Thornburg v. Lynch (In Re Thornburg)Thornburg v. Lynch (In Re Thornburg)
MEMORANDUM OPINION
Now before the Court is the Motion For Contempt, Sanctions And Attorney Fees And To Declare Judgment Lien Void (“Motion”) filed by Lynn Thomas Thorn-burg (“Debtor”). The Court considered the pleadings filed, the evidence adduced, the arguments of counsel and the record in this case. This opinion constitutes the Court’s findings of fact and conclusions of law required by Fed.R.Bankr.Proc. 7052 and disposes of all issues before the Court.
FACTUAL AND PROCEDURAL BACKGROUND
The parties, Lynn Thomas Thornburg, Jr., and his former wife, Fredye Long Lynch a/k/a Fredye Mac Long (“Lynch”), were divorced November 9, 1995, in Bowie County, Texas. This matter is a continuation of the bitter protracted divorce and bаnkruptcy dispute between the Debtor and Lynch.
1
The Debtor filed his petition
Lynch (“Defendant”) filed an answer to the Motion for Contempt admitting that she filed the Abstract of Judgment in Bowie County, but denying, inter alia, that in so doing she was in violation of the automatic stay under § 362. 2 In addition, Lynch’s Answer raises three affirmative defenses to the Motion: lack of subject matter jurisdiction, the law of the case doctrine 3 and claim preclusion. The matter came on to be heard pursuant to a regular setting and, after trial, was taken under advisement following time to allow for the filing of briefs.
JURISDICTION
This Court has jurisdiction over the within proceeding pursuant to 28 U.S.C. §§ 157(a) and 1334. This is a core prоceeding under 28 U.S.C. § 157(b)(k). The Bankruptcy Court has jurisdiction to clarify and enforce its own orders in a core proceeding or to prevent abuse of process under 11 U.S.C. § 105(a).
RES JUDICATA
Lynch argues that the doctrine of res judicata prevents this Court from adjudicating the instant contempt action which she avers involves the same nucleus of operative facts heard by this Court on
LAW OF THE CASE
The “law of the case doctrine” is defined as that principle under which the initial determination of quеstions of law will be held to govern the case throughout its subsequent stages.
Justice Bail Bonds v. Samaniego,
DISCUSSION
Once a bankruptcy petition has been filed, the protections of § 362 of the Bankruptcy Code apply. Under § 362(a)(1) through (6), pertinent here:
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of—
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debt- or or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures а claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title; .
11 U.S.C. §§ 362(a)(1), (2), (3), (k), (5) and(6).
The automatic stay is a fundamental protection afforded by the bankruptcy laws. See
In re Stringer,
The relations between the parties have been so rancorous, and the parties themselves so litigious, as to have brought them before this Court — and others — innumerable times. Now before the Court is the task of determining which, if any, of the actions taken, or caused to be taken, by Lynch or her agents following this Court’s May 28, 1997 ruling violated the automatic stay under 11 U.S.C. § 362, as modified and are actions fоr which Lynch must be held in contempt of this Court. To do so, this Court must interpret the May 28, 1997 order modifying the automatic stay. “The bankruptcy court [is] ‘in the best position to interpret its own orders.’ ”
Texas N.W. Ry. Co. v. Atchison, Topeka and Santa Fe Ry. Co. (In re Chicago, Rock Island & Pac. R.R. Co.),
The specific relief sought by Lynch pursuant to her Motion for Relief from the Automatic Stay filed May 8, 1997 was to permit Lynch “to have a hearing in state court on her Motion for Enforcement” respecting the parties’ final decree of divorce.
5
There was no trial on the merits of the Motion for Relief from the Automatic Stay because the parties submitted an agreed order to the Court. The Court approved the agreed order presented. Thereafter, the state court heard the Motion For Enforcement and entered an ordеr, including findings, granting judgment in favor of Lynch. The narrow relief sought in the Motion for Relief From the Automatic Stay cannot be broadened retroactively by the loosely drafted language of the order which recites simply that “the automatic stay is lifted accordingly”. An Agreed Order is a contract and its interpretation is governed by basic rules of contract construction.
In re Continental Airlines Corp.,
The Abstract of Judgment
Under V.T.C.A., Property Code § 52.001, “Except as provided by Section 52.0011, a first or subsequent abstract of judgment, when it is recorded and indexed in accordance with this chapter, if the judgment is not then dormant, constitutes a lien on the real property of the defendant located in the county in which the abstract is recorded and indexed, including reаl property acquired after such recording and indexing.” Given that under the foregoing statute the recording of the judgment created a lien on the real property of the Debtor located in Bowie County (regardless of whether the lien was a valid one which is a separate issue under Texas homestead law), given Lynch’s admission that she filed or caused to be filed, the Abstract of Judgment complained of by Debtor, the Court must conclude that Lynch violated the prohibitions of 11 U.S.C. § 362 by her “act to create, perfect, or enforce any lien against property of the estate” to the extent that there was estate property in Bowie County: which was the case. 9
The Bowie County real property was “property of the estate” as that term is defined under 11 U.S.C. § 541(a)(1) on the date Lynch filed the Abstract of Judgment. Lynch’s Memorandum asserts: “The only real property owned by the Debtor has consistently been claimed as exempt property under Texas homestead laws.” This is not completely accurate. When the Debtor filed his Schedules and Statement of Financial Affairs on April 8, 1997, included on Schedule “C” was an entry for “200 acres of rural land” exempted under the Texas Property Cоde, See.41.001. The Debtor’s first meeting of creditors was held on May 29, 1997. Thereafter, on June 10, 1997, he amended,
The relief obtained under the order was limited by the language of the Motion. 10 The relief was limited to: “permitting [Lynch] to have a hearing in state court on her Motion for Enforcement”. Abstracting the judgment entered by the Court was an act of enforcement or collection beyond the scope of the relief requested and granted; as such, it required additional relief from the stay under § 362. 11 Lynch did not return to the bankruptcy court to obtain relief to enforce the judgment and, therefore, the Court must find that in so doing she violated the automatic stay. 12
The Notice of Lis Pendens
The Debtor avers Lynch violated the automatic stay by filing a Notice of Lis Pendens against his real property. The Debtor alleges that on May 2, 2000, Lynch caused to be filed a Notice of Lis Pendens in Bowie County with respect to the real property he had listed in his bankruptcy schedules.
13
Lynch denied the allegation and denied that the act of filing same was an attempt to create a lien on Debtor’s
Review of the certified Notice of Lis Pendens, executed by counsel for Lynch, indicates that it was filed with the Texas Clerk’s Office in Bowie County in Volume 8258 at page 316 on May 9, 2000, on behalf of Lynch as Plaintiff, against the Debtor’s real property situated in Bowie County. The Notice of Lis Pendens was filed as a pleading under Cause No. 99-C1181-102. 15 Cause No. 99-C1181-102 was initiated by the filing of the Petition For Clarification Of Agreed Decree of Divorce & Declaratory Judgment, Or In The Alternative, For A Bill of Review, filed in the 102nd District Court of Bowie County, Texas by Lynch against the Debtor on August 27, 1999. Exhibit D-L. It should not be confused here with the matter of the Motion For Enforcement (Cause No. 94-1197) (although it was pending in the same state court) referred to in the Motion For Relief From the Automatic Stay. This Court previously ruled from the bench on May 30, 2000 that the automatic stay did not prohibit the Court in Bowie County from entertaining Cause No. 99-C1181-102 or Lynch from pursuing it. In this regard, as Defendant pointed out, law of the case doctrine applies. (However, the Debtor has not challenged the filing of the Petition in the instant Motion for Contempt.) The question becomes: whether filing a notice of lis pendens is within the scope of pursuing Lynch’s case or beyond the scope and a violation of the automatic stay.
The Court reiterates its orаl ruling of May 30, 2000, that the relief sought in Cause No. 99-C1181-102 is a declaratory judgment or order clarifying the Bowie County Court’s decree of divorce respecting whether the property settlement in the parties’ divorce was flawed. Enforcement or collection, once the court has ruled on the issue, is a separate matter from obtaining a ruling and judgment or even a re-division of property. 16 The Notice of Lis Pendens expressly refers to the fact that Lynch “seeks to assert ownership interest in and/or a lien for a monetary judgment” against the Debtor’s real property in Bowie County. It places the public on notice that the extent of the matter in controversy is $85,000.000 plus attorney’s fees and costs.
The effect of filing a Notice of Lis Pendens in the State of Texas is the “functional equivalent of an involuntary hen as it acts as a cloud on title under Texas law”.
F.D.I.C. v. Walker,
Actions Void or Voidable
It is well settled that “actions taken in violation of the automatic stay are not void, but rather they are merely voidable, because the bankruptcy court has the power to annul the automatic stay pursuant to section 362(d).”
Picco v. Global Marine Drilling Co.,
Finally, the Debtor sought this Court’s ruling that Lynch be held in contempt for her failure to remove the void hen on property of the Debtor. Until the Court declared the hen void, the issue was not ripe.
CONCLUSION
The Court has carefully considered the Movant’s request for attorney fees and sanctions. Given the blatant disregard of both of these parties for the dignity of this or any other court system and the continuous manipulation of each party to attempt to gain the upper hand in some way, the Court finds that sanctions and attorney fees are not warranted and will not be granted.
For the foregoing reasons, the Court finds that Fredye Long Lynch violated the provisions of 11 U.S.C. § 362(a) when she filed an abstract of judgment handed down from the State Court and when she caused the Notice of Lis Pendens to be filed; the Court finds Lynch in contempt of this Court for her actions. This Court’s ruling shоuld not be construed by the parties, nor is it intended to be, an attack on the validity of the State Court’s judgment, order or entry thereof by the clerk of such court, which acts were contemplated under the Motion For Relief and Order. The Court, accordingly, must deny Debtor’s request that the Judgment entered by the District Court of Bowie County, Texas on August 11, 1997, be declared void. The Court grants the request that the Abstract of Judgment and Notice of Lis Pendens should be declared, and they are hereby, void. All other relief requested in the Motion For Contempt, Sanctions And Attorneys Fees is DENIED. An order will be entered accordingly.
Notes
. Previously this Court heard and adjudicated several disputes including controversy leading up to the confirmation of Debtor’s Chapter 13 Plan and a controversy over the classification of an $85,000.00 claim which Debtor scheduled in his schedules as an unsecured debt. Pursuant to an agreement worked out by the parties during that litigation, an agreed judgment was entered which recognized that the $85,000.00 claim was not a claim in the bankruptcy but was Fredye Long Lynch’s "separate property.” Lynch believed that her position as assignee of the proceeds of the trust or of the life insurance policy protected her and that her property right was secure in those items. The life insurance policy was allowed to lapse and subsequent investigation revealed that the trust contained spendthrift provisions
. She also denied that a hearing was conducted on a Motion For Enforcement in the District Court on July 28, 1997 and an order entered with respect to same on August 11, 1997. Defendant Lynch denies several other of the Debtor’s allegations, including that she caused the Notice of Lis Pendens to be filed in Bowie County to create a judicial lien on property of the estate. Lynch also denies that on August 27, 1999, she filed a Petition for Clarification of Agreed Decree of Divorce & Declaratory Judgment containing allegations of fraud and seeking judgment against the Debtor.
. Lynch pleads "law of the case” as an affirmative defense. It is not an affirmative defense per se, although it may be included under the “wild card” clause: "and any other matter constituting an avoidance or affirmative defense.” See, Fed.R.Civ. Pro. 8(c).
. The Defendant’s Memorandum argues that the issue was raised in other pleadings filed by the Debtor but later withdrawn. A withdrawn pleading has not been "actually litigated”.
. "Wherefore, Lynch prays that upon final hearing of this Motion an Order be entered relieving her from the’ stay permitting her to have a hearing in state court on her Motion for Enforcement, and for such other and furthеr relief as is just and proper.” Exhibit DD. The relief sought in the motion for enforcement, as amended, which was attached as an exhibit to the Motion For Relief from the Automatic Stay, included a request for a judgment against the Debtor, attorneys’ fees and costs, a limited modification of the Agreed Final Settlement, Release and Order, requests that Debtor be held in contempt, fined and jailed and sought that various pleadings he had filed be stricken from the record.
. "An agreed order, like a consent decree, is in the nature of a contract, and the interpretation of its terms presents a question оf contract interpretation.”
Covington,
."The plain meaning of words and not the perception of such words by interested parties like the HEW shall always be the "master”: "When I use a word” Humpty Dumpty said, in a rather scornful tone, "it means just what I choose it to mean no more, no less.” "The question is,” said Alice, "whether you can make words mean so many different things.” "The question is” said Humpty Dumpty, “which is to be master that[’s] all.”
Finnegan v. Matthews,
. Lynch also raises the issue of whether she "acted with knowledge of the applicability of the automatic stay in filing the abstract.” "Whether the party believes in good faith that it had a right to property is nоt relevant to whether the act was "willful” or whether compensation must be awarded.
Bloom,
. At the point in time of the filing of the Abstract of Judgment, the Debtor’s Chapter 13 plan of reorganization had not been confirmed, property of the estate had not revested in the Debtor.
. Lynch is an attorney licensed to practice in the State of Texas. At the time the Motion and Order were drafted, Lynch was appearing before this Court on her own behalf and appears to have drafted the documents at issue in addition to executing them. She cannot now complain of any ambiguity in those pleаdings. If Lynch intended additional or specific relief, she had the opportunity of moving for same or negotiating the agreement with the Debtor to encompass whatever relief she desired.
. Lynch’s acts should not be confused with the ministerial acts of the State Court which were directly in keeping with the relief granted under the May 28, 1997 order.
. Lynch argues that her actions do not fall under the rubric of actions prohibited by § 362. She argues that the Amended Motion For Enforcement which resulted in the state court judgment was filed March 10, 1997, after the commencement of the case. The argument is spurious because the amendment of a pleading relates back in time to the originally filed pleading. Fed.R.Civ.P. IS. The original Motion for Enforcement was filed in December, 1996 — pre-petition. Lynch argues further that "the judgment obtained and abstract filed.. .pertained to .. .post-petition actions of the debtor.. .the judgments for sanctions and attorneys fees were for repetitious pleadings filed by the debtor ... after the commencement of this case”. These arguments do not negate the fact that her actions against the property of the estate exceeded the relief Lynch had been granted by the Court. See 11 U.S.C. § 362(a)(3) and (4).
.Under V.T.C.A., Property Code § 12.007: "a) ... during the pendency of an action involving title to real property, the establishment of an interest in real property, or the enforcement of an encumbrance against real property, a party to the action who is seeking affirmative relief may file for record with the county clerk of each county where a part of the property is located a notice that the action is pending.”
. Subject to Motion To Dismiss Adversary Proceeding Defendant's Answer To Motion For Contempt filed by Lynch November 30, 2000, p. 3, paras. 14 and 15.
. The Notice of Lis Pendens was admitted as Exhibit P-4.
.
Compton Corp. v. U.S.,
. Under 11 U.S.C. § 1327(b) "the confirmation of a plan vests all of the property of the estate in the debtor.”
. Some of the compelling circumstances considered by the courts in granting such extraordinary relief are: (1) if the creditor had actual or constructive knowledge of the bankruptcy filing and, therefore, of the stay; (2) if the debtor has acted in bad faith; (3) if there was equity in the property of the estate; (4) if the property was necessary for an effective reorganization; (5) if grounds for relief from the stay existed and a motion, if filed, would have been granted prior to the violation; (6) if failure to grant retroactive relief would cause unnecessary expense to the creditor; and (7) if the creditor has detrimentally changed its position on the basis of the action taken.
In re Lett,
.
In re Pierce,
.
Texas Extrusion Corp. v. Lockheed Corp.,