Stay Order. IT IS SO ORDERED.

M ay 6, 2010 C o lu m b ia , South Carolina

J o s e p h F. Anderson, Jr. U n ite d States District Judge

5