491 B.R. 395
Bankr. E.D. Pa.2013Background
- Debtors filed for bankruptcy in the Eastern District of Pennsylvania to address JPMorgan Chase Bank’s asserted mortgage and equitable lien on the Doylestown property.
- A Bucks County Court of Common Pleas equitable lien was entered on April 11, 2011 and perfected on April 12, 2011, totaling about $1.339 million plus costs.
- The bankruptcy petition stayed enforcement of the lien; JPM sought relief from stay to enforce the lien in state court.
- The Bankruptcy Court granted JPM relief from stay, and debtors were ordered to comply, leading to state court proceedings and a sheriff’s sale set for June 8, 2012.
- The Bankruptcy Court later dismissed parts of the Amended Complaint, abstained from ruling on the mortgage-avoidance claims under 28 U.S.C. § 1334(c)(1), and denied injunctive relief; sale proceeded and JPM purchased the property.
- The district court affirmed the bankruptcy court’s ruling and remanded for further proceedings consistent with the memorandum.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the appeal is moot due to the sheriff’s sale. | D’Angelo contends mootness should defeat appellate review. | JPM argues sale extinguished interests and the lien. | Not moot; § 550 possible recovery keeps live issues on appeal. |
| Whether the Bankruptcy Court’s permissive abstention order is final and reviewable. | Debtors contend the abstention ruling is appealable as a final order. | JPM argues abstention is interlocutory or not final. | Final order reviewable; district court has jurisdiction to review the abstention ruling. |
| Whether the equitable lien is avoidable under § 544(a) and/or (b). | Debtors claim the lien is unperfected or derived from an invalid mortgage. | JPM contends the lien was properly perfected and not avoidable. | Affirmed dismissal of § 544(a) claim; lien was perfected and not unperfected at petition date; § 544(b) claim failed for lack of unsecured creditor. |
| Whether the mortgage and lien issues should be decided in bankruptcy or abstained to state court. | Debtors seek bankruptcy resolution of mortgage validity. | State court proceedings should resolve mortgage issues; abstention appropriate. | Abstention properly exercised; state court proceedings should proceed with mortgage validity questions. |
Key Cases Cited
- In re BWP Gas, LLC, 354 B.R. 701 (E.D. Pa. 2006) (finality of permissive abstention orders reviewable by district court)
- In re Federal-Mogul Global, Inc., 300 F.3d 368 (3d Cir. 2002) (bankruptcy court decisions to abstain are final and appealable)
- Wells Fargo Home Mortgage, Inc. v. Lindquist, 592 F.3d 838 (8th Cir. 2010) (§550 recovery possibilities preserved post-avoidance)
- In re Madera, 586 F.3d 228 (3d Cir. 2009) (Rooker-Feldman applies to bankruptcy courts; cannot negate state judgments)