Appeal from the United States Bankruptcy Court
for the Western District of Kentucky at Paducah.
No. 14-50679; Adv. No. 14-05021—Thomas H. Fulton, Judge.
Argued: February 7, 2017
Decided and Filed: July 3, 2017
Before: HUMPHREY, PRESTON and WISE, Bankruptcy Appellate Panel Judges.
GUY R. HUMPHREY, Bankruptcy Appellate Panel Judge. The record below evidences
that a stay violation occurred during a previous bankruptcy case, apparently without Appellee
Debtor Linda Isaacs’ knowledge, ten years prior to her current bankruptcy filing. Between the
two bankruptcy cases, a state court adjudicated the scope of Isaacs’ discharge, finding a
mortgage lien valid and enforceable. The state court scheduled a foreclosure sale, prompting
Isaacs to file a second bankruptcy case and a complaint against Appellant Creditor DBI-ASG
Coinvester Fund III, LLC, seeking relief from the subject mortgage under 11 U.S.C. § 544(a)(1)
and (a)(3). The parties filed cross-motions for summary judgment. Construing the mortgage’s
language, the bankruptcy court held that the mortgage lien did not attach to Isaacs’ real property
because the initial mortgagee did not record its mortgage until after Isaacs and her husband filed
their prior bankruptcy case and while the automatic stay was in effect. The bankruptcy court thus
found that the debt associated with the mortgage was unsecured when the first petition was filed
and was discharged in the prior case. As a result, the bankruptcy court held that Isaacs could
avoid the mortgagee’s lien in this proceeding. The bankruptcy court also declared void ab initio
the state court foreclosure judgment finding the mortgage to be valid, concluding that it
impermissibly modified the chapter 7 discharge order.
For the reasons stated below, the Panel REVERSES the bankruptcy court’s judgment
and REMANDS this case to the bankruptcy court for dismissal. While the entire Panel agrees
that the bankruptcy court’s judgment should be reversed for a lack of subject matter jurisdiction
on the basis of the Rooker-Feldman doctrine, the reasoning of the majority and the concurrence