In re Busch

• Decision Date: 06 June 2003
• Docket Number: BAP No. UT-02-087.,Bankruptcy No. 02T-27006.
• Citation: 294 B.R. 137
• Parties: In re Jay BUSCH, Debtor. Jay Busch, Appellant, v. Cindy Busch, also known as Cindy Hancock, and Kevin R. Anderson, Trustee, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Tenth Circuit

294 B.R. 137

In re Jay BUSCH, Debtor Jay Busch, Appellant, v. Cindy Busch, also known as Cindy Hancock, and Kevin R. Anderson, Trustee, Appellees.

BAP No. UT-02-087.

Bankruptcy No. 02T-27006.

United States Bankruptcy Appellate Panel of the Tenth Circuit.

June 6, 2003.

Submitted on the briefs:^*

Scott B. Mitchell, Salt Lake City, Utah, for Appellant.

Steven C. Tycksen (S. Dayn Kelson with him on the brief), of Zoll & Tycksen, L.C., Murray, Utah, for Appellee Cindy Busch.

Before PUSATERI¹, CORNISH, and NUGENT, Bankruptcy Judges.

OPINION

CORNISH, Bankruptcy Judge.

Jay Busch appeals an Order of the United States Bankruptcy Court for the District of Utah that granted a Motion for Relief From Stay made by Appellee, Cindy Busch.² Jay Busch argues that the bankruptcy court abused its discretion when it lifted the stay to permit a Utah state court to determine whether his failure to pay a second mortgage as required by a divorce order terminated his equity in the former marital home. We affirm.

I. Background

Appellant Jay Busch ("Busch") and Appellee Cindy Busch ("Appellee") obtained a Decree of Divorce in January 2000 ("Decree"). The Appellee was awarded the family home. In paragraph eleven of the Decree, the divorce court ordered Busch to pay the second mortgage on the family home. In paragraph twelve, the divorce court awarded him "a lien on the home equal to $14,977.50 payable to [Busch] if [Appellee] remarries, cohabits, sells the home, or when the minor child reaches age 18." Appellant's App. at 59. Appellee remarried in September 2000.

On July 28, 2000, Busch filed his first Chapter 13 bankruptcy petition ("First Case"). During the course of the First Case, the bankruptcy court found that the second mortgage obligation was in the nature of alimony or support as delineated in 11 U.S.C. § 523(a)(5)(B)³ and therefore had priority status under § 507(a)(7)(B). The bankruptcy court found further that such priority status would continue only with respect to payments made before the parties' minor child turned eighteen in August 2004. After that time, any further amount owing on the obligation would become a general unsecured debt. The bankruptcy court then lifted the stay to allow the Appellee to proceed in state court for clarification as to whether payment of the Debtor's equity interest was due in full. This was triggered by Appellee's remarriage. Appellee further sought clarification as to whether payment in full of the second mortgage was a precondition to his right to receive the equity in the former marital home.

In May 2001, the Utah state court held that Busch's "obligation to pay the second mortgage is a reasonable pre-condition to his right to receive his equity in the marital home," and further found that Appellee's "obligation to pay [Busch] his equity in the marital home shall be deferred until he has satisfied the second mortgage in full" (hereinafter, referred to as "Modification Order"). Appellant's App. at 84. After the Utah state court ruling, upon Busch's request, the Chapter 13 case was dismissed.

Within the next day or so, Busch filed a second Chapter 13 case, which was assigned to a different bankruptcy judge ("Second Case"). The second bankruptcy judge agreed with the first bankruptcy judge that the payments on the second mortgage were in the nature of support and a priority claim only until the minor child's eighteenth birthday. In April 2002, the Second Case was dismissed.

On October 2, 2002, Busch filed a third Chapter 13 petition ("Third Case"). In his schedules, he claimed a $15,000 homestead exemption on his equity interest in the former family home. On October 3, 2002, Busch filed a Chapter 13 Plan ("Plan") in which he proposed to pay the second mortgage payment directly to the mortgage holder through August 2004, after which time the second mortgage would be paid by an unidentified third party. The Plan further provided that any remaining claim the Appellee would have against Busch for his failure to pay the second mortgage would be converted to an unsecured debt. Under the Plan, unsecured creditors will realize approximately 10% of their claims.

Appellee moved to dismiss the Debtor's Chapter 13 case with prejudice. The bankruptcy court heard the motion and denied it. The Order provided that Busch could not become delinquent for fifteen days or more on payments to the trustee, the second mortgage holder, or child support. If any of those events occurred, the bankruptcy court provided for dismissal with prejudice. Additionally, the bankruptcy court ordered that a Motion for Relief from Stay by the Appellee could be heard within ten days' notice.

Subsequently, the Appellee filed a Motion for Relief from Stay ("Motion"). On September 16, 2002, the bankruptcy court heard the Motion and on November 22, 2002, entered an Order on Motion for Relief From Automatic Stay ("Order"). In the Order, the bankruptcy court found that there was cause to lift the stay to permit the state court to determine whether Busch had any equity in the former marital home.

This appeal timely followed.

II. Appellate Jurisdiction

The Bankruptcy Appellate Panel has jurisdiction over this appeal. An order granting relief from the automatic stay is a final order. Franklin Sav. Ass'n v. Office of Thrift Supervision, 31 F.3d 1020, 1022 n. 3 (10th Cir.1994). Busch filed a timely notice of appeal. The parties have consented to this court's jurisdiction because they did not elect to have the appeal heard by the United States District Court for the District of Utah. 28 U.S.C. § 158(c)(1); Fed. R. Bankr.P. 8001.

III. Standard of Review

"For purposes of standard of review, decisions by judges are traditionally divided into three categories, denominated questions of law (reviewable de novo), questions of fact (reviewable for clear error), and matters of discretion (reviewable for `abuse of discretion')." Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988); see Fed. R. Bankr.P. 8013.

We review an order lifting the stay for abuse of discretion. Pursifull v. Eakin, 814 F.2d 1501, 1504 (10th Cir.1987). "Under the abuse of discretion standard: `a trial court's decision will not be disturbed unless the appellate court has a definite and firm conviction that the lower court made a clear error of judgment or exceeded the bounds of permissible choice in the circumstances.'" Moothart v. Bell, 21 F.3d 1499, 1504 (10th Cir.1994) (quoting McEwen v. City of Norman, 926 F.2d 1539, 1553-54 (10th Cir.1991) (further quotation omitted)).

IV. Discussion

The principal issue here is whether the bankruptcy court abused its discretion when it lifted the automatic stay imposed by § 362(a) upon the filing of Busch's Third Case. The automatic stay serves to shield both a debtor and his creditors by permitting the debtor to marshal his affairs and by ensuring that the bankruptcy procedure may provide an orderly resolution of all claims. Fortier v. Dona Anna Plaza Partners, 747 F.2d 1324, 1330 (10th Cir.1984). Under § 362(d)(1) stay relief may be granted for cause. While cause under § 362(d)(1) includes "the lack of adequate protection of an interest in property," it is not so limited. 11 U.S.C. § 362(d)(1). Because "cause" is not further defined in the Bankruptcy Code, relief from stay for cause is a discretionary determination made on a case by case basis. Pursifull, 814 F.2d at 1506. The moving party has the burden to show that "cause" exists to lift the stay, after which the burden shifts to a debtor to demonstrate why the stay should remain in place. 11 U.S.C. §§ 362(d)(1), 362(g).

Courts have found that one of the factors to consider when determining whether to modify the stay is whether doing so would permit pending litigation involving the debtor to continue in a nonbankruptcy forum. Blan v. Nachogdoches County Hosp. (In re Blan), 237 B.R. 737, 739 (8th Cir. BAP 1999) (finding that Congress intended such a result because "`[i]t will often be more appropriate to permit proceedings to continue in their place of origin, when no great prejudice to the bankruptcy estate would result, in order to leave the parties to their chosen forum and to relieve the bankruptcy court from duties that may be handled elsewhere.'") (quoting H.R.Rep. No. 95-595, at 341 (1977), U.S.Code Cong. & Admin.News 1978, at 5963, 6297; S.Rep. No. 95-989, at 50 (1978), U.S.Code Cong. & Admin.News 1978, at 5787, 5836). Twelve factors were identified in In re Curtis, 40 B.R. 795, 799-800 (Bankr.D.Utah 1984), as some of the issues a bankruptcy court might consider when determining whether to lift the stay to permit pending litigation in another forum. These factors are frequently referred to as the "Curtis factors." See, e.g., Sonnax Indus., Inc. v. Tri Component Prods. Corp. (In re Sonnax Indus., Inc.), 907 F.2d 1280, 1286 (2d Cir.1990). The Curtis factors have been widely adopted by bankruptcy courts.⁴

In this case, the bankruptcy court considered the following seven Curtis factors: (1) whether the relief would result in a partial or complete resolution of the issues; (2) the lack of any connection with or interference with the bankruptcy case; (3) whether a specialized tribunal has been established to hear the particular cause of action and that tribunal has the expertise to hear such cases; (4) whether litigation in another forum would prejudice the interests of other creditors, the creditors' committee and other interested parties; (5) the interest of judicial economy and the expeditious and economical determination of litigation for the parties; (6) whether the foreign proceedings had progressed to the point where the parties were prepared for trial; (7) the impact of the stay on the parties and the "balance of the hurt."⁵ After weighing the factors, the bankruptcy court determined that six of the seven factors favored the Appellee, and that factor 3 favored neither party. The bankruptcy court concluded that there was cause...