Gina Lee v. James Anasti , 461 F. App'x 227 ( 2012 )


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  •                               UNPUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    No. 10-1772
    In Re:   GINA ANASTI LEE,
    Debtor.
    ----------------------
    GINA ANASTI LEE, on behalf of the bankruptcy estate,
    Plaintiff - Appellant,
    v.
    JAMES ANASTI,
    Defendant – Appellee,
    and
    WILLIAM K. STEPHENSON, JR.,
    Trustee.
    No. 10-1774
    In Re:   GINA ANASTI LEE,
    Debtor.
    ----------------------
    GINA ANASTI LEE, on behalf of the bankruptcy estate,
    Plaintiff - Appellant,
    v.
    JAMES ANASTI,
    Defendant – Appellee,
    and
    WILLIAM K. STEPHENSON, JR.,
    Trustee.
    Appeals from the United States District Court for the District of
    South Carolina, at Columbia. Joseph F. Anderson, Jr., District
    Judge. (3:10-cv-00626-JFA; 3:10-cv-00196-JFA)
    Submitted:   October 17, 2011           Decided:   January 6, 2012
    Before SHEDD and DUNCAN, Circuit Judges, and William L. OSTEEN,
    Jr., United States District Judge for the Middle District of
    North Carolina, sitting by designation.
    Affirmed in part; dismissed in part by unpublished per curiam
    opinion.
    Tony R. Megna, Columbia, South Carolina, for Appellant. Steven
    B. Licata, LAW OFFICE OF STEVEN B. LICATA, PC, Columbia, South
    Carolina, for Appellee.
    Unpublished opinions are not binding precedent in this circuit.
    2
    PER CURIAM:
    Gina Anasti Lee (“Lee”) appeals the orders of the district
    court affirming two separate orders issued by the United States
    Bankruptcy    Court    for   the     District     of   South    Carolina.         Both
    orders arise from the same bankruptcy case, In re Lee, Ch. 13
    Case No. 09-02854 (Bankr. D.S.C. filed Apr. 16, 2009), but were
    addressed by the district court in two separate appeals from the
    bankruptcy    court:   (1)    In   re    Lee,    No.   3:10CV00196,       
    2010 U.S. Dist. LEXIS 44693
     (D.S.C. May 6, 2010) (hereinafter “196 Case”)
    and (2) In re Lee, No. 3:10CV00626, 
    432 B.R. 212
     (D.S.C. 2010)
    (hereinafter “626 Case”).             In the 196 Case, Lee appeals the
    district court’s order affirming the bankruptcy court’s decision
    to grant appellee, James Anasti (“Anasti”), relief from the stay
    imposed by 
    11 U.S.C. § 362
    .             In the 626 Case, Lee appeals the
    district     court’s     order       affirming      the      bankruptcy     court’s
    dismissal of Lee’s adversary complaint in which Anasti was named
    as   a   defendant.          These      two     related      appeals    have     been
    consolidated    before    this     court.        For   the    reasons   set      forth
    below, we affirm the grant of relief from the stay, affirm the
    dismissal of Lee’s avoidance action, and dismiss the remainder
    of the appeal.
    3
    I.
    This appeal arises from what originally began as a real
    property dispute in South Carolina state court between a sister
    (Lee) and brother (Anasti) over real property located at 2325
    Two Notch Road in Columbia, South Carolina (“the Property”).                    In
    1978, the then-owner of the Property, Laura Corvi, deeded the
    Property to Anasti and the parties’ father, Albert Anasti, as
    tenants in common with right of survivorship.               J.A. 56.
    Although James Anasti held an interest in the Property by
    virtue of his right of survivorship, Albert Anasti devised the
    Property to Lee in his will.               J.A. 62.     Albert Anasti died in
    1995, and, subsequently, a South Carolina probate court found
    Lee to have inherited the Property in accordance with Albert
    Anasti’s will.           
    Id.
    In 2000, Lee sold the Property to Lance Wilson and Willis
    Goodwin 1 “by       way    of   ‘owner   financing.’”      J.A. 57.      A    title
    dispute then arose between Lee and the purchasers; Anasti was
    not a party to that action.               Following this dispute, and as a
    result    of   a    related      condemnation      proceeding   (see   J.A.    55),
    Anasti filed a state court action in 2007 to quiet title to the
    Property.          See    Anasti   v.    Wilson,   2007-CP-40-0576     (S.C.    Ct.
    1
    Wilson and Goodwin were named as defendants in the state
    court litigation, but are not parties to the adversary
    proceeding in bankruptcy court described hereinafter.
    4
    Common Pleas Oct. 26, 2007) (the “state court action”) (order
    granting partial summary judgment) (J.A. 55); J.A. 182.         In this
    state court action, Anasti asserted his interest to the Property
    through the original deed from Corvasi, while Lee claimed to
    have acquired superior title to the Property through adverse
    possession under color of title.        J.A. 56, 59.   The state trial
    court granted summary judgment in favor of Anasti on October 26,
    2007, finding that Lee had not acquired title through adverse
    possession and that the Property is “the exclusive real property
    of [Anasti].”   J.A. 64.
    In January 2008, Lee appealed the trial court’s decision to
    the South Carolina Court of Appeals, which remanded the case to
    the trial court for a determination of whether Lee’s appeal was
    timely filed.    See Anasti v. Wilson, 
    2011 S.C. App. Unpub. LEXIS 204
    , at *1 (S.C. Ct. App. Apr. 28, 2011).       The state trial court
    conducted an evidentiary hearing and thereafter held that Lee’s
    appeal was not timely filed.        
    Id.
        Before the South Carolina
    Court of Appeals issued its final ruling, however, Lee filed for
    bankruptcy   under   Chapter   7.   J.A.   190-91.     After   initially
    dismissing and then reinstating the appeal, the South Carolina
    Court of Appeals “issued an order holding the appeal in abeyance
    pending a final decision in the bankruptcy proceedings.”           J.A.
    191.
    5
    On June 22, 2009, the Chapter 7 trustee filed a “Report of
    No    Distribution”      in     which   she     found     that    no    property    was
    available for distribution from the estate.                      J.A. 90.     Lee then
    converted     the     bankruptcy    case       to   Chapter      13.     J.A.    45-46.
    Thereafter, Anasti moved the bankruptcy court pursuant to 
    11 U.S.C. § 362
    (d)(1) to lift the automatic stay to permit the
    state appeals process to continue.                  J.A. 48.      Concurrently, Lee
    filed an adversary proceeding under 
    11 U.S.C. §§ 1303
     and 1306,
    seeking to recover the Property.               See Compl., Lee v. Anasti, No.
    09-02854 (Bankr. D.S.C. Aug. 20, 2009) (J.A. 111).                          The claims
    set forth in Lee’s adversary complaint were similar to those
    asserted in the state court action; both cases were grounded in
    theories of adverse possession or related claims.                       See generally
    Order Granting Partial Summ. J. (J.A. 55-64); Compl., Lee v.
    Anasti, No. 09-02854 (Bankr. D.S.C. Aug. 20, 2009) (J.A. 124-
    28).     Specifically, in her adversary complaint, Lee requested
    that the bankruptcy court declare that she held title to the
    Property      based     on     claims     of    adverse       possession,       laches,
    estoppel,     and     staleness.        J.A.    124-28.        The     complaint   also
    included an avoidance action brought pursuant to 
    11 U.S.C. § 544
    (a).      J.A. 129.
    After Anasti filed his motion seeking relief from the stay
    and    Lee   filed    her     adversary    complaint,      the    bankruptcy       court
    6
    issued the two separate orders that are the subject of this
    appeal.        The first order granted Anasti’s motion for relief from
    the stay (J.A. 196); that order was appealed to the district
    court    in     the     196    case.    The       second       order    dismissed    Lee’s
    adversary complaint (J.A. 228); that order was appealed to the
    district court in the 626 case. 2                      The district court affirmed
    both of the bankruptcy court’s orders.                       J.A. 185, 217.
    After the stay was lifted, the state court appeals process
    continued, and on April 28, 2011, the South Carolina Court of
    Appeals dismissed Lee’s appeal as untimely.                            Anasti v. Wilson,
    
    2011 S.C. App. Unpub. LEXIS 204
    , at *2 (S.C. Ct. App. Apr. 28,
    2011).     The Supreme Court of South Carolina then denied Lee’s
    petition for writ of certiorari.                       Anasti v. Wilson, 
    2011 S.C. LEXIS 338
    ,    at     *1    (S.C.   Oct.       5,    2011).         The   state   court
    litigation concluded while this appeal was pending; both parties
    acknowledged in supplemental pleadings the final order of the
    Supreme Court of South Carolina denying certiorari.                             See Supp.
    Br. of Appellant at 2; Supp. Br. of Appellee at 1.
    In this appeal, Lee argues that the district court erred in
    affirming both the bankruptcy court’s decision to grant relief
    from     the     stay    and    its    decision         to    dismiss     her   adversary
    2
    The bankruptcy court also denied Lee’s motion to amend her
    complaint in the adversary proceeding without prejudice to her
    right to renew the motion upon conclusion of the state court
    proceedings. J.A. 228 n.4.
    7
    complaint.       We first address the issue of whether the district
    court    erred       in   affirming     the    bankruptcy         court’s     decision     to
    grant relief from the stay.
    II.
    We have jurisdiction to hear this appeal pursuant to 
    28 U.S.C. § 158
    (d), which “allows us to review ‘final decisions’ by
    the   district       court      when   it   acts     in    its    bankruptcy     appellate
    capacity.”       Safety-Kleen, Inc. v. Wyche, 
    274 F.3d 846
    , 864 n.4
    (4th Cir. 2001). An order granting or denying relief from the
    automatic stay is final and appealable.                         See 
    id. at 864
     (“[T]he
    denial of relief from the automatic stay is a final, appealable
    order.”); Nat’l Envtl. Waste Corp. v. City of Riverside (In re
    Nat’l Envtl. Waste Corp.), 
    129 F.3d 1052
    , 1054 (9th Cir. 1997)
    (“Orders granting or denying relief from the automatic stay are
    deemed to be final orders.”); In re Sonnax Indus., 
    907 F.2d 1280
    ,    1283    (2d      Cir.    1990)     (“All        seem   to   agree    that     orders
    lifting the automatic stay are final.”).
    a.
    “We    review       the    judgment     of    a     district    court     sitting   in
    review      of   a    bankruptcy       court        de    novo,      applying    the     same
    standards of review that were applied in the district court.”
    Logan v. JKV Real Estate Servs. (In re Bogdan), 
    414 F.3d 507
    ,
    8
    510 (4th Cir. 2005) (citing Devan v. Phoenix Am. Life Ins. Co.
    (In   re   Merry-Go-Round      Enters.),       
    400 F.3d 219
    ,     224   (4th    Cir.
    2005)). “Specifically, ‘we review the bankruptcy court's factual
    findings for clear error, while we review questions of law de
    novo.’”      
    Id.
     (quoting Loudoun Leasing Dev. Co. v. Ford Motor
    Credit Co. (In re K & L Lakeland, Inc.), 
    128 F. 3d 203
    , 206 (4th
    Cir. 1997)).
    In   this     case,    the   district       court,     employing      the     same
    reasoning     as    the     bankruptcy        court   below,        found   that     the
    automatic stay was properly lifted under 
    11 U.S.C. § 362
    (d)(1).
    “A decision to lift the automatic stay under section 362 of the
    Code is within the discretion of the bankruptcy judge and this
    decision     may    be    overturned      on     appeal      only     for   abuse     of
    discretion.”       In re Robbins, 
    964 F.2d 342
    , 345 (4th Cir. 1992).
    
    11 U.S.C. § 362
    (d)(1) provides that a court shall grant
    relief from the stay “for cause, including the lack of adequate
    protection     of    an     interest     in     property      of     such   party     in
    interest.”     Because the statute does not define cause, “courts
    must determine when discretionary relief is appropriate on a
    case-by-case basis.”         In re Robbins, 
    964 F.2d at 345
    .
    The court must balance potential prejudice to the
    bankruptcy debtor's estate against the hardships that
    will be incurred by the person seeking relief from the
    automatic stay if relief is denied . . . .           The
    factors that courts consider in deciding whether to
    lift the automatic stay include (1) whether the issues
    in the pending litigation involve only state law, so
    9
    the expertise of the bankruptcy court is unnecessary;
    (2) whether modifying the stay will promote judicial
    economy   and    whether  there   would   be   greater
    interference with the bankruptcy case if the stay were
    not lifted because matters would have to be litigated
    in bankruptcy court; and (3) whether the estate can be
    protected properly by a requirement that creditors
    seek   enforcement   of  any   judgment  through   the
    bankruptcy court.
    
    Id.
     (citation omitted).
    In   its    order      granting    Anasti    relief     from    the   stay,    the
    bankruptcy court identified the standards set forth in Robbins
    and concluded that cause to grant relief existed under 
    11 U.S.C. § 362
    (d)(1).         J.A. 192-94.          With regard to the first and second
    factors set forth in Robbins, the bankruptcy court found that
    “[t]he determination of title to the Property and the nature and
    extent of [Lee’s] interest is an issue of state law that has
    already      been    litigated        in   and    addressed    by   the     lower   state
    court.”       J.A. 195.         The court also found that the third factor
    had been met, noting that Anasti did “not seek authority to
    pursue       any     action      or    liability      against       [Lee]     beyond      a
    determination        of     title     to   the    Property     in   the     state   court
    proceedings.”            
    Id.
         The court found that allowing the state
    court        proceedings        to     continue      would      avoid     “unnecessary
    duplication         of    efforts”     and   that     the     debtor    would   not    be
    prejudiced by the court’s refusal to relitigate the issue.                          
    Id.
    10
    In affirming the bankruptcy court’s order granting relief
    from the stay, the district court also applied Robbins and held
    that “the bankruptcy court rightly deferred to the courts of
    South Carolina in abstaining, on grounds of comity . . . .
    South      Carolina   courts       possess      particular         expertise     in
    interpreting South Carolina property law.”                 J.A. 184.    The court
    additionally noted that, because the quiet title action involved
    only    the   application     of   state    law,     the    bankruptcy    court’s
    expertise would not be utilized.             
    Id.
         The court concluded that
    allowing Lee “to pursue identical litigation in the bankruptcy
    court would be highly duplicative.”            
    Id.
    b.
    Lee does not challenge the facts found by the bankruptcy
    court.     The findings of fact that both the bankruptcy court and
    district court relied upon accurately reflect the procedural and
    substantive     history     of   the   state    court      litigation    and    the
    bankruptcy proceedings.          Instead, Lee’s objections are directed
    to   the   lower   court’s   application       of    
    11 U.S.C. § 362
    (d)   and
    Robbins to Anasti’s motion seeking relief from the stay.
    Bearing in mind that “Congress . . . has granted broad
    discretion to bankruptcy courts to lift the automatic stay to
    permit enforcement of rights against property of the estate”
    Claughton v. Mixson, 
    33 F.3d 4
    , 5 (4th Cir. 1994), we find that
    11
    the bankruptcy court did not abuse its discretion in granting
    Anasti=s    motion    to    lift    the   stay      pursuant     to    
    11 U.S.C. § 362
    (d)(1).     Each of the Robbins factors supports the bankruptcy
    court’s exercise of discretion.
    The first factor identified in Robbins, “whether the issues
    in   the   pending     litigation       involve      only    state     law,    so    the
    expertise     of   the     bankruptcy     court      is     unnecessary,”      clearly
    supports     the   decision        to   lift   the    stay.     The    state        court
    litigation    involved      only    issues     of    state    real    property      law,
    rendering    the     expertise     of   the    bankruptcy      court    unnecessary.
    Notably, real property law is an area in which federal courts
    are especially deferential to state courts.                    See Dayton & M. R.
    Co. v. Comm’r, 
    112 F.2d 627
    , 630 (4th Cir. 1940) (noting that
    even prior to Erie R. Co. v. Tompkins, it was “well settled that
    we were bound by state decisions as to rights of property and
    other matters of local law”); Warburton v. White, 
    176 U.S. 484
    ,
    496 (1900).
    The second factor identified by Robbins, “whether modifying
    the stay will promote judicial economy and whether there would
    be greater interference with the bankruptcy case if the stay
    were not lifted because matters would have to be litigated in
    bankruptcy court,” also supports lifting the stay.                          The state
    court litigation had been ongoing for over two years and was
    12
    near finality in the South Carolina Court of Appeals when Lee
    filed for bankruptcy under Chapter 7.                             Lifting the stay thus
    promoted      judicial            economy;        the     bankruptcy        court’s        order
    permitted the conclusion of an adjudication of real property
    issues in the South Carolina courts in lieu of relitigation of
    those same issues in bankruptcy court.
    With respect to the third Robbins factor, Lee was afforded
    adequate protection in the bankruptcy proceeding because of her
    ability to seek subsequent relief if she were to succeed on
    appeal in state court.                  J.A. 195.       In summary, all three factors
    identified        by    Robbins         heavily    weigh    in    favor     of   lifting     the
    stay.
    Lee argues that in granting Anasti’s motion to lift the
    stay,   both           the     bankruptcy         court     and    the      district       court
    improperly failed to consider that the bankruptcy estate was not
    a   party    to    the       state      court     proceeding.         Lee      contends     that
    lifting the stay deprived the bankruptcy estate of due process
    because the estate has not been provided an opportunity to be
    heard   on     the       issue       of     ownership       of     the    Property.          See
    Appellant’s        Br.       at    43-45.          Specifically,         Lee     argues,     “If
    Appellee prevails in the state-court appeal, he has free and
    clear   title      -     and      the     bankruptcy      estate    (as     opposed    to    the
    individual        Debtor)         never    has    the     opportunity       to   present     its
    13
    claims to the property, and is never heard by any court.”                Id.
    at 45 (emphasis in original).
    Lee’s arguments in this regard are not persuasive, as Lee
    misinterprets her position in relation to the bankruptcy estate
    and the Property.      Any interest of the bankruptcy estate in the
    Property    is   derived   from   Lee’s   right   in   the   Property.   The
    bankruptcy estate’s claim is not greater than Lee’s claim.               Cf.
    Old Republic Nat’l Title Ins. Co. v. Tyler (In re Dameron), 
    155 F.3d 718
    , 721 (4th Cir. 1998) (noting that a trustee may “take
    no greater rights [in property] than the debtor himself had”)
    (internal quotation marks omitted).         Furthermore,
    [p]roperty interests are created and defined by state
    law.     Unless some federal interest requires a
    different result, there is no reason why such
    interests    should   be   analyzed  differently  simply
    because   an    interested   party  is   involved in   a
    bankruptcy proceeding.     Uniform treatment of property
    interests by both state and federal courts within a
    State serves to reduce uncertainty, to discourage
    forum shopping, and to prevent a party from receiving
    a windfall merely by reason of the happenstance of
    bankruptcy.
    Butner v. United States, 
    440 U.S. 48
    , 55 (1979).
    Lee does not offer any facts that suggest the bankruptcy
    estate held a better, or different, claim to the Property than
    Lee held.    Nor does Lee point to any additional facts she would
    have presented in the bankruptcy court had the stay remained in
    effect.     Instead, Lee contends that the order lifting the stay
    14
    deprived the bankruptcy estate of any opportunity to be heard as
    to any claim it might have to the Property.                     The claims of Lee
    and the bankruptcy estate, however, are the same for the purpose
    of determining the parties’ respective rights to the Property,
    and “there is no reason why such interests should be analyzed
    differently simply because an interested party is involved in a
    bankruptcy proceeding.”         Butner, 
    440 U.S. at 55
    .                Because Lee’s
    interest in the Property is analyzed under the same standard
    whether the bankruptcy estate is a party in interest or not,
    Lee’s arguments fail to demonstrate why the bankruptcy estate’s
    interest, or its rights in the Property, are not effectively
    advanced    by     Lee   individually,          or   more   pointedly,      why     the
    bankruptcy estate should be required to relitigate those claims
    already asserted and litigated by Lee.
    Regardless, even if due process did require that the estate
    be given an opportunity to state a claim to the Property, the
    estate has chosen not to do so after notice and an opportunity
    to   be   heard.     The     Chapter   7    trustee     filed     a   Report   of    No
    Distribution       stating     that    no       property    was       available     for
    distribution from the estate.               J.A. 182-83.        Additionally, the
    Chapter 13 trustee did not oppose modification of the stay to
    allow the state court appeals process to continue.                     J.A. 191.
    15
    Finally, the fact that the bankruptcy estate chooses not to
    participate in, or pursue, Lee’s claim to the Property in the
    pending state court action does not pose a barrier to future
    enforcement of a final state court judgment as to all those in
    privity with Lee.       A judgment in a prior case may properly act
    as a bar to relitigation in a later proceeding.                              See, e.g.,
    First     Union    Commer.    Corp.        v.    Nelson,      Mullins,         Riley,    &
    Scarborough (In re Varat Enters.), 
    81 F.3d 1310
    , 1314-17 (4th
    Cir. 1996).
    Accordingly,      we    find    that       the   bankruptcy       court    and     the
    district    court    properly       considered        and    applied    the     relevant
    factors under Robbins and provided a reasoned basis for finding
    that each factor had been met.                   The bankruptcy court did not
    abuse its discretion in granting Anasti relief from the stay
    pursuant to 
    11 U.S.C. § 362
    (d)(1).                     We therefore affirm the
    district court’s order affirming the bankruptcy court’s decision
    to grant relief from the stay.
    III.
    We now turn to Lee’s appeal of the district court’s order
    affirming    the    bankruptcy       court’s      dismissal       of   the     adversary
    proceeding.        Lee’s adversary complaint contains four causes of
    action.      The    first    cause    of    action      is    a   state-law      adverse
    16
    possession    claim     (J.A.    124-27);      the    second      cause      of    action
    asserts     the     state-law    doctrines       of     laches,      estoppel,          and
    staleness (J.A. 127-28); the third cause of action requests that
    the court issue an order demanding the sale of the Property for
    the benefit of the estate 3 (J.A. 129); and the fourth cause of
    action is an avoidance action under 
    11 U.S.C. § 544
    (a) (J.A.
    129-30).     The bankruptcy court dismissed the avoidance action
    brought pursuant to 
    11 U.S.C. § 544
    (a) for lack of standing and
    dismissed     the    other     state-law       claims     based    on     comity        and
    judicial economy.        J.A. 226-27.           We will first address the §
    544(a) avoidance action before turning to the state-law claims.
    a.
    The    dismissal    of     an    adversary        proceeding      is    a        final
    appealable order under 
    28 U.S.C. § 158
    (d).                    See In re Moody, 
    825 F.2d 81
    , 85 (5th Cir. 1987) (“[I]t is generally held that a
    separate     adversary       proceeding    within       the     framework         of     the
    overall bankruptcy case is an appropriate ‘judicial unit’ for
    determining finality.”).              We thus have jurisdiction to review
    the dismissal of Lee’s avoidance action.
    “To survive a motion to dismiss, a complaint must contain
    sufficient factual matter, accepted as true, to ‘state a claim
    3
    Because Lee may only succeed on this claim if she succeeds on
    at least one of the other claims, this cause of action must be
    dismissed if the first, second, and fourth claims are all
    dismissed.
    17
    to relief that is plausible on its face.’”                      Ashcroft v. Iqbal,
    
    129 S. Ct. 1937
    , 1949 (2009) (quoting Bell Atlantic Corp. v.
    Twombly,    
    550 U.S. 544
    ,     570    (2007)).       A     claim     is    facially
    plausible if the plaintiff provides enough factual content to
    enable   the    court     to   reasonably       infer    that    the    defendant      is
    liable for the misconduct alleged.                 
    Id.
            A court may consider
    collateral      estoppel       at    the     motion      to     dismiss        stage    of
    litigation.       See, e.g., Aliff v. Joy Mfg. Co., 
    914 F.2d 39
    , 44
    (4th Cir. 1990) (affirming a district court’s use of collateral
    estoppel in granting a motion to dismiss); see also Blue Tree
    Hotels v. Starwood Hotels & Resorts, 
    369 F.3d 212
    , 217 (2d Cir.
    2004) (stating that courts “may also look to public records,
    including complaints filed in state court, in deciding a motion
    to dismiss”).
    Lee’s fourth cause of action was brought pursuant to 
    11 U.S.C. § 544
    (a).          The complaint alleges that the state court
    judgment in favor of Anasti was rendered unenforceable by the
    automatic stay provisions of 
    11 U.S.C. § 362
    (a).                       J.A. 129.       The
    complaint      also   asserts       in    conclusory     fashion       that     “Section
    544(a) creates a legal fiction of a transfer from the debtor to
    a bona fide purchaser on the date of filing, thereby clothing
    the trustee in whatever legal rights a bona fide purchaser would
    18
    possess.”     J.A. 130 (quoting In re Houston, 
    409 B.R. 799
    , 807
    (Bankr. D.S.C. 2009)).
    In dismissing Lee’s fourth cause of action, the bankruptcy
    court held that a Chapter 13 debtor lacks standing to pursue an
    avoidance action under 
    11 U.S.C. § 544
    (a).             J.A. 226-27.        Because
    the state court judgment has become final, however, collateral
    estoppel applies and Lee is now bound by that judgment. 4                      We
    therefore     affirm    the    bankruptcy    court’s    dismissal     of    Lee’s
    avoidance action on the basis of collateral estoppel.
    After     the    bankruptcy    court    dismissed     Lee’s     adversary
    complaint, and during the pendency of this appeal, the South
    Carolina Court of Appeals dismissed Lee’s state court appeal and
    the   Supreme     Court   of    South    Carolina      denied   her   writ      of
    certiorari.     The parties filed these judgments and have addressed
    their effect on this court in supplemental briefs.              See Supp. Br.
    of Appellant at 2-3; Supp. Br. of Appellee at 1-2.               We find that
    the state court judgment in favor of Anasti is now final and
    binding on Lee pursuant to 
    28 U.S.C. § 1738
    .
    4
    Neither the bankruptcy court nor the district court had the
    benefit of the final state court judgment and therefore neither
    addressed this issue.    However, because we “can affirm on any
    basis fairly supported by the record,” Eisenberg v. Wachovia
    Bank, N.A., 
    301 F.3d 220
    , 222 (4th Cir. 2002), we can affirm the
    bankruptcy court’s dismissal of Lee’s avoidance action based on
    the final state court judgment.
    19
    “The Full Faith and Credit Act, 
    28 U.S.C. § 1738
    , requires
    federal courts . . . to give state judicial proceedings ‘the same
    full faith and credit . . . as they have by law or usage in the
    courts of such State . . . from which they are taken.’” Parsons
    Steel,   Inc.   v. First   Alabama   Bank,   
    474 U.S. 518
    ,   519   (1986)
    (quoting 
    28 U.S.C. § 1738
    ).     In determining the preclusive effect
    of a state court judgment under the Act, federal courts must look
    to the law of the state in which the judgment was entered.               Id.
    at 523; see Heckert v. Dotson (In re Heckert), 
    272 F.3d 253
    , 257
    (4th Cir. 2001) (“A federal court, as a matter of full faith and
    credit, under 
    28 U.S.C. § 1738
    , must give a state court judgment
    the same preclusive effect ‘as the courts of such State’ would
    give.”); Empire Funding Corp. v. Armor, No. 99-1529, 
    2000 U.S. App. LEXIS 26405
    , at *5-9 (4th Cir. Oct. 20, 2000) (applying this
    principle in the context of a bankruptcy proceeding filed after
    the entry of a final state court judgment).
    The Supreme Court of South Carolina has stated the following
    with regard to collateral estoppel:
    [W]hen an issue has been actually litigated and
    determined   by  a  valid   and  final   judgment,  the
    determination is conclusive in a subsequent action
    whether on the same or a different claim. The doctrine
    may not be invoked unless the precluded party has had a
    full and fair opportunity to litigate the issue in the
    first action.
    20
    Zurcher v. Bilton, 
    379 S.C. 132
    , 135, 
    666 S.E.2d 224
    , 226 (S.C.
    2008) (citations omitted).
    All of the requirements under South Carolina law for the
    application of collateral estoppel are met in this case.        The
    ownership of the Property was actually litigated and determined
    in the quiet title action.   The state trial court granted partial
    summary judgment in favor of Anasti and held that the Property is
    “Confirmed and Ordered as belonging solely to [Anasti].”      J.A.
    64.   The judgment is final, and Lee has exhausted all of her
    state court appeals.   See Supp. Br. of Appellee at 3-6.   Finally,
    Lee had a full and fair opportunity to litigate the issue in the
    state trial court and did so.
    Lee argues that the bankruptcy estate will be prejudiced if
    not given its own full and fair opportunity to assert Lee’s right
    to the Property. 5   As discussed above, however, any interest of
    the bankruptcy estate in the Property is derivative of Lee’s
    interest.   See In re Dameron, 
    155 F.3d at 721
    .       Neither the
    estate nor Lee has argued that the estate’s potential interest in
    the Property was not adequately represented by Lee in the state
    court action.   The trustee would therefore be in privity with Lee
    5
    We note that both the Chapter 7 and the Chapter 13 trustees
    had the opportunity to assert claims to the Property and have
    chosen not to do so.
    21
    for the purpose of determining the collateral estoppel effect of
    the state court judgment.             See Richburg v. Baughman, 
    290 S.C. 431
    , 434, 
    351 S.E.2d 164
    , 166 (1986) (“One in privity is one
    whose legal interests were litigated in the former proceeding.”).
    All of the requirements established by the South Carolina
    courts for the application of collateral estoppel have thus been
    met.       Accordingly, pursuant to 
    28 U.S.C. § 1738
    , this court must
    grant full faith and credit to the final state court judgment. 6
    We turn now to the effect that final judgment has on this
    appeal.        The South Carolina trial court held the Property “to be
    the exclusive real property of [Anasti]” and granted Anasti title
    to       the   Property.   J.A.   64.        The   court’s   findings   of   fact
    supporting this judgment explain why the avoidance action must be
    dismissed.        The court stated:
    It is undisputed that in 1978 Laura Corvi deeded the
    Two Notch real property to Albert Anasti and his son
    James Anasti as tenants in common with a right of
    survivorship. . . .      Future interest created by
    tenancy in common with right of survivorship vest on
    the death of the other party.   Smith v. Cutler, 
    366 S.C. 546
    , 
    623 S.E.2d 644
    .   Upon the death of Albert
    Anasti the property passed immediately to his son,
    6
    Further, in affirming the bankruptcy court’s order granting
    relief from the stay, we recognized the state court to be an
    appropriate forum for the resolution of Lee’s state-law claims.
    It would be incongruous for us to now hold that the state court
    judgment, which reached finality because relief from the stay was
    granted, is not binding on Lee and, resultingly, the bankruptcy
    estate.
    22
    Plaintiff Anasti, as tenant in common with right of
    survivorship.    Albert Anasti’s act of leaving the
    property to his daughter did not destroy the tenancy
    in common with right of survivorship. See 
    Id.
    (“Future interests created by a tenancy in common with
    a right of survivorship are indestructible, i.e. not
    subject to defeat by the unilateral act of one
    cotenant”).    Therefore, I find the Two Notch Road
    property was not part of the probate estate of Albert
    Anasti, but property of Plaintiff Anasti, when the
    probate court made its ruling. J.A. 62.
    The court went on to hold that “the probate court wrongfully
    distributed property that did not belong to a decedent, and the
    probate   court’s      ruling   is     void     for    lack       of    subject    matter
    jurisdiction.”      Id. at 63. Thus, under the state court ruling,
    Anasti’s sole ownership of the Property vested at the time of
    Albert Anasti’s death in 1995.
    Lee’s fourth cause of action was brought pursuant to 
    11 U.S.C. § 544
    (a), which provides that: “The trustee shall have . .
    . the rights and powers of, or may avoid any transfer of property
    of the debtor . . . that is voidable by . . . (3) a bona fide
    purchaser of real property, other than fixtures, from the debtor,
    against   whom    applicable         law     permits       such        transfer   to    be
    perfected.”      U.S.C.    §    544(a).         “Under     section       544(a)(3)     the
    trustee   has    the    right    and       power,     as   of     the     date    of   the
    commencement of the case, to avoid any lien or transfer avoidable
    by a hypothetical bona fide purchaser of real property of the
    23
    debtor.”      Anderson v. Conine (In re Robertson), 
    203 F.3d 855
    , 864
    (5th Cir. 2000).         We have previously noted that § 544 “confers on
    the    trustee      no   ‘greater      rights    than     those      accorded    by   the
    applicable [state] law.’”               Havee v. Belk, 
    775 F.2d 1209
    , 1219
    (4th Cir. 1985) (citation omitted); see Anderson, 
    203 F.3d at 864
    (“A hypothetical bona fide purchaser under section 544(a)(3) is a
    purchaser     who     under    state     law    could    have     conducted     a   title
    search, paid value for the property and perfected his interest as
    a legal title holder as of the date of the commencement of the
    case.”).
    Lee’s claim pursuant to § 544(a) is therefore subject to
    dismissal because there was no transfer of the Property to Anasti
    that Lee could seek to avoid.                   Instead, the state trial court
    entered a judgment recognizing Anasti as the record owner and
    finding that the probate court’s ruling in favor of Lee was void.
    J.A. 63-64.      Furthermore, the estate did not accede to any claim
    to the Property as a hypothetical bona fide purchaser on the date
    of the bankruptcy filing because, under state law as determined
    by    the   South     Carolina    courts,       Lee   held      no   interest    in   the
    Property on the date of filing.                Id. at 62-64; see In re Houston,
    
    409 B.R. 799
    ,      807   (Bankr.    D.S.C.        2009)    (“Trustee      acquired
    whatever interest the Debtor possessed on the date of filing.”);
    24
    In re Granada, Inc., 
    92 B.R. 501
    , 504 (Bankr. D. Utah 1988)
    (“[T]he debtor’s interest in the property (or lack thereof) may
    well   limit    the    bona       fide   purchaser’s    ‘rights     and   powers.’”).
    Lee’s avoidance action thus fails to state a claim upon which
    relief can be granted and must be dismissed.
    b.
    In dismissing the first, second, and third causes of action
    in Lee’s complaint (the “state law claims”) the bankruptcy court
    noted that it had “previously found in its [order granting relief
    from    the    stay]        that    these    issues     should      be    conclusively
    determined     by     the    state       appellate    court   and    should      not   be
    relitigated via this adversary proceeding.”                   J.A. 227.        The court
    cited “judicial economy” as a justification for its decision and
    dismissed the complaint without prejudice, stating that “should
    the state court find that [Lee] has an interest in the Property,
    the automatic stay shall apply and the parties may return to this
    [c]ourt.”      
    Id.
    In   affirming       the    bankruptcy    court’s      order,     the    district
    court stated that the bankruptcy court’s dismissal of the state-
    law claims “appear[ed] to be based on 
    28 U.S.C. § 1334
    , which
    allows a district court to abstain from hearing state-law claims
    related to bankruptcy cases in the interest of justice, in the
    25
    interest of comity, or out of respect for state law.”                    J.A. 216.
    The district court upheld the bankruptcy court and dismissed the
    case “[b]ecause state law predominates, the state-court action
    has proceeded to the court of appeals, and the timing of the
    bankruptcy action gives rise to an inference of forum shopping.”
    J.A. 216-17.        Although the district court did not specify which
    subsection of § 1334 it applied, neither party disputes that it
    applied § 1334(c)(1), which states: “[N]othing in this section
    prevents a district court in the interest of justice, or in the
    interest of comity with State courts or respect for State law,
    from   abstaining       from   hearing    a    particular   proceeding     arising
    under title 11 or arising in or related to a case under title
    11.”
    We   agree      with    the    district    court’s   finding      that     the
    bankruptcy court applied 
    28 U.S.C. § 1334
    (c).                   Furthermore, the
    district court’s reference to the predominance of state-law, the
    presence    of     a    related      proceeding    in   state   court,    and     the
    inference     of       forum   shopping       clearly   invokes   
    28 U.S.C. § 1334
    (c)(1) and the factors courts have utilized in applying it.
    See, e.g., New Eng. Power & Marine, Inc. v. Town of Tyngsborough
    (In re Middlesex Power Equip. & Marine, Inc.), 
    292 F.3d 61
    , 69
    (1st Cir. 2002) (noting that, in applying § 1334(c)(1), courts
    26
    consider “the extent to which state law issues predominate over
    bankruptcy issues; the presence of a related proceeding commenced
    in state court or other nonbankruptcy court; and the likelihood
    that    the   commencement      of    the    proceeding        in     bankruptcy    court
    involves      forum   shopping       by     one    of   the     parties”)     (internal
    quotation marks omitted).             The ability of this court to review a
    district court’s abstention decision made pursuant to 
    28 U.S.C. § 1334
    (c)(1) is limited by 
    28 U.S.C. § 1334
    (d), which provides:
    Any decision to abstain or not to abstain made under
    subsection (c) (other than a decision not to abstain in
    a proceeding described in subsection (c)(2)) is not
    reviewable by appeal or otherwise by the court of
    appeals under section 158(d), 1291, or 1292 of this
    title . . . or by the Supreme Court of the United
    States under section 1254 of this title . . . .
    
    28 U.S.C. § 1334
    (d).
    “[T]he current version of section 1334(d) permits appellate
    review only of refusals of mandatory abstention.”                        United States
    (IRS) v. Paolo (In re Paolo), 
    619 F.3d 100
    , 103 n.3 (1st Cir.
    2010); see also Baker v. Simpson, 
    613 F.3d 346
    , 352 (2d Cir.
    2010) (“[D]ecisions on permissive abstention, which lie within
    the discretion of the bankruptcy court, are not subject to review
    by   the    court   of appeals.           We therefore         lack    jurisdiction    to
    decide      whether   the    district        court's     decision       on   permissive
    abstention was correct.”); Geruschat v. Ernst Young LLP (In re
    Seven      Fields   Dev.    Corp.),    
    505 F.3d 237
    ,    249    (3d   Cir.   2007)
    27
    (“[A]ppeals of decisions involving permissive abstention, whether
    or not the court abstains, are barred.”).
    “We   therefore     lack     jurisdiction       to    decide      whether      the
    district court’s decision on permissive abstention was correct,”
    Baker, 
    613 F.3d at 352
    , and dismiss Lee’s appeal to the extent it
    asks us to review the district court’s decision to affirm the
    bankruptcy court’s dismissal of the state-law claims based upon
    
    18 U.S.C. § 1334
    (c).          Accordingly, we affirm the dismissal of
    Lee’s   avoidance   action       brought    pursuant       to   §   544(a),    and    we
    dismiss Lee’s appeal of the district court’s order affirming the
    bankruptcy court’s dismissal of the state-law claims based on
    abstention under 
    28 U.S.C. § 1334
    (c)(1).
    Conclusion
    For the foregoing reasons, we affirm the district court’s
    order   affirming   the   bankruptcy        court’s    order        granting   relief
    from the stay, we affirm the district court’s order affirming
    the bankruptcy court’s dismissal of Lee’s avoidance action, and
    we dismiss the appeal of the district court’s order affirming
    the   bankruptcy    court’s      decision    to   abstain       from   hearing       the
    state-law claims.
    AFFIRMED IN PART;
    DISMISSED IN PART
    28
    

Document Info

Docket Number: 10-1772, 10-1774

Citation Numbers: 461 F. App'x 227

Judges: Shedd, Duncan, Osteen, Middle

Filed Date: 1/6/2012

Precedential Status: Non-Precedential

Modified Date: 10/19/2024

Authorities (31)

Peter W. Billings v. Cinnamon Ridge, Ltd. (In Re Granada, ... , 1988 Bankr. LEXIS 1754 ( 1988 )

In Re: Merry-Go-Round Enterprises, Inc., Debtor. Deborah H. ... , 400 F.3d 219 ( 2005 )

Richburg v. Baughman , 290 S.C. 431 ( 1986 )

justin-havee-as-trustee-for-william-henry-belk-jr-aka-william-henry , 775 F.2d 1209 ( 1985 )

elwin-e-aliff-lin-elco-corporation-v-joy-manufacturing-company-a , 914 F.2d 39 ( 1990 )

bankr-l-rep-p-71941-in-the-matter-of-shearn-moody-jr-debtor-w , 825 F.2d 81 ( 1987 )

Geruschat v. Ernst Young LLP (In Re Seven Fields ... , 505 F.3d 237 ( 2007 )

Bankr. L. Rep. P 76,048 Edward N. Claughton, Jr. v. Beverly ... , 33 F.3d 4 ( 1994 )

in-re-thomas-h-dameron-ta-st-asaph-lawyers-title-company-incorporated , 155 F.3d 718 ( 1998 )

Bell Atlantic Corp. v. Twombly , 127 S. Ct. 1955 ( 2007 )

Ashcroft v. Iqbal , 129 S. Ct. 1937 ( 2009 )

Eric Eisenberg v. Wachovia Bank, N.A. , 301 F.3d 220 ( 2002 )

Baker v. Simpson , 613 F.3d 346 ( 2010 )

in-re-michael-bogdan-aka-andrew-michael-bogdan-inner-city-management , 414 F.3d 507 ( 2005 )

In Re Lee , 432 B.R. 212 ( 2010 )

United States v. Paolo (In Re Paolo) , 619 F.3d 100 ( 2010 )

Smith Ex Rel. Estate of Smith v. Cutler Ex Rel. Estate of ... , 366 S.C. 546 ( 2005 )

in-re-k-l-lakeland-incorporated-dba-jkj-chevrolet-sterling-debtor , 128 F.3d 203 ( 1997 )

Dayton & Michigan R. v. Commissioner of Internal Revenue , 112 F.2d 627 ( 1940 )

In Re Houston , 2009 Bankr. LEXIS 2141 ( 2009 )

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