Split COA Refuses Stay Pending Bankruptcy
Today the Court of Appeals (COA), in yet another split decision, rejected a stay pending a defendant's bankruptcy proceeding. The case is Park East Sales, LLC v. Clark-Langley, Inc.
After one of defendants filed for bankruptcy and instituted an adversary proceeding in the Bankruptcy Court, other defendants in the state court action moved the trial court per N.C.G.S. 1-75.12 to stay further proceedings pending final disposition in the bankruptcy action. (Section 1-75.12 authorizes a trial judge to stay an action to avoid substantial injustice.) When the trial court denied the stay, defendants appealed. In a majority opinion by Judge Tyson, the COA rejected the appeal on the ground that, under 1-75.12's text, review of a stay denial may be had only by petition for writ of certiorari. Defendants hadn't filed a cert petition, but instead a notice of appeal. The majority refused to treat the appeal as a petition for a writ of certiorari.
Chief Judge Martin dissented. He would exercise discretion to treat defendants' assignment of error as a cert petition. He added that the trial court abused its discretion in denying the stay because the bankrupt party was a necessary party whose rights and obligations were at the center of the state court action, and because the bankruptcy court was a more convenient and efficient forum since all parties already had been joined in the adversary proceeding there. The majority responded that Judge Martin's position would set a "dangerous precedent" that would "compel a stay to be entered in any pending multi-party state action where only one party later files bankruptcy." Judge Martin deemed that an overstatement of his position.
After one of defendants filed for bankruptcy and instituted an adversary proceeding in the Bankruptcy Court, other defendants in the state court action moved the trial court per N.C.G.S. 1-75.12 to stay further proceedings pending final disposition in the bankruptcy action. (Section 1-75.12 authorizes a trial judge to stay an action to avoid substantial injustice.) When the trial court denied the stay, defendants appealed. In a majority opinion by Judge Tyson, the COA rejected the appeal on the ground that, under 1-75.12's text, review of a stay denial may be had only by petition for writ of certiorari. Defendants hadn't filed a cert petition, but instead a notice of appeal. The majority refused to treat the appeal as a petition for a writ of certiorari.
Chief Judge Martin dissented. He would exercise discretion to treat defendants' assignment of error as a cert petition. He added that the trial court abused its discretion in denying the stay because the bankrupt party was a necessary party whose rights and obligations were at the center of the state court action, and because the bankruptcy court was a more convenient and efficient forum since all parties already had been joined in the adversary proceeding there. The majority responded that Judge Martin's position would set a "dangerous precedent" that would "compel a stay to be entered in any pending multi-party state action where only one party later files bankruptcy." Judge Martin deemed that an overstatement of his position.
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