In The Matter Of: LARRY BROWN Debtor CITY BANK; SCOTT SEIDEL v. Industrial Bank Na

* Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
United States Court of Appeals
Fifth Circuit
F I L E D
May 4, 2006
Charles R. Fulbruge III
Clerk
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 05-10872
____________________
In The Matter Of: LARRY BROWN
Debtor
_________________________________________________________________
CITY BANK; SCOTT SEIDEL
Appellants
v.
INDUSTRIAL BANK NA
Appellee
_________________________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
No. 4:05-CV-35
_________________________________________________________________
Before KING, STEWART, and DENNIS, Circuit Judges.
PER CURIAM:*
The order of the bankruptcy court was correct for the
reasons well set out in its Memorandum Opinion and Order;
therefore, we REVERSE the judgment of the district court. The

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district court erred as a matter of law in concluding that the
dismissal of the two previous bankruptcy proceedings necessarily
served both to lift the automatic stay and to cleanse the
appellee’s violations of the stay. In re Brown, 330 B.R. 548,
553 (N.D. Tex. 2005) (stating that “11 U.S.C. § 349(b) caused the
dismissals of Cases 1 and 2 to have the effect of validating
actions taken . . . during the pendency of those cases”). The
bankruptcy court correctly recognized that the dismissal of a
bankruptcy proceeding does not necessarily retroactively validate
actions taken in violation of an automatic stay. Rather, the
retroactive validation of actions taken in violation of an
automatic stay is reserved to the discretion of bankruptcy
courts, and they are cautioned to use this discretion sparingly
because of the adverse impact that validation could have on other
creditors who honored the stay. See, e.g., In re Cueva, 371 F.3d
232, 236 (5th Cir. 2004) (stating that bankruptcy courts have
“broad discretion” to grant or to deny retroactive annulment or
modification of an automatic stay); In re Thornburg, 277 B.R.
719, 731 (Bankr. E.D. Tex. 2002) (stating that bankruptcy courts
should grant retroactive relief for actions that violated an
automatic stay only in exceptional circumstances). The
bankruptcy court correctly exercised that discretion here.
The final judgment of the district court is REVERSED, and
the Memorandum Opinion and Order of the bankruptcy court is
AFFIRMED. Costs shall be borne by appellee.

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