Lee v. McCardle (In re Peeples)
PUBLISHED
Creditor filed a pre-petition state court lawsuit against the trustee of a trust of which the debtor at one time had been a beneficiary. The creditor lost the suit and, after the debtor filed bankruptcy, the trustee obtained a judgment against the creditor. The creditor then filed a declaratory judgment action in bankruptcy court against the trustee, arguing that the automatic stay of § 362(a) had stayed the state court lawsuit because the creditor sued the trustee with the subjective intent to recover against the debtor. On cross-motions for summary judgment, the Court denied the creditor’s motion because the state court lawsuit had not been an action to recover a claim against the debtor. The Court held that the automatic stay does not stay an action whose basis is independent of a claim against the debtor. The Court also held that whether the automatic stay applies to an action is not determined by a party’s subjective intent in undertaking that action. Accordingly, the Court denied the creditor’s request for stay violation damages under § 362(k).