616 B.R. 381
9th Cir. BAP2020Background
- Debtor Shawne Merriman filed a Chapter 13 petition in November 2018; the Fattorinis were not served with notice of the bankruptcy.
- In July 2019 the Fattorinis filed a wrongful-death complaint in California state court against Merriman and others shortly before the statute of limitations would expire.
- After learning of the bankruptcy, the Fattorinis promptly moved in bankruptcy court to annul the automatic stay retroactively to validate their state-court filing and to liquidate their claim; they also filed a proof of claim.
- The bankruptcy court sustained many evidentiary objections by Merriman but found (1) the Fattorinis lacked notice of the bankruptcy when they filed, (2) judicial economy favored adjudicating the multi‑defendant tort action in state court, and (3) retroactive annulment was warranted to avoid time‑bar for the claim; it annulled the stay retroactively but enjoined enforcement of any state‑court judgment without further bankruptcy order.
- Merriman appealed; the Bankruptcy Appellate Panel affirmed, and addressed whether the Supreme Court’s Acevedo decision bars retroactive annulment under § 362(d).
Issues
| Issue | Plaintiff's Argument (Merriman) | Defendant's Argument (Fattorinis) | Held |
|---|---|---|---|
| Whether the Stay Motion was supported by sufficient evidence | Evidence was inadmissible/unverified and insufficient to show "cause" | Complaint and counsel declaration were sufficient to show lack of notice and the nature/timing of the state suit | Court: Evidence (as considered) was sufficient; excluded portions did not undermine core facts supporting relief |
| Whether the bankruptcy court applied correct legal standards (Curtis/Fjeldsted factors) | Court failed to make explicit findings on each Curtis/Fjeldsted factor and misapplied the tests | Court need not mechanically recite every factor; may consider factors as aid in discretion | Court: No error; correct standards were applied; mechanical factor‑by‑factor findings not required |
| Whether equitable balance/facts weigh against relief (prejudice, insurance, nondischargeability deadline) | Merriman lacks insurance and will be prejudiced; nondischargeability deadlines passed | Fattorinis lacked notice so deadlines do not bar them; judicial economy and multi‑defendant posture favor state forum | Court: Factors (judicial economy, state‑law claims, lack of notice, prompt motion) support relief; nondischargeability avenue preserved |
| Whether Acevedo Feliciano precludes retroactive annulment of the stay | Acevedo prohibits nunc pro tunc orders that retroactively create jurisdiction, so retroactive annulment is impermissible | § 362(d) expressly authorizes termination/annulment of the stay; Acevedo concerns about jurisdiction do not control this statutory power | Court: Acevedo does not bar bankruptcy courts from granting retroactive relief under § 362(d); annulment is within statutory authority |
Key Cases Cited
- Roman Catholic Archdiocese of San Juan v. Acevedo Feliciano, 140 S. Ct. 696 (2020) (per curiam) (nunc pro tunc remand cannot retroactively create federal jurisdiction)
- In re Nat’l Envtl. Waste Corp., 129 F.3d 1052 (9th Cir. 1997) (annulment test focuses on creditor's knowledge and prejudice)
- In re Fjeldsted, 293 B.R. 12 (9th Cir. BAP 2003) (factors for balancing equities in retroactive annulment)
- In re Kronemyer, 405 B.R. 915 (9th Cir. BAP 2009) (factors for stay relief to permit state‑court litigation: judicial economy, expertise, prejudice, bankruptcy issues)
- In re Curtis, 40 B.R. 795 (Bankr. D. Utah 1984) (multi‑factor test for allowing litigation to proceed in another forum)
- Catalano v. Comm’r, 279 F.3d 682 (9th Cir. 2002) (relief from stay does not remove an asset from the bankruptcy estate)