Court Opinion

ID: 9742619
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:16:59.610782+00
Date Added: 2024-06-11T07:24:34.139428
License: Public Domain

BROOK, Judge,
dissenting.
When resolving questions of bankruptcy law, the federal courts cannot decide what effect the filing of a state court action in violation of a bankruptcy stay or injunction has on the running of a state statute of limitations. See Pettibone Corp. v. Easley, 935 F.2d 120, 121 (7th Cir.1991). That determination is a question of state law. Id. However, in order to resolve the effect under state law of a violation of the automatic stay, the state court must defer to the bankruptey court's determination of whether an act violates the stay. See Reich, 605 N.E.2d at 1182.
I agree with the majority that our supreme court created an exception to the general rule that a plaintiff is prohibited from proceeding with a lawsuit if the plaintiff files a complaint in violation of an automatic stay. See Hammes/Hendrix, 659 N.E.2d at 1027.7 Specifically, our supreme court stated that where the bank-ruptey court later "expressly modified the stay, allowing [the plaintiff] to pursue her complaint to the extent of the insurance proceeds" and "ordered that the stay be lifted all together nune pro tunc," the trial court was "without jurisdiction to question" the bankruptcy court's "obvious determination that [the plaintiff] could pursue her state action[.]" Id. at 1027, 1028 (emphasis added). Our supreme court further concluded that the court of appeals was clearly without jurisdiction to bar the plaintiff's complaint "even in light of the expiration of the state statute of limitations[.]" Id. at 1028.
However, I diverge from the majority when it finds no meaningful distinction between the Hammes/Hendrix bankruptey order and the order in the present case. In Hammes/Hendrix, the bankruptcy court saved the Pages' action by explicitly making its order lifting the stay retroactive to June 5, 1990. The order created the fiction that the Pages filed their complaint before the bankruptcy petition was filed, hence before the automatic stay became effective. With no stay in effect, no stay violation (which could void the negli-genee action and require later re-filing) occurred.
In contrast, the bankruptey court's order in the present case provided:
This Matter is before the Court on the Consolidated Motion for Relief from Stay of Melinda Gregory and Randy Gregory ("Plaintiffs") requesting that the automatic stay be modified in order that Plaintiffs can proceed with a cause of action involving Dr. Charles W. Zoll-man and the Zollman Surgery Center ("Zollman"). The parties appeared by counsel and reported to the Court that they are agreeable to a limited modification of the automatic stay. Zollman, without agreeing that Plaintiffs' violation of the automatic stay was proper or justified and without wawing any rights or defenses, agrees that the Plaintiffs should be allowed to proceed with their medical malpractice claims, currently pending before medical review *503panels on the condition that Plaintiffs shall not levy upon any judgment obtained in said cause without first obtaining leave of the Bankruptcy Court to do so. Because Wally Zollman, M.D., P.C. and the Zollman Surgery Center, Inc. have demonstrated to the Insurance Commissioner of Indiana that they have the required statutory insurance coverage, any potential settlement or judgment will come from insurance proceeds and any excess proceeds would come from the Patient's Compensation Fund maintained by the State of Indiana. Since no assets of the bankruptey petitioner are in question or jeopardy, no further court approval need be sought.
The Court, having considered the Motion and agreement of the parties, now finds that the automatic stay should be modified without making any determination of the propriety and/or legal effect to the Plaintiffs' action in filing their medical review panel claims in violation of the automatic stay in this proceeding. Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the automatic stay involved herein is modified in order to allow the Plaintiffs to proceed before medical review panels on the condition that no Plaintiff shall levy execution upon any judgment ultimately obtained in said causes against Dr. Zollman or the Estates' assets without first obtaining leave of the Bankruptey Court to do so.
(Emphases added). That is, unlike the bankruptey court in Hammes/Hendrix, the bankruptcy court in the present case did not make its order lifting the stay retroactive to the date Zollman filed for bankruptcy. Hence, the order lifting the stay did not create the fiction that the Gregorys filed their complaint before the bankruptcy petition was filed, and thus before the automatic stay became effective. To the contrary, the bankruptey court specifically made no "determination of the propriety and/or legal effect to the [Gregorys'] action in filing their medical review claims in violation of the automatic stay [.]" Thus, the Hammes/Hendrix exception does not apply here.
Absent the applicability of the Ham-mes/Hendrix exception, I would return to the general rule that a complaint filed in violation of an automatic stay is void. There is no dispute that at the time the Gregorys filed their original complaint with the IDI, a § 362(a) automatic stay was in effect,. The trial court, therefore, did not have jurisdiction to entertain the action, and thus, it was a nullity and void. See Raikes v. Langford, 701 S.W.2d 142, 144 (Ky.App.1985). As a result of the jurisdictional defect that existed at the time the Gregorys commenced their action against Zollman, it was as if they had filed no complaint. If the limitations period had not expired prior to the order lifting the stay, then the Gregorys would have been free to re-file their action. However, under these facts, I would conclude that the two-year statute of limitations bars the Grego-rys' malpractice action, making dismissal appropriate.
I would also note that the drafters of the bankruptcy code attempted to prevent just this type of situation by including a savings feature, which states:
if applicable nonbankruptey law ... fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor ... and such period has not expired before the date of the filing of the [bankruptcy] petition, then such period does not expire until the later of-
(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or
(2) 30 days after notice of the termination or expiration of the stay ... with respect to such claim.
*50411 U.S.C. § 108(c)8
If the Gregorys had filed with the bank-ruptey court, prior to the August 4, 1999 expiration of the statute of limitations, a motion to lift the stay, and if the bankruptcy court had decided to lift the stay, then section 108 would have extended the period during which the Gregorys could have filed suit against Zollman. That is, the Gregorys would have been permitted to refile their action within thirty days after notice of the lifting of the stay-even if that notice occurred after the expiration of the original limitations period. Cf. Brown v. MRS Mfg. Co., 617 So.2d 758 (Fla.App. 19983) (concluding that wrongful death action brought against Chapter 11 debtor within thirty days of the termination of the automatic stay was timely even though more than two years had passed since the accident in question). However, because the Gregorys' filed their motion to lift the stay after the two-year statute of limitations had expired, they failed to invoke section 108's limitations extension provision. The Gregorys did re-file, but not until December 19, 1999, well after the August 4, 1999 expiration of the statute of limitations. I would conclude, therefore, that the trial court had no jurisdiction and that it should have granted Zollman's motion to dismiss. Accordingly, I respectfully dissent.

. See also the federal authority cited in footnote 3 supra.

. Some states allow plaintiffs additional time to maintain suits against the debtor after the bankruptcy case is closed. See 735 ILCS 5/13-216 (Illinois statute providing, "When the commencement of an action is stayed by injunction ... the time of the continuance of the injunction or prohibition is not part of the time limited for the commencement of the action"). Indiana, however, has no comparable statute.