Regions Bank v. Rivet ( 2000 )

REVISED, OCTOBER 3, 2000
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 99-30501
_____________________
REGIONS BANK OF LOUISIANA; WALTER L BROWN, JR;
PERRY S BROWN; FSA, L.L.C.
Plaintiffs - Appellees
v.
MARY ANNA RIVET; MINNA REE WINER; EDMOND G MIRANNE;
EDMOND G MIRANNE, JR
Defendants - Appellants
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
_________________________________________________________________
August 22, 2000
Before KING, Chief Judge, and GARWOOD and DeMOSS, Circuit Judges.
KING, Chief Judge:
Defendants-Appellants Mary Anna Rivet, Minna Ree Winer,
Edmond G. Miranne, and Edmond G. Miranne, Jr. appeal from the
district court’s judgment permanently enjoining them from
relitigating in state court issues and claims regarding a
collateral mortgage that had previously been decided by order of
a federal bankruptcy court and from enforcing two default
judgments. Defendants-Appellants argue that the Anti-Injunction
Act, 28 U.S.C. § 2283, bars the district court’s actions.
Although we find that the lower court properly enjoined
relitigation of issues and claims regarding the collateral
mortgage, we determine that its enjoining enforcement of the
default judgments was in error. As a result, we affirm in part
and reverse in part.
I. FACTUAL AND PROCEDURAL BACKGROUND
At the heart of this case is a collateral mortgage on a
leasehold estate granted by Tulane Hotel Investors Limited
Partnership (“THILP”) to members of the Miranne family
(Defendants-Appellants Edmond G. Miranne, Edmond G. Miranne, Jr.,
Mary Anna Rivet, and Minna Ree Winer, hereinafter “the Mirannes”)
to secure a $5,000,000 collateral mortgage note.1 The leasehold
estate was created in 1957, when Lois Stern Brown executed a
lease in favor of Pelican State Hotel Corporation. After a
number of subsequent transfers, the leasehold estate was acquired
by THILP in September 15, 1983. On that same date, THILP granted
to First Financial Bank2 a first mortgage on the leasehold to
1
THILP was described by a district court as the Mirannes’
investment vehicle. See United States ex rel. Minna Ree Winer
Children’s Class Trust v. Regions Bank, Civ.A.No. 94-4085, 1996
WL 264981, at *1 (E.D. La. May 17, 1996). Minna Ree Winer is the
wife of Edmond Miranne Jr.; Mary Ann Rivet is the wife of Edmond
Miranne.
2
This Bank apparently was formerly controlled by the
Miranne family. See Minna Ree Winer Children’s Class Trust, 1996
WL 264981, at *1.
2
secure a $15,000,000 collateral mortgage note pledged to the
Bank. On May 2, 1984, THILP granted the Mirannes the second
mortgage on the leasehold that forms the basis of the parties’
instant dispute. That mortgage was recorded in the public
records on August 17, 1984.
THILP apparently defaulted on its loan to First Financial
Bank, causing the Bank to act to enforce its mortgage on the
partnership’s primary asset, the leasehold estate. On October 5,
1984, THILP sought protection under Chapter 11 of the Bankruptcy
Code. The bankruptcy court subsequently granted First Financial
Bank’s motion to convert the proceeding to a Chapter 7
liquidation proceeding and appointed an interim trustee. In
April, 1986, the appointed trustee applied for court approval to
sell the leasehold estate at public auction free and clear of all
liens, including, specifically, the second mortgage. The
bankruptcy court issued an order advising all creditors and
parties in interest of the sale pursuant to 11 U.S.C. § 363(f),
and setting a hearing on any objections for June 16, 1986. THILP
objected to the sale. Edmond Miranne Jr. appeared at the hearing
on behalf of himself and Edmond Miranne Sr., as holders of the
second mortgage. On June 17, 1986, the bankruptcy court denied
the objection, granted the sale application, authorized the
trustee to sell the property, and ordered that the sale would be
free and clear of all interests, claims, liens, mortgages and
encumbrances, including the Mirannes’ second mortgage. The court
3
also included in his order the terms of the sale (e.g., there
would be a minimum opening bid of $5,250,000), with the listed
terms reflecting the provisions of a letter agreement between
First Financial Bank and the trustee. THILP appealed from this
order and moved for a stay. A hearing was held on the matter,
and THILP’s motion for a stay was denied by the bankruptcy court
and by the district court.
The leasehold was sold at public auction to First Financial
Bank for the minimum bid of $5,250,000.3 On August 14, 1986, the
bankruptcy court approved the sale to First Financial free and
clear of all encumbrances other than four chattel mortgages.
First Financial was ordered to pay $150,000 to the trustee, an
amount previously agreed upon, and to pay the auctioneer’s fees
and costs.4 The Orleans Parish Recorder of Mortgages was
directed by the bankruptcy court to cancel and erase all liens,
mortgages, and encumbrances bearing against the property.
Nonetheless, the Mirannes contend that the second mortgage
remains on the public records.5
3
This amount represented 75% of the $7,000,000 appraised
value of the property as found by the court in a judgment signed
June 9, 1986.
4
THILP appealed to our court from the bankruptcy court’s
orders approving the sale of the leasehold. This appeal was
dismissed on the basis of 11 U.S.C. § 363(m). See In re: Tulane
Investors Ltd. Partnership, No. 86-3836 (5th Cir. June 1, 1987)
(unpublished).
5
Because the first mortgage was not reinscribed after ten
years, it was cancelled. See LA. REV. STAT. ANN. 9:5161 (West
4
On December 29, 1993, Secor Bank, First Financial Bank’s
successor, purchased from Walter S. Brown, Jr. and Perry L. Brown
(members of Lois Stern Brown’s family) the fee interest in the
property, making Secor the owner of both the property and the
leasehold. This caused the lease to cease to exist.6 Secor
immediately conveyed its interest to FSA, the current owner of
the property.
On December 29, 1994, the Mirannes filed a “Suit to Enforce
Mortgage Via Ordinaria or Alternatively for Damages” in state
court against Regions Bank (Secor’s successor), Perry Brown,
Walter Brown, and FSA, alleging that the Mirannes’ superior
rights under the second mortgage had been violated by the 1993
transactions. The Mirannes sought payment of their secured debt
and to have their mortgage recognized and maintained against the
property, and alternatively, sought damages.7
1991) (allowing for cancellation of inscriptions of mortgages
that have not been reinscribed within applicable periods).
6
As this court noted in Rivet v. Regions Bank, 108 F.3d
576, 581 n.7 (1997) (“Rivet I”), rev’d, 522 U.S. 470 (1998),
under Louisiana law, “when a lessor’s interest and a lessee’s
interest in the same immovable property are consolidated in the
same person, the lease ceases to exist and the person vested with
both interests will hold perfect or full ownership — essentially
the equivalent of ‘fee simple’ title in the common law.”
7
Judge Wiener, writing for the panel in Rivet I, noted
that “[i]n their complaint, the Mirannes assiduously avoided any
hint of the previous bankruptcy proceedings and orders affecting
the leased premises, the leasehold estate, and their second
mortgage against it.” Rivet I, 108 F.3d at 582.
5
On February 3, 1995, defendants in the state action
(Plaintiffs-Appellees here) removed the case to federal court on
grounds of federal question jurisdiction. FSA filed an answer in
federal court on February 7, 1995, and the Browns filed answers
in federal court on February 14, 1995. The district court denied
the Mirannes’ motion to remand and granted Regions Bank’s motion
for summary judgment.
This judgment was appealed to this court, which affirmed the
district court’s denial of the motion to remand. See Rivet v.
Regions Bank of La., F.S.B., 108 F.3d 576 (5th Cir. 1997) (“Rivet
I”). The Supreme Court reversed, see Rivet v. Regions Bank of
La., 118 S. Ct. 921 (1998), and the case was remanded to state
court. The clerk of the district court apparently forwarded only
the order of remand to the state court. The answers of the
Browns and of FSA were not also forwarded. On August 7, 1998,
Regions Bank, FSA, and the Browns filed this action in federal
court under the All Writs Act, 28 U.S.C. § 1651, and the
relitigation exception to the Anti-Injunction Act, 28 U.S.C.
§ 2283, seeking preliminary and permanent injunctions against
further proceedings in state court.
After this action was filed by Plaintiffs-Appellees, the
Mirannes filed in state court a motion for summary judgment
against Regions Bank. Three days later, on October 30, 1998, the
Mirannes sought preliminary defaults against the Browns and FSA,
based on their not having filed answers in state court. On
6
November 4, 1998, a judge, who was not the judge to whom the
Mirannes’ state-court action had been assigned, confirmed default
judgments against the Browns and FSA for $4,688,919.10, and
explicitly recognized the second mortgage on the leasehold
estate.8 Documents filed in support of the default judgments did
not mention that FSA and the Browns had filed answers in federal
court (stating only that no answers had been filed in state
court). At the ex parte hearing held with regard to the
confirmation of default judgments, no mention was made of the
answers filed in federal court, or of the leasehold’s sale free
and clear of all liens.
On January 26, 1999, the district court entered a
preliminary injunction, staying further proceedings in state
court. Regions Bank filed a motion for summary judgment to
enjoin permanently the Mirannes from relitigating the issues
regarding the Mirannes’ second mortgage that were resolved by the
bankruptcy court. The Browns and FSA filed a motion for summary
judgment to enjoin permanently the Mirannes from prosecuting the
state lawsuit, from executing or enforcing the default judgments,
and from initiating any other action to recover against them
based on the second mortgage. They also requested that the
district court require the Recorder of Mortgages to remove the
8
The judgment against FSA indicates it is in rem.
7
default judgments from the public records. The Mirannes also
filed a motion for summary judgment.
The district court determined that the state-court claim
involved the same subject matter as the bankruptcy court’s orders
and thus that the relitigation exception to the Anti-Injunction
Act applied. It also determined that Plaintiffs-Appellees would
suffer irreparable injury if the state-action was allowed to
proceed, and that conversely, the Mirannes would suffer no
injury. Thus, on April 13, 1999, the court entered judgment in
favor of Regions Bank, FSA, and the Browns permanently enjoining
the Mirannes from relitigating in state court issues and claims
regarding the second mortgage that had been decided by order of
the bankruptcy court (“Injunction I”), and further permanently
enjoining the Mirannes from enforcing the default judgments
entered in state court against the Browns and FSA (“Injunction
II”). It denied the Mirannes’ motion. The Mirannes timely
appeal.
II. THE RELITIGATION EXCEPTION
The Mirannes challenge the district court’s determination
that the relitigation exception to the Anti-Injunction Act
applies to this case. The application of the relitigation
exception is an issue of law, and therefore this court reviews de
novo the lower court’s determination that an injunction may be
issued under that exception. See Next Level Communications LP,
8
v. DSC Communications Corp., 179 F.3d 244, 249 (5th Cir. 1999).
We review a lower court’s decision to issue a permanent
injunction for abuse of discretion. See Peaches Entertainment
Corp. v. Entertainment Repertoire Assocs., Inc., 62 F.3d 690, 693
(5th Cir. 1995).
We use a four-part test to determine whether the
relitigation exception to the Anti-Injunction Act applies to
preclude litigation of a claim in state court: (1) “the parties
in a later action must be identical to (or at least in privity
with) the parties in a prior action”; (2) “the judgment in the
prior action must have been rendered by a court of competent
jurisdiction”; (3) “the prior action must have concluded with a
final judgment on the merits”; and (4) “the same claim or cause
of action must be involved in both suits.” New York Life Ins.
Co. v. Gillispie, 203 F.3d 384, 387 (5th Cir. 2000) (quoting
United States v. Shanbaum, 10 F.3d 305, 310 (5th Cir. 1994)). It
is insufficient that a claim or issue could have been raised in
the prior action: The relitigation exception requires that the
claims or issues that the federal injunction is to insulate from
litigation in state proceedings “actually have been decided by
the federal court.” Chick Kam Choo v. Exxon Corp., 486 U.S. 140,
148 (1988); Texas Commerce Bank Nat’l Ass’n v. State of Florida,
138 F.3d 179, 182 (5th Cir. 1998). We must review both the
district court’s determination that each of these requirements
has been met in the instant case and its conclusion that the
9
principles of equity, comity, and federalism supported its
issuance of an injunction. See Regional Properties, Inc. v.
Financial & Real Estate Consulting Co., 678 F.2d 552, 566 (5th
Cir. 1982) (noting that the Anti-Injunction Act does not
“‘qualify in any way the principles of equity, comity, and
federalism that must [in its absence] restrain a federal court
when asked to enjoin a state court proceeding.’” (quoting Mitchum
v. Foster, 407 U.S. 225, 243 (1972))).
A. Injunction I
Injunction I bars the relitigation in state court of issues
and claims regarding the Mirannes’ second mortgage that were
decided by the bankruptcy court. The Mirannes dispute that their
state-court action involves claims or issues that have been
“actually litigated.” They present no arguments regarding the
other requirements for application of the relitigation exception.
We note that a prior panel of this court examined, inter
alia, whether the Mirannes’ state-court action involved questions
that were “actually litigated” in THILP’s bankruptcy proceedings.
See Rivet I, 108 F.3d at 590-91. It found it “indisputable that
in the 1986 bankruptcy court proceedings the continuing validity
of the Mirannes’ inferior mortgage was ‘actually litigated and
decided.’” Id. It was subsequently decided that that panel was
without jurisdiction to decide the issues before it, see Rivet v.
10
Regions Bank of La., 118 S. Ct. 921 (1998), and we therefore
cannot regard its determinations as binding. Our own examination
of the Mirannes’ argument, however, leads to the same conclusion.
The Mirannes’ state-court action is “in part an in rem
action to enforce a mortgage against immovable property situated
in the Parish of Orleans.” A key issue decided by the bankruptcy
court was whether that same property — the leasehold estate —
should continue to be encumbered by the very lien the Mirannes
seek to enforce in state court. Under 28 U.S.C. § 1334(e), the
bankruptcy court had exclusive jurisdiction over the leasehold
estate. In THILP’s bankruptcy proceedings, the trustee
determined that the bankruptcy estate would benefit by the sale
of the leasehold free and clear of essentially all liens, in part
because it was only on these terms that First Financial
Bank/Secor Bank/Regions Bank (hereinafter “the Bank”) would agree
to release its claims and pay the trustee $150,000, which could
be distributed to the remaining creditors. The bankruptcy court
agreed with the trustee’s determination, and authorized a sale
pursuant to 11 U.S.C. § 363(f). Creditors were given notice of
the sale and the opportunity to be heard. Compare Ray v.
Norseworthy, 90 U.S. 128 (1874) (holding that a sale of property
purportedly free and clear of liens was ineffective in cancelling
the lien held by an individual not given notice of that sale),
and Mooney Aircraft Corp. v. Foster (In re Mooney Aircraft,
11
Inc.), 730 F.2d 367, 375 (5th Cir. 1984) (“We recognize that a
sale free and clear is ineffective to divest the claim of a
creditor who did not receive notice . . . .”), with In re
Edwards, 962 F.2d 641 (7th Cir. 1992) (holding that a bona fide
purchaser at a bankruptcy sale acquired good title to the
debtor’s property, despite the mortgagee not having received
prior notice of the sale). There is no question that the
bankruptcy court had the power to issue orders that stripped
liens from the leasehold estate and that extinguished the
Mirannes’ rights in that property. See Norseworthy, 90 U.S. at
135 (“Beyond all doubt the property of a bankrupt may, in a
proper case, be sold by order of the bankrupt court free of
incumbrance . . . .”).
The Mirannes state that they do not contest the validity of
the bankruptcy court’s orders when those orders were entered in
1986. Instead, they contend that because those orders were never
domesticated and enforced in accordance with Louisiana law, the
orders never had force or effect to extinguish the Mirannes’
mortgage rights. The Mirannes point to events occurring after
entry of the orders and argue that those events enabled them to
“revive” their mortgage and to assert their rights under it in
the state-court action.9 In short, the Mirannes assert that
9
In addition to the failure of the Bank to domesticate
and enforce the bankruptcy court’s orders in accordance with
Louisiana law, the Mirannes assert that two events are
particularly important to their ability to enforce their
12
whether they are able to enforce their second mortgage today is a
question different from that addressed by the bankruptcy court in
1986. At the heart of their argument is the assumption that the
bankruptcy court’s orders were not self-executing. The orders,
rather than effectuating a sale free and clear of all liens,
merely gave the Bank a right that required use of state
procedures to perfect and enforce.
The Mirannes and the State of Louisiana, as amicus curiae,
point to Louisiana Revised Statutes 9:525110 and 9:5031,11 which
mortgage. The first of these events is the reaffirmance of the
debt between THILP and the Mirannes. This was accomplished in
April, 1989, when Minna Ree Winer, President, and THILP’s general
partner, the Tulane Hotel Investors Corporation, signed a
document reaffirming the original debt. The second of the events
is the reinscription of the mortgage on the public records in
April, 1994.
10
Louisiana Revised Statute 9:5251 seeks to preserve
rights of mortgage holders by providing that:
Except as otherwise provided in Civil Code Articles 813
and 815, no conventional or judicial mortgage . . .
shall be cancelled, removed from the public records, or
in any manner affected by any public or private sale of
property subject thereto in . . . bankruptcy . . .
proceeding.
The provisions of this Section shall not apply to the
execution of judgments governed by Book IV of the
Louisiana Code of Civil Procedure, Article 2251 et
seq., or to judicial sales in executory proceedings
under the Louisiana Code of Civil Procedure, Article
2631 et seq.
LA. REV. STAT. ANN. § 9:5251 (West Supp. 2000).
11
Louisiana Revised Statute 9:5031 seeks to protect rights
of lien holders by providing that:
13
purportedly prevent any public sale of property in bankruptcy
from affecting “in any manner” any conventional mortgage or lien
on that property, and argue that under these statutes, the Bank
was required to use state domestication and enforcement
procedures to remove the Mirannes’ mortgage and to truly hold the
leasehold free and clear of that mortgage. The State of
Louisiana states that the purpose of the statutes is
to avoid putting the Recorder in a quasi judicial role
by calling on him to determine, inter alia, whether the
judgment was validly entered, whether jurisdiction
existed in the rendering court, whether the holder of
the mortgage had been afforded notice and a fair
opportunity to be heard, whether or not the right to
enforce the judgment had lapsed under Louisiana law,
and so on. Th[e] tried and true Louisiana procedure
[listed in the statutes] provides for a Louisiana
District Court Judge, and not a Parish Recorder, to
decide whether these various legal niceties have been
observed, and, therefore, whether a foreign judgment is
entitled to enforcement in Louisiana.
Amicus Brief, at 12. The implication of this language is clear —
if a Louisiana District Court Judge determines that one or more
of the listed “legal niceties” have not been observed, then the
order is not enforced in Louisiana. But, in relevant part,
No lien . . . shall be cancelled, removed from the
public records, or in any manner affected by any public
or private sale of property subject thereto in any . .
. bankruptcy . . . proceeding. However, the provisions
of this Section shall not apply to the execution of
judgments governed by Book IV of the Louisiana Code of
Civil Procedure, Article 2251 et seq., or to judicial
sales in executory proceedings under the Louisiana Code
of Civil Procedure, Articles 2631 et seq.
LA. REV. STAT. ANN. § 9:5031 (West 1991).
14
whether the above-listed “legal niceties” were observed in the
sale of the leasehold estate to the Bank was determined by the
bankruptcy court and by the district court.12
The Mirannes contend that our recent decision in Davis v.
Davis (In re Davis), 170 F.3d 475 (5th Cir.) (en banc), cert.
denied, 120 S. Ct. 67 (1999), supports their position that
despite the provisions of the Bankruptcy Code and the language of
the bankruptcy court’s orders, the Bank was obligated to use
state procedures to enforce its right to hold the leasehold
estate free and clear of the Mirannes’ lien. They rely on
portions of Davis’ language to argue that § 363(f) does not pre-
empt Louisiana property law and enforcement provisions. Although
we are inclined to disagree with this,13 we need not decide the
question here. We find little in Davis that applies directly to
the instant case. Unlike the plaintiff in Davis, the Bank is not
a judgment creditor. The bankruptcy court’s orders in this case
12
The trustee supplied the bankruptcy court with evidence
that creditors had been notified of the proposed sale. At
several points during the proceedings related to the sale, THILP
challenged that sale, arguing, inter alia, that the bankruptcy
court did not have jurisdiction over the property, that the
requirements of § 363(f) had not been met, and that the sale was
enjoined by state law.
13
We note, for example, that the language of § 363(f), by
allowing a trustee to sell a debtor’s property free and clear of
all liens, would seem to be in direct conflict with the language
of the Louisiana statutes, which state that mortgages will not
“in any manner” be affected by a public sale in bankruptcy. See
Davis, 170 F.3d at 482 (“[P]reemption may be implied if state and
federal laws conflict . . . .”).
15
involved a sale of property determined to be within the court’s
jurisdiction. Unlike the plaintiff in Davis, who sought to use
§ 522(c) of the Bankruptcy Code to collect a non-discharged debt,
the Bank did not need to take further steps to “execute” the
bankruptcy court’s orders.
The Mirannes’ argument that the questions they raise in
their state-court action are different from those resolved by the
bankruptcy court must be rejected. Once the sale of the
leasehold occurred and was approved, title was transferred, as
ordered (free and clear of all liens). See In re Whatley, 155
B.R. 775, 781 (D. Colo. 1993) (holding that orders authorizing a
sale free and clear of liens and confirming that sale were self-
executing and did not require “any enforcement proceedings in
order to bring them to fruition”), aff’d, 169 B.R. 698 (D. Colo.
1994), aff’d, 54 F.3d 788 (10th Cir. 1995). If a bankruptcy
court’s orders authorizing and approving a sale free and clear of
liens were not self-executing, it would seemingly be impossible
to have the liens attach to the sale proceeds. See, e.g., 11
U.S.C. § 1129(b)(2)(A)(ii) (providing that a “fair and equitable
plan” includes those that sell property free and clear of liens,
have those liens attach to the proceeds of such sale, and meet
other requirements regarding the treatment of those liens on the
proceeds); S. REP. No. 95-989, at 56 (1978), reprinted in 1978
U.S.C.C.A.N. 5787, 5842 (“Most often, adequate protection in
connection with a sale free and clear of other interests will be
16
to have those interests attach to the proceeds of the sale.”).
Orders that were not self-executing would also be inconsistent
with the Code’s emphasis on the finality of sales. See, e.g., 11
U.S.C. § 363(m); Edwards, 962 F.2d at 643 (noting that “[i]f
purchasers at judicially approved sales of property of a bankrupt
estate, and their lenders, cannot rely on the deed that they
receive at the sale, it will be difficult to liquidate bankrupt
estates at positive prices”); Bleaufontaine, Inc. v. Roland Int’l
(In re Bleaufontaine, Inc.), 634 F.2d 1383, 1389 n.10 (5th Cir.
Unit B 1981) (“If deference were not paid to the policy of speedy
and final bankruptcy sales, potential buyers would not even
consider purchasing any bankrupt’s property. As a result, the
bankrupt’s creditors would be the ones most injured thereby.”).
As was noted in Rivet I, “[f]or the bankruptcy court in the
instant case to authorize and approve the sale of the leasehold
estate free and clear of essentially all liens and encumbrances,
that court necessarily had to decide whether the Mirannes’
inferior second mortgage could survive as an encumbrance against
the leasehold estate after that estate was sold at public auction
by the THILP trustee’s foreclosure on the superior first
mortgage.” 108 F.3d at 590. The Mirannes’ state-court action
represents an attempt to use subsequent events to “revive” and
enforce a mortgage on property that had been conclusively
stripped of the Mirannes’ lien in 1986. Because the Mirannes’
state-court action necessarily requires relitigation of the
17
precise question resolved by the bankruptcy action, i.e., the
survival of the Mirannes’ mortgage as an encumbrance on the
leasehold estate, we agree with the district court that the
relitigation exception applies in this case.
We also find that the district court did not abuse its
discretion in issuing Injunction I. It specifically determined
that the Plaintiffs-Appellees would suffer irreparable injury if
the Mirannes were allowed to proceed, and that the Mirannes, “who
have always been aware of the bankruptcy court’s orders to
discharge the underlying debt and to sell the property free and
clear of the mortgage,” and who have “nevertheless attempted to
obtain a judgment from a state court in flagrant disregard of the
bankruptcy court’s orders,” would not be injured by an
injunction. With respect to Injunction I, we have no cause to
disagree with this conclusion.14
14
The Mirannes also argue that the district court’s
actions impermissibly encroach on state sovereignty, citing,
among other cases, the Supreme Court’s recent Eleventh Amendment
decisions in support of their contentions. The crux of the
Mirannes’ argument appears to be that the district court’s
actions infringe on the states’ “absolute Constitutional
authority to judge the existence of real property interests
within their borders.” Although states have the power to define
property interests, it is clear that the Constitution also
provides Congress with the authority to establish procedures for
the transfer of those interests within the context of
bankruptcies. See U.S. CONST. art. I, § 8, cl. 4 (giving Congress
the authority to establish uniform laws on the subject of
bankruptcies in the United States); International Shoe Co. v.
Pinkus, 278 U.S. 261, 264 (1929) (“The power of Congress to
establish uniform laws on the subject of bankruptcies throughout
the United States is unrestricted and paramount. . . . The
national purpose to establish uniformity necessarily excludes
18
B. Injunction II
We find we must reach a different conclusion with respect to
Injunction II. That injunction bars the Mirannes’ enforcement of
default judgments, entered by the Civil District Court for the
Parish of Orleans, against FSA and the Browns. The Mirannes’
challenge to the issuance of Injunction II has two main prongs:
They assert that the district court had no subject-matter
jurisdiction over FSA’s and the Browns’ claims and that the
court’s action is inconsistent with the commands of Parsons
Steel, Inc. v. First Alabama Bank, 474 U.S. 518 (1986). We
address first the question of subject-matter jurisdiction.
The Mirannes assert the district court did not have subject-
matter jurisdiction over the action brought by FSA and the Browns
because “as to them there was no federal element in the State
Action.” The Mirannes contend that the only way a state court
defendant becomes entitled to the protection of the Anti-
Injunction Act is to have raised the affirmative defense of res
judicata in the state-court proceedings. Because there is no
affirmative defense of res judicata on file in the state
state regulation. . . . States may not pass or enforce laws to
interfere with or complement the Bankruptcy Act or to provide
additional or auxiliary regulations.”).
19
action,15 FSA and the Browns are not entitled to the protections
of the Act.
We emphatically reject this argument. Neither the All Writs
Act nor the Anti-Injunction Act is jurisdictional. See Southwest
Airlines Co. v. Texas Int’l Airlines, Inc., 546 F.2d 84, 89 (5th
Cir. 1977) (Anti-Injunction Act); Brittingham v. Commissioner,
451 F.2d 315, 317 (5th Cir. 1971) (All Writs Act). Instead,
jurisdiction is based on the original case (here the bankruptcy
proceeding). It is not necessary for the district court to have
jurisdiction over the second suit as an original action. See
Royal Ins. Co. v. Quinn-L Capital Corp., 960 F.2d 1286, 1292 (5th
Cir. 1992) (“[A] federal district court can exercise ancillary
jurisdiction over a second action in order to secure or preserve
the fruits and advantages of a judgment or decree rendered by
that court in a prior action.” (internal quotation marks
omitted)); id. (noting that jurisdiction exists “even where the
federal district court would not have jurisdiction over the
second action if it had been brought as an original suit”); see
also Local Loan Co. v. Hunt, 292 U.S. 234, 239 (1934); In re
Mooney, 730 F.2d at 374. Because the court below was the court
in which the bankruptcy proceedings were conducted, it had
15
This is due to FSA’s and the Browns’ answers filed in
federal court not being transferred to the state court upon
remand.
20
subject-matter jurisdiction over the claims of FSA and the
Browns.
We turn now to the Mirannes’ Parsons Steel argument. They
contend that because the district court did not consider the
preclusive effect of the default judgments, and certainly did not
give the judgments the preclusive effect they deserved, it erred
in issuing Injunction II. See Parsons Steel, 474 U.S. at 525.
The Supreme Court held in Parsons Steel that “the Full Faith and
Credit Act requires that federal courts give the state-court
judgment, and particularly the state court’s resolution of the
res judicata issue, the same preclusive effect it would have had
in another court of the same State.” 474 U.S. at 525. We read
the Court’s language to require that we assess whether a state
court has issued a final decision that operates to bar re-
assessment of the preclusive effect of a prior federal action.
We therefore confront two questions in the context of this case:
whether the default judgments in this case are final judgments,
and if final judgments, whether they bar our re-assessment of the
res judicata issue. As the Parsons Steel Court noted, we must
look to state law for the answers to both of these questions.
Id.
Our analysis of the question whether the default judgments
are final judgments under Louisiana law provides us with no
definitive answer. On one hand, the language of article 1915(B)
of the Louisiana Code of Civil Procedure suggests that the
21
default judgments, because they were issued against fewer than
all the parties in the original action, are not final
judgments.16 On the other hand, FSA and the Browns, in filing
actions in state court challenging the validity of the default
judgments, have acted as though the judgments are final. Our
research uncovered no case that has applied the language of
article 1915 to hold that default judgments issued against fewer
than all the parties are not final judgments. The Mirannes
contend that that article is not applicable to the instant case,
16
At the time the Mirannes filed their state-court action,
article 1915(B) of the Louisiana Code of Civil Procedure
provided:
(1) When a court renders a partial judgment . . . as to
one or more but less than all of the . . . parties,
. . . the judgment shall not constitute a final
judgment unless specifically agreed to by the
parties or unless designated as a final judgment by
the court after an express determination that there
is no just reason for delay.
(2) In the absence of such a determination and
designation, any order or decision which
adjudicates fewer than all claims or the rights and
liabilities of fewer than all the parties, shall
not terminate the action as to any of the claims or
parties and shall not constitute a final judgment
for the purpose of an immediate appeal. Any such
order or decision issued may be revised at any time
prior to rendition of the judgment adjudicating all
the claims and the rights and liabilities of all
the parties.
LA. CODE CIV. PROC. ANN. art. 1915(B) (West 1998).
22
but also acknowledge, as they must, a degree of confusion in the
extant cases.17
If we were to conclude that the default judgments were final
judgments, we would still face the preclusion question. Under
Louisiana law, judgments that suffer from “vices of form” do not
preclude relitigation of the claims or issues because such
judgments are null and void.18 See Kelty v. Brumfield, 633 So. 2d
1210, 1215 (La. 1994); Murdock v. Brittco, Inc., 517 So. 2d 898,
902 (La. Ct. App. 1987) (“Since service . . . was not made in
accordance with law, it follows that the proceedings which
resulted in the default judgment . . . were null, void and of no
17
The Louisiana Legislature amended Article 1915(B) in
1999 to “eliminate confusion with Article 1915(A).” The
amendment, which eliminated the term “parties,” was made
applicable to cases filed on or after January 1, 2000. See 1999
La. Acts 1263 § 3.
18
Default judgments will be declared null and void if they
suffer from any of the defects listed in Louisiana Code of Civil
Procedure art. 2002:
A. A final judgment shall be annulled if it is
rendered:
(1) Against an incompetent person not represented
as required by law.
(2) Against a defendant who has not been served
with process as required by law and who has
not waived objection to jurisdiction, or
against whom a valid judgment by default has
not been taken.
(3) By a court which does not have jurisdiction
over the subject matter of the suit.
B. Except as otherwise provided in Article 2003, an
action to annul a judgment on the grounds listed in
this Article may be brought at any time.
LA. CODE CIV. PROC. ANN. art. 2002 (West 1990).
23
effect”). Judgments that suffer from “vices of substance” may be
annulled as well. See LA. CODE CIV. PROC. art. 2004 (West 1990)
(providing that “[a] final judgment obtained by fraud or ill
practices may be annulled”).
FSA and the Browns have filed petitions in state court
seeking to have their default judgments declared null and void,
arguing that those judgments suffer from vices of form and of
substance. See LA. CODE CIV. PROC. art. 2002; 2004. In addition,
Perry Brown has filed a motion for a new trial. FSA and the
Browns point to a number of facts that they argue render the
default judgments invalid, including (1) the failure to serve
Walter Brown while the state court had jurisdiction over the
Mirannes’ case; (2) the failure of Mirannes’ counsel to inform
FSA or the Browns of the intent to seek default judgments; (3)
the failure of Mirannes’ counsel to inform the judge issuing the
default judgments that FSA and the Browns had in fact filed
answers after the case was removed to federal court;19 (4) the
failure of the Mirannes’ counsel to inform the judge of the
lengthy history of this case and of the efforts made by FSA and
the Browns to defend themselves against the demands made by the
Mirannes; (5) the failure of the Mirannes’ counsel and of Edmond
19
The Mirannes’ counsel has admitted to not informing the
judge of the answers FSA and the Brown filed in federal court.
24
Miranne Jr.20 to inform the judge of the bankruptcy court’s
orders or the leasehold’s sale free and clear of the Mirannes’
lien; (6) the failure of the Mirannes’ counsel to inform the
judge of the ongoing proceedings for injunctive relief in federal
court; and (7) the falsity of Edmond Miranne Jr.’s testimony at
the default judgment hearing as the mortgage he testified was
recorded at the time had in fact been cancelled.
FSA argues that we may look to these facts as a basis for a
conclusion that the default judgments, if final judgments, do not
have preclusive effect. But this means we would be deciding the
same questions that the state court has been asked to decide.
Thus, under the circumstances, our task under Parsons Steel
requires that we predict whether that state court would declare
the judgments nullities under Louisiana Code of Civil Procedure
article 2002, would exercise its discretion and set the judgments
aside under article 2004, or rule that the judgments are valid.
We find that the principles of comity and federalism counsel
against making such predictions, given the existence of FSA’s and
the Browns’ state-court actions. The Louisiana state court is in
20
Edmond G. Miranne, Jr. testified at the ex parte hearing
conducted regarding confirmation of the default judgments. The
only mention of the transfer of the property from THILP to the
Bank occurs on page 12 of the hearings transcript. Mr. Miranne
described the sale as follows:
There was a sale by Tulane Hotel Investors Limited
Partnership to what was then First Financial Bank, FSB,
which through a couple of mergers and name changes, is
now Regions Bank.
25
the best position to determine whether the default judgments
should be declared nullities under state law. Thus, although we
view the facts that FSA and the Browns present as compelling, we
nonetheless determine it best to refrain from drawing any
conclusion regarding the judgments’ preclusive effect under the
circumstances present here. As the Supreme Court advised long
ago, federal courts should decline to issue an injunction against
state-court proceedings if there are any doubts as to its
propriety. See Atlantic Coast Line R.R. Co. v. Brotherhood of
Locomotive Eng’rs, 398 U.S. 281, 297 (1970) (“Any doubts as to
the propriety of a federal injunction against state court
proceedings should be resolved in favor of permitting the state
courts to proceed in an orderly fashion to finally determine the
controversy.”). Given the circumstances of this case, we
conclude that we must reverse the district court’s judgment with
respect to Injunction II.
This is not a felicitous result. The default judgments’
recognition of the Mirannes’ mortgage is in direct conflict with
the bankruptcy court’s orders, and we certainly would not
advocate that others use the means apparently employed here to
obtain such judgments. But our displeasure with the outcome with
respect to Injunction II cannot be used to uphold its issuance.
Cf. id. at 294 (noting that a federal court cannot issue an
injunction “merely because [state court proceedings] interfere
with a federal protected right or invade an area preempted by
26
federal law, even when the interference is unmistakably clear”).
Federal courts assessing whether to enjoin state-court
proceedings must also assess whether principles of comity and
federalism counsel restraint. See Parsons Steel, 474 U.S at 526;
Mitchum, 407 U.S. at 243. Our respect for the state court moves
us to leave to it questions related to the validity and
enforceability of the default judgments under Louisiana law.
III. CONCLUSION
For the foregoing reasons, we affirm the district court’s
judgment as it relates to the injunction barring the Mirannes’
relitigating in state court issues and claims covered by the
bankruptcy court’s orders, and reverse the court’s judgment as it
relates to the injunction barring the enforcement of the default
judgments issued against FSA and the Browns.
AFFIRMED in part; REVERSED in part. The Defendants-
Appellants shall bear the costs of this appeal.
27