From another listserve. The debtor files – postpetition – a Motion to Vacate Judgment against him in state court. He was the defendant in the state court case. Is he violating the automatic stay?
My first reaction was to say – of course not. The automatic stay in section 362(a) is actually pretty specific.
Filing a petition “operates as a stay,” “(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title.”
The debtor is not proceeding against himself.
Someone immediately posted – rightly so – that the debtor may not proceed with an appeal – postpetition – if the debtor was the defendant in the underlying action.
See Parker v. Bain, 68 F.3d 1131 (9th Cir. 1995)
We need not spill a great deal of ink discussing the assertion, pressed by Parker, that an appeal by the debtor cannot constitute the continuation of an action against the debtor. This Court, as well as seven other courts of appeals,has concluded that the automatic stay can operate to prevent an appeal by a debtor when the action or proceeding below was against the debtor. “[S]ection 362 should be read to stay all appeals in proceedings that were originally brought against the debtor, regardless of whether the debtor is the appellant or the appellee….” Ingersoll-Rand Fin. Corp. v. Miller Mining Co., 817 F.2d 1424, 1426 (9th Cir.1987) (quoting Cathey v. Johns-Manville Sales Corp., 711 F.2d 60, 62 (6th Cir.1983)); see also Delpit v. Commissioner Internal Revenue Serv., 18 F.3d 768, 770-71 (9th Cir. 1994). This rule finds its source in the language of section 362, which extends the automatic stay to the continuation, as well as the commencement, of an action against the debtor. [emphasis in original].
Still makes no sense to me therefore my view is that the debtor may proceed and ask the state court to vacate the judgment. Would I proceed without seeking relief? Probably not. In the 9th Circuit, you don’t violate the stay! I can’t imagine a set of facts where it was worth the risk to find out if I’m right about this.
Another thought I had on the issue is that the debtor may no longer be the real party in interest. That really has nothing to do with the stay but a lot to do with whether the debtor may proceed.