In Re Samuel G. Bialac, Debtor. Samuel G. Bialac v. Harsh Investment Corporation and Harsh Building Co.

This appeal arises from a dispute over a creditor’s right to foreclose on a note that secures a judgment it holds against a bankrupt debtor. After the debtor, Samuel G. Bialac, filed a petition for reorganization under Chapter 11 of the Bankruptcy Code, an automatic stay was placed on disposition of his property. The creditor, Harsh Investment Corporation, and its subsidiary, Harsh Building Co., sought relief from the stay so that they could foreclose on the note, which Harsh Building Co. had issued to Bialac years earlier. The bankruptcy court lifted the stay, and the bankruptcy appellate panel (BAP) and this court refused to stay the order pending appeal. Before Harsh Investment could foreclose on the note, however, Bialac obtained an injunction from another bankruptcy court judge restraining the sale. On appeal, the BAP vacated the second court’s injunction and upheld the first order lifting the automatic stay. Bialac’s interest in the note was then sold to Harsh Investment Corporation at a foreclosure sale.

Bialac argues here that the bankruptcy court abused its discretion when it lifted the automatic stay because it erred in finding he had no equity in the note and that the…