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In-Grid Malat Irrevocable Trust v. Surety Title Corp.

September 16, 2010

THE IN-GRID MALAT IRREVOCABLE TRUST, APPELLANT,
v.
SURETY TITLE CORPORATION, ET AL., APPELLEES.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

Appellant, the In-grid Malat Irrevocable Trust, has appealed a decision by the United States Bankruptcy Court denying Appellant's motion to reinstate its Chapter 11 bankruptcy case and to impose temporary restraints. As a result of the Bankruptcy Court's prior rulings, Appellant's real property, located at 214 White Horse Pike, Haddon Heights, New Jersey ("the property"), was sold during a sheriff's sale. Appellant argues that the Bankruptcy Court improperly stripped it of the protection afforded by the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure. Surety Title Corporation ("Surety Title"), the property's mortgagee, and Hugh O'Connell, the property's purchaser, oppose Appellant's appeal.

For the reasons expressed below, the Court will affirm the Bankruptcy Court's decision.*fn1

I. JURISDICTION

United States district courts have mandatory jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy judges. 28 U.S.C. S 158(a)(1).

II. BACKGROUND

In April 2009, Appellant filed for Chapter 11 bankruptcy protection. In an Order dated June 23, 2009, the Bankruptcy Court granted Surety Title stay relief with respect to its foreclosure actions against Appellant's property. Moreover, at a hearing held on the same day, June 23, 2009, the Bankruptcy Court granted the United States Trustee's motion to dismiss the case, holding that, as an irrevocable trust, Appellant did not properly constitute a "person" or "entity" under Chapter 11 and, thus, was not a debtor entitled to bankruptcy protection.*fn2 The Bankruptcy Court filed an order memorializing its dismissal of the case on or around June 26, 2009. In the meantime, on June 24, 2009, Appellant's property was sold at a sheriff's sale to a third-party purchaser, Hugh O'Connell.

Soon thereafter, in July 2009, Appellant filed a second Chapter 11 bankruptcy petition. The Bankruptcy Court, in or around August 2009, granted Surety Title relief from stay and prospective relief and denied Appellant's second petition. A motion for reconsideration of the Bankruptcy Court's decision was denied. Appellant then filed a motion in the Superior Court of the State of New Jersey to vacate the property's sale and to extend the redemption date. In an Order dated October 7, 2009, the Superior Court denied Appellant's application to show cause and held that Appellant's "motion to vacate Sale held June 24, 2009 is hereby denied." The Superior Court, however, did extend the redemption period for about ten days. Appellant did not redeem the property during the time period prescribed by the court.

Instead, Appellant moved to reinstate the Chapter 11 case, and sought additional relief, so that it could initiate an adversary proceeding in the Bankruptcy Court. The Bankruptcy Court held a hearing on or around November 30, 2009 and, as set forth in an Order dated December 8, 2009, denied Appellant's motion to reinstate the Chapter 11 case and to impose temporary restraints in the form of stay continuation. At the hearing, the Bankruptcy Court reiterated that Appellant was ineligible to be a debtor entitled to bankruptcy protection and that on June 23, 2009, the Court had both granted stay relief to Surety Title and dismissed the original bankruptcy proceeding. In light of the equities of the case, the Bankruptcy Court retroactively annulled any stay that may have existed at the time of the sheriff's sale and, in turn, validated the sale. Accordingly, in its December 8th Order, the Bankruptcy Court decreed that "any stay existing from June 23, 2009 through June 26, 2009 be and is hereby annulled" and that "the Sheriff's Sale conducted by Surety on June 24, 2009 in connection with the sale of [the property] be and is hereby validated."

On or around December 21, 2009, Appellant filed an application for an order to show cause in this Court, seeking injunctive and temporary stay relief. The Court denied Appellant's request. Present before the Court is Appellant's appeal of the December 8, 2009 ruling of the Bankruptcy Court.

III. DISCUSSION

A. Standard of Review

On appeal, legal conclusions are subject to de novo review. In re United Healthcare Sys., 396 F.3d 247, 249 (3d Cir. 2005). Factual findings are reviewed for clear error. Discretionary ...


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