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In Re Patricia Gray

February 16, 2012

IN RE PATRICIA GRAY
IN RE T. BARRY GRAY



The opinion of the court was delivered by: Padova, J.

MEMORANDUM

Appellants T. Barry Gray and his wife, Patricia Gray, refused to leave their house after it had been foreclosed upon and sold. After the purchaser of the house brought an action in ejectment against them, Patricia and Barry separately filed petitions for bankruptcy in the federal bankruptcy court, which resulted in an automatic stay of the action in ejectment. In each bankruptcy case, the bankruptcy court refused to maintain the automatic stay and also issued an order prohibiting the Grays from filing additional bankruptcy petitions without the court's permission.

In these two appeals, the Grays challenge both the bankruptcy court's refusal to maintain the automatic stays and the court's injunctive orders. At the same time, VRF REO, LLC ("VRF"), the current owner of the house, has filed a motion for injunctive relief in each case, seeking orders prohibiting the Grays from filing additional federal or state court actions. For the following reasons, we affirm the bankruptcy court orders and deny VRF's motions for injunctive relief.

I. BACKGROUND

In February 2001, First Union National Bank began foreclosure proceedings against Thelma Gray,*fn1 T. Barry Gray, and Patricia Gray, with respect to a home located at 141 7th Avenue, in Folsom, Pennsylvania (the "Property"). Years of litigation followed. While the owner of the mortgage attempted to protect its interests in state court proceedings, the Grays filed numerous bankruptcy petitions in federal court, which, in turn, triggered automatic stays of the state court proceedings. Eventually, the Property was sold in November 2007 via Sheriff's Deed to TCIF REO CIT, LLC ("TCIF"). In January 2008, TCIF commenced a state court action for ejectment against the Grays.

Barry then brought a federal court action against TCIF and other parties challenging the foreclosure and sale of the Property on constitutional grounds. TCIF failed to respond to Barry's federal court complaint and, on November 24, 2010, Barry requested and obtained a default judgment against TCIF. See Gray v. Martinez, Civ. A. No. 08-2603, 2011 WL 4389543, at *1 (E.D. Pa. Sep. 21, 2011) (describing the case's history). Shortly thereafter, on February 17, 2011, TCIF sold the Property to its successor-in-interest, VRF, via Quit Claim Deed In the meantime, on December 14, 2010, Barry filed for bankruptcy under Chapter 7. Patricia filed for bankruptcy under Chapter 13 on April 25, 2011. Both cases were assigned to Chief Judge Stephen Raslavich. As a result of the bankruptcy filings, automatic stays prevented VRF from continuing the action in ejectment against the Grays that TCIF had commenced in January 2008.

The automatic stay in Barry's case was lifted on March 24, 2011, when the bankruptcy Trustee reported that Barry had no property to be distributed. Thereafter, VRF filed a motion in Patricia's case to lift the automatic stay that was still in effect there. In addition, because the Grays had filed multiple bankruptcy petitions over the years, which had repeatedly stymied creditors from enforcing their rights against the Property, VRF also filed motions in both cases to prohibit the Grays from filing any more bankruptcy petitions without leave of the bankruptcy court. On June 14, 2011, Barry filed a motion for an extension of the automatic stay in his case, despite the fact that the stay had already been lifted.

On June 15, 2011, Chief Judge Raslavich held a hearing in Barry's case to address VRF's motion for an injunction. At the hearing, Barry argued that VRF had no standing to file motions in his bankruptcy action because the transfer of the Property from TCIF to VRF was a fraudulent transfer under the Pennsylvania Uniform Fraudulent Transfers Act ("PUFTA"), 12 Pa. Cons. Stat. Ann. § 5101 et seq. Rejecting Barry's standing argument, Chief Judge Raslavich granted VRF's motion in Barry's case, as well as its motion in Patricia's case, thereby enjoining both Barry and Patricia from filing future bankruptcy petitions without prior court approval.

The order in Patricia's case also lifted the automatic stay that was still operative in her case. In the order in Barry's case, the court refused to "extend" the stay in spite of Barry's motion for an extension for the stay, noting that, contrary to Barry's suggestion in the very title of the motion, the stay had already been lifted and, thus, could not be "extended."*fn2

Both Patricia and Barry appealed the June 15 orders in their respective case. Each takes issue with the bankruptcy court's failure to maintain the automatic stays that were preventing VRF from proceeding with the state court action in ejectment. They again argue, based on PUFTA, that VRF lacked standing to bring any motion to lift the stay, and also that the bankruptcy court erred in not permitting the Trustee to examine the Debtor's Amended Statement of Financial Affairs when deciding to lift the automatic stay. They further argue that the bankruptcy court erred in limiting their ability to file further bankruptcy petitions.

VRF, as a "party in interest," has filed two motions for injunctive relief in this Court, one in each of the two appeals. The motions for injunctive relief ask this Court to "enter an Order which dismisses any and all actions filed by the Grays . . . in the U.S. District Court for the Eastern District of Pennsylvania, in the Court of Common Pleas for Delaware County, and the Superior Court of Pennsylvania," and for the Court to "enjoin any further filings by the Grays . . . in this or any other federal or state court without first seeking leave" of this Court. (VRF Mot. at 13, In re Patricia Gray, Civ. A. No. 11-4594; VRF Mot. at 14, In re T. Barry Gray, Civ. A. No. 11-4595.)

II. JURISDICTION

We have jurisdiction over both appeals pursuant to 28 U.S.C. § 158, which gives district courts jurisdiction to hear appeals from "final judgments, orders, or decrees" of bankruptcy courts. 28 U.S.C. § 158(a)(1). The finality requirement for bankruptcy appeals is construed more broadly than the finality requirement for appeals to the circuit court. See In re White Beauty View, Inc., 841 F.2d 524, 526 (3d Cir. 1988) (citations omitted). An order lifting an automatic stay as to a particular piece of property is a final order, even though the order does not finalize the bankruptcy proceedings, "because the order ends this particular controversy" between debtor and creditor. In re Comer, 716 F.2d 168, 172 (3d Cir. 1983). An order imposing sanctions is also a final order. See In re Armstrong, 304 B.R. 432, 434-35 (B.A.P. 10th Cir. 2004) (citing Mountain Am. Credit Union v. Skinner (In re Skinner), 917 F.2d 444, 446 (10th Cir. 1990) (per curiam)).

III. STANDARD OF REVIEW

District courts and circuit courts review bankruptcy orders under the same standard. See Fellheimer, Eichen & Braverman, P.C. v. Charter Techs. Inc., 57 F.3d 1215, 1223 (3d Cir. 1995) (citation omitted). We review a bankruptcy court's "'findings of fact for clear error and its legal conclusions de novo.'" In re Jersey Tractor Trailer Training Inc., 580 F.3d 147, 153 (3d Cir. 2009) (quoting In re Pransky, 318 F.3d 536, 542 (3d Cir. 2003)). We review a bankruptcy court order lifting an automatic stay for abuse of discretion. In re Myers, 491 F.3d 120, 128 (3d Cir. 2007) (citations omitted). Likewise, we review a bankruptcy court's imposition of sanctions for abuse of discretion. See Fellheimer, 57 F.3d at 1223 (citations omitted). An abuse of discretion arises when the bankruptcy court's decision "'rests upon a clearly erroneous finding of ...


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