Court Opinion

ID: 42796
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:30:15+00
Date Added: 2024-06-11T17:16:56.795126
License: Public Domain

United States Court of Appeals
                                                                Fifth Circuit
                                                             F I L E D
               IN THE UNITED STATES COURT OF APPEALS
                                                               May 4, 2006
                       FOR THE FIFTH CIRCUIT
                                                         Charles R. Fulbruge III
                                                                 Clerk
                       ____________________

                           No. 05-10872
                       ____________________

     In The Matter Of: LARRY BROWN

                                     Debtor

_________________________________________________________________

     CITY BANK; SCOTT SEIDEL

                                     Appellants

          v.

     INDUSTRIAL BANK NA

                                     Appellee

_________________________________________________________________

           Appeal from the United States District Court
                for the Northern District of Texas
                          No. 4:05-CV-35
_________________________________________________________________

Before KING, STEWART, and DENNIS, Circuit Judges.

PER CURIAM:*

     The order of the bankruptcy court was correct for the

reasons well set out in its Memorandum Opinion and Order;

therefore, we REVERSE the judgment of the district court.       The

     *
        Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
district court erred as a matter of law in concluding that the

dismissal of the two previous bankruptcy proceedings necessarily

served both to lift the automatic stay and to cleanse the

appellee’s violations of the stay.      In re Brown, 330 B.R. 548,

553 (N.D. Tex. 2005) (stating that “11 U.S.C. § 349(b) caused the

dismissals of Cases 1 and 2 to have the effect of validating

actions taken . . . during the pendency of those cases”).      The

bankruptcy court correctly recognized that the dismissal of a

bankruptcy proceeding does not necessarily retroactively validate

actions taken in violation of an automatic stay.      Rather, the

retroactive validation of actions taken in violation of an

automatic stay is reserved to the discretion of bankruptcy

courts, and they are cautioned to use this discretion sparingly

because of the adverse impact that validation could have on other

creditors who honored the stay.       See, e.g., In re Cueva, 371 F.3d

232, 236 (5th Cir. 2004) (stating that bankruptcy courts have

“broad discretion” to grant or to deny retroactive annulment or

modification of an automatic stay); In re Thornburg, 277 B.R.

719, 731 (Bankr. E.D. Tex. 2002) (stating that bankruptcy courts

should grant retroactive relief for actions that violated an

automatic stay only in exceptional circumstances).      The

bankruptcy court correctly exercised that discretion here.

     The final judgment of the district court is REVERSED, and

the Memorandum Opinion and Order of the bankruptcy court is

AFFIRMED.   Costs shall be borne by appellee.

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