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In re Peeples

United States Court of Appeals, Tenth Circuit

January 26, 2018

In re: ADAM PEEPLES; JENNIFER K. PEEPLES, Debtors.
v.
SCOTT J. MCCARDLE, individually and as trustee of the Jack and Ruth McCardle Trust, Defendant Counterclaimant -Appellee. ADRIAN J. LEE; ANGELA LYNN NOYES LEE, Plaintiffs Counter Defendants -Appellants,

         Appeal from the United States District Court for the District of Utah (D.C. No. 2:16-CV-00808-JNP)

          Adrian J. Lee, Holladay, Utah, pro se and for Co-Appellant.

          Daniel K. Brough, Bennett Tueller Johnson & Deere, Salt Lake City, Utah (Brigman L. Harman, Bennett Tueller Johnson & Deere, Salt Lake City, Utah, with him on the brief) for Appellee.

          Before LUCERO, BACHARACH, and MORITZ, Circuit Judges.

          MORITZ, CIRCUIT JUDGE.

         Plaintiffs Adrian and Angela Lee[1] asked the bankruptcy court to declare that the automatic stay in Adam and Jennifer Peeples' bankruptcy case applies to a separate lawsuit Adrian Lee filed in state court against defendant Scott McCardle. The Lees also asserted that the automatic stay prevented McCardle from collecting attorney's fees levied against Adrian Lee in that state-court lawsuit. The Lees further sought damages against McCardle for willfully violating the automatic stay. The bankruptcy court found-and the district court agreed-that the automatic stay didn't apply to the state-court lawsuit. Thus, it granted summary judgment to McCardle. The Lees appeal, arguing that the district court erred in ruling that the automatic stay didn't apply. We don't reach this question; instead, we vacate the district court's judgment against Angela Lee because she lacks Article III standing to bring this lawsuit, and we affirm summary judgment against Adrian Lee because his claims don't fall within the Bankruptcy Code's zone of interests.

         I

         In 2012, the Lees obtained a default judgment against the Peepleses for unpaid rent and waste. In 2013, they obtained a second default judgment against the Peepleses for fraud. The Lees then sought to collect on those judgments by garnishing distributions that the Jack and Ruth McCardle Trust (the Trust) allegedly owed Adam Peeples. Trustee Scott McCardle responded that Adam Peeples was only an inconsequential beneficiary of the trust who wasn't owed any distributions. Adrian Lee then sued Scott McCardle in Utah state court, both individually and in Scott McCardle's capacity as trustee, essentially alleging that Scott McCardle's undue influence over Ruth McCardle prompted her to disinherit Adam Peeples in a memorandum amending the Trust. Thus, Lee asserted that the memorandum must be rescinded and that the Trust owed Adam Peeples overdue distributions dating back to Ruth McCardle's death in 2009. Lee sought to collect these distributions as Peeples' judgment creditor.

         The state court dismissed the lawsuit because it determined Lee didn't have standing and, alternatively, the claims were time-barred. The state court further ordered Lee to pay McCardle attorney's fees and left the case open to determine those fees. The Peepleses filed their bankruptcy petition while the state court was calculating fees. Lee then argued that the automatic stay triggered by the Peepleses' bankruptcy petition covered his lawsuit against McCardle and moved to stay further proceedings. The state court denied the motion and entered judgment assessing $41, 889 in attorney's fees against Lee.

         The Lees initiated this adversarial proceeding against McCardle in the Peepleses' bankruptcy case a week before the state court entered final judgment. The Lees sought (1) a declaratory judgment to confirm that the automatic stay applied to the state-court lawsuit and (2) damages from McCardle for willfully violating the automatic stay. The Lees moved for partial summary judgment on the declaratory judgment and the issue of McCardle's liability for violating the automatic stay. But they reserved the issue of damages for trial. McCardle filed a cross-motion for full summary judgment. The bankruptcy court held that the automatic stay didn't apply to the state-court lawsuit because Lee had asserted claims against McCardle, not Adam Peeples. Thus, the bankruptcy court denied the Lees' motion and granted McCardle's.[2] The Lees appealed to the district court, which affirmed for substantially the same reasons the bankruptcy court provided in its order.

         II

         When hearing an appeal from a district court's review of a bankruptcy-court order, "we independently review the bankruptcy court's decision, applying the same standard as the . . . district court." Jubber v. SMC Elec. Prods., Inc. (In re C.W. Min. Co.), 798 F.3d 983, 986 (10th Cir. 2015). We review bankruptcy-court orders granting summary judgment in adversarial proceedings de novo, id., and affirm if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Fed. R. Bankr. P. 7056 (applying Rule 56 to adversarial proceedings). The scope of the automatic stay is a question of law that we review de novo regardless of the case's posture. Johnson v. Smith (In re Johnson), 575 F.3d 1079, 1082 (10th Cir. 2009). We also review jurisdictional questions de novo. In re Special Grand Jury 89-2, 450 F.3d 1159, 1170 (10th Cir. 2006).

         A

         Initially, we must address whether Angela Lee has Article III standing to bring this appeal. Article III standing is jurisdictional; thus, "where the record reveals a colorable standing issue, we have a 'duty to undertake an independent examination' (sua sponte if necessary) of that issue." United States v. Ramos, 695 F.3d 1035, 1046 (10th Cir. 2012) (quoting Morgan v. McCotter, 365 F.3d 882, 887 (10th Cir. 2004)). Article III standing requires that a "plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016). The plaintiff bears the burden of "demonstrat[ing] ...


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