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Banner Bank v. Real Estate Investor Education, LLC

United States District Court, D. Utah

December 20, 2018

BANNER BANK, successor by merger of American West Bank which formerly did business in Utah as Far West Bank, Plaintiff,
v.
REAL ESTATE INVESTOR EDUCATION, LLC, a Nevada limited liability company; REAL ESTATE INVESTOR SUPPORT, LLC, a dissolved Nevada limited liability company; JAMES M. SMITH, a Utah resident, JMS MARKETING L.L.C., a Utah limited liability company; LOREE C. SMITH, an individual and JOHN DOES 1-10, Defendants. JAMES M. SMITH Counterclaimant,
v.
BANNER BANK, Counterclaim Defendant. LOREE C. SMITH, Counterclaimant
v.
BANNER BANK, Counterclaim Defendant.

          MEMORANDUM DECISION & ORDER

          CLARK WADDOUPS, UNITED STATES DISTRICT COURT JUDGE.

         Before the court is Loree Smith's Motion for Reinstatement Pursuant to Order Granting Motion for Relief from the Automatic Stay. (Motion, ECF No. 269.) Banner Bank opposes Ms. Smith's Motion. (Opposition, ECF No. 272.) No. party has requested oral argument, and the court concludes it is unnecessary. Having fully considered the parties' briefing and otherwise being fully informed, and for the reasons stated herein, the court GRANTS Ms. Smith's Motion.

         Background

         In 2012, Americanwest Bank, Banner Bank's predecessor in interest, sued James and Loree Smith along with three LLCs with which the Smiths were associated. (Complaint, ECF No. 2.) The Complaint sought declaratory judgment against all Defendants to “determine the interrelationship between [the] Note and Loan Agreement” that the LLC Defendants had entered and that James Smith had Guaranteed. (Id. ¶¶ 63-67.) It also sought declaratory relief to determine that Loree Smith “does not hold any interest in any of the property [the Bank] is seeking to foreclose including the real property and personal property in South Carolina, the real property in Oregon, except for her undivided interest in Unit 7, and any interest in JMS Marketing.” (Id. ¶ 68.) After a series of settlement discussions, Banner Bank eventually “voluntarily reconvey[ed] and release[d] the Oregon Trust Deed as it pertains to the Condominium, ” which the parties agreed was the only property to which Ms. Smith had a claim. (Status Report, ECF No. 191.)

         Ms. Smith raised several counterclaims in her answer, including a claim for breach of contract. (Loree Smith Answer, ECF No. 75.) In her claim for breach of contract, Ms. Smith alleged that the Bank “breached its duty to release and discharge [her] as agreed by recording an erroneous deed of trust; by perpetuating claims, controversies and disputes regarding [the Condominium] and; by filing and maintaining an action against [her] notwithstanding knowledge of its own contractual duty and its fraudulent, illegal and coercive acts and conduct.” (Loree Smith Answer ¶ 28, ECF No. 75.) After considering motions for summary judgment, the court dismissed all claims other than the Bank's claim against James Smith for declaratory judgment and Loree Smith's claim against the Bank for breach of contract. (Order on Summary Judgment, ECF No. 196; Memorandum Decision and Order Denying Summary Judgment, ECF No. 198; Memorandum Decision and Order on Denying Motion to Alter Judgment, ECF No. 231.)

         The court held a bench trial on the remaining two issues on June 5 through June 7, 2017. (Minute Entries, ECF Nos. 239-41.) After the presentation of evidence concluded, the court set a briefing schedule (Minute Entry, ECF No. 241) and scheduled closing arguments for October 12, 2017 (Notice of Hearing, ECF No. 264). But before closing arguments could occur, James Smith filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court for the Middle District of Florida. (Bankruptcy Notice, ECF No. 265.) This court accordingly stayed this action.

         Several months later, on January 17, 2018, Loree Smith filed a Notice of Order Granting Motion for Relief from the Automatic Stay. (Notice of Stay Relief, ECF No. 266.) The Notice represented that the Florida bankruptcy court had “entered an Order directing the lifting of the automatic stay as provided in 11 U.S.C. § 362(a) to allow the Utah Action to proceed to conclusion.” (Id.) But the bankruptcy court's order also stated:

1. The Motion is granted.
2. The automatic stay provided in 11 U.S.C. § 362(a) is lifting to allow the Movant to proceed with the Utah Action to conclusion.
3. The relief granted herein permits the Movant to seek and obtain in rem relief only and does not permit the Movant to seek or obtain in personam relief against the Debtor.

(Bankruptcy Order, ECF No. 266-1.)

         Banner Bank objected to Ms. Smith's notice. (Objection, ECF No. 267.) And the court, after reviewing all documents, determined the order did not pertain to this action because the only relief the bankruptcy court granted was for Ms. Smith to bring an in rem claim against Mr. Smith, but Ms. Smith has no such claim in this action. Therefore, the court determined there were no claims that could proceed in this court under the bankruptcy judge's order and the stay served the goal of judicial economy because of the close relationship to the Bank's claim against James Smith. And because there was no motion before the court, the court took no action. Then four months later on April 12, 2018, Ms. Smith filed her Motion to Withdraw Bankruptcy Reference. (Motion, ECF No. 269.)

         In August 2018, the parties filed status reports updating the court of the proceedings in bankruptcy court. (ECF Nos. 276 & 277.) The reports notified the court that bankruptcy proceedings were ongoing but that the Trustee had filed a “Report & Notice of Trustee's Intention to Abandon Property of the Estate, ” including the properties at issue in this action. (Loree Smith's Status Report 2, ECF No. 276.) Banner Bank's report indicated that no objections had been filed and it appeared that ...


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