IN RE: Stephen J. Ayoub (2022)

Chapter 13

ORDER GRANTING DEBTOR'S MOTION FOR RELIEF FROM AUTOMATIC STAY TO PROCEED WITH APPEAL AND CANCELING HEARING ON MOTION

THIS CASE came on for consideration without a hearing on the Debtor's Motion for Relief From Automatic Stay.¹ In his Motion, the Debtor seeks an order confirming that the automatic stay does not bar the Debtor from proceeding with an appeal of a state court foreclosure judgment entered in favor of Wilmington Savings Fund Society.² Even if the stay does apply, the Debtor contends it is appropriate for the Court to modify the stay to allow him to proceed with the appeal.³ Wilmington has no objection to the Court's granting the Debtor stay relief so long as stay relief is conditioned on the Debtor's making adequate protection payments or posting a bond.⁴

To begin, the Court addresses the Debtor's incorrect argument that the stay does not apply to the appeal. Relying on In re Kozich, the Debtor argues the automatic stay does not apply when a debtor initiates an appeal and does not seek to exercise possession or control of property of the estate.⁵ But in Kozich, the underlying lawsuit had been initiated by—not against—the Debtor:

The question raised by this case is as follows: Does an automatic stay under section 362 prevent a non-debtor party from taking action in a state court appeal, initiated by the debtor, of an original action also initiated by the debtor? It is clear to this court, given the plain language of the law, that the answer is no. Section 362, by its own terms, only stays proceedings against the debtor.6

Here, unlike in Kozich, the underlying action is against the Debtor. Filing a notice of appeal in a case against a debtor is a continuation of an action against the debtor and therefore runs afoul of Bankruptcy Code § 362(a)(1).⁷ Because the underlying action was filed against the Debtor, the automatic stay applies to the Debtor's pursuing appellate review.

Now let's turn to granting stay relief. The Court agrees that stay relief is appropriate. So, too, does Wilmington. The lone issue is whether the Court should require the Debtor to post a bond.

According to Wilmington, the Debtor is using his motion for stay relief to circumvent the state-court requirement to post a bond pending an appeal.⁸ Filing a notice of appeal in state court, of course, does not stay a final judgment.⁹ Stay of a final judgment in state court may be conditioned on the appellant's posting a bond.¹⁰ This is the requirement Wilmington says the Debtor is seeking to avoid.

But Wilmington's argument misunderstands the procedural posture of this case. Ordinarily, the Rooker-Feldman doctrine bars this Court from reviewing state court judgments that have become final—meaning Rooker-Feldman applies only when the state court proceeding has ended.¹¹ A state court proceeding has not ended for Rooker-Feldman purposes if an appeal is pending.¹² Because the state court appeal is still pending, the state court proceeding has not ended, and this Court therefore has jurisdiction to review the state court final judgment.

If the Debtor sought review of the state court judgment here as part of the claims-objection process, it is indisputable that he would get the benefit of the stay (while the Court reviews the state court judgment) without posting a bond. But the Court believes the state court is the better forum for reviewing the state court judgment. The Debtor should not be punished—by being required to post a bond—simply because this Court defers to the state court to decide the issues on the appeal instead of entertaining them here. Thus, the Court concludes that granting stay relief should not be conditioned on the Debtor's posting a bond.¹³

Accordingly, it is

ORDERED:

1. The Motion is GRANTED.

2. The September 19, 2022 hearing on the Motion is canceled.

Attorney Mark F. Robens is directed to serve a copy of this Order on interested parties who do not receive service by CM/ECF and to file a proof of service within three days of entry of this Order.

FOOTNOTES

1.   Doc. No. 10 (“Motion”).

2.   See Wilmington Savings Fund Society, FSB v. Ayoub et al., Case Number 2016-008022-CI.

3.   Doc. No. 10.

4.   Doc. No. 11.

5.   Doc. No. 10, ¶ 4 (citing Kozich v. Cavallaro (In re Kozich), 406 B.R. 949, 953 (Bankr. S.D. Fla. 2009)).

6.   Kozich, 406 B.R. at 953 (emphasis in original).

7.   Hewett v. Wells Fargo Bank, N.A.. 197 So. 3d 1105, 1105 – 06 (Fla. 2d DCA 2016).

8.   Doc. No. 11, ¶

9.   Mann-Tack v. Homeside Lending, Inc., 982 So. 2d 72, 74 (Fla. 2d DCA 2008) (“In the absence of a stay pending appeal, however, the trial court retains the power to enforce a judgment that has been appealed.”).

10.   Fla. R. App. P. 9.310.

11.   Behr v. Campbell, 8 F.4th 1206, 1209 – 10 (11th Cir. 2021); Nicholson v. Shafe, 558 F.3d 1266, 1277 (11th Cir. 2009).

12.   Id. at 1279.

13.   Further, Wilmington may seek additional adequate protection of its interest if the payments required by the Order Directing Mortgage Modification Mediation are arguably insufficient. Doc. No. 13, ¶ 18.

Catherine Peek McEwen United States Bankruptcy Judge