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IN RE ADAMS

September 1, 2005.

IN RE: KEVIN L. ADAMS Debtor.


The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge

MEMORANDUM OPINION

This matter is before the court on Appellant Kevin Adams' ("Adams") appeal of an order issued by a bankruptcy court. For the reasons stated below, we affirm the bankruptcy court.

BACKGROUND

  Appellee MidAmerica Bank, fsb (MidAmerica") held a mortgage lien on property owned by Adams that is located in Aurora, Illinois ("Property"). Adams filed a Chapter 13 petition in the bankruptcy court in August of 2003. In December of 2003, MidAmerica filed a motion in those bankruptcy proceedings to modify the automatic stay in the proceedings to allow MidAmerica to institute a foreclosure of mortgage case against the Property. The motion to modify the stay was granted and MidAmerica subsequently filed a foreclosure of mortgage case. Judgment of foreclosure was entered on August 5, 2004, and the judgment provided that the redemption period expired on November 8, 2004.

  Adams subsequently filed a Chapter 13 bankruptcy petition on November 22, 2004 instituting the present action. MidAmerica claimed that before the Property was sold on November 23, 2004, MidAmerica conducted a search for Adams' name to make sure that he had not filed another Chapter 13 bankruptcy and MidAmerica discovered no such filing by Adams. On November 23, 2004, the Property was auctioned at a Sheriff's sale and was sold to a third party and on December 8, 2004, the state court entered an order approving the sale. After the sale was confirmed, Adams' counsel informed MidAmerica that Adams had filed a Chapter 13 petition for bankruptcy before the sale of the Property, but that the filing had been made under the name of "Keith L. Adams" rather than "Kevin L. Adams."

  MidAmerica then appeared before the bankruptcy court in the instant action and filed a motion to annul the automatic stay in the instant action in order to validate the final approval by the state court of the sale of the Property on December 8, 2004. We note that Adams claims that the sale was confirmed on December 8, 2005, (Applt. 2), but that such a date is clearly inaccurate, in that it is in the future. MidAmerica pointed out in its motion to annul the stay that Adams was in substantial default on the mortgage for the Property prior to the filing of his petition for bankruptcy. The bankruptcy court granted MidAmerica's motion to annul the stay, noting that the court lacked jurisdiction to nullify the state court order approving the sale. Adams filed a motion with the bankruptcy court seeking a rehearing and a vacation of the order granting MidAmerica's motion to annul. The bankruptcy court denied the motion for rehearing and the motion to vacate. Adams is now before this court to appeal the bankruptcy court's ruling granting MidAmerica's motion to annul and denying the motion for a rehearing and vacation of the order.

  LEGAL STANDARD

  A federal district court has jurisdiction, pursuant to 28 U.S.C. § 158, to hear appeals from the rulings of a bankruptcy court. On appeal, the district court reviews the factual findings of the bankruptcy court under the clearly erroneous standard and reviews the bankruptcy court's legal findings under the de novo standard. In re A-1 Paving and Contracting, Inc., 116 F.3d 242, 243 (7th Cir. 1997).

  DISCUSSION

  Adams argues that the bankruptcy court erred in concluding that it lacked jurisdiction over the third party-purchaser of the property. Adams argues that the automatic stay under 11 U.S.C. § 362 ("Section 362") encompassed the Property. Pursuant to 11 U.S.C. § 541, the bankruptcy estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). Adams argues that the Property was thus part of the bankruptcy estate on November 22, 2004, before the Property was sold and was covered by the automatic stay. Under Section 362, the stay applies to "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. § 362(a)(3). Adams argues that the sale of the Property, which is part of the bankruptcy estate, constitutes an exercise of control over the property of the estate and falls within the prohibition of Section 362.

  Adams acknowledges that he failed to notify MidAmerica of his filing of bankruptcy on November 22, 2004 until after the sale and the approval of the sale by the state court. Adams claims that his attorney attempted to send a letter to MidAmerica informing it of Adams' filing, but that "[t]he letter was inadvertently sent via the wrong fax number. . . ." (Mot. 9). Adams argues that, regardless of the fact that MidAmerica did not receive notice of his filing prior to the sale, the automatic stay is effective without the necessity of notice to any party that would be subject to the stay. See In re Garcia, 23 B.R. 266, 267 (N.D. Ill. 1982) (stating that notice to creditor of stay is not required).

  I. Rooker-Feldman Doctrine

  The bankruptcy court did not, as Adams suggests, find that the automatic stay was not in effect on November 23, 2004 when the Property was sold. Rather, the bankruptcy court pointed out that it was not disputed that at that juncture, the Property had already been sold and that the sale had already been approved by the state court. (1/15/05 Hr. tr. 4-5). The bankruptcy court acknowledged that a third-party purchaser had acquired a deed in the Property and that the state court entered an order approving the sale. (1/15/05 Hr. tr. 6-7). The bankruptcy court properly concluded that it did not have jurisdiction over the state court matter and that it did not have jurisdiction over the third-party purchaser. The bankruptcy court granted the annulment of the automatic stay, but did so with the express proviso that, if Adams pursued his remedies in the state court and the state court vacated the sale, Adams could renew his arguments before the bankruptcy court. (1/15/05 Hr. tr. 4-5). Also, in denying Adams' motion to vacate, the bankruptcy court denied the motion without prejudice, stating that if Adams was able to get the state court to vacate the confirmation of the sale, Adams could renew his motion to vacate with the bankruptcy court. (2/4/05 Hr. tr. 5).

  The bankruptcy court stated that under the Rooker-Feldman doctrine, a federal bankruptcy court does not have jurisdiction to reverse the final orders of state courts and that a judgment of foreclosure that has proceeded to an order confirming a sale is a final order. Under the Rooker-Feldman Doctrine, the lower federal courts are precluded from "jurisdiction over claims seeking review of a state court judgment" and over claims "inextricably intertwined" with a state court judgment. Rooker v. Fidelity Trust, 263 U.S. 413, 415-16 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482-86 (1983). In determining whether Rooker-Feldman is applicable, an inferior federal court must determine whether the claim seeks to "set aside a state court judgment" or whether the claim is in fact "an independent claim." 4901 Corporation v. Town of Cicero, 220 F.3d 522, 527-28 (7th Cir. 2000). If a ...


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