On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 96-cv-01831)
District Judge: Hon. Anne E. Thompson, Chief Judge
Before: SLOVITER, Chief Judge, NYGAARD and ALDISERT, Circuit Judges.
Submitted under Third Circuit LAR 34.1(a) April 28, 1997
This appeal by Lisa Baldino from the district court's affirmance of a bankruptcy court order requires us to decide whether the bankruptcy court abused its discretion in denying Baldino's motion for relief from the automatic stay in proceedings against the Debtor, Robert Frank-Leonard Wilson. Baldino sought relief from the stay in order to proceed with a pending appeal in a state court action against Wilson. The bankruptcy court denied the request, reasoning that the state court appeal should not proceed until the bankruptcy court determined whether any judgment Baldino might receive would be dischargeable. The district court agreed and affirmed. We find two distinct grounds for reversing the district court: (1) the bankruptcy court relied on an erroneous legal premise in exercising its discretion to deny relief from the stay and (2) the bankruptcy court's order effectively prevents Baldino from challenging the state court judgment in any forum. Accordingly, we will reverse and remand to the district court for entry of an order directing the bankruptcy court to lift the automatic stay for the limited purpose of allowing Baldino's appeal.
The district court had jurisdiction under 28 U.S.C. Section(s) 158(a). This court has jurisdiction under 28 U.S.C. Section(s) 1291. In bankruptcy cases, the district court sits as an appellate court and, therefore, we exercise plenary review over the district court judgment. Brown v. Pennsylvania State Employees Credit Union, 851 F.2d 81, 84 (3d Cir. 1988). We review a decision to deny the automatic stay for abuse of discretion. See Claughton v. Mixson, 33 F.3d 4, 5 (4th Cir. 1994); Holtkamp v. Littlefield (Matter of Holtkamp), 669 F.2d 505, 507 (7th Cir. 1982).
On July 27, 1989, Wilson signed and swore to a criminal complaint charging Baldino with criminal trespass and harassment. Wilson's complaint was subsequently dismissed. Four years later, on July 20, 1993, Baldino filed a civil complaint against Wilson in the Superior Court of New Jersey. Baldino asserted a claim of malicious prosecution against Wilson based on the 1989 criminal complaint.
On February 3, 1995 the state court granted Wilson's motion for summary judgment. The court found that Baldino had not made out a prima facie case of malicious prosecution because she failed to show that Wilson acted without probable cause. Baldino appealed. The parties filed briefs on appeal and argument was scheduled for February 6, 1996. On September 7, 1995, Wilson filed a petition for relief under Chapter 7 of the Bankruptcy Code, thereby automatically staying the appeal.
Baldino filed a pro se motion for relief from the automatic stay, seeking permission to complete her appeal. The bankruptcy court denied Baldino's request, reasoning:
Why would I grant stay relief before the dischargeability of the debt has been determined? . . . You could be completely successful in the State Court and not be successful on the nondischargeability determination. . . . [S]imply because you prevail in the State Court does not necessarily mean that you will prevail in a non-dischargeability action . . . there's no need to determine the extent and validity of claims unless there's going to be a distribution or unless the debt has been determined to be dischargeable.
The district court adopted the reasoning of the bankruptcy court and affirmed the order denying Baldino's ...