Taylor v. Deutsche Bank and Appeals of Automatic Stay Relief

Taylor v. Deutsche Bank and Appeals of Automatic Stay Relief

This case involves an appeal by Mr. Kenneth S. Taylor from a decision of the lower Bankruptcy Court granted Deutsche Bank’s motion for relief from the automatic stay imposed by 11 U.S.C. 362. In granted the relief from the automatic stay, the Bankruptcy Court concluded that property involved in the case had already been sold and deed to Deutsche Bank as of the date of the bankruptcy. Due to this, the bankruptcy estate did not have a possessory interest in the property, and it was of inconsequential value to the bankruptcy estate. Furthermore, Deutsche Bank was entitled to an order directing the Bankruptcy Trustee to abandon the property. The Bankruptcy Court order lifting the stay was appealed.

The debtor in this case borrowed money in 2006 and the debt was evidenced by a note and a mortgage. Deutsche bank recorded its mortgage. The Debtor did not make the required payment on the loan and it was found to be in default. Without a cure for the default, Deutsche Bank was entitled to foreclose on the loan. Deutsche Bank obtained summary judgment in 2010 and a judgment entry and decree of foreclosure was entered by the State court. They sought a Sheriff’s sale and the property was purchased by Deutsche Bank and confirmed by the state court. Ultimately, Deutsche Bank was issued a sheriff’s deed and recorded it in the land records of Summit County in 2017. In 2018, the Debtor filed a voluntary Chapter 7 Bankruptcy petition and several months later, commenced an adversary proceeding.

On appeal, the granting or denial of relief from the automatic stay is considered a final and appealable order. The order regarding relief will be reviewed by the appellate court only for an abuse of discretion unless clearly erroneous with respect to factual findings but may engage in plenary review with respect to issues of law. The appellate court engaged in a review of only some of the Debtor’s arguments but ultimately found they had been resolved in order courts and were not properly before the appellate court here. The appellate court held that they will not review the decisions of state courts as to the validity of the Sheriff’s deed or whether or not relief from the stay was unlawful given that Deutsche Bank was a trust. The court explained that the federal courts do not have subject matter jurisdiction to review state court decisions and that they appeal should have been brought in State court.

The court did briefly opine on whether the bankruptcy court abused its discretion granting relief from the automatic stay. The court’s position was that under Ohio Law, Deutsche Bank purchased the property at a foreclosure sale, and as such, acquired all of the mortgagee’s rights – including the right of possession. Even if the date the Sheriff’s deed was recorded was the date these rights came into fruition, it was before the bankruptcy petition was filed. The Debtor had no legal interest in the property at the time the petition was filed and so the property was not part of the bankruptcy estate nor protected by the automatic stay.

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