Hollowell v. Branch Banking Trust ( 1996 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: JOSEPH B. HOLLOWELL, JR.,
a/k/a Joe Hollowell, d/b/a Oak Hill
Real Estate Development,
Debtor.
JOSEPH B. HOLLOWELL, JR., a/k/a Joe
Hollowell, d/b/a Oak Hill Real
Estate Development,
No. 95-1256
Plaintiff-Appellant,
v.
BRANCH BANKING & TRUST
COMPANY,
Defendant-Appellee,
and
GEORGE E. JONES,
Party in Interest.
In Re: JOSEPH B. HOLLOWELL, JR.,
a/k/a Joe Hollowell, d/b/a Oak Hill
Real Estate Development,
Debtor.
JOSEPH B. HOLLOWELL, JR., a/k/a Joe
Hollowell, d/b/a Oak Hill Real
Estate Development,
No. 95-2094
Plaintiff-Appellant,
v.
BRANCH BANKING & TRUST
COMPANY,
Defendant-Appellee,
and
GEORGE E. JONES,
Party in Interest.
Appeals from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
James C. Fox, Chief District Judge.
(CA-94-507-5-F, BK-93-2617-8-JRL, MISC-95-41-5-F)
Argued: May 7, 1996
Decided: August 27, 1996
Before WILKINSON, Chief Judge, ERVIN, Circuit Judge, and
CHAPMAN, Senior Circuit Judge.
_________________________________________________________________
Affirmed in part and dismissed in part by unpublished opinion. Judge
Ervin wrote the opinion, in which Chief Judge Wilkinson and Senior
Judge Chapman joined.
_________________________________________________________________
2
COUNSEL
ARGUED: Rosbon D.B. Whedbee, Ahoskie, North Carolina, for
Appellant. Joseph Newton Callaway, II, BATTLE, WINSLOW,
SCOTT & WILEY, P.A., Rocky Mount, North Carolina, for Appel-
lee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
ERVIN, Circuit Judge:
Chapter 11 debtor Joseph Hollowell appealed separately from two
orders of the bankruptcy court, both of which the district court
affirmed. The appeals were consolidated before this court. The first
order granted relief from the Chapter 11 automatic stay to Branch
Banking & Trust Company ("BB&T"), which held first and second
deeds of trust on real estate ("the property") jointly owned by Hollo-
well and his wife, Linda. We hold that Hollowell's appeal of that
order is moot, because BB&T foreclosed upon and sold the property
and Hollowell failed to exercise his equity of redemption. The second
order dismissed Hollowell's Chapter 11 petition, and Hollowell's
appeal of that order challenges only the court's jurisdiction to issue
it. We conclude that Hollowell's appeal of the stay issue did not
divest the bankruptcy court of jurisdiction over remaining issues in
the case. Accordingly, we dismiss Hollowell's appeal of the stay
relief and affirm the court's dismissal of his petition.
I
On April 15, 1988, the Hollowells executed a note in favor of
Edenton Savings & Loan ("ES&L") for $150,000, secured by a first
deed of trust on the property. Joseph Hollowell, without Linda's sig-
nature, executed a second note to ES&L on February 22, 1989, for
3
$442,000. The second note was secured by a second deed of trust on
the property. Appellee George M. Jones, who originally sold the
property to the Hollowells, agreed to subordinate his purchase money
interest to both of the ES&L notes.
ES&L initiated foreclosure proceedings in February 1993. It
merged soon afterward with BB&T, which continued the foreclosure
process. Jones bought the property at the foreclosure sale for
$325,500, and a report of the sale was filed on September 24, 1993.
Hollowell filed his bankruptcy petition exactly ten days later, at 5:00
p.m. on October 4.
The sequence of proceedings after the bankruptcy filing is impor-
tant and somewhat confusing, so a chronological guide will aid our
discussion:
10/4/93: Hollowell filed under Chapter 11.
12/1/93: BB&T moved for relief from automatic stay.
1/31/94: Bankruptcy court granted relief from automatic
stay.
2/14/94: District court issued Order affirming stay relief.
10/28/94: District court filed Judgment affirming stay
relief.
After the district court affirmed the bankruptcy court's stay relief,
both courts continued to participate in the case:
No. 95-1256 No. 95-2094
7/8/94: Bankruptcy court entered order
allowing Hollowell 30 days to
(1) file a motion to dismiss or
convert the Chapter 11 case,
or (2) submit a plan of reorga-
nization.
4
No. 95-1256 No. 95-2094
1/4/95: District court denied
Hollowell's Motion for
Rehearing on issue of
stay relief.
1/10/95: Because Hollowell took no
action in response to the order
of 7/8/94, bankruptcy court
dismissed Chapter 11 proceed-
ing.
1/31/95: Bankruptcy court denied Hol-
lowell's Motion for Reconsid-
eration of the Order of
Dismissal.
2/3/95: Hollowell filed notice
of appeal to Fourth Cir-
cuit.
2/95: Hollowell appealed denial of
Motion for Reconsideration to
district court.
4/95: BB&T moved to dismiss
appeal to district court.
4/19/95: District court dismissed appeal.
5/18/95: Hollowell appealed to Fourth
Circuit.
The two appeals from the separate proceedings are consolidated
before this panel. Hollowell contends in his first appeal that the filing
of his Chapter 11 petition, at exactly 5:00 p.m. on October 4, 1993,
properly stayed the foreclosure proceeding, because the automatic
5
stay took effect before the expiration of the ten-day period allowed
for upset bids under North Carolina law. See N.C. Gen. Stat. § 45-
21.27. He also argues that the bankruptcy court made various errors
in its findings of fact. Additionally, Hollowell includes in the first
appeal an assignment of error identical to the only issue of the second
appeal: whether the bankruptcy court had jurisdiction to dismiss his
Chapter 11 case.
BB&T, in response, does not focus immediately on the merits of
Hollowell's first appeal. It asserts that it was free, absent a stay pend-
ing Hollowell's appeal of the bankruptcy court's order granting relief
from the automatic stay, to complete the foreclosure sale. Hollowell
neither sought a stay pending his appeal nor exercised his equity of
redemption, and the deed transferring the property to the foreclosure
buyer has been recorded. Consequently, BB&T concludes, Hollo-
well's appeal of the order granting relief from the automatic stay is
moot.
II
BB&T succinctly summarized its position on the mootness ques-
tion:
The property has been sold and the bankruptcy estate has
nothing left to save. Thus, this appeal is moot. Hollowell did
not request the Bankruptcy Court or the District Court to
stay the foreclosure and the statutory rights of redemption
have long since run. The Appellate Court has no power to
grant relief where the stay has been lifted, no stay pending
appeal was granted, and the foreclosure took place.
Brief of Appellee at 13 (citations omitted).
This circuit addressed a nearly identical situation in In re March,
988 F.2d 498 (1993), cert. denied sub nom., Kittey v. Farmers Bank,
510 U.S. 864 (1993). Like Hollowell, the bankruptcy trustee in March
appealed to this court from the district court's ruling that a foreclosure
could proceed despite the automatic stay. Id. at 499. Also like Hollo-
well, the March trustee failed to obtain a stay of the ruling pending
6
his appeal. Id. Citing decisions of the Fifth and Eleventh Circuits, this
court held that the March appeal was moot:
[The bankruptcy trustee] failed to obtain a stay of the district
court's order pending appeal and thereby allowed Farmers
Bank to foreclose on the property at issue before the present
appeal was heard. Consequently, the foreclosure rendered
moot any appeal on the applicability of the § 362(a) stay.
See, e.g., In re Sullivan Central Plaza, I, Ltd., 914 F.2d 731,
733 (5th Cir. 1990) ("If the debtor fails to obtain a stay, and
if the property is sold in the interim, the district court will
ordinarily be unable to grant any relief. Accordingly, the
appeal will be moot."); In re Lashley, 825 F.2d 362, 364
(11th Cir. 1987) ("When a debtor does not obtain a stay
pending appeal of a bankruptcy court order setting aside an
automatic stay and allowing a creditor to foreclose on prop-
erty the subsequent foreclosure renders moot any appeal,"),
cert. denied, 484 U.S. 1075, 107 S. Ct. 1051, 98 L.Ed.2d
1013 (1988).
Id.March is precisely on point. Hollowell did not seek a stay pending
appeal of the bankruptcy court's grant of relief from the automatic
stay, so BB&T was free to proceed with the foreclosure process.
Because BB&T has completed the transfer to the foreclosure buyer,
Hollowell's appeal on that issue is moot.
In his second appeal, Hollowell argues that the bankruptcy court
was divested of jurisdiction to dismiss his Chapter 11 proceeding by
his appeal of the relief from stay. We disagree. As the Ninth Circuit
explained in In re Christian & Porter Aluminum Co., a bankruptcy
court retains jurisdiction over all issues except those on appeal:
The general rule that a properly filed notice of appeal
deprives the trial court of jurisdiction to proceed further
except by leave of the appellate court does not apply in
bankruptcy proceedings. . . . :
7
[P]roceedings in bankruptcy should not halt
merely because interlocutory orders are appealed
from the referee . . . (rather,) a case should con-
tinue to be adjudicated on the merits by the referee
unless the order appealed from was of such a
nature as to render further proceedings useless.
Mavity v. Associates Discount Corp., 320 F.2d 133, 136 (5th
Cir. 1963)[, cert. denied, 376 U.S. 920 (1964)].
The Trustee in a bankruptcy proceeding is expected and
encouraged to proceed with administration of the estate after
the entry and during the appeal of an order of adjudication.
Georgia Jewelers, Inc. v. Bulova Watch Co., 302 F.2d 362,
370 (5th Cir. 1962).
584 F.2d 326, 334 (9th Cir. 1978); accord In re Sullivan Central
Plaza I, Ltd., 935 F.2d 723, 727 (5th Cir. 1991) (holding that appeal
of relief from automatic stay did not divest bankruptcy court of juris-
diction to consider whether Chapter 11 case should be converted to
Chapter 7); see also In re Bryant, 175 B.R. 9, 13 (W.D. Va. 1994) ("A
bankruptcy court is divested of jurisdiction with respect to matters
raised in an appeal to a higher court.") (emphasis added). Following
the reasoning of Christian & Porter Aluminum, we hold that the bank-
ruptcy court had jurisdiction to dismiss Hollowell's Chapter 11 peti-
tion.
III
Whether the bankruptcy court properly granted BB&T relief from
the automatic stay is a moot point. Thus we dismiss Hollowell's
appeal of that issue. Moreover, the bankruptcy court retained jurisdic-
tion to continue its Chapter 11 administration. We affirm, therefore,
its dismissal of Hollowell's petition.
AFFIRMED IN PART AND DISMISSED IN PART
8