Pleasant Hill, CA asked in Bankruptcy for California

Q: Superior court matter stayed due to bankruptcy auto-stay… does that remove jurisdiction from state court?

We brought an administrative mandamus action in State Calif Superior court against local city agency for land use decision on a property whose prior owner was in Chapter 11 bankruptcy. Superior court judge ordered that due to auto stay provisions(11 USC 362), no further proceedings until AFTER the bankruptcy stay was lifted by Bankruptcy Court order. Property involving our mandamus action was later sold to us, but bankruptcy matter still pending. Upon stay being ordered, does that remove jurisdiction from the State Superior court?

What is the status of jurisdiction in this Superior Court matter?

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3 Lawyer Answers
Bahram Madaen
Bahram Madaen
Answered
  • Bankruptcy Lawyer
  • Sunland, CA
  • Licensed in California

A: You can file a motion for relief from stay in the bankruptcy case and then you are allowed to continue with your case in state court.

W. J. Winterstein Jr.
W. J. Winterstein Jr.
PREMIUM
Answered
  • Bankruptcy Lawyer
  • Boyertown, PA

A: The automatic stay in a bankruptcy case simply prohibits actions, or the continued prosecution of actions, against the debtor or his property. If the debtor no longer has an interest in the property subject to the California state court action, and there is no threat of liability of the debtor in that action, then the automatic stay should not reach or affect the California state court action. (If there is some "recourse" in your purchase of the property from the bankruptcy debtor, that would support some involvement/reach of the bankruptcy court to your Superior court case).

That said, the rule of thumb is-when in doubt, seek relief from stay from the bankruptcy court to proceed with any action in a non-bankruptcy court.

Pay some attention to the bankruptcy court's jurisdiction, and "core" and "non-core" matters, and the "arising under" and "related to" issues under 28 U.S. Code § § 157, 1334.

It should be a simple step to procure relief from stay from the bankruptcy court to proceed in your Superior Court action.

W. J. Winterstein Jr.
W. J. Winterstein Jr.
PREMIUM
Answered
  • Bankruptcy Lawyer
  • Boyertown, PA

A: Follow-up to my previous answer.

In theory, it is possible that the debtor's transfer of the property to you can be questioned/attacked, and the property ordered to be returned to the debtor's bankruptcy estate, for, e.g., inadequacy of the purchase price compared to fair market value of the property. That sort of action can be brought by a Ch. 11 debtor (who enjoys the powers of a bankruptcy trustee), or a Ch. 7 or Ch. 13 trustee. Procuring relief from stay from the bankruptcy court should effectively terminate that threat.

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