In re Suggs

Decision Date05 November 2007
Docket NumberNo. 06-6077WM.,06-6077WM.
Citation377 B.R. 198
PartiesIn re Tanna LaTisha SUGGS, Debtor. Tanna LaTisha Suggs, Plaintiff-Appellant, v. Regency Financial Corp., Defendant-Appellee.
CourtU.S. Bankruptcy Appellate Panel, Eighth Circuit

R. Todd Wilhemus, Liberty, MO, for Appellant.

Louis Jay Wade, Kansas City, MO, for Appellee. Jason L. Buchanon, Kansas City, MO, appeared on the brief.

Before KRESSEL, Chief Judge, MAHONEY, and MCDONALD, Bankruptcy Judges.

MAHONEY, Bankruptcy Judge.

This is an appeal of two orders of the bankruptcy court which arose from an order granting relief from the automatic stay to creditor Regency Financial Corporation ("Regency"). The order granting relief has not been appealed. The debtor filed an adversary proceeding against Regency alleging violation of the automatic stay. She appeals a text order filed October 6, 2006, memorializing an oral ruling granting Regency's motion to dismiss the adversary proceeding and denying the debtor's motion for summary judgment, and a memorandum opinion and order filed November 30, 2006, denying the debtor's motion for new trial or amendment of the October 6th order.

We reverse the decision of the bankruptcy court on the order dismissing the adversary proceeding.

I. Procedural Background

Regency held a perfected first lien on the debtor's 1998 Ford Windstar van securing its purchase-money security interest in the vehicle. Debtor filed a Chapter 13 bankruptcy case in March 2005. Early in the case, Regency moved for adequate protection on the vehicle and specifically referred to the debtor's contractual obligation to maintain casualty insurance on the vehicle. That motion was denied. In the meantime, the debtor suspended her plan payments from April 16, 2005 through May 14, 2005. The debtor then obtained confirmation of a plan in May 2005. The plan called for weekly $202 payments to Regency, but the debtor was unable to make those payments as scheduled. In August 2005, the debtor moved to suspend the plan payments from May 14, 2005, through October 1, 2005. The motion was granted over Regency's objection. Regency, having received only one plan payment during the pendency of the case and knowing that the debtor's automobile insurance coverage was about to expire, then moved for relief from the automatic stay on October 6, 2005. That motion was denied.

In April 2006, aware that insurance coverage on the vehicle had lapsed and was not reinstated, Regency sent notice to the debtor that insurance coverage on the vehicle must be in place by a date certain or Regency would take steps to protect its collateral. This was based on a local rule in the Western District of Missouri requiring debtors to maintain insurance coverage on vehicles serving as collateral and permitting secured creditors, prior to obtaining relief from the stay, to take possession of such, vehicles pending presentation of proof of insurance.1 After receiving no response, Regency sent a reminder letter to the debtor's attorney, setting a new deadline for providing proof of insurance. On May 2, 2006, Regency repossessed the vehicle due to the debtor's failure to provide proper insurance coverage. On May 3rd, Regency wrote to the debtor's attorney, informing him of the repossession and advising him that the vehicle could be returned to the debtor if she provided proof of three months of pre-paid insurance coverage, signed a stipulation agreeing to maintain the insurance or surrender the vehicle to Regency without further action, and paid the repossession and filing fees incurred, by Regency. On May 4th, the debtor filed an adversary complaint seeking damages for Regency's violation of the automatic stay in repossessing the van.2 On May 5th, Regency filed a motion for relief from the automatic stay pursuant to Local Rule 4070-1.D., setting out the reasons for the repossession and seeking an order permitting it to foreclose its security interest. The debtor objected, asserting inter alia, that Regency violated 11 U.S.C. § 362(a), failed to comply with the terms of the local rule regarding submission of an affidavit in support of the relief motion, and, moreover, that the local rule is invalid because it conflicts with and is inconsistent with the Bankruptcy Code and Rules, particularly § 362(a) and Federal Rule of Bankruptcy Procedure 4001. After a hearing on June 5, 2006, the bankruptcy court granted Regency's motion for relief, via a text entry on the docket.3 That order was not appealed.

In late June 2006, Regency filed a motion to dismiss the adversary proceeding, asserting that by granting the motion for relief, the bankruptcy court had created law of the case with regard to the debtor's allegations in the adversary complaint and the issue should not be subject to relitigation. The debtor responded with her own motion for summary judgment. The court held a hearing and ruled from the bench, subsequently entering a text order granting Regency's motion to dismiss and denying the debtor's motion for summary judgment. The debtor moved to reconsider, which was treated as motion to amend or for a new trial pursuant to Federal Rules of Civil Procedure 59(a), 59(e), and 60(b), which the court denied in an oral ruling. In that oral ruling, the court said there could be no violation of the automatic stay if Regency's action was authorized by the order granting Regency's motion for relief from the automatic stay. The court went on to explain that Regency would not have been entitled to relief from the stay unless it had complied with the local rule. The issue of compliance was necessarily ruled on when the court granted the motion for relief, the court said, and therefore, the issue was "actually litigated" and was not subject to collateral attack. Tr. of Oct. 10, 2006, 9:1-14. For the same reason, the debtor could not relitigate the issue of the validity of the local rule because the court necessarily overruled that claim when it granted the motion for relief. Id. 9:18-10:6.

The court thereafter filed a memorandum opinion and order denying the motion. The memorandum opinion clarifies the court's finding that collateral estoppel precluded the debtor's attempt to relitigate the constitutionality of and Regency's compliance with the local rule, because the order granting relief from stay "necessarily resolved those issues in Regency's favor." Mem. Op. at 4 (Appellant's App. at 145). This appeal followed.

II. Standard of Review

The parties agree that no facts are in disputes here. The trial court's legal conclusions are reviewed de novo. Apex Oil Co. v. Sparks (In re Apex Oil Co.), 406 F.3d 538, 541 (8th Cir.2005).

In reviewing de novo an order granting a motion to dismiss, the appellate court must accept all well-pled facts as true and draw all reasonable inferences in favor of the appellant. Weaver v. Clarke, 45 F.3d 1253, 1255 (8th Cir.1995); Foss v. Hall County Child Support Office (In re Foss), 328 B.R. 780, 782 (8th Cir. BAP 2005). The bankruptcy court's application of collateral estoppel is reviewed de novo. Osborne v. Stage (In re Stage), 321 B.R. 486, 491 (8th Cir. BAP 2005).

A bankruptcy court's denial of a motion for new trial, or to alter or amend a judgment, is reviewed with deference and will not be reversed absent a clear abuse of discretion. Browder v. Director, Dep't of Corrections, 434 U.S. 257, 263 n. 7, 98 S.Ct. 556, 54 L.Ed.2d 521 (1978); Guy v. Danzig (In re Danzig), 233 B.R. 85, 93 (8th Cir. BAP 1999). "An abuse of discretion occurs if the court bases its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence." PW Enter., Inc. v. Kaler (In re Racing Servs., Inc.), 332 B.R. 581, 584 (8th Cir. BAP 2005).

Because the order denying the debtor's motion to alter or amend and the underlying order granting the motion to dismiss have both been appealed, our review of the merits of the dismissal order will be dispositive under the circumstances.

III. Discussion

As noted above, the merits of the order granting the motion for relief are not before us. The issue on appeal is whether the bankruptcy court properly dismissed the debtor's adversary proceeding on the basis of collateral estoppel. This decision will necessarily entail a ruling on the validity of the local rule because the bankruptcy court, in dismissing the adversary proceeding, determined that the relief order encompassed a finding that the local rule is valid. In the memorandum opinion on the motion to alter or amend, the court decided that issue again. Therefore, it forms the basis for the appeal and must be dealt with.

The debtor concedes that Regency was entitled to relief from stay for cause based on lack of adequate protection as a result of her failure to keep the vehicle insured. However, the debtor argued in opposition to the motion for relief that the only way Regency could have legally taken possession of the vehicle prior to obtaining stay relief is if the local rule is valid. She contends that the local rule is not valid, and that the judge dealing with the motion for relief from stay did not rule on that issue in the context of the motion for relief, yet a different judge dealing with the adversary proceeding used the relief ruling to collaterally estop her from pursuing the issue in the adversary proceeding. The judge dealing with the adversary proceeding held that the validity and legitimacy of the local rule were implicitly ruled on by the order granting Regency relief from the stay, although the judge did not address the merits of the debtor's arguments until ruling on her motion for new trial.

It is clear from the record that a stay violation did occur, and the violation was at no time addressed by the bankruptcy court. The violation occurred when Regency repossessed the vehicle before obtaining a court order authorizing it to do so. The debtor could have filed a motion for sanctions, at...

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