Jefferson v. Mississippi Gulf Coast YMCA, Inc.

• Decision Date: 31 October 1986
• Docket Number: Civ. A. No. S86-0473(GN).
• Citation: 73 BR 179
• Parties: Raymond JEFFERSON and June Jefferson, Plaintiffs, v. MISSISSIPPI GULF COAST YMCA, INCORPORATED, and Landmark Finance Corporation of Mississippi, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

73 B.R. 179 (1986)

Raymond JEFFERSON and June Jefferson, Plaintiffs, v. MISSISSIPPI GULF COAST YMCA, INCORPORATED, and Landmark Finance Corporation of Mississippi, Defendants.

Civ. A. No. S86-0473(GN).

United States District Court, S.D. Mississippi, S.D.

October 31, 1986.

David Oliver, Gulfport, Miss., for plaintiffs.

C. Thomas Anderson, Ocean Springs, Miss., for trustee.

David Cobb, Richard B. Brown, Jr., Gulfport, Miss., for defendants.

MEMORANDUM OPINION

GEX, District Judge.

This matter is before the Court on an attempted¹ appeal, filed by the debtors, from an Order of the Bankruptcy Court which dismissed with prejudice an adversary proceeding the debtors had filed against the Appellees Landmark Finance Corporation of Mississippi ("Landmark") and the Mississippi Gulf Coast Y.M.C.A. ("Y.M.C.A."), 59 B.R. 707. For the reasons stated below, the Court is of the opinion that the decision of the Bankruptcy Court was proper and should be affirmed.

This Court is mindful of the limitations placed upon its review of the lower court's factual and legal determinations. On an appeal from a bankruptcy court judgment, a district court must review the bankruptcy court's findings of fact by the clearly erroneous standard of review, even when the lower court's findings do not rest on credibility determinations but on physical or documentary evidence or inferences from other facts. Rule 8013 of the Rules of Bankruptcy Procedure; Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303 (5th Cir.1985). However, with regard to the conclusions of law adopted by the bankruptcy court, this Court is empowered to conduct a de novo review and thus independently determine the ultimate legality of the bankruptcy court's ruling. Matter of Consolidated Bancshares, Inc., 785 F.2d 1249 (5th Cir.1986); Matter of Bufkin Bros., Inc., 757 F.2d 1573 (5th Cir.1985).

The Court need not state in detail the procedural history of this case as such was accurately recounted in the Bankruptcy Court's Order of Dismissal and Conclusions of Law on Dismissal of Proceedings. Briefly, the adversary proceeding from which this appeal is taken was instituted subsequent to the fourth bankruptcy filing by the debtors within a period of nineteen months. Several months subsequent to the dismissal of the debtor's first filing (No. 8208144SC) on June 20, 1983, which was dismissed for their failure to file a plan of reorganization, the debtors again became in arrears with Landmark and Landmark again² commenced foreclosure proceedings. The second foreclosure sale was cancelled because of the debtors' second filing (No. 8407357SC) on the day of the scheduled sale, March 19, 1984. Landmark's Motion to Lift the Automatic Stay was granted by the Court's Order of March 27, 1984. This second filing was dismissed on April 3, 1984, on the debtors' own Motion to Dismiss. The third filing (No. 8407488SC) also occurred on the day the new foreclosure sale was scheduled, April 19, 1984. Oral authority to proceed with the sale was obtained from the Bankruptcy Judge (Record, pp. 24-26), and the sale was conducted that day. This third bankruptcy proceeding was dismissed on May 7, 1984, for the debtors' failure to file the required schedules.

The fourth bankruptcy filing (No. 8407599SC) occurred on May 17, 1984. The debtors, without being joined in by the trustee, commenced the adversary proceeding from which the instant appeal is taken by filing an Amended Complaint³ on April 17, 1985, against the Y.M.C.A. and Landmark alleging, inter alia, (1) "collusion and conspiracy" on the part of appellees as well as inadequate consideration with regard to the Trustee's Deed executed in favor of the Y.M.C.A., (2) slander of title, and (3) that the trustee, Tom Anderson, should be removed for mismanagement, failing to adequately protect the debtors' estate, and for neglect of duty. The debtors requested that the foreclosure be set aside and that they be awarded compensatory and punitive damages. The Bankruptcy Court granted the Motion to Dismiss filed by the appellees (and joined in by the trustee) and awarded attorney's fees against the appellants.

Although appellants' brief has attempted to assign four errors allegedly committed by the lower court, this Court's analysis will address the two issues presented by the appeal, viz., (1) whether the lower court erred in dismissing the Amended Complaint, and (2) whether the lower court abused its discretion in awarding attorney's fees.

The Court determines at the outset that the lower court's finding that "the true consideration paid for (the subject) property was reasonable and adequate and was the result of competitive bidding for the property" is not clearly erroneous. The Y.M.C.A., which submitted the highest bid for the property, assumed responsibility for the payment of two prior mortgages and several thousand dollars in delinquent property taxes. The foreclosure sale resulted in a surplus of approximately $38,000.00 which was turned over to the trustee for the benefit of the estate.

The Court further finds that the lower court's determinations under the law that (1) the appellants had no standing to institute this adversary proceeding and (2) the Order Lifting the Automatic Stay in appellants' second filing (No. 8407357SC) constituted res judicata (or collateral estoppel) are correct. It is well settled that the right to pursue causes of action formerly belonging to the debtor — a form of "property" under the Bankruptcy Code — vests in the trustee and must be brought by the trustee for the benefit of the estate. See In re Couch, 43 B.R. 56 (Bankr.E.D.Ark. 1984); Bryson v. Bank of New York, 584 F.Supp. 1306 (S.D.N.Y.1984). Also see 11 U.S.C. Section 323 and 541; Rules 6009 and 8001 of the Rules of Bankruptcy Procedure. The trustee in the instant case — based upon his statements made at the May 30, 1985, hearing — elected not to join in the (Amended) Complaint after having assessed the circumstances surrounding the foreclosure, including the fact that it had been conducted pursuant to the lower court's Order lifting the automatic stay and because the proceeds of the sale were an asset of the estate. A bankruptcy trustee is not obligated to pursue every cause of action, Merrill v. Abbott, 41 B.R. 985 (D.Utah 1984), and the evidence of record in the instant case amply supports his declining to do so here. Accordingly, this Court is of the opinion that the lower court did not err as a matter of law in ruling that the appellants had no standing to initiate this adversary proceeding.

The Court next addresses the legal propriety of the lower court's holding that the automatic stay provisions of 11 U.S.C. Section 362(a) did not operate to bar or preclude the foreclosure proceedings where an Order pursuant to 11 U.S.C. Section 362(d) was entered lifting the stay and allowing a sale to proceed in a previous bankruptcy involving the same debtors, the same creditors and the same property. The Court has studied the issue and concludes that the lower Court's decision that the April 19, 1984, foreclosure sale did not violate the automatic stay provision of 11 U.S.C. Section 362(a) — whether based on principles of res judicata, ODECO v. Mont Boat Rental Services, Inc., Et Al, 799 F.2d 213 (5th Cir.1986), or collateral estoppel, United States v. Mendoza, 464 U.S. 154, 104 S.Ct. 568, 78 L.Ed.2d 379 (1984) — did not constitute error as a matter of law and, in fact, was fully justified given the posture of this case. See In re Bystrek, 17 B.R. 894 (E.D.Pa.1982); Carondelet Savings and Loan Assn. v. McKanders, 42 B.R. 108 (N.G.Ga.1984). The lower court's decision to lift the automatic stay in No. 8407357SC was an act within the discretion of the bankruptcy judge, In re MacDonald, 755 F.2d 715 (9th Cir.1985), In re Timbers of Inwood Forest Associates, Ltd., 793 F.2d 1380 (5th Cir.1986), and to have allowed the debtors to effectively circumvent the effects of the Order Lifting the Automatic Stay by voluntarily dismissing their own bankruptcy and filing a new bankruptcy shortly thereafter would have amounted to a condonation of appellants' attempts to thwart the purposes of 11 U.S.C. Section 362(a). See GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711 (5th Cir. 1985).

Appellants further allege that the lower court erred in not conducting an evidentiary hearing relative to the portion of the Amended Complaint which asked for the removal of the trustee. The Court is of the opinion that the bankruptcy judge acted correctly in dismissing this portion of the Amended Complaint (as well as the remaining allegations) for failure to state a claim upon which relief can be granted for two reasons. See Rule 7012(b) of the Rules of Bankruptcy. Firstly, the removal of a trustee is not among the matters enumerated in Rule 7001 of the Rules of Bankruptcy Procedure as being within the scope of an adversary proceeding. 11 U.S.C. Section 325 provides for the removal of a...