Turnover of a vehicle held by a Raeford Collision and subject to a possessory mechanic’s lien was resolved subject to a Consent Order, which required the MacGregor to provide the title to the vehicle so that a lien could be recorded with the North Carolina DMV. When the MacGregor’s Chapter 13 case was dismissed and they failed to produce the title, Raeford Collision sought an order “divesting title” or to sequester the vehicle and to hold the McGregors in contempt.
The bankruptcy court held that, while it would have had authority to grant relief in an open case, because a dismissal is a final appealable order and neither had a reservation of jurisdiction nor had been appealed, the bankruptcy court not able to “affect the rights of litigants before it . . . and the court lacks subject matter jurisdiction to decide it.” In re Westgate Nursing Home, Inc., 518 B.R. at 256; see also Fox v. Bd. of Trs. of the State Univ. of New York, 42 F.3d 135, 140 (2d Cir. 1994). That notwithstanding, the bankruptcy court did continue and found that dismissal of the case, pursuant to 11 U.S.C. § 349(b), “rolls back the clock and the parties’ relative rights in estate property existing as of the minute before a bankruptcy petition’s filing are reinstated.” As such another court with competent jurisdiction could reinstate the mechanic’s lien previously held by Raeford Collision.
As will surprise no one, the McGregors did file a second Chapter 13, but in order to avoid the inevitable bad faith objections, did tender the title to the vehicle and fully comply with the terms of the previous Consent Order. Additionally worthy of note, were the serious allegations of bad acts by Raeford Collision both prior to and during the bankruptcy.
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