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In Re Samuel G. Bialac, Debtor. Samuel G. Bialac v. Harsh Investment Corporation and Harsh Building Co.
Citations: 694 F.2d 625; 7 Collier Bankr. Cas. 2d 899Docket: 82-5135
Court: Court of Appeals for the Ninth Circuit; December 13, 1982; Federal Appellate Court
The case involves a dispute regarding the right of Harsh Investment Corporation and Harsh Building Co. to foreclose on a note securing a judgment against debtor Samuel G. Bialac, who filed for Chapter 11 bankruptcy. An automatic stay was imposed on Bialac’s property, but the bankruptcy court lifted the stay to allow foreclosure. Bialac attempted to block this with an injunction from a different bankruptcy judge, which was later vacated by the Bankruptcy Appellate Panel (BAP), affirming the lifting of the stay. On appeal, Bialac contended that the bankruptcy court abused its discretion by concluding he had no equity in the note and that it was not essential for his reorganization. The BAP upheld the lower court's decision, indicating Bialac needed to demonstrate equity in the note exceeding $448,000, which he failed to do. Testimonies confirmed the note's value was significantly below this threshold, supporting the conclusion that Bialac had no equity in the note, thus justifying the lifting of the automatic stay under 11 U.S.C. § 362(d)(2). The bankruptcy court acted within its discretion by assessing the value of the note during the Sec. 362(d) hearing, as issues surrounding the debtor's equity are pertinent to stay proceedings. Although a Sec. 362(d) hearing is designed for expedited decisions regarding lack of adequate protection and the necessity of property for effective reorganization, it allows for consideration of the note’s payment terms if they are crucial to valuation. The court affirmed that Bialac had no equity in the note and that it was not essential for reorganization. Additionally, the order vacating the injunction by the second bankruptcy court was upheld, as that court lacked jurisdiction due to the overlapping issues with the trial for relief from stay. A bankruptcy court cannot vacate or modify orders while an appeal is pending. The Senate Committee's considerations for Sec. 362 emphasize that stay hearings should focus on equity and need, not collateral counterclaims. If Bialac believed that a newly completed reorganization plan could affect the initial stay decision, he should have requested a motion for relief under Fed.R.Civ.P. 60(b) and sought a remand if the court showed willingness to consider it.