The opinion of the court was delivered by: Thomas W. Phillips United States District Judge
Debtor Larry Graves appeals the dismissal of his complaint in the bankruptcy court. The United States Bankruptcy Court for the Eastern District of Tennessee found that Graves' claims were barred by res judicata and/or collateral estoppel. For the following reasons, the court affirms the bankruptcy court's dismissal of Graves' complaint.
Graves raises two issues on appeal. First, whether the bankruptcy court erred in dismissing his complaint on the grounds that his cause of action was barred by res judicata or collateral estoppel. Second, whether the bankruptcy court erred in dismissing the complaint on the grounds that the bankruptcy court lacked subject matter jurisdiction over the issues.
II. JURISDICTION AND STANDARD OF REVIEW
The basis of appellate jurisdiction in this court is 28 U.S.C. §§158(a)(1) and (a)(2), and Bankruptcy Rule 8001 et seq.
Dismissal of a bankruptcy case is reviewed for abuse of discretion. Booker Enters. v. Eastown Auto Co. (In re Eastown Auto Co.), 215 B.R. 960, 963 (B.A.P. 6th Cir. 1998). A bankruptcy court abuses its discretion when "it relies upon clearly erroneous findings of fact or when it improperly applies the law or uses an erroneous legal standard." Id. A bankruptcy court's findings supporting dismissal of a bankruptcy case are factual determinations. Id. Findings of fact are reviewed under the clearly erroneous standard. Fed.R.Bankr.P. 8013. A finding of fact is clearly erroneous "when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985); United States v. United States Gypsum Co., 333 U.S. 364 (1948).
Conclusions of law are reviewed de novo. Nicholson v. Isaacman (In Re Isaacman), 26 F.3d 629 (6th Cir. 1994). De novo means deciding the issue as if it had not been heard before. In re Downs, 103 F.3d 472 (6th Cir. 1996). No deference is given to the bankruptcy court's conclusions of law. Razavi v. Commissioner, 74 F.3d 125 (6th Cir. 1996).
Appellant Larry Graves filed his initial voluntary bankruptcy petition under Chapter 11 on March 9, 2005. The ownership of 100,000 shares of IdleAire Technologies, Inc., stock was at issue in the original case. BGSA, LLC, claimed a security interest in the stock and filed a motion to lift the automatic stay in order to foreclose on its interest. The motion was withdrawn when BGSA learned that Citizens Bank of Blount County (CBBC) had in its possession a stock assignment indicating that Graves had transferred the stock to CBBC. The original Chapter 11 case was dismissed by the bankruptcy court on June 1, 2005, upon Graves' inability to propose a confirmable plan of reorganization.
Graves filed a second voluntary petition in bankruptcy under Chapter 11 of the Bankruptcy Code on June 30, 2005. On July 19, 2005, BGSA filed a motion to lift the automatic stay in regards to the IdleAire stock claimed to be owned by Graves. In a memorandum opinion entered by the bankruptcy court on October 25, 2005, the court ruled that the 100,000 shares of IdleAire stock were sold, assigned, and transferred to CBBS by Graves on November 26, 2002, by virtue of a stock assignment. The bankruptcy court ruled that the shares of IdleAire stock were never property of the bankruptcy estate of Graves. The motion to lift the automatic stay filed by BGSA was thus denied as moot. BGSA subsequently noticed a public sale of the IdleAire stock to foreclose on its security interest in the stock. Graves filed his complaint as an adversary proceeding in the bankruptcy court. His complaint asked the court (1) to issue an injunction enjoining BGSA from transferring the IdleAire stock at a public sale scheduled for December 16, 2005, and enjoining CBBC from transferring the IdleAire stock at any time; (2) to reform the document between Graves and CBBC transferring the IdleAire stock into an assignment or transfer for security purposes only; (3) to determine that the IdleAire stock was property of the estate; and (4) to determine that BGSA had an unsecured claim and that its security interest did not attach since it was not perfected while Graves owned the IdleAire stock.
The facts as alleged by Graves in his complaint are that on November 26, 2002, he executed the document titled "Stock Assignment Separate From Certificate," which the bankruptcy court held transferred Graves' interest in the IdleAire stock to CBBC, leaving the bankruptcy estate without any interest in the stock. Graves asserted that additional documents, promissory notes, and security agreement were also executed at the same time as the Stock Assignment. Graves alleged that the documents never indicate that CBBC will be the owner of the stock pending the payoff of the promissory notes. Graves went on to allege that all the other documents of CBBC contradict such a transfer and indicate the true intent of the parties was that the stock would be solely for security rather than for CBBC to own the stock. In his complaint, Graves sought reformation of the instruments between the parties based upon mutual mistake and requested a declaration that he is the true owner of the IdleAire stock. In the alternative, Graves requested the bankruptcy court to determine that the Stock Assignment was ineffective to actually transfer the shares or that the subsequent failure of CBBC to actually take the shares and transfer them on the records of IdleAire left the shares as property of the bankruptcy estate.
BGSA sought dismissal of Graves' complaint pursuant to FRCP 12(b)(1) for lack of subject matter jurisdiction and pursuant to FRCP 12(b)(6) for failure to state a claim upon which relief could be granted. In the alternative, BGSA sought dismissal of the complaint by summary judgment pursuant to FRCP 56. That motion was based on the principles of res judicata and collateral estoppel arising out of the October 25, 2005 decision of the bankruptcy court in the underlying bankruptcy case. The bankruptcy court dismissed the complaint pursuant to FRCP 12(b)(1) finding that the court did not ...