596 B.R. 375
W.D. Wash.2019Background
- Plaintiff (sole member of Williams Family Holdings LLC) conveyed his Seattle parcel to the LLC in 2005; the LLC obtained a construction loan from PLG in 2007 secured by a deed of trust.
- The project faltered, a nonjudicial trustee sale occurred on Sept. 11, 2009, and PRK purchased the property; Plaintiff filed, then had dismissed, a personal Chapter 7 bankruptcy that he says created an automatic stay.
- PRK obtained possession and later (Dec. 2010) sold the property to Defendants Gavrylyuk and Shankarnarayan ("Defendant Owners"), who have occupied the property since.
- Plaintiff sued many defendants in 2018 asserting (inter alia) that the trustee sale violated the bankruptcy stay and asserting various state-law claims; several defendants moved for summary judgment or joinder.
- The Court determined (1) Plaintiff lacked a direct property interest in property owned by the LLC, so the bankruptcy stay did not protect the property, and (2) most state-law claims are time-barred; summary judgment was granted to the moving defendants and several defendants were dismissed for lack of service.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the trustee sale violate the automatic bankruptcy stay? | Plaintiff contends his personal bankruptcy stay barred the trustee sale and rendered the sale void. | Defendants argue the property belonged to the LLC, not Plaintiff personally, so Plaintiff had no estate property interest subject to the stay. | Court: Sale did not violate stay; Plaintiff had no ownership interest in LLC property, so claims premised on stay violation fail. |
| Are Plaintiff's state-law claims timely? | Plaintiff contends discovery rule or other facts tolled or delayed accrual. | Defendants assert statutes of limitations (3, 6, or 10 years depending on claim) bar claims based on 2009–2010 conduct. | Court: Most claims are time-barred; discovery rule inapplicable because Plaintiff knew of the injury. |
| Does Plaintiff have standing to sue for harms to the property owned by the LLC? | Plaintiff asserts injury from loss of property/possession. | Defendants argue injuries were to the LLC; Plaintiff only had an LLC membership interest (derivative), not standing to sue individually. | Court: Plaintiff lacks standing to assert direct claims for injury to LLC-owned property. |
| Were certain defendants properly served? | Plaintiff later filed proof of service for DOR but not for others and did not seek more time. | Defendants argue no proper service on DOR, Northwest Trustee Services, or Fidelity National Title. | Court: Claims against Northwest Trustee and Fidelity dismissed for lack of service; claims against DOR dismissed for improper service. |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (nonmoving party's burden to show genuine issue)
- Butner v. United States, 440 U.S. 48 (property interests in bankruptcy determined by state law)
- Burton v. Infinity Capital Mgmt., 862 F.3d 740 (automatic stay is self-executing)
- In re Disciplinary Proceeding Against McGrath, 308 P.3d 615 (Wash. Supreme Court: LLC members have no ownership in LLC property)
- In re Perl, 811 F.3d 1120 (no stay violation where debtor had no interest in property at petition time)