Pursifull v. Eakin

• Decision Date: 27 March 1987
• Docket Number: 84-2128,Nos. 84-2127,s. 84-2127
• Parties: 16 Collier Bankr.Cas.2d 881, Bankr. L. Rep. P 71,724 Charles PURSIFULL, Trustee in Bankruptcy, Plaintiff-Appellant, v. Jimmy Luther EAKIN and Hilburn Paul Eakin, Defendants-Appellees. Charles PURSIFULL, Trustee in Bankruptcy, Plaintiff-Appellant, v. Jimmy Luther EAKIN, Hilburn Paul Eakin, Energy Agri Products, Inc., Getty Oil Company, and Getty Trading and Transportation Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1501

814 F.2d 1501

16 Collier Bankr.Cas.2d 881, Bankr. L. Rep. P 71,724

Charles PURSIFULL, Trustee in Bankruptcy, Plaintiff-Appellant, v. Jimmy Luther EAKIN and Hilburn Paul Eakin, Defendants-Appellees.

Charles PURSIFULL, Trustee in Bankruptcy, Plaintiff-Appellant, v. Jimmy Luther EAKIN, Hilburn Paul Eakin, Energy Agri

Products, Inc., Getty Oil Company, and Getty

Trading and Transportation Company,

Defendants-Appellees.

Nos. 84-2127, 84-2128.

United States Court of Appeals Tenth Circuit.

March 27, 1987.

John E. Patterson, Jr. and Dennis C. Roberts, Oklahoma City, Okl., for plaintiff-appellant.

Don L. Patterson, Coulton, Morgan, Britain & White, Amarillo, Tex., and Douglas C. McBee, Andrews, Davis, Legg, Bixler, Milsten & Murray, Oklahoma City, Okl., for defendants-appellees.

Before BARRETT, LOGAN and BALDOCK, Circuit Judges.

BALDOCK, Circuit Judge.

After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See Fed.R.App.P. 34(a); 10th Cir.R. 34.1.8(c). The cause, therefore, is submitted without oral argument.

Cases 84-2127 and 84-2128 have been consolidated on appeal for purposes of record, briefing, argument and submission. Each appeal stems from an adversary proceeding filed in conjunction with the bankruptcy case involving Larry L. Sharp, debtor (Sharp). Due to the similarity of the issues on appeal, we decide these cases together.

Appellant Pursifull, the trustee in bankruptcy, appeals the denial of the debtor's appeal to an en banc panel of judges for the Western District of Oklahoma. The appeal to the en banc court involved an order of the trial judge which lifted the automatic stay provided in 11 U.S.C. Sec. 362 with regard to a pending state court action, as well as an order rejecting the findings of fact, conclusions of law, and proposed judgment submitted by the bankruptcy judge. For the reasons set forth below, we affirm the lifting of the stay, and dismiss the appeal as it pertains to the rejection of the bankruptcy judge's recommendations.

The oil and casinghead gas lease involved in these cases was entered into December 21, 1982, by Jimmy Luther Eakin and Hilburn Paul Eakin (referred to collectively as Eakin), as lessors, and Energy Agri Products (Energy Agri), as lessee. Energy Agri farmed out the lease to Sharp on December 24, 1982. The lease covered 160 acres of land located in Carson County, Texas.

On September 9, 1983, Eakin commenced a suit against Sharp in Texas state court. The purpose of the Texas suit was to determine the rights of Eakin and Sharp based on Sharp's alleged failure to meet the drilling obligations in the lease. Sharp then filed a petition for chapter 11 bankruptcy on November 27, 1983. According to appellant, the sole asset of any value in the debtor estate is the oil and casinghead gas lease.

Sharp filed an adversary proceeding (No. 83-1151) against Eakin and Energy Agri to determine the validity of the lease in the bankruptcy court. Energy Agri was served, failed to answer, and consented to the entry of an order of judgment in favor of Sharp as to Energy Agri's interest in the lease. Eakin moved to dismiss the adversary proceeding for lack of subject matter and personal jurisdiction. The motions were heard and denied by the bankruptcy judge. Eakin then filed a motion to compel the deposit of funds held by Sharp, and was granted affirmative relief. The bankruptcy judge later vacated this order and allowed the use of the production income by the debtor estate.

On February 23, 1984, Sharp filed a second adversary proceeding (No. 84-0129) against Eakin, alleging slander of title as to the lease. Eakin filed an answer, counterclaim, demand for jury trial, and moved to consolidate 84-0129 with 83-1151. The motion to consolidate was denied, and the cases were consolidated for the first time on appeal.

On March 8, 1984, Eakin filed a motion to withdraw the automatic reference and a motion to stay the adversary proceedings. These motions were heard by the district court on March 22, 1984. The district court declined to act, thus leaving the reference in place and not staying the adversary proceeding. The bankruptcy judge conducted a trial in 84-1151 on April 24, 1984.

Eakin's motion for abstention from jurisdiction or, in the alternative, for transfer of venue of the adversary proceedings, was heard by the district judge on April 26, 1984. The next day, the district court entered an order withdrawing the automatic reference, lifting the automatic stay as to the Texas state court proceeding, and reserving the right to receive the findings of fact and conclusions of law of the bankruptcy judge from the April 24, 1984, trial.

The bankruptcy judge submitted his findings of fact, conclusions of law, and a proposed order on May 9, 1984. The district court conducted a hearing on the bankruptcy judge's submitted findings and conclusions on May 24, 1984, and announced that it declined to follow the recommendations of the bankruptcy judge. An order was entered June 7, 1984, rejecting the findings, conclusions, and report and recommendation of the bankruptcy judge.

On July 6, 1984, the district court entered an order abstaining from the exercise of jurisdiction over the adversary proceedings pursuant to 28 U.S.C. Sec. 1471(d). ¹ The district court concluded that the issues raised by the proceedings related to title to real property located in Texas, and that the issues should thus be determined by the Texas state courts. No appeal was taken from this abstention order.

Sharp appealed the April 27, 1984, order withdrawing the automatic stay as well as the district court's rejection of the bankruptcy judge's findings and conclusions, to the judges of the Western District of Oklahoma sitting en banc. By order dated July 6, 1984, the district judge who had heard the cases and entered the appealed orders affirmed the earlier orders, apparently without submitting the appeal to the full panel. It is from this order that the trustee appeals.

We first address appellant's contention that the district court erred in affirming the withdrawal of the automatic stay. Appellant argues that the withdrawal of the stay was improper because the district court did not follow the procedures for lifting the stay as set forth in 11 U.S.C. Sec. 362(d). Appellees, on the other hand, contend that the notice and hearing provided in connection with the motion to abstain from exercising jurisdiction satisfied the procedural requirements for the lifting of the stay.

The purpose of the automatic stay provided by 11 U.S.C. Sec. 362 is to protect the debtor and his creditors by allowing the debtor to organize his affairs, and by ensuring that the bankruptcy procedure may operate to provide an orderly resolution of all claims. Fortier v. Dona Anna Plaza Partners, 747 F.2d 1324, 1330 (10th Cir.1984). Section 362(d) ² allows the granting of relief from the automatic stay under appropriate circumstances. The decision as to whether to lift the stay is committed to the discretion of the judge presiding over the bankruptcy proceedings, and we review such decision under the abuse of discretion standard. Matter of Boomgarden, 780 F.2d 657, 660 (7th Cir.1985); In re Castlerock Properties, 781 F.2d 159, 163 (9th Cir.1986).

The automatic stay generally prohibits, with exceptions not relevant here, litigation, enforcement of liens, and other actions, be they judicial or otherwise, which would affect or interfere with property of the estate, of the debtor, or which is in the custody of the estate. 11 U.S.C. Sec. 362(a). The stay procedure thus allows the federal court presiding over the bankruptcy to retain control over the resolution of all claims pertaining to the debtor and the bankruptcy estate. As applied to this case, the stay effectively limits the power of the Texas state court to adjudicate the rights of the respective parties under the oil and gas lease.

While the operation of the automatic stay affects the power of entities other than the court presiding over the bankruptcy to resolve claims involving the debtor or the estate, the abstention provided for in Sec. 1334(c) ³ deals with the exercise of jurisdiction by the court presiding over the bankruptcy itself. Thus, a decision to abstain affects the power of the court presiding over the bankruptcy only, and does not give any other entity the power to resolve claims involving the debtor or the estate. Even where the court has abstained pursuant to Sec. 1334(c), the stay granted under Sec. 362 must be modified in order to allow the resolution of claims other than in the court with jurisdiction over the bankruptcy. In the present case, although the district court abstained from hearing the adversary proceedings regarding the oil and gas lease, the Texas courts could not adjudicate the rights under the lease unless the automatic stay was lifted. ⁴ The abstention by the district court, therefore, does not render moot the propriety of the lower court's decision to lift the stay as it pertains to the Texas proceedings.

Section 362(d) allows the modification of the automatic stay "[o]n request of a party in interest and after notice and a hearing." Appellant contends that no request for modification was made by a party in interest, and that notice and hearing were not provided prior to the lifting of the stay. We disagree.

11 U.S.C. Sec. 102(1)(A) provides that, as used in title 11, "after notice and a hearing ... means after such notice as is appropriate in the particular circumstances, and such opportunity for a hearing as is appropriate in the particular circumstances." Also, the request for relief may be in the form of a motion; a complaint is not required. Browning v. Navarro, 743 F.2d 1069, 1083 (5th Cir.1984). See also Bankr.R. 4001(a) and 9014. Eakin filed a "motion for abstention from exercise from...