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Mann Realty Associates, Inc. v. Double M Development

United States District Court, M.D. Pennsylvania

December 19, 2017

MANN REALTY ASSOCIATES, INC., Appellant,
v.
DOUBLE M DEVELOPMENT, Appellee.

          MEMORANDUM

          John E. Jones III, Judge

         Appellant Mann Realty Associates, Inc. (“Mann Realty”) appeals a June 29, 2017, order of the Honorable Robert N. Opel, II, of the United States Bankruptcy Court for the Middle District of Pennsylvania. The June order denied reconsideration (the “Reconsideration Order”) of an order issued on May 11, 2017, granting Appellee Double M Development (“Double M”) relief from stay (the “Lift Stay Order”) and permitting Double M to proceed with state court litigation in the Court of Common Pleas of Dauphin County.[1] Mann Realty filed a timely Notice of Appeal to this Court on July 12, 2017. (Doc. 1). The Appeal has been fully briefed by the parties (Docs. 8-10) and is thus ripe for our adjudication. For the reasons that follow, we shall affirm the Reconsideration Order of the Bankruptcy Court.

         I. BACKGROUND[2]

         Mann Realty filed for Chapter 11 bankruptcy on March 31, 2017. (R1). About two weeks later, Double M filed a Motion for Relief from the Automatic Stay and requesting permission to proceed with underlying state court litigation in Dauphin County, Pennsylvania, related to a parcel of property purportedly within the bankruptcy estate. (R2).

         At that time, the state action had a nearly 20-year history, arising out of an attempt by Double M to exercise an option to purchase 35 acres of real estate (the “Property”) then-owned by Robert M. Mumma, II, Grantor Retained Annuity Trust (“GRAT”). Through subsequent proceedings the state court ordered the GRAT to honor the option and convey the Property to Double M. In defiance of that order, the GRAT transferred the Property to Robert and Susan Mumma individually, and later to Mann Realty, of which the GRAT was a majority shareholder.[3] The state court found that the GRAT “knowingly attempted to circumvent its responsibilities through the conveyance, in disregard of an order which ruled upon [Appellees] substantive rights to exercise the option.” (Br. of Appellee, p. 5). The state court then sanctioned the GRAT $1, 000 per day until the Property was conveyed to Double M. Over time, as the GRAT continually failed to reconvey the property, the sanctions, with accompanying attorneys' fees, reached over $900, 000. Double M obtained a judgment against the GRAT for that amount. (Br. of Appellee, Ex. C). All orders of the state trial court were affirmed by the Pennsylvania Superior Court, which ultimately determined that the Mummas, the GRAT, and Mann Realty were indistinguishable entities. The Pennsylvania Supreme Court denied requests for appeal, leaving the Superior Court's decisions as the final rulings.

         On May 11, 2017, after a hearing on Double M's Motion, the Honorable Robert N. Opel, II, granted Double M's requested relief on the basis of 11 U.S.C. § 362(d)(1) and permitted Double M to proceed with the state court litigation. (Doc. 6). On June 29, 2017, following a hearing on Mann Realty's Motion to Reconsider the prior order, Judge Opel affirmed his prior decision. (Doc. 7). This appeal followed.

         Following Mann Realty's appeal, but before the parties filed briefs, Mann Realty filed an Emergency Motion to Stay Sheriff Sale before this Court on October 17, 2017. (Doc. 4). The sheriff's sale was scheduled for October 19, 2017. We summarily denied Mann Realty's motion on October 18, 2017, (Doc. 5), and the Property was subsequently sold at sheriff's sale to Double M.[4]

         II. JURISDICTION AND STANDARD OF REVIEW

         We have jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a)(1), which grants district courts jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy judges. The bankruptcy court's June 29, 2017, order denying reconsideration was a final, appealable order. See In re Syntax-Brillian Corp., 689 Fed.App'x 145, 148 (3d Cir. 2017) (“The Bankruptcy Court's … refusal to reconsider its rulings [is a] final order[] because those issues have been conclusively resolved. Thus, the District Court ha[s] jurisdiction under 28 U.S.C. § 158(a)(1).”).

         The district court “review[s] the bankruptcy court's legal determinations de novo, its factual findings for clear error and its exercise of discretion for abuse thereof.” In re Am. Pad & Paper Co., 478 F.3d 546, 551 (3d Cir. 2007). Orders denying reconsideration are reviewed according to an abuse-of-discretion standard. See Long v. Atlantic City Police Dept., 670 F.3d 436, 447 (3d Cir. 2012) (stating that the court is “bound by an abuse of discretion standard in reviewing the denial of reconsideration.”); see also Planned Parenthood of Cent. N.J. v. Att'y Gen. of the State of N.J., 297 F.3d 253, 265 (3d Cir. 2002) (“[A] court abuses its discretion when its ruling is founded on an error of law or a misapplication of law to the facts.”).

         III. DISCUSSION

         The order directly on appeal is the Reconsideration Order, as noted above. On a motion for reconsideration, the moving party must show “at least one of the following grounds: (1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court granted the [underlying motion]; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.” Max's Seafood Café ex rel. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999). With regard specifically to the third ground, to determine if the bankruptcy judge abused his discretion in not finding clear error or manifest injustice, we must consider the Lift Stay Order. “We review the Bankruptcy Court's decision to lift the automatic stay for abuse of discretion.” Rocco v. J.P. Morgan Chase Bank, 255 Fed.App'x 638, 640 (3d Cir. 2007) (citing In re Myers, 491 F.3d 120, 128 (3d Cir. 2007) (“Whether to annul the automatic stay is a decision committed to the bankruptcy court's discretion, and may be reversed only for abuse of that discretion.”)). Thus, if the Lift Stay Order was an abuse of discretion, then the bankruptcy judge's order denying reconsideration was also an abuse of discretion. Therefore, we will begin by reviewing, with due deference, the bankruptcy court's findings in issuing the Lift Stay Order.

         A. Lift Stay Order

         In its motion for relief from the automatic stay, Double M presented four theories for why the bankruptcy court should grant the motion and permit Double M to proceed with the state court litigation to its conclusion. Judge Opel granted Double M's motion only as to the first theory. Because the other three theories are not pertinent to Mann Realty's appeal, we will ...


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