Kipps v. Stincavage-Kipps

UNITED STATES BANKRUPTCY COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

In re: : Chapter 13

:

Ronald William Kipps, : Case No. 5:19-01662-MJC

:

Debtor. :

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

Ronald Kipps, :

:

Plaintiff, : Adversary Proceeding

: No. 5:19-00064-MJC

v. :

:

Margaret Stincavage-Kipps, :

:

Defendant. :

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O P I N I O N

I. INTRODUCTION

Before the Court is the Defendant’s motion for summary judgment on the

Debtor/Plaintiff’s claim for damages relating to the Defendant’s alleged willful violation of the

automatic stay under 11 U.S.C. §362. The Plaintiff alleges that: (i) pre-petition, the Defendant

caused the Debtor’s bank accounts to be frozen and post-petition, refused to release the account;

and (ii) in a state court divorce proceeding between the parties the state court, post-petition,

exercising “concurrent jurisdiction” found that the automatic stay did not apply and ordered that

certain deeds be executed transferring ownership from the Plaintiff to the Defendant based upon

a prior state court order. The Defendant argues that her actions were proper and that she is

entitled to summary judgment because (i) there is no obligation to release a pre-petition levy, and

(ii) the Defendant cannot be found liable for a willful stay violation where the state court

specifically found that the stay did not apply.

For the reasons that follow, the Court concludes there are no issues of material fact, the

Defendant did not have a post-petition obligation to release the bank accounts, and the state court

correctly determined that the execution of the deeds was a ministerial act that was not subject to

the automatic stay. Accordingly, the Defendant is entitled to summary judgment on her motion.

II. PROCEDURAL HISTORY

On April 22, 2019, Plaintiff Ronald William Kipps (“Plaintiff” or “Debtor”) filed his

Voluntary Petition for Relief under Chapter 13 of the Bankruptcy Code. On May 24, 2019, the

Plaintiff filed this Adversary Proceeding against his former spouse, Defendant Margaret

Stinavage-Kipps1 (“Defendant” or “Defendant/Wife”) for alleged violations of the automatic stay

for refusing to release bank accounts that were frozen pre-petition and participating in a state

court proceeding post-petition relating to the conveyance of former marital property and

contempt proceedings. Dkt. # 1.2 The Plaintiff seeks damages in excess of $25,000.00,

reimbursement of counsel fees, and injunctive relief.

On June 7, 2019, the Plaintiff filed an Emergency Motion for Immediate Injunctive

Relief (“Motion for Injunctive Relief”), Dkt. # 6, requesting that all state court proceedings be

stayed; the frozen bank accounts be released to the Debtor; the Defendant be enjoined from

pursuing the execution and filing of the subject deeds; and the Defendant be enjoined from

transferring or seizing any Estate property. On June 14, 2019, the Defendant filed an Answer

and Request for Sanctions and Relief from Automatic Stay. Dkt. # 9. On June 17, 2019, Judge

Robert N. Opel (now retired) held a hearing on the Motion for Injunctive Relief. After making

findings on the record, Judge Opel entered an Order dated June 17, 2019, Dkt. # 12, granting in

1 The Plaintiff appears to have misspelled the Defendant’s surname when he instituted this

proceeding.

2 An amended complaint was filed on October 15, 2020 (“Amended Complaint”). Dkt. # 47.

part and denying in part the Motion for Injunctive Relief. Judge Opel found that the Plaintiff

could suffer irreparable harm if the frozen bank accounts were not released. However, relying

on the Rooker-Feldman Doctrine, the Court found that the Plaintiff had no reasonable likelihood

of prevailing on a challenge to the 2017 Equitable Distribution Order entered in the pending state

court divorce action and denied all other injunctive relief. Dkt. # 12, ¶ 11.3 The Court found that

Rooker-Feldman “provides that this Court lacks subject matter jurisdiction over challenges to

certain final state court judgments.” Id. (citing Great W. Mining & Mineral Co. v. Fox

Rothschild LLP, 615 F.3d 159 (3d Cir. 2010)).

On November 5, 2020, the Defendant filed an answer to the Amended Complaint

(“Answer”), Dkt. # 49, which asserted that (i) the pre-petition levy and refusal to release the levy

post-petition was not a violation of the stay, and (ii) the State Court properly moved forward

post-petition to award and convey the subject real property to the Defendant.

On July 1, 2021, the Defendant filed a Motion for Summary Judgment (“Motion”). Dkt.

# 71. The parties have filed briefs and pursuant to Local Bankruptcy Rules 7002-1 and 7056-1

which incorporate Local Rule 56.1 of the District Court, the Plaintiff and the Defendant each

filed a Statement of Material Facts. See Dkt. #’s 82 and 85-1. Except for the issue of damages,

there does not appear to be any dispute as to the operative and material facts.

III. JURISDICTION

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§157 and 1334 and the

Standing Order of Reference of the U.S. District Court for the Middle District of Pennsylvania

3 The Rooker-Feldman doctrine applies in certain circumstances where a federal lawsuit follows a

state court suit and prohibits a federal court from subsequently exercising jurisdiction. The doctrine takes

its name from two cases in which the Supreme Court has applied it to defeat federal subject-matter

jurisdiction: Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S. Ct. 149 (1923), and District of Columbia

Court of Appeals v. Feldman, 460 U.S. 462, 103 S. Ct. 1303 (1983).

dated March 11, 2016. The claims asserted in the Amended Complaint are core proceedings

pursuant to 28 U.S.C. §157(b)(2)(A). Venue is proper pursuant to 28 U.S.C. §1409(a).

IV. FACTS4

The material facts here are not in dispute. From the parties’ submissions the Court finds

the following facts to be relevant:

1. On April 22, 2019, the Plaintiff/Debtor filed his Voluntary Petition for Relief

under Chapter 13 of the Bankruptcy Code.

2. On June 14, 2019, the Debtor filed his Schedules. BK Dkt. # 28. On his

Schedule A, he lists several parcels of real property having a value of $1,659,300.00. On

Schedule I, Debtor indicates that he is a “Retired-Farmer” and his sole income is $770.00 from

social security benefits and $497.00 from a “Trust Fund” for a total monthly income of

$1,267.00.

3. At the time of the bankruptcy filing, the Plaintiff/Debtor and the Defendant/Wife

were parties to a pending divorce action in the Court of Common Pleas of Susquehanna County,

Pennsylvania captioned Margaret Stinavage-Kipps v. Ronald W. Kipps, No. 2012-2213-CP

(“State Court Action”).

4. On March 10, 2017, the Court of Common Pleas of Susquehanna County,

Pennsylvania (“State Court”) entered an order (“2017 Equitable Distribution Order”) overruling

and sustaining certain objections of both the Plaintiff/Debtor and the Defendant/Wife to a

November 15, 2016 Report and Recommendations submitted by the Divorce Master regarding

the equitable distribution of assets in the divorce proceeding. See 2017 Equitable Distribution

4 Docket entries in the main bankruptcy case are noted as “BK Dkt.” and all other docket entries

refer to this Adversary Proceeding (“Dkt.”).

Order; Dkt. # 82-1. The 2017 Equitable Distribution Order directed that the Debtor, inter alia,

convey the jointly owned real property “held [in] New York State” and the 9.53 acres located in

Clifford Township (collectively “Property”) to the Defendant and make an “equalization

payment” to the Defendant in the amount of $419,871.09 within 90 days of the date of the Order.

5. The Debtor appealed the 2017 Equitable Distribution Order to the Superior Court

of Pennsylvania and the Superior Court affirmed. On or about July 25, 2018, the Debtor filed a

Petition For Allowance of Appeal to the Pennsylvania Supreme Court, and on February 4, 2019,

the Pennsylvania Supreme Court denied the Petition For Allowance of Appeal. See Amended

Answer, Ex. C; Dkt. # 52.

6. On January 30, 2019, the State Court issued an order freezing all bank accounts of

the Debtor up to an amount of $80,000.00 and scheduled a hearing for May 3, 2019 on the

Defendant’s Emergency Petition For Special Relief. See Dkt. # 82-2.

7. By letter dated April 22, 2019, the Debtor notified the Defendant’s State Court

attorney that the Debtor had filed bankruptcy. Dkt. # 85-1, ¶1, Ex. H.

8. On April 25, 2019, the State Court held a hearing on the Defendant/Wife’s (i)

Motion to Compel the execution of deeds and (ii) Emergency Petition for Special Relief relating

to the bank accounts. See April 25, 2019 Transcript at 3; Dkt. # 85-3, Ex. A.

9. On April 26, 2019, the Debtor filed a Suggestion of Bankruptcy in the State Court

Action. See Dkt. # 85-1, ¶ 2, Exhibit G.

10. On May 3, 2019, the State Court conducted a hearing and issued two separate

orders each dated May 3, 2019. One order granted the Defendant/Wife’s petition seeking the

Susquehanna County Prothonotary (on behalf of the Plaintiff/Debtor) to execute certain deeds in

favor of the Defendant/Wife; and a second order scheduled a hearing for June 18, 2019, to

determine whether the Plaintiff/Husband should be held in criminal contempt for his prior

actions and conduct in the divorce proceedings which “attack the dignity and integrity of this

Court’s Order (dated January 30, 2019).” See Dkt. #’s 82-3 & 82-4, Exs. C & D.

11. The State Court found that, based on its concurrent jurisdiction with federal

bankruptcy courts over determinations regarding the applicability of §362, the automatic stay did

not apply to ministerial acts, including the execution of deeds necessary to effectuate the transfer

of the marital property awarded pursuant to the 2017 Equitable Distribution Order. See May 3,

2019 State Court Order, n. 1.

12. On June 18, 2019, the Defendant/Wife complied with this Court’s June 17, 2019

Order directing that the Plaintiff/Debtor’s frozen accounts be released. See Dkt. # 15.

13. This Court (Judge Opel) determined that the State Court criminal contempt

proceeding was excepted from the automatic stay pursuant to §362(b)(1). See June 17,

2019 Order, ¶15.

14. On June 18, 2019, the State Court found the Plaintiff/Debtor guilty of criminal

contempt and fined him $2,550.00. See Dkt. # 85-3, Ex. K.

15. On July 1, 2019, the Defendant filed a Proof of Claim No. 5 (“Claim”) in the

amount of $447,964.28 based the 2017 Equitable Distribution Order. 5

5 The Claim is comprised of the equalization payment of $419,871.09 plus interest of $28,093.19

for a total of $447,964.28. The 2017 Equitable Distribution Order also provided that if the Debtor failed

to pay, the Defendant would be entitled to a first priority mortgage lien against 186.65 acres in Clifford

Township and 3.18% per annum interest payable over a 10-year period.

V. LEGAL ANALYSIS

A. SUMMARY JUDGMENT STANDARD

Pursuant to Federal Rule of Civil Procedure 56(a) (made applicable to this adversary

proceeding by Fed. R. Bankr. P. 7056): “The court shall grant summary judgment if the movant

shows there is no genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law.” E.g., Steele v. Cicchi, 855 F.3d 494, 500 (3d Cir. 2017); Transguard Ins. Co.

of Am. Inc., v. Hinchey, 464 F. Supp. 2d 425, 429 (M.D. Pa. 2006). Thus, the inquiry on a

motion for summary judgment is to determine whether there is a disputed issue of material fact.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505 (1986); Hinchey, 464 F.

Supp. 2d at 430. “A dispute of material fact is ‘genuine’ only if the evidence ‘is such that a

reasonable jury could return a verdict for the non-moving party.’” Holbrook v. Jellen, 2017 WL

4401897, at *4 (M.D. Pa. Mar. 8, 2017) (quoting Anderson, 477 U.S. at 248).

The moving party has the initial burden to demonstrate “the absence of a genuine issue of

material fact.” United States v. Donovan, 661 F.3d 174, 185 (3d Cir. 2011) (quoting Celotex

Corp. v. Catrett, 477 U.S. 317, 323 (1986)). If the moving party meets this initial burden, then

the burden shifts to the non-moving party to “come forward with specific facts showing that

there is a genuine issue for trial.” Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 586-87 (1986)). On summary judgment, the court must draw all reasonable

inferences in favor of the non-moving party. United States v. 717 S. Woodward St., 2 F.3d 529,

533 (3d Cir. 1993).

When the moving party has the burden of proof at trial on the underlying claim, the Third

Circuit Court of Appeals characterized the standard as more stringent, explaining that the moving

party must establish that no reasonable jury could find for the non-moving party in essence by

producing enough evidence to justify a directed verdict in its favor. Donovan, 661 F.3d at 185;

Kahle v. Roemmele (In re Roemmele), 2011 WL 4804833, at *4 (Bankr. E.D. Pa. Oct. 11, 2011).

When the moving party does not carry the burden of proof at trial, the moving party has

the initial burden of showing the absence of a genuine issue of material fact. Roemmele, 2011

WL 4804833, at *4. The moving party “has no obligation to produce evidence negating its

opponent’s case. The moving party merely has to point to the lack of any evidence supporting

the non-movant’s claim.” Nat’l State Bank v. Fed. Reserve Bank of New York, 979 F.2d 1579,

1582 (3d Cir. 1992) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986)). In this

proceeding, the Defendant as the moving party is required to establish that the Plaintiff has not

supported one or more elements of his claim under §362(k) or that the undisputed evidence

negates an element of the claim.

B. THE PARTIES’ CONTENTIONS

The Plaintiff asserts that the Defendant violated the automatic stay by (i) refusing to

release the frozen accounts after the filing of the bankruptcy petition; and (ii) by participating in

the State Court Action post-petition, where the State Court explicitly found that it was exercising

“concurrent jurisdiction” in finding that that the automatic stay did not apply and ordered that

certain deeds be executed transferring ownership of real property from the Plaintiff to the

Defendant based upon the 2017 Equitable Distribution Order. The Defendant argues that there

are no genuine issues of material fact, her actions were proper, and she is entitled to summary

judgment because (i) there is no obligation to release a pre-petition levy, and (ii) the Defendant

cannot be found liable for a willful stay violation where the State Court specifically found that

the stay did not apply. Given the parties submissions relating to the Motion, the Court finds that

there are no issues of material fact outstanding.

C. THE AUTOMATIC STAY

a. General Principles

The Plaintiff’s Amended Complaint asserts claims against the Defendant for violating the

automatic stay under §362. Somewhat inexplicably, the Amended Complaint does not assert any

specific sub-section of §362 that has been violated, and the Plaintiff’s brief likewise offers no

specificity as to the claims. See Dkt. # 85. Despite the defective pleadings and in order to not

delay the decision on this matter any further, the Court will consider each relevant subsection of

§362(a).6

Section 362(a) provides a fundamental protection of the debtor in bankruptcy and

operates as an automatic stay against certain actions. It provides, in pertinent part:

(a) Except as provided in subsection (b) of this section, a petition

filed under section 301, 302, or 303 of this title … operates as a

stay, applicable to all entities, of—

(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;

(3) any act to obtain possession of property of the estate or

of property from the estate or to exercise control over

property of the estate;

(4) any act to create, perfect, or enforce any lien against

property of the estate;

6 The Court will exclude §362(a)(7) and (8) from its consideration as those subsections do not

appear to be relevant under the facts of this proceeding.

(5) any act to create, perfect, or enforce against property of

the debtor any lien to the extent that such lien secures a

claim that arose before the commencement of the case

under this title;

(6) any act to collect, assess, or recover a claim against the

debtor that arose before the commencement of the case

under this title.

11 U.S.C. §362(a)(1)-(6).

The automatic stay is a mechanism under the Bankruptcy Code that provides broad

protection by freezing the status quo which in effect bars and nullifies post-petition actions in

non-bankruptcy cases against the debtor or property of the estate. Hillis Motors, Inc. v. Hawaii

Auto. Dealers’ Ass’n (In re Hillis Motors), 997 F.2d 581, 585 (9th Cir. 1993). The automatic

stay not only protects a debtor by granting a breathing spell from creditors but it “also protects

creditors as a class from the possibility that one creditor will obtain payment on its claim to the

detriment of all others.” Id.; City of Chicago, Illinois v. Fulton, 141 S. Ct. 585, 589 (2021)

(automatic stay “benefits creditors as a group by preventing individual creditors from pursuing

their own interests to the detriment of the others”); In re Krystal Cadillac Oldsmobile GMC

Truck, Inc., 142 F.3d 631, 637 (3d Cir. 1998) (absent automatic stay, creditors would be able to

pursue their own remedies to the detriment of other creditors).

b. Elements of Claim for Violation of Automatic Stay

To recover for a violation of the automatic stay, a debtor must show by a preponderance

of the evidence that: “(1) a violation of the stay occurred; (2) the creditor had knowledge of the

bankruptcy case when acting; and (3) the violation caused actual damages.” Kaushas v. Popple

Constr., Inc. (In re Kaushas), 616 B.R. 57, 62 (Bankr. M.D. Pa. 2020) (citing In re Linsenbach,

482 B.R. 522, 526 (Bankr. M.D. Pa. 2012)). “Willfulness does not require that the creditor

intend to violate the automatic stay provision, rather it requires that the acts which violate the

stay be intentional.” Kaushas, 616 B.R. at 62 (quoting In re Lansdale Family Rests., Inc., 977

F.2d 826, 829 (3d Cir. 1992)). Therefore, a creditor commits a willful violation of the stay, if it

acts with knowledge that the bankruptcy petition has been filed. Boltz-Rubinstein v. Bank of

Am. (In re Boltz-Rubinstein), 596 B.R. 494, 503 (Bankr. E.D. Pa. 2019) (quoting In re Lansaw,

853 F.3d 657, 664 n.4 (3d Cir. 2017)). A good faith belief that one’s actions did not violate the

stay is not a defense. In re Webb, 472 B.R. 665, 2012 WL 2329051 at *15 (B.A.P. 6th Cir.

2012) (citing TranSouth Fin’l Corp. v. Sharon (In re Sharon), 234 B.R. 676, 688 (B.A.P. 6th Cir.

1999)). A debtor may recover “actual damages, including costs and attorneys’ fees” for a willful

violation of the stay. 11 U.S.C. §362(k)(1).

D. THE DEFENDANT DID NOT VIOLATE THE STAY WITH RESPECT TO THE

FROZEN BANK ACCOUNTS

The first cause of action asserted in the Amended Complaint is merely titled as “Funds on

Deposit.” It relates to the Defendant’s refusal to “voluntarily” release the bank accounts post-

petition. 7 As stated above, the Amended Complaint does not identify any specific sub-section of

§362(a) that has been violated, simply stating:

8. Despite repeated demands, FNCB has failed to release said accounts from the

levy without the approval of the Defendant and/or her counsel.

9. That the Defendant has refused to take any steps to release the levy and has

continued to act in willful violation of the automatic stay to the great and ongoing

detriment of the Plaintiff.

7 The State Court froze the Debtor’s bank accounts pursuant to its January 30, 2019 Order, thus,

this is not a typical garnishment action by a creditor. The State Court directed that the accounts be frozen

“up to an amount of $80,000.00” which represented funds the Debtor received in connection with a lease

and sale option of 400 acres of land in New York after the property had been awarded to Ms. Stinavage-

Kipps. Based on the State Court record, it appears the Debtor admitted to receiving $40,000.00 in 2017

and an additional $40,000.00 in 2018 for the lease/purchase of the property without Ms. Stinavage-Kipps’

approval. June 18, 2019 Tr. at 28-32; Dkt. # 85-3. This Court could not find any disclosure or mention

of a lease or sale of property in the Debtor’s Schedules, Dkt. # 28, or Statement of Financial Affairs, Dkt.

# 29, or the receipt of those funds.

On October 28, 2021, at oral argument on the Motion, Counsel for the parties

acknowledged the United States Supreme Court’s Fulton, supra, decision (relating to creditor’s

refusal to release a pre-petition impounding of automobiles) and this Court’s then recent decision

in In re Margavitch, 2021 WL 4597760 (Bankr. M.D. Pa. Oct 6, 2021), which dealt with similar

allegations regarding a levied bank account. Much like the facts in Fulton and Margavitch, there

is no allegation here of any affirmative action taken as to the frozen accounts after the filing of

the bankruptcy petition. The Plaintiff asserts only that the Defendant refused to release the

frozen accounts.

1. The Defendant Did Not Violate §362(a)(3)-(6)

The Court will turn first to §362(a)(3)-(6) and consider those subsections together. The

Supreme Court in Fulton specifically limited its decision to interpreting §362(a)(3).8 In

discussing Fulton, this Court observed that

The Supreme Court determined that the “most natural reading” of

the operative terms of § 362(a)[(3)], i.e., “stay,” “act,” and

“exercise control,” would be a prohibition on affirmative acts that

disturb the status quo of estate property as of the petition date. Id.

at 590. The Supreme Court further determined that the language of

(a)(3) implies something more than merely having control of, or

retaining power over, estate property. In reaching its holding, the

Supreme Court rejected the debtors’ argument that § 362(a)(3)

covers the mere retention of estate property because to do so would

render the turnover provision in § 542 superfluous and essentially

transform § 362(a)(3) into a blanket turnover provision. The

Supreme Court found that this was not the intent of Congress when

it added the phrase “or to exercise control of property of the estate”

in 1984 amendments. Id. at 591-92. The Supreme Court

specifically found that § 362(a) imposes no “turnover obligation”

and is not to be construed as an “enforcement arm of sorts for §

542(a)....” Id. at 592. Furthermore, the Supreme Court found that

the debtors’ interpretation of § 362(a)(3) would render the

8   See Fulton, 141 S. Ct. at 592 (“Nor do we settle the meaning of other subsections of §362(a).”).

commands of § 362(a)(3) and § 542 as contradictory given the fact

that § 542 carves out specific exceptions to the turnover command.

Id. at 591.

Margavitch, 2021 WL 4597760 at *5 (footnotes omitted).

Because subsections (a)(4), (5), and (6) also all begin with the phrase: “any act to,” it

follows that Fulton’s reasoning regarding §362(a)(3) can be applied to these other subsections.

Fulton determined that an affirmative act is likely necessary to violate §362(a)(3).9 Therefore, as

this Court found in Margavitch, it logically follows that an affirmative post-petition “act” is

necessary to constitute a violation of those subsections. Margavitch, 2021 WL 4597760, at *6.

Because the Defendant did not take any post-petition action to “control” the accounts that had

been frozen and the Defendant did not gain any advantage with respect to the Debtor or property

of the estate, the mere retention of the status quo of a valid pre-petition state court attachment or

lien without more, is not a violation of §362(a)(3) - (6). See id. at *7.

Here, the State Court imposed a pre-petition freeze on the Debtor’s bank accounts. This

Court continues to adhere to the view that based on the reasoning of Fulton, there is no

obligation set forth in §362(a) that compels a creditor to “turnover” or release a valid lien once a

bankruptcy is filed.10 The Defendant was thus, not required to withdraw the attachment because

to do so would put her in a more disadvantageous position than she had been as of the petition

9 The Supreme Court’s holding is qualified slightly: “We do not maintain that these terms

definitively rule out the alternative interpretation adopted by the court below and advocated by

respondents. As respondents point out, omissions can qualify as ‘acts’ in certain contexts.” Fulton, 141

S. Ct. at 590. See also In re Iskric, 496 B.R. 355, 362 (Bankr. M.D. Pa. 2013) (where creditor was found

to violate stay and discharge injunction under §524(a)(2), by failing to seek a vacatur of state court civil

contempt order which resulted in issuance of bench warrant against debtor and her subsequent

incarceration in county prison for several days).

10 The Fulton Court specifically set forth a debtor’s right to seek a “turnover” under 11 U.S.C. §

542 which is separate from a §362(a) claim. Fulton, 141 S. Ct. at 590-591. In fact, the Debtor here did

file a post-petition motion seeking a release of the funds. See Dkt. # 6.

date and she was entitled to maintain the status quo. Id. at *6. The Defendant merely

maintained the status quo as of the petition date, which did not violate the stay.

2. The Defendant Did Not Violate §362(a)(1)-(2)

Again, although the Plaintiff did not plead a violation of any specific sub-section of

§362(a), it would appear that §362(a)(1) or (a)(2) might be more applicable.11 Section 362(a)(1)

prohibits the “commencement or continuation” of a judicial, administrative, or other action or

proceeding against the debtor and (a)(2) prohibits the “enforcement” of a pre-petition judgment

against the debtor.

Subsection (a)(1) is very broad in its reach and covers all

types of legal proceedings. See Galmore v. Dykstra (In re

Galmore), 390 B.R. 901, 910 (Bankr. N.D. Ind. 2008) (“Every

proceeding of a judicial or quasi-judicial nature is affected.”

(quoting In re Joe DeLisi Fruit Co., 11 B.R. 694, 695 (Bankr. D.

Minn. 1981))). For purposes of subsection (a)(1), “continuation”

has generally been interpreted to mean the “carrying forward … of

a proceeding that has already begun.” Taylor v. Slick, 178 F.3d

698, 702 (3d Cir. 1999). It does not cover actions taken to

continue, i.e., postpone a proceeding that preserves the status quo

until the bankruptcy process has concluded. Id.

* * *

[Section] 362(a)(2) stays the enforcement of a pre-petition

judgment against a debtor or property of the estate. §362(a)(2).

“Enforcement” is defined as “[t]he act or process of compelling

compliance with a law, mandate, command, decree, or agreement.”

Black’s Law Dictionary (11th ed. 2019).

Margavitch, 2021 WL 4597760, at *7-8.

While divorce counsel for the Defendant did appear at the post-petition State Court

proceedings, Counsel did not seek any affirmative relief with respect to the frozen accounts, i.e.,

11 The Defendant’s meandering 35 page brief in response to the Motion likewise does not identify

any specific section of the Code.

to continue or enforce the garnishment/levy process.12 Because there is no evidence that there

was a change in the status quo, the Court finds that there was no violation of §362(a)(1) and

(2).13 Accordingly, summary judgment shall be granted in favor of the Defendant as to the

Plaintiff’s first cause of action labeled “Bank Accounts.”

E. THE DEFENDANT DID NOT VIOLATE THE STAY WITH RESPECT TO THE

REAL PROPERTY

The Plaintiff’s second cause of action is titled “Real Property.” Like the first claim, the

Plaintiff does not identify what section of §362(a) was violated, nor does he identify any

damages.14 This claim relates to the State Court’s Order directing the Susquehanna County

Prothonotary to execute the deeds transferring the real property awarded to the Defendant

pursuant to the 2017 Equitable Distribution Order, and the Defendant pursuing a contempt

finding against the Debtor/Plaintiff. After a full review of the transcripts of the proceedings held

in the State Court Action, it’s clear that the State Court Judge went forward with these

proceedings not only to allow for the transfer of the real property but also because the State

Court was not pleased with the Debtor’s conduct in the divorce proceedings and pursued a

criminal contempt proceeding due to the Debtor

12 This Court reviewed the transcripts of the State Court proceedings held on April 25, 2019, Dkt. #

85-3, Ex. A, and May 3, 2019, Dkt. #85-3, Ex. D. Counsel for the Defendant acknowledged that the

frozen accounts were subject to the §362 stay (Ex. A at pp. 4 and 10). The State Court agreed and was

more concerned with the Debtor’s conduct in disobeying its order and moving forward on seeking

contempt.

13 Further, at the May 3, 2019 hearing, the State Court specifically found that any related financial

matters regarding the Debtor would be stayed but that it would go forward with a criminal contempt

proceeding due to “a course of conduct by Mr. Kipps which attack[s] the dignity and integrity of this

Court’s Order …” May 3, 2019 Tr. at 12, Dkt. # 85-3.

14 The closest this Court can find as to an averment of damages is at ¶14 of the Amended Complaint

where the Plaintiff states that the involuntary conveyance of real property in Susquehanna County has

caused “loss and detriment” to him. Debtor’s Brief, Dkt. # 85-4 at 22, sets forth certain unspecified

damages but that is not verified by any affidavit or otherwise properly supported.

demonstrating a course of conduct … which attack[s] the dignity

and integrity of this Court’s order, and the Defendant (Debtor) now

having failed to appear at two separate proceedings the first being

a hearing on April 25, 2019 and the second being today’s date, the

Court hereby schedules a criminal contempt hearing to be held on

June 18, 2019, commencing at 11:00 a.m. The Defendant, Ronald

W. Kipps, is advised that should he fail to appear for the criminal

contempt hearing, a Bench Warrant will be issued for his arrest.

May 3, 2019 State Court Order. Given the convoluted nature of the Plaintiff’s claim, as alleged,

the Court will break it down into two separate sections – the Defendant/Wife’s conduct in

connection with (1) the post-petition execution of deeds, and (2) the pursuit of the contempt

finding against the Debtor.

1. The Post-Petition Court Ordered Real Property Transfers

As set forth above, the 2017 Equitable Distribution Order directed the Plaintiff/Husband

to convey the Property to the Defendant/Wife. Despite this Order, and without any apparent

justification, the Debtor failed to execute the deeds, which necessitated the Defendant’s Motion

to Compel in the State Court Action. The State Court entered an Order on January 30, 2019

scheduling a hearing for May 3, 2019. The Debtor filed his bankruptcy case on April 22, 2019

and timely advised the State Court and the Defendant’s Counsel of the filing.

Notwithstanding the filing, the State Court held a hearing on April 25, 2019 on the

Defendant/Wife’s petitions seeking execution of the deeds and relating to the freezing of the

Debtor’s bank accounts. See Transcript at Dkt. # 85-3, Ex. A. The Debtor’s Counsel and

divorce counsel for the Defendant/Wife appeared. The Debtor’s Counsel confirmed that the

Debtor had filed bankruptcy and informed the State Court that all matters were stayed pursuant

to §362. Id. at 3-4. The State Court disagreed, stating that “the deed situation seems to me to be

the one that should not be stayed … [b]ecause she’s (Defendant) the owner of that property by an

Opinion that’s been confirmed by the Superior Court” and “[c]ertainly Mr. Kipps is not

prejudiced because it’s not his property. It wouldn’t be part of the bankruptcy – bankrupt estate

at all… This is not property of the estate.” April 25, 2021 Tr. at 4-5. In response to the Debtor’s

argument that the Property should be considered property of the bankruptcy estate, the State

Court pointed out that title to the Property remained in the Debtor’s name “[o]nly because of his

willful misconduct in refusing to comply with this Court’s Order.” Id. at 6-7.15

a. The State Court had Concurrent Jurisdiction

In its May 3, 2019 Order, the State Court correctly found that it had concurrent

jurisdiction to determine the applicability of the automatic stay imposed under §362.16 It has

long been recognized that a state court is capable and empowered to determine whether the

automatic stay under §362 is applicable in a matter before it. See Brock v. Morysville Body

Works, Inc., 829 F.2d 383, 387 (3d Cir. 1987). In Brock, the Third Circuit found that it had

jurisdiction over a federal employer/employee enforcement matter notwithstanding the pending

Chapter 11 proceeding of the employer. The Court stated:

We have no difficulty deciding that we may determine the

applicability of the automatic stay. As the Second Circuit has said,

“[w]hether the stay applies to litigation otherwise within the

jurisdiction of a district court or court of appeals is an issue of law

within the competence of both the court within which the litigation

is pending ... and the bankruptcy court supervising the

reorganization.” The court in which the litigation claimed to be

stayed is pending thus “has jurisdiction to determine not only its

own jurisdiction but also the more precise question whether the

proceeding pending before it is subject to the automatic stay.”

15 The Property was in the names of both parties as of the petition date.

16 The Bankruptcy Court has the power to review the State Court’s determination regarding the

applicability of the automatic stay as an exception to the Rooker-Feldman doctrine under Kalb v.

Feuerstein, 308 U.S. 433, 438–40, 60 S. Ct. 343, 345–46 (1940). Accord Raymark Indus., Inc. v. Lai,

973 F.2d 1125 (3d Cir. 1992).

Brock, 829 F.2d 383, 387 (3d Cir. 1987) (citations omitted). Although Brock was a federal court

deciding whether it had jurisdiction to determine the applicability of the stay, this rationale has

been extended to allow state courts to have concurrent jurisdiction. See In re Grigg, 2013 WL

5771870 at *14 (Bankr. W.D. Pa. 2013); Cortellessa v. Cortellessa, 2006 WL 1997407 at *2

(Bankr. E.D. Pa. June 9, 2006); Pennsylvania Department of Environmental Resources v.

Ingram, 658 A.2d 435, 438 (Pa. Commw. Ct. 1995).

b. Execution of the Deeds was a Ministerial Act

that Did Not Violate the Automatic Stay

The State Court was first confronted with the issue of the Debtor’s bankruptcy filing at

the April 25, 2019 hearing on the Defendant/Wife’s two petitions: one requesting the execution

of the deeds and the other requesting emergency relief as to the Debtor’s bank accounts. The

Debtor’s Counsel appeared at the hearing to inform the State Court of the bankruptcy filing and

to assert the Debtor’s position that the State Court proceedings were therefore stayed. The State

Court heard brief argument and indicated on the record its belief that the real property was not

the Debtor’s property or property of the bankruptcy estate, and the Defendant was the owner,

based on the 2017 Equitable Distribution Order. See April 25, 2019 Tr. at 5-7. The State Court

did not make a determination regarding the automatic stay until May 3, 2019. The State Court

found:

The equitable distribution award is now a final order and [the

Defendant’s] entitlement to ownership of that real property has been

established.

Prior to [the Debtor] filing his bankruptcy petition, [the

Defendant’s] counsel had prepared deeds in compliance with the

equitable distribution award and forwarded said deeds to [the

Debtor’s] legal counsel. [The Debtor] refused to sign the deeds in

compliance with March 10, 2017 final equitable distribution order

and thereafter filed a bankruptcy petition. Given the facts presented

in this case, the execution of the deeds as required under the March

10, 2017 equitable distribution order is a ministerial act that cannot

be thwarted by [the Debtor’s] obstinance prior to the filing of his

bankruptcy petition or the automatic stay imposed under § 362 upon

the filing of defendant’s bankruptcy petition. Given [the Debtor’s]

refusal to execute the necessary deeds, the Susquehanna County

Prothonotary has the power and authority to execute the deeds if

directed to [sic] so by this court. See Friday v. Friday, 12 Phila. Co.

Rep. 655, 568 (Phila. Ct. Common Pleas 1985); Miller v.

DeSzirmay, 58 Pa. D. & C.2d 731, 734 (Pike Ct. Common Pleas

1971).

May 3, 2019 Order, n. 1.

The Plaintiff argues here that the State Court was incorrect and the Property was property

of the estate and subject to the automatic stay. Regardless of whether the State Court was correct

in its statement that the Debtor’s interest was extinguished by the 2017 Equitable Distribution

Order, the State Court correctly determined that the automatic stay did not apply to ministerial

acts and ordering the Prothonotary to execute the deeds was ministerial. In taking this position,

the State Court relied upon In re Rugroden, 481 B.R. 69, 78 (Bankr. E.D. Cal. 2012). In

Rugroden, the debtor moved for sanctions against the Internal Revenue Service and pre-petition

tax sale purchaser where the debtor filed his bankruptcy case after the tax sale but prior to the

expiration of a redemption and period and execution of the deeds. The Rugroden Court, after

analyzing what constitutes a “ministerial act,” found that the applicable statute required the IRS

to execute the deeds in favor of the purchaser and as such, constituted a ministerial act which did

not violate the stay. Id. at 78-79.17

17 At the May 3, 2019 hearing, the State Court made a specific finding “that [the] automatic stay

does not apply to ministerial acts” and that the Prothonotary may execute the deeds after a 30 day notice

to the Debtor. May 3, 2019 Tr. at 4-5.

Given the pre-petition 2017 Equitable Distribution Order directing conveyance of the

Property to the Defendant, and the Debtor’s “gamesmanship,”18 clearly the Property was

awarded to the Defendant in 2017 and should have been conveyed. Accordingly, this Court

agrees with the State Court in this instance that it properly exercised concurrent jurisdiction and

that the execution of the deeds by the Prothonotary was a “ministerial act” not barred by the

automatic stay in order to uphold the “dignity and integrity” of the State Court’s Order.

2. Did the Contempt Proceeding violate the Stay?

This Court finds it questionable to construe the Amended Complaint as asserting a proper

cause of action against the Defendant for violating the stay with respect to the contempt

proceedings in the State Court Action. The Amended Complaint (under the count captioned

“Real Property”) states:

14. That contrary to the provisions of 11 U.S.C. [§§]362 and 1301, the

Defendant, Margaret’s (sic) Stinavage-Kipps, caused or seized by involuntary

conveyance real property located in Susquehanna County and has retained that

property to the loss and detriment of Ron Kipps.

15. Furthermore, despite being fully aware of the Stay, the Defendant

continued to pursue her relief request before the Court of Common Pleas, which

resulted in said Court issuing an Order dated May 3, 2019, scheduling a criminal

contempt hearing for the Debtor because the Debtor (sic), even to the point of

threatening a bench warrant being issued against the Debtor. …

16. Defendant’s continued pursuits against assets of the Bankruptcy

Estate not only are in direct violation of the automatic stay, but have not (sic)

reached the point where the Debtor was on the verge of being held in criminal

contempt by a Common Pleas Court despite the lack of a foundation for such

sanction.19

18 The State Court referred to the Debtor’s delay tactics as “gamesmanship” for, inter alia, refusing

to sign the deeds to the real property. April 25, 2019 Tr. at 13.

19 Although the Amended Complaint states “not” in paragraph 16, the Court will assume that the

Plaintiff did not mean to include that word.

Amended Complaint at ¶¶14-16. Although not contained anywhere in the Amended Complaint

or in the Plaintiff’s Statement of Material Facts, it is apparent from the record that the State

Court held a contempt hearing on June 18, 2019 and found the Debtor to be in criminal

contempt.20 Since this was not pleaded, there is no mention of it in the Defendant’s Motion, and

Judge Opel ordered that the contempt hearing could proceed in his June 17, 2019 Order, Dkt. #

12, the Court will not consider that hearing. However, there is a reference to the May 3, 2019

hearing and the Court will consider the facts relating to that proceeding.

In connection with the contempt proceeding, the State Court stated, “[i]t has nothing to

do with his financial situation; it has to do with whether or not he’s disobeyed a court order

willfully.” April 25, 2019 Tr. at 11. As alluded to above, the State Court clearly had tired of the

“gamesmanship” employed by the Debtor in the divorce proceeding which had been pending

since 2012. With full knowledge of the bankruptcy filing and the imposition of the automatic

stay, the State Court held the previously scheduled hearing on May 3, 2019. The Defendant’s

divorce counsel appeared but neither the Debtor nor his counsel appeared. At the hearing the

State Court indicated that “it’s basically the Court enforcing it. He’s going to have to appear

before me and answer to what he’s done.” May 3, 2019 Tr. at 13. The issue of contempt was

clearly driven by the State Court’s frustration with the Debtor/Plaintiff and not by the

Wife/Defendant.

“The majority of courts that have considered this issue … have held that the enforcement

of a civil contempt order is outside of the scope of the automatic stay provided that the primary

purpose of the issuing court is to uphold the court’s dignity.” Lowery v. McIlroy & Millian (In

20 A copy of the transcript from the June 18, 2019 State Court contempt hearing is attached to the

Plaintiff’s response at Dkt. # 85-3, p.65. The Debtor’s Counsel and the Defendant’s divorce counsel

appeared at this hearing. Based upon Judge Opel’s Order from the day before (Dkt 12), both counsel

consented to the State Court moving forward with the contempt hearing. Id. pp. 2-3.

re Lowery), 292 B.R. 645, 649-50 (Bankr. E.D. Mo. 2003) (citing NLRB v. Sawulski, 158 B.R.

971, 977 (E.D. Mich. 1993); O’Brien v. Nachtigal (In re O’Brien), 153 B.R. 305, 308 (D. Or.

1993); U.S. Sprint Communications v. Buscher, 89 B.R. 154, 156 (D. Kan. 1988); Siskin v.

Complete Aircraft Serv. (In re Siskin), 258 B.R. 554, 565–66 (Bankr. E.D.N.Y. 2001);

Lori v. Lori (In re Lori), 241 B.R. 353, 355 (Bankr. M.D. Pa. 1999); In re Dunham, 175 B.R.

615, 617 (Bankr. E.D. Va. 1994); Rook v. Rook (In re Rook), 102 B.R. 490, 493–94 (Bankr.

E.D. Va. 1989)). If a state court issues a contempt order that predominantly focuses on

upholding a previous order of that state court, it may not violate the automatic stay. Lowery, 292

B.R. at 650. However, a contempt order or a civil confinement order, focused on receiving funds

to satisfy a money judgment, “pursue a ‘collection motive,’” or to excessively embarrass or

harass a judgment debtor does violate the automatic stay. Rook, 102 B.R. at 493 (quoting Int’l.

Distribution Ctrs., Inc. v. Walsh Trucking Co. Inc. (Int’l. Distribution Ctrs. Inc.), 62 B.R. 723,

729-30 (Bankr. S.D.N.Y. 1986)). To make this determination, a bankruptcy court must look at

the totality of the circumstances. Lowery, 292 B.R. at 650 (citing Lori, 241 B.R. at 355).

Instantly, with the record before this Court, the State Court was very specific in finding

that the contempt proceeding would be criminal in nature and would be to address the Plaintiff’s

course of conduct which “attack[ed] the dignity and integrity of the Court’s Order” and for

failing to attend two (2) hearings before the State Court. See May 3, 2019 Order ¶3. Further,

from the record, it is apparent that the Defendant’s counsel did not materially participate in the

contempt issue and that was driven primarily by the State Court Judge. Given the clear and

unambiguous finding by the State Court, the Defendant cannot be held to have violated the stay

with respect to the May 3 proceeding. Accordingly, summary judgment shall be granted in favor

of the Defendant as to the Plaintiff’s second cause of action labeled “Real Property.”

VI. CONCLUSION

For the reasons stated above, the Defendant’s Motion for Summary Judgment shall be

granted. An appropriate order will be entered.

By the Court,

Mark J. Conway, EA Judge

Dated: March 31, 2022

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