In re Harris, No. 19-4081 (6th Cir. 2020)
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The Harrises filed a voluntary Chapter 13 bankruptcy petition. The bankruptcy court issued an automatic stay. The Harrises’ neighbors, the Cooleys, subsequently filed a lawsuit, seeking removal of an encroaching fence. While the state court case remained pending, the Harrises filed an adversary proceeding against the Cooleys, alleging violation of the bankruptcy court order by filing the state court complaint and that the Cooleys “continue to pursue to take control of" property of the bankruptcy estate (the fence) to which, the Harrises alleged, they were entitled by adverse possession.
The bankruptcy court dismissed the Harrises’ adversary proceeding on abstention grounds. The district court and Sixth Circuit affirmed. The bankruptcy court did not abuse its discretion: the adverse possession claim is governed by state law, and in Ohio, such a claim is “disfavored.” The property at issue is not a part of the bankruptcy estate and the disposition of the Harrises’ adverse possession claim will not impact the administration of the bankruptcy proceeding. Rejecting an argument that the Cooleys knowingly violated the bankruptcy court order, the court noted that they are not creditors of the bankruptcy estate and the Harrises do not allege that they were injured by the state court action. The automatic stay provision provides that only “an individual injured by any willful violation of a stay” may recover damages, 11 U.S.C. 362(k)(1).
The court issued a subsequent related opinion or order on July 20, 2020.
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