Court Opinion

ID: 9488907
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:59:25.788931+00
Date Added: 2024-06-11T17:53:10.954130
License: Public Domain

KELLY, Jr., Circuit Judge,
dissenting.
The Court holds that ten months after being lifted for cause an automatic stay may be reimposed without an adversary proceeding, relying on Bankr.R. 9024 and Fed. R.Civ.P. 60(b). For the reasons set forth below, I respectfully dissent.
11 U.S.C. § 105(a) permits a bankruptcy court to reimpose or issue a new stay that has otherwise lapsed or been terminated. 2 Collier On Bankruptcy ¶¶ 105.03-.04 (Lawrence P. King ed., 15th ed. 1995); see also In re Wedgewood Realty Group, Ltd., 878 F.2d 693, 701 (3d Cir.1989); In re Martin Exploration Co., 731 F.2d 1210, 1214 (5th Cir.1984). The reimposition or issuance of a new stay under § 105 is considered injunctive relief and therefore requires the filing of an adversary proceeding including the giving of notice to affected parties. 2 Collier On Bankruptcy ¶¶ 105.03-.04; see also In re Wedgewood, 878 F.2d at 700; In re Martin Exploration, 731 F.2d at 1214; In re Stacy, 167 B.R. 243, 247-48 (N.D.Ala.1994); Spagnol Enters. v. Atlantic Fin. Fed. Sav. Ass’n, 33 B.R. 129, 131 (W.D.Pa.1983).
Fed.R.Civ.P. 60(b)(6) “provides a procedure whereby, in appropriate cases, a party may be relieved of a final judgment.” Liljeberg v. Health Serv. Acquisition Corp., 486 U.S. 847, 863, 108 S.Ct. 2194, 2204, 100 L.Ed.2d 855 (1988). Bankruptcy courts, as courts of equity, have the power to reconsider, modify or vacate their previous orders pursuant to Rule 60(b). In re Lenox, 902 F.2d 737, 739-40 (9th Cir.1990). To successfully invoke Rule 60(b), a party must demonstrate that relief is warranted under one of six enumerated provisions. See Fed.R.Civ.P. 60(b)(1) — (6). Of primary importance to this case, Rule 60(b)(6) “ ‘gives the court a grand reservoir of equitable power to do justice in a particular case,’ ” Lyons v. Jefferson Bank & Trust, 994 F.2d 716, 729 (10th Cir.1993) (quoting Pierce v. Cook & Co., 518 F.2d 720, 722 (10th Cir.1975), cert. denied, 423 U.S. 1079, 96 S.Ct. 866, 47 L.Ed.2d 89 (1976)) (additional internal quotation marks omitted); however, relief should not be granted pursuant to Rule 60(b)(6) unless the movant shows exceptional or extraordinary circumstances, Johnston v. Cigna Corp., 14 F.3d 486, 497 (10th Cir.1993), cert. denied, — U.S. -, 115 S.Ct. 1792, 131 L.Ed.2d 720 *1086(1995); In re Durkalec, 21 B.R. 618, 620 (Bankr.E.D.Pa.1982), and the relief sought is not premised upon one of the grounds in Rule 60(b)(1) — (5), Lyons, 994 F.2d at 729. Relief under Rule 60(b) is not per se injunc-tive and, unlike the reimposition of the automatic stay pursuant to 11 U.S.C. § 105, does not automatically or necessarily require an adversary proceeding pursuant to Bankruptcy Rule 7001(7). See, e.g., In re Lenox, 902 F.2d at 740 (“FRCP 60(b) provides that a court may relieve a party from a final order upon motion ”).
The Court characterizes State Bank as arguing that “the plain language of Rules 7001(7), 9024, and 60(b) required the Trustee to pursue Rule 60(b) relief by filing an adversary proceeding and not by motion.” Ct.Op. at 12 (emphasis added). The Court’s characterization is inaccurate. In its brief, State Bank asserts that the Trustee’s requested relief constituted injunctive relief, not Rule 60(b) relief, and “should not have [been] made by motion but through the filing of an adversary proceeding in accordance with Fed.R.Bankr.P. 7001(7).” Aplt.Br. at 34. Its characterization of the Trustee’s requested relief as Rule 60(b) relief leads the Court to the apparent conclusion that such relief may be granted by motion without an adversary proceeding. Merely because the Trustee sought relief under Rule 60(b), Ct.Op. at 13 n. 5, does not obviate the need to address State Bank’s argument that the procedure was wholly inadequate given the statutory scheme governing reimposition of the automatic stay.
The bankruptcy court had lifted the automatic stay to enable State Bank to foreclose its lien against the debtors’ property. Aplt. App. 0341, 0491-92. Ten months later, by granting the Trustee’s motion to reimpose the automatic stay, the bankruptcy court prevented State Bank from foreclosing its lien against property held by the Trustee. State Bank vehemently argues that this relief, granted by the bankruptcy court pursuant to Rule 60(b), rather than 11 U.S.C. § 105, constitutes injunctive relief requiring an adversary proceeding in accordance with Bankruptcy Rule 7001(7). Aplt.Br. at 33-35. The weight of authority supports State Bank because the Trustee plainly was seeking injunc-tive relief, specifically, to impose a stay, under the guise of a Rule 60(b) motion seeking vacation of the order granting relief from the automatic stay. See, e.g., In re Wedgewood, 878 F.2d at 700-701 (reimposition of the automatic stay under § 105 constitutes injunc-tive relief requiring adherence to adversarial procedures, such as providing notice); In re Voron, 157 B.R. 251, 252-53 (Bankr.E.D.Va. 1993) (any request to reimpose the automatic stay constitutes injunctive relief that must be brought by way of an adversary proceeding pursuant to § 105 and Bankruptcy Rule 7001(7)); In re Parker, 154 B.R. 240, 243 (Bankr.S.D.Ohio 1993) (debtor’s motion to reimpose automatic stay pursuant to section 105 constituted request for injunctive relief requiring adversary proceeding pursuant to Bankruptcy Rule 7001(7)). Given the gravity of reimposing an automatic stay, and its potential to play havoc with the orderly liquidation of the bankruptcy estate and creditors’ rights, an end run around 11 U.S.C. § 105(a) should not be permitted.
According to the Court, the “exceptional circumstances” of this case, namely the conversion of the case from Chapter 11 to a Chapter 7, the increase in the property value, and the disparate appraisals of the property, justify relief under Rule 60(b)(6). As a matter of law, these factors alone do not constitute the “exceptional circumstances” necessary for successful invocation of Rule 60(b)(6). For example, the normal rule is that not even a change in the law constitutes an extraordinary circumstance which would allow relief under Rule 60(b)(6). Pierce, 518 F.2d at 723. Because the district court did not assess these circumstances against the very high threshold required for Rule 60(b)(6) relief, it abused its discretion. Lyons, 994 F.2d at 727 (district court necessarily abuses its discretion if it bases its conclusion on an erroneous view of the law). The factors relied upon are the unexceptional, ordinary occurrences encountered in the normal course of bankruptcy litigation. The parties often disagree about valuation of the debtor’s property, a failed reorganization often is converted to a straight liquidation without substantively impacting the procedure, see, e.g., In re M & L Business Mach. *1087Co., 75 F.3d 586 (10th Cir.1996) (conversion of bankruptcy proceeding from Chapter 11 to Chapter 7 does not even toll the two-year statute of limitations for avoidance actions), and creditors’ claims usually exceed the value of a debtor’s property. These are not “exceptional circumstances.” See, e.g., In re Durkalec, 21 B.R. at 620 (prior to sheriffs sale, debtor’s finding of employment and submission of viable repayment plan that would make creditor whole constituted “exceptional circumstances” justifying relief from order granting creditor relief from stay).
Furthermore, the Court’s conclusion that, ten months after termination an injunction may be reimposed under the guise of a Rule 60(b)(6) motion eclipses § 105(a), which requires an adversary proceeding. In re Wedgewood, 878 F.2d at 700-701; In re Twenver, 149 B.R. 950, 953 (D.Colo.1993). The result will be the evasion of § 105(a). No party would seek injunctive relief by filing an adversary proceeding under § 105— the more difficult, expensive route — if allowed to achieve exactly the same relief by simply filing a motion under Rule 60(b)(6).
Finally, the Court’s evisceration of § 105, in the absence of truly exceptional circumstances which would justify invocation of Rule 60(b)(6), seems to contravene at least the spirit of the Supreme Court’s recent decision in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, — U.S. -, 115 S.Ct. 2322, 132 L.Ed.2d 462 (1995), which held that “ “when two statutes are capable of coexistence ... it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective.’” — U.S. at -, 115 S.Ct. at 2326 (quoting Morton v. Mancari, 417 U.S. 535, 551, 94 S.Ct. 2474, 2483, 41 L.Ed.2d 290 (1974)). The Court’s opinion fails to do this.