Opinion ID: 32591
Heading Depth: 2
Heading Rank: 3

Heading: Status of Chapman's Remitted State Judgment

Text: 17 Bituminous insists that the district court erred in implicitly concluding that Chapman possesses a valid, final judgment executable under Mississippi law. Bituminous argues in the alternative (1) that Chapman's judgment is not final because all post-petition actions, including the state court's remittitur, are void as a result of the automatic bankruptcy stay; 15 (2) that even if the post-petition actions are not void, but merely voidable, Chapman failed to seek to annul or retroactively ratify the post-petition actions in the bankruptcy court; and (3) that the district court impermissibly delegated authority to the Mississippi state courts to determine whether the judgment is void or merely voidable. As we shall demonstrate, each of these arguments fails. 18 Section 362 of the Bankruptcy Code provides that the filing of a bankruptcy petition operates as a stay of the commencement or continuation of all non-bankruptcy judicial proceedings against the debtor. 16 This stay is automatic and springs into being immediately upon the filing of a bankruptcy petition. 17 Courts disagree, however, as to the effect of violations of this automatic stay. Some courts hold that acts in violation of the stay are void ab initio and incurable. 18 We adhere to the view that violations are merely voidable and are subject to discretionary cure. 19 This position rests on the bankruptcy court's statutory power to annul the automatic stay, 20 i.e., to lift the automatic stay retroactively and thereby validate actions which otherwise would be void. 21 19 In this case, the parties complain of several actions taken in violation of the automatic stay. First, the first — and pivotal — violation occurred when the Mississippi Circuit Court ruled on Coho 's post-trial motions (and granted a remittitur) days after the suggestion of bankruptcy was filed in that court. Second, both Chapman and Coho acted — with the knowledge of the bankruptcy proceedings — in response to the remitted judgment: Chapman formally accepted the reduced judgment; Coho filed a notice of appeal challenging the remitted judgment and the state court's rulings on the pending post-trial motions. 20 In spite of these patent violations of the automatic stay, the parties' voidness arguments fail for three reasons. First, as a threshold matter, we agree with the district court that the validity and procedural posture of Chapman's Mississippi state judgment should be resolved by the Mississippi courts. In the bankruptcy court, Chapman filed a motion seeking authority to execute on/or collect the subject State court judgment from Bituminous and Chubb to the extent that insurance proceeds are available. He apparently did not ask for total annulment of the automatic stay or retroactive validation of the remitted judgment. 21 Although Bituminous raised the alleged voidness of the state court judgment in opposition to Chapman's motion, on appeal neither Bituminous nor Chubb addresses any of the thorny procedural issues needed to resolve conclusively the void-voidable dichotomy. 22 Incredibly, Chubb summarily asserts that because the remitted judgment was issued in violation of the stay, it is void as a matter of law, and Chapman recovers nothing. 23 Given that Chapman had prevailed at trial two months before Coho's petition was filed, and that both Chapman and Coho took steps to preserve their rights post-petition (Chapman by accepting the remittitur, Coho by appealing it), this argument is feckless. Chapman may be required to seek retroactive annulment of the stay before executing his judgment in Mississippi, but this is not the relief that he sought in the bankruptcy court. Consequently, this issue is not properly before us on appeal, and we decline Bituminous and Chubb's invitation to issue an advisory opinion on the question. 22 Second, Bituminous's assertion that the district court has improperly delegated appellate authority to the Mississippi courts is without merit. State courts, including those of Mississippi, routinely rule on the applicability of a bankruptcy stay or permanent injunction to state judicial proceedings. 24 In Overbey v. Murray, 25 the Mississippi Supreme Court explained that courts of this state have jurisdiction to determine whether a pending action is stayed by a ruling of the bankruptcy court, yet cautioned that state courts should consider deferring close questions involving the applicability of exceptions to the automatic stay to the bankruptcy court. 26 Bituminous's argument that only the bankruptcy court can make this voidness determination is unpersuasive. 23 Third, as Bituminous acknowledges, the district court did not conclusively determine that Chapman's state judgment is valid. According to Bituminous, the court made findings of fact and reached conclusions of law that indicate that [it] believed, although it did not rule that, Chapman currently possesses a valid final judgment enforceable in Mississippi state courts. A review of the district court's order, however, reveals that the court specifically avoided this issue, expressly leaving its resolution to the Mississippi courts. Whether the remitted Mississippi judgment is void, and whether Coho's failure to post a supersedeas bond allows Chapman to execute the judgment, are complex procedural issues of Mississippi law that the district court prudently left to the Mississippi courts. Any beliefs that the district court might have implied are simply irrelevant.