Gasprom, Inc. v. Fateh (In Re Gasprom, Inc.)

500 B.R. 598, 70 Collier Bankr. Cas. 2d 977, 2013 Bankr. LEXIS 4604, 58 Bankr. Ct. Dec. (CRR) 178, 2013 WL 5783723
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedOctober 28, 2013
DocketBAP CC-12-1567-KuKiTa; Bankruptcy ND 12-10772-RR
StatusPublished
Cited by18 cases

This text of 500 B.R. 598 (Gasprom, Inc. v. Fateh (In Re Gasprom, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gasprom, Inc. v. Fateh (In Re Gasprom, Inc.), 500 B.R. 598, 70 Collier Bankr. Cas. 2d 977, 2013 Bankr. LEXIS 4604, 58 Bankr. Ct. Dec. (CRR) 178, 2013 WL 5783723 (bap9 2013).

Opinion

OPINION

KURTZ, Bankruptcy Judge.

INTRODUCTION

Chapter 7 2 debtor Gasprom, Inc. (“Gas-prom”) appeals from a bankruptcy court order holding that the postpetition foreclosure of Gasprom’s principal asset, a gas station, did not violate the automatic stay because the stay had terminated by operation of law as a result of the chapter 7 trustee’s abandonment of the gas station. The bankruptcy court based this holding on an incorrect legal analysis regarding *601 the effect of the abandonment on the automatic stay.

In the same order, the bankruptcy court held in the alternative that it would annul the stay in order to retroactively validate the foreclosure sale and the actions of the parties who conducted the foreclosure sale. But the bankruptcy court abused its discretion in annulling the stay. The court did not apply the appropriate legal standard for determining whether the stay should be annulled. Nor did the court give the parties any opportunity to develop the record regarding the equities of their respective positions. Consequently, we VACATE AND REMAND for further proceedings.

FACTS

Gasprom commenced its chapter 11 bankruptcy case in February 2012. Within roughly a month, the bankruptcy court converted Gasprom’s case to chapter 7, and Sandra McBeth was appointed to serve as chapter 7 trustee (“Trustee”).

Gasprom’s only asset of significance was a non-operational gas station in Oxnard, California (“Gas Station”). In June 2012, the Trustee filed a notice of intention to abandon the Gas Station. Gasprom filed a two-page objection to the proposed abandonment, stating that the Trustee should not be permitted to abandon the Gas Station because it had “significant equity potential.” Gasprom further asserted that the Gas Station suffered from hazardous waste contamination and that state law prohibited the Trustee from abandoning contaminated property. Gasprom offered no evidence or legal authority to support its assertions.

The Trustee then submitted evidence in support of her intention to abandon the Gas Station and noticed her proposed abandonment for hearing. According to the Trustee’s evidence, she did not have any funds available to render the Gas Station operational. Nor did she have any funds available to address a number of troublesome issues concerning permitting, hazardous waste contamination and underground storage tank compliance. As the Trustee explained, the Gas Station’s value was significantly impaired by these issues and by its nonoperational status, and the Gas Station also was fully encumbered.

On July 27, 2012, a few days before the hearing on the proposed abandonment, Michelle Fateh (“Fateh”) filed a memorandum and a declaration in support of the Trustee’s proposed abandonment. Fateh asserted that she was the holder of a first deed of trust (“Deed Of Trust”) against the Gas Station, that the obligation secured by the Deed Of Trust exceeded $1 million and that Gasprom’s opposition to the proposed abandonment was meritless. More importantly for our purposes, Fateh asserted that, if the court authorized the Trustee to abandon the Gas Station, the abandonment effectively would terminate the § 362 automatic stay as to the Gas Station and thereby would enable Fateh to proceed with her pending foreclosure sale against the Gas Station. 3

The bankruptcy court held the hearing on the proposed abandonment on August 1, 2012 (“Abandonment Hearing”). 4 At *602 the hearing, Gasprom asserted that the court should continue the Abandonment Hearing to “prevent any rash or sudden actions” by the creditors asserting liens against the Gas Station. Hr’g Tr. (Aug. 1, 2012) at 6:15-8:13. The bankruptcy court rejected Gasprom’s argument for a continuance. As the court put it, Gasprom only sought to prevent the Trustee from abandoning the Gas Station so that the automatic stay would continue to enjoin other parties claiming an interest in the Gas Station from pursuing their rights in state court. The court further opined that it would be improper to prohibit or delay abandonment only so that the automatic stay would continue to cover the Gas Station and would continue to enjoin interested parties from pursuing their state law rights and remedies.

After the bankruptcy court orally ruled that it would authorize the Trustee’s proposed abandonment, Gasprom requested that the court delay entry of the abandonment order. If the court immediately entered the abandonment order, Gasprom explained, it feared that Fateh would immediately proceed with a foreclosure sale she had scheduled for that day. But the court declined to delay entry of the abandonment order and instead suggested that, if Gasprom sought to further enjoin Fa-teh’s foreclosure sale, Gasprom should seek an injunction from a state court. 5

On the same day as the Abandonment Hearing, August 1, 2012, the bankruptcy court signed and entered the Trustee’s proposed form of order authorizing the abandonment and declaring the Gas Station abandoned (“Abandonment Order”). 6 Even though the Abandonment Order was silent regarding the automatic stay, Fa-teh’s affiliate and her successor in interest under the Deed of Trust Green Energy Holdings (“Green”) proceeded with the foreclosure sale later that same day.

Before the Abandonment Hearing, on July 9, 2012, the Trustee issued a final report reflecting that there were no estate assets available for distribution. Thereafter, on August 16, 2012, the bankruptcy case was closed. As a combined result of the August 1, 2012 abandonment and the August 16, 2012 case closure, the automatic stay terminated for all purposes with respect to the Gas Station on August 16, 2012, a short time after the foreclosure sale. See § 862(c).

In September 2012, Gasprom moved to reopen its bankruptcy case, so that it could seek to set aside the foreclosure sale and commence contempt proceedings against Fateh, Green and others for violation of the automatic stay. According to Gas-prom, the Abandonment Order caused the estate’s interest in the Gas Station to revert to it, and notwithstanding the court’s comments regarding the automatic stay at the Abandonment Hearing, §§ 362(a)(5) *603 and (a)(6) continued to protect Gasprom from Fateh/Green’s foreclosure. As a result, Gasprom asserted, when Fateh/Green proceeded with the foreclosure sale on August 1, 2012, they wilfully violated the stay, and the foreclosure sale was void as a violation of the stay.

Fateh opposed the motion to reopen, arguing that Gasprom was not entitled to any of the relief that it intended to pursue upon reopening. Relying principally on a single Minnesota bankruptcy case, D'Annies Rest., Inc. v. N.W. Nat. Bank of Mankato (In re D’Annies Rest., Inc.), 15 B.R. 828 (Bankr.D.Minn.1981), Fateh asserted that no aspect of the stay had survived the entry of the Abandonment Order. According to Fateh and In re D’Annies,

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Bluebook (online)
500 B.R. 598, 70 Collier Bankr. Cas. 2d 977, 2013 Bankr. LEXIS 4604, 58 Bankr. Ct. Dec. (CRR) 178, 2013 WL 5783723, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gasprom-inc-v-fateh-in-re-gasprom-inc-bap9-2013.