Zinchiak v. CIT Small Business Lending Corp. (In Re Zinchiak)

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit

4-28-2005

In re Zinchiak
Precedential or Non-Precedential: Precedential

Docket No. 03-4509

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 PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 03-4509

IN RE KENNETH ZINCHIAK,
d/b/a ZINCHIAK MANUFACTURING CO.,

Debtor,

KENNETH A. ZINCHIAK &
KATHLEEN K. ZINCHIAK, husband and wife,

Appellants,

v.

CIT SMALL BUSINESS LENDING CORPORATION,
as successor to NEWCOURT SMALL BUSINESS LENDING
CORPORATION
f/k/a AT&T SMALL BUSINESS LENDING CORPORATION.

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 03-cv-38)
District Judge: Honorable David S. Cercone

Argued February 8, 2005

Before: BARRY, FUENTES, and BECKER, Circuit Judges.

(Filed: April 28, 2005)

P. Raymond Bartholomew (Argued)

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Bartholomew & Wish
701 North Hermitage Road
Hermitage, PA 16148

ATTORNEYS FOR APPELLANTS

Dennis J. Roman (Argued)
Grogan Graffman, P.C.
Four Gateway Center, 12th Floor
Pittsburgh, PA 15222

ATTORNEYS FOR APPELLEE

OPINION OF THE COURT

FUENTES, Circuit Judge.

In this appeal, we must determine whether the Bankruptcy
Court abused its discretion in reopening the bankruptcy case of
appellant Kenneth A. Zinchiak (“Zinchiak” or “Debtor”) to permit
the appellee Newcourt Small Business Lending Corporation
(“Newcourt”)1 to file a petition to fix the fair market value of
certain real estate under Pennsylvania’s Deficiency Judgment Act
(“DJA”), 42 Pa. Const. Stat. Ann. § 8103, and, if not, whether the
Bankruptcy Court properly interpreted the interplay between the
DJA and the jurisdictional and automatic stay provisions of the
U.S. Bankruptcy Code (“Code”). The District Court affirmed the
decision of the Bankruptcy Court to reopen the case as well as its
treatment of the merits of Newcourt’s deficiency petition under the
DJA. The Debtor-appellant Zinchiak and his wife now appeal
from these decisions. For the following reasons, we will affirm.

I. Background

1
N/k/a CIT Small Business Lending Corporation.

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 A. Bankruptcy Proceedings

The essential facts are not in dispute. Zinchiak filed a
voluntary Chapter 11 petition in the Bankruptcy Court for the
Western District of Pennsylvania on January 29, 1999. With the
debtor’s consent, the case was converted to a Chapter 7 proceeding
on April 22, 1999, and a trustee was appointed.

Zinchiak owned commercial real estate located in Crawford
County, Pennsylvania (“business property”) as well as certain
personal property used in his business operation (“personal
property,” and together with business property, the “business
assets”). Zinchiak and his wife, Kathleen Zinchiak, also owned
residential real estate in Mercer County, Pennsylvania (“residential
property”). Each parcel of property was encumbered as follows.
Newcourt held a first mortgage lien against the business property,
as well as a first security lien on most of the personal property
associated with the business operations. PNC Mortgage
Corporation (“PNC”), as successor to Marine Bank, held a first
mortgage lien against the residential property. Newcourt held a
second mortgage lien on the residential property. The Money
Store, n/k/a Alegis Group, Inc., held a third mortgage lien against
the residential property.

On April 8, 1999, several months after Zinchiak’s initial
filing for bankruptcy, Newcourt filed a motion seeking relief from
the automatic stay. See 11 U.S.C. § 362.2 Specifically, Newcourt
sought relief from the automatic stay to pursue its interests in the
business property, personal property, and the residential property.
Zinchiak and the trustee subsequently filed responses to
Newcourt’s motion. Zinchiak argued that the value in the business

2
The automatic stay serves several purposes, including
providing “a debtor a breathing spell from creditors by stopping all
collection efforts and all foreclosure actions,” as well as protecting
“creditors by preventing particular creditors from acting
unilaterally to obtain payment from a debtor to the detriment of
other creditors.” McCartney v. Integra Nat’l Bank N., 106 F.3d
506, 509 (3d Cir. 1997).

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property was more than sufficient to satisfy Newcourt’s claim on
its business loan and thus there was no need to look to the
residential property except in the event of a deficiency after
liquidation of the business assets. Based on Zinchiak’s assertions
of value, the trustee requested that the automatic stay remain in
effect until it was determined whether the administration of the
estate might result in equity for the benefit of unsecured creditors.
At a hearing on May 3, 1999 to consider the motion, Newcourt
agreed to continue its motion to permit the trustee an opportunity
to determine whether the Debtor’s property could be marketed for
a price which would render a benefit for the estate.

Thereafter, at a subsequent hearing on September 7, 1999,
Newcourt presented recent appraisals of the Debtor’s business
property. Based on these appraisals, the trustee concluded that
there was no equity for the benefit of unsecured creditors and
therefore consented to the entry of an order granting Newcourt’s
motion for relief from the automatic stay. Nonetheless, although
Zinchiak did not oppose the granting of relief from the automatic
stay as to the business assets, he continued to oppose relief as to the
residential property on the grounds that Newcourt could be paid in
full, or nearly in full, from liquidation of the business assets.
Accordingly, Zinchiak argued that there was no need to grant relief
with respect to the residential property until it became evident from
liquidation of the business assets that a deficiency remained on
Newcourt’s claim.

After the hearing, the Bankruptcy Court entered an order
dated September 29, 1999 granting the Debtor’s request. The order
contemplated essentially a “step-by-step” approach in which
Newcourt would proceed first to liquidate the business assets but
wait to pursue its interests in the residential property until it
became clear that a deficiency existed on its claim. Accordingly,
the order lifted the automatic stay as to the business assets “so that
Newcourt Financial may exercise its right to the above property
under non-bankruptcy law.” However, the order specifically stated

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that the motion “is deferred as to the [residential property].” 3

With the automatic stay partially lifted, Newcourt proceeded
to liquidate its interests in the business assets. In particular, at a
sheriff’s sale of the business property in June 2000, Newcourt was
the successful purchaser for a bid of costs and taxes. After
Newcourt commenced efforts to market the business property, it
became clear, however, that liquidation of the business property
would not satisfy Newcourt’s claim and thus Newcourt would have
to look to the residential property for full satisfaction. In light of
this new information, Zinchiak was forced to concede for the first
time, at a status conference held on October 2, 2000, that no equity
remained in the residential property for the benefit of himself or
any unsecured creditors.

Accordingly, on November 1, 2000, the Bankruptcy Court
issued a memorandum opinion addressing the outstanding motions
for relief from the automatic stay filed by PNC, Newcourt, and the
Money Store. After reviewing the information submitted by the
parties regarding the amount of the secured creditors’ claims and
the value of the residential property, the Bankruptcy Court found
that under no scenario would there be any equity in the residential
property for the benefit of the Debtor or unsecured creditors.4

3
Subsequent to the Bankruptcy Court’s ruling on the
Newcourt motion, both PNC and the Money Store, as first and third
secured mortgage holders on the residential property respectively,
filed motions to lift the automatic stay so that they could proceed
on their interests in the residential property. In response, Zinchiak
asserted once again that there was substantial value in the
residential property and that the equity therein could not be
determined until Newcourt exhausted its remedies against the
business assets. Consequently, the Bankruptcy Court deferred PNC
and the Money Store’s motions until it was determined whether
Newcourt, following liquidation of the business assets, would have
a deficiency that needed to be satisfied by the residential property.

4
Throughout the bankruptcy proceeding, a wide range of
values for the residential property had been alleged, with Zinchiak

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Consequently, the Bankruptcy Court concluded that “[t]here
appears to be no reason to further delay the [secured creditors]
from proceeding against their collateral.” In re Zinchiak, 280 B.R.
117, 124 (Bankr. W.D. Pa. 2002). An order was entered on
January 9, 2001 lifting the automatic stay and permitting PNC,
Newcourt, and the Money Store to pursue “state court remedies”
against the residential property.

An order of discharge was entered on March 28, 2001, and
a final decree was entered on the same date closing the bankruptcy
case.

B. Post-Bankruptcy Proceedings

On or about April 20, 2001, the Money Store filed a quiet
title action in the Court of Common Pleas of Mercer County
seeking to have Newcourt’s mortgage against the residential
property declared discharged and marked satisfied based on
Newcourt’s purported failure to comply with the requirements of
the DJA.5 In particular, the Money Store alleged that Newcourt

asserting the highest value of $350,000 while PNC submitted
valuations in the $229,000-$239,000 range. The Bankruptcy Court
found that the remaining outstanding balances due the various
lenders with respect to the residential property were as follows:

PNC: ($111,164)
Newcourt: ($165,000)
The Money Store: ($89,000)

Even if the Debtor’s high-end $350,000 valuation was used, it was
clear that there was negative equity in the residential property.
5
The DJA “was passed in the 1940s to remedy a practice
prevalent among judgment creditors during the Great Depression.”
First Fed. Sav. and Loan Ass’n of Carnegie v. Keisling, 746 A.2d
1150, 1155 (Pa. Super. Ct. 2000). The practice was that creditors
would credit only the price of the property purchased at a sheriff’s
sale towards their judgments, rather than credit the fair market
value of the property. The provisions of the DJA “protect

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had failed to file a timely petition to fix the fair market value of the
business property within the applicable six-month limitation period
under the DJA or within 30 days of the lifting of the automatic stay.
Newcourt filed preliminary objections to the Money Store’s action
on June 27, 2001. In addition, Newcourt filed a motion with the
Bankruptcy Court to reopen the Debtor’s bankruptcy proceeding,
pursuant to Federal Rule of Bankruptcy Procedure 5010 and 11
U.S.C. § 350(b), in order to file the deficiency petition. Newcourt
filed a similar petition to fix the market value of the business
property in the Court of Common Pleas of Crawford County,
although Newcourt insisted that this parallel state court filing was
purely precautionary and that the Bankruptcy Court, which it
contended shared concurrent jurisdiction with the state court to
hear the petition, was the most suitable forum to hear the matter.
In addition, Zinchiak and his non-debtor spouse filed a petition to
mark Newcourt’s foreclosure judgment satisfied, released, and
discharged in the Court of Common Pleas of Crawford County.
Thus, when the Bankruptcy Court ruled on the motion to reopen,
at least three proceedings relating to Newcourt’s deficiency petition
were pending in state court.6

judgment debtors whose real estate is sold in execution, by
requiring the [judgment creditor] to give credit for the [fair market]
value of the property [the judgment creditor] purchased at his
execution and not merely to credit the price at which [the property]
was sold.” Id. (quoting PNC Bank Nat’l Ass’n v. Balsamo, 634
A.2d 645, 654 (1993)) (alterations in original).
6
Newcourt contests certain factual statements made in the
Bankruptcy Court and District Court opinions. First, with regards
to both courts’ statement that Newcourt filed deficiency petitions
in two state courts – the Court of Common Pleas of Mercer County
and the Court of Common Pleas of Crawford County – Newcourt
states that only one such motion was ever filed, in Crawford
County. Second, with regards to both courts’ statement that
Zinchiak and his wife filed a motion to mark the foreclosure
judgment satisfied, released and discharged in the Court of
Common Pleas of Crawford County, Newcourt argues that the state
court docket reveals that the motion was never filed, only served on
opposing counsel. Because these questions of fact do not bear on

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 The Bankruptcy Court addressed the matters raised in
Newcourt’s motion to reopen in an opinion issued on July 3, 2002.
See In re Zinchiak, 280 B.R. at 117. The Bankruptcy Court
determined that cause existed to reopen the closed case and
proceeded to adjudicate the merits of Newcourt’s deficiency
petition under the DJA. Thereafter, the Bankruptcy Court entered
a separate consent order dated November 20, 2002, fixing the fair
market value of the business property at $172,500. Having
complied with the requirements of the DJA, Newcourt was now
free to satisfy the deficiency on its claim from the residential
property under applicable state law.

Zinchiak, his wife, and the Money Store filed an appeal to
the District Court for the Western District of Pennsylvania. In a
thorough and persuasive opinion, the District Court affirmed the
Bankruptcy Court’s decision to reopen the bankruptcy case as well
as its resolution of the merits of Newcourt’s deficiency petition
under the DJA. Zinchiak and his wife now appeal to this Court.
The Money Store did not participate in this appeal.

II. Standard of Review and Jurisdiction

The standard of review over the Bankruptcy Court’s
decision is the same as that exercised by the District Court. See In
re Pillowtex, Inc., 349 F.3d 711, 716 (3d Cir. 2003). Accordingly,
this Court reviews “the Bankruptcy Court’s findings of fact for
clear error and exercises plenary review over the Bankruptcy
Court’s legal determinations.” Id. Additionally, the decision of the
Bankruptcy Court to reopen a previously closed bankruptcy
proceeding is reviewed for abuse of discretion. See Donaldson v.
Bernstein, 104 F.3d 547, 551 (3d Cir. 1997). We have jurisdiction
over this appeal pursuant to 28 U.S.C. §§ 158(d) and 1291.

III. Discussion

our ultimate disposition of this appeal, we need not resolve the
factual disputes. However, for purposes of this appeal, we will rely
on the facts recited by the Bankruptcy Court in its opinion.

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 In McCartney v. Integra National Bank North, we discussed
at length the purposes and requirements of the DJA:

Under Pennsylvania law, every judgment creditor
who forces real estate to be sold in an execution sale
must comply with the DJA to protect its claim to any
unpaid balance remaining after the sale. 42
Pa.C.S.A. § 8103. Under the DJA, the judgment
creditor has six months after the debtor’s collateral
is sold in which to petition the court to fix the fair
market value of the real property. 42 Pa.C.S.A. §
5522(b). Failure to file a petition within this time
period creates an irrebuttable presumption that the
creditor was paid in full in kind. This presumption
serves to discharge all parties either directly or
indirectly liable to the judgment creditor for payment
of the debt, including guarantors. 42 Pa.C.S.A. §
8103(d).

106 F.3d at 509 (citations omitted).7

7
The relevant provisions of the Deficiency Judgment Act
state as follows:

§ 8103. Deficiency judgments
(a) General rule.- Whenever any real property is
sold, directly or indirectly, to the judgment creditor
in execution proceedings and the price for which
such property has been sold is not sufficient to
satisfy the amount of the judgment, interest and costs
and the judgment creditor seeks to collect the
balance due on said judgment, interest and costs, the
judgment creditor shall petition the court to fix the
fair market value of the real property sold. The
petition shall be filed as a supplementary proceeding
in the matter in which the judgment was entered.

(d) Action in absence of petition.- If the judgment
creditor shall fail to present a petition to fix the fair

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 In this matter, it is undisputed that Newcourt did not file a
petition to fix the fair market value of the business property within
six months of the sheriff’s sale, but did so more than a full year
after the sale.8 Ordinarily, the failure to file a timely petition would
serve to discharge Newcourt’s claim on the debtor’s estate, thereby
benefitting other creditors or potentially the Debtor himself.
However, this case “does not present a normal situation where the
DJA can be applied by its literal terms.” Id. at 509. The
Bankruptcy Court, upon Newcourt’s request, reopened Zinchiak’s
bankruptcy case and concluded that the six month limitation period
of the DJA had been tolled by operation of the automatic stay that
remained in place as to the residential property. The Bankruptcy
Court also concluded that Mrs. Zinchiak could be named as a

market value of the real property sold within the time
after the sale of such real property provided by
section 5522 (relating to six months limitation), the
debtor, obligor, guarantor or any other person liable
directly or indirectly to the judgment creditor for the
payment of the debt, or any person interested in any
real estate which would, except for the provisions of
this section, be bound by the judgment, may file a
petition, as a supplementary proceeding in the matter
in which the judgment was entered, in the court
having jurisdiction, setting forth the fact of the sale,
and that no petition has been filed within the time
limited by section 5522 to fix the fair market value
of the property sold, whereupon the court, after
notice as prescribed by general rule, and being
satisfied of such facts, shall direct the clerk to mark
the judgment satisfied, released and discharged.

42 Pa. Cons. Stat. Ann. § 8103(a), (d) (2002 Supp.).
8
In this matter, the sheriff’s sale as to the business property
occurred on June 2, 2000, and the deed reflecting the sale was
recorded on June 13, 2000. Under Pennsylvania law, the six month
period in which Newcourt would ordinarily be expected to file a
deficiency petition expired on or around December 13, 2000.
However, Newcourt did not file its petition until June 29, 2001.

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respondent in the deficiency proceeding, even though she was not
a debtor in bankruptcy.

In this appeal, Zinchiak raises three principal arguments.
First, he asserts that the Bankruptcy Court abused its discretion in
reopening his bankruptcy case to hear Newcourt’s deficiency
petition under the DJA. Second, Zinchiak argues that the
Bankruptcy Court erred in exercising jurisdiction over his wife,
Kathleen Zinchiak, as a respondent in the deficiency proceeding.
Finally, Zinchiak argues that the Bankruptcy Court erred in its
conclusion that Newcourt’s deficiency petition was timely filed
under the DJA by misapplying the start-date for the six month
limitation period under the DJA.

We address each argument in turn.9

A.

In order to reach the merits of Newcourt’s deficiency
petition under the DJA, the Bankruptcy Court was required to
reopen Zinchiak’s Chapter 7 bankruptcy case, which had been
previously closed. Section 350(b) of the Code provides that “[a]

9
As an initial matter, Newcourt argues that the appeal has
been rendered moot because, during the pendency of this appeal,
the residential property was sold at a sheriff’s sale and Zinchiak,
having failed to seek a stay of that sale, no longer has any legal or
equitable interest in the residential property. We conclude that the
appeal is not moot because Zinchiak contends, and we have not
heard or been presented with convincing arguments to the contrary,
that he retains certain rights against Newcourt, including possible
disgorgement, were this Court to reverse the decision of the
Bankruptcy Court. See In re Swedeland Dev. Group, Inc., 16 F.3d
552, 562 (3d Cir. 1994) (noting that an appeal is not moot if, upon
reversal, some meaningful relief can be granted to the appellant
even though the parties cannot be returned to the status quo ante).
However, in holding that the appeal is not moot, we express no
opinion as to whether such a disgorgement right exists as a matter
of state law.

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case may be reopened in the court in which such case was closed
to administer assets, to accord relief to the debtor, or for other
cause.” 11 U.S.C. § 350(b); see also Fed. R. Bankr. P. 5010. We
have previously noted that bankruptcy courts have broad discretion
to reopen cases after an estate has been administered. See Judd v.
Wolfe, 78 F.3d 110, 116 (3d Cir. 1996); In re Becker’s Motor
Transp., Inc., 632 F.2d 242, 245 (3d Cir. 1980) (interpreting the
previous version of the Code); see also In re Castillo, 297 F.3d 940,
945 (9th Cir. 2002); In re Woods, 173 F.3d 770, 778 (10th Cir.
1999).

The record contains sufficient grounds to support the
Bankruptcy Court’s decision to reopen for cause. As the
Bankruptcy Court noted, cause existed to reopen because
Newcourt’s petition under the DJA implicated issues regarding the
“effect of the automatic stay during the duration of the bankruptcy
case and an interpretation of [the] court’s orders granting [step-by-
step] relief from [the automatic] stay.” In re Zinchiak, 280 B.R. at
125. As part of this step-by-step approach, the initial order
partially lifted the automatic stay only as to the business property,
and not as to the residential property. However, Zinchiak argued
then, and does so now, that once the automatic stay was lifted as to
the business property, Newcourt should have immediately filed a
petition to fix the fair market value of the business property
following its sale in order to proceed against the residential
property, even though the automatic stay remained in effect as to
the residential property. The issue of whether the filing of a
deficiency petition following sale of the business property was
encompassed within, and thus barred by, the automatic stay was an
issue properly to be decided by the Bankruptcy Court after
reopening. As the Bankruptcy Court noted, it was well suited to
“provide the best interpretation of its own order” granting partial
relief from the automatic stay. Id. (citations omitted).

Moreover, the Bankruptcy Court found that Newcourt’s
petition had the potential to generate assets for the benefit of
unsecured creditors of the Debtor’s estate. This is notable
considering that previously the Bankruptcy Court had concluded
that there remained no equity in the residential property for the
benefit of the Debtor or unsecured creditors. However, in the event

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that it was found that Newcourt had failed to comply with the
requirements of the DJA, and its claim declared discharged and
marked satisfied, additional equity in the residential property could
emerge for the benefit of unsecured creditors. It is well-recognized
that a bankruptcy proceeding may be reopened to administer estate
assets and to determine whether additional assets may be available
for creditors of the estate. See, e.g., In re Phoenix Petroleum Co.,
278 B.R. 385, 402 (Bankr. E.D. Pa. 2001); see also Miller v.
Shallowford Cmty. Hosp., Inc., 767 F.2d 1556, 1559 n.4 (11th Cir.
1985).10

In light of the clear evidence in the record supporting the
Bankruptcy Court’s exercise of its discretion, Zinchiak’s arguments

10
We are unpersuaded by Zinchiak’s argument that the
Bankruptcy Court erred in its conclusion that Newcourt’s petition
had the potential to generate assets for the benefit of unsecured
creditors. See Appellant’s Br. at 12 (citing Napotnik v. Equibank,
679 F.2d 316 (3d Cir. 1982); In re Hunter, 970 F.2d 299 (7th Cir.
1992); In re Maloney, 146 B.R. 168 (Bankr. W.D. Pa. 1992); and
In re Houck, 184 B.R. 21 (Bankr. E.D. Pa. 1995)). It is Zinchiak’s
position that any remaining equity that emerged following the
disposition of Newcourt’s petition would accrue to the joint benefit
of Zinchiak and his non-debtor wife, and be exempt from the
bankruptcy estate, by virtue of Pennsylvania law governing
property held in tenancy by the entireties.

However, Zinchiak’s argument rests on a misunderstanding
of the issue before the Bankruptcy Court. The dispute was not
whether any residual equity in the residential property that emerged
would accrue, as a matter of law, to either creditors of the estate or
to Zinchiak and his wife. Such an issue would only become
relevant if additional equity in fact did emerge in the residential
property, well after reopening had been granted. Rather, the issue
was whether cause existed to reopen, and the Bankruptcy Court
was well within its discretion to conclude that the possibility that
the disposition of Newcourt’s petition could generate additional
assets for the benefit of unsecured creditors of the estate supported
reopening the bankruptcy proceeding.

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to the contrary are misplaced. Zinchiak renews his contention,
already rejected by the District Court, that the lifting of the
automatic stay as to both the business and residential property
relinquished the Bankruptcy Court’s authority over all property in
the Debtor’s estate, and what remained essentially was an inter-
creditor dispute between Newcourt and the Money Store (i.e.,
between the second and third priority mortgagees on the residential
property), a matter which would have no impact on the bankruptcy
estate. However, as the District Court noted, this argument is off
the mark because Newcourt did not petition the Bankruptcy Court
to resolve an inter-creditor dispute with the Money Store. Nor was
Newcourt’s right to pursue a deficiency petition dependent upon
the property released by the orders granting partial relief from the
automatic stay. Rather, Newcourt’s right to pursue a deficiency
petition arose from its ownership of business loans extended to the
Debtor, and its right to collect on those loans was an issue
controlled exclusively by the Bankruptcy Court and the relief it
permitted. Indeed, Newcourt’s ability to proceed against the
residential property was entirely contingent upon a judicial
determination that liquidation of the business property had not
satisfied its secured interest. And, it was the Bankruptcy Court that
retained control over Newcourt’s ability to proceed against the
residential property, long after it had lifted the automatic stay as to
the business property. Accordingly, the cases cited by Zinchiak for
the proposition that a bankruptcy court lacks jurisdiction to resolve
disputes having no impact on the bankruptcy estate are inapposite.

We also reject Zinchiak’s argument that the Bankruptcy
Court should have abstained from reopening the proceeding when
several related deficiency actions were pending in Pennsylvania
state courts. In exercising its discretion to reopen, a bankruptcy
court should consider whether similar proceedings are already
pending in state court as well as make a determination as to which
forum – state court or bankruptcy court – is most appropriate to
adjudicate the issues raised by a motion to reopen. See In re John
G. Berg Assocs., Inc., 138 B.R. 782, 786 (Bankr. E.D. Pa. 1992).
Contrary to Zinchiak’s claim, the Bankruptcy Court did in fact
make an explicit determination that it was the appropriate forum to
resolve the merits of Newcourt’s deficiency petition. See In re
Zinchiak, 280 B.R. at 127 (“We see no reason to relinquish this

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matter to the state court for resolution. Resolution of Newcourt’s
deficiency judgment claim will have an undeniable affect on the
value of the assets, which might be available for the benefit of its
creditors. The determination is therefore relevant to case
administration.”) (internal citation omitted). We see no error in
this determination in light of the evidence in the record that
Newcourt’s deficiency petition presented issues related to the
Bankruptcy Court’s “step-by-step” lifting of the automatic stay, as
well as the possibility that additional assets could be generated for
the benefit of unsecured creditors of the Debtor’s estate.11

B.

Zinchiak contends that the Bankruptcy Court erred when it
concluded that Zinchiak’s wife, Mrs. Zinchiak, was subject to the
court’s “related to” jurisdiction and thus could be made a party to
Newcourt’s deficiency petition. We disagree.

In In re Combustion Engineering, we explained that federal
bankruptcy jurisdiction is defined by 28 U.S.C. § 1334, which
confers upon the “district courts ‘original and exclusive jurisdiction
of all cases under title 11,’ and ‘original but not exclusive
jurisdiction of all civil proceedings arising under title 11, or arising
in or related to cases under title 11.’” 391 F.3d 190, 225 (3d Cir.
2004) (quoting § 1334(b)). “Section 157(a) of the Bankruptcy
Code permits district courts to refer most matters to a bankruptcy
court.” Id. (citing 28 U.S.C. §§ 157(a), 151). Thus, “[b]ankruptcy
court jurisdiction potentially extends to four types of title 11
matters: (1) cases under title 11, (2) proceeding[s] arising under

11
Our conclusion in this regard is informed by the Court’s
prior decision in McCartney in which we analyzed the effects of
the automatic stay on a deficiency petition under the DJA in
slightly different circumstances. In particular, in rejecting the
argument that the automatic stay did not extend to deficiency
petitions under the DJA, we noted that “debtors should not be
burdened by state court litigation when deficiency judgment actions
impacting upon the debtor’s estate can be settled in the bankruptcy
forum.” 106 F.3d at 512.

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title 11, (3) proceedings arising in a case under title 11, and (4)
proceedings related to a case under title 11.” Id. (internal
quotations omitted). We focus our attention on the fourth type of
proceeding.

The test of whether a bankruptcy court has “related to”
jurisdiction over a matter is whether “the outcome of [the]
proceeding could conceivably have any effect on the estate being
administered in bankruptcy.” In re Resorts Int’l, Inc., 372 F.3d
154, 164 (3d Cir. 2004) (quoting Pacor, Inc. v. Higgins, 743 F.2d
984, 994 (3d Cir. 1984), overruled on other grounds, Things
Remembered, Inc. v. Petrarca, 516 U.S. 124 (1995)). The key
word in the test is “conceivable” and “certainty, or even likelihood,
is not a requirement.” Id. (quoting In re Marcus Hook Dev. Park,
Inc., 943 F.2d 261, 264 (3d Cir. 1991)). The “conceivable effects”
test is broad and extends to any related lawsuit or proceeding,
including third-party proceedings, that “would affect the
bankruptcy proceeding without the intervention of . . . another
lawsuit.” In re Federal-Mogul Global, Inc., 300 F.3d 368, 382 (3d
Cir. 2002). Thus, “related to” jurisdiction has been exercised
where third-party actions involve assets that are under the
bankruptcy court’s administration, see In re Wood, 825 F.2d 90,
93-94 (5th Cir. 1987), as well as third-party actions where the
outcome could have a direct effect on the assets of the estate, see
Kaonohi Ohana, Ltd. v. Sutherland, 873 F.2d 1302, 1306-07 (9th
Cir. 1989).12

12
Zinchiak’s contends that the Bankruptcy Court erroneously
relied on Abramowitz v. Palmer, 999 F.2d 1274 (8th Cir. 1993)
(holding that “related to” jurisdiction existed to impose a
constructive trust on a non-debtor’s spouse’s interest in property
held in the entireties where the evidence indicated that the debtor
spouse and the non-debtor spouse acted fraudulently), to support
“related to” jurisdiction because there is no evidence of fraud in
this case. However, regardless of whether Zinchiak’s narrow
reading of Abramowitz is correct, we need not confine our analysis
of “related to” jurisdiction merely to the Eighth Circuit’s decision.
Instead, like the District Court, we think the exercise of “related to”
jurisdiction over the DJA proceeding in this matter is amply

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 Clearly, the deficiency proceeding involving Mrs. Zinchiak
was a matter that could have a conceivable effect on the handling
and disposition of the assets of the Debtor’s estate.13 Similar to
how a finding that Newcourt failed to comply with the DJA could
affect the bankruptcy estate, the amount determined to be the fair
market value as a result of the DJA petition could have an effect on
the estate with respect to the amount available to Newcourt, other
creditors, and the Debtor. Zinchiak appears to argue that it was
error for the Bankruptcy Court to assert “related to” jurisdiction
over Kathleen Zinchiak herself, making repeated references to the
Bankruptcy Court’s action of making her a respondent in the case.
However, “related to” jurisdiction is a species of federal court
subject matter jurisdiction (not personal jurisdiction); it governs the
question whether a federal court may hear a proceeding.
Accordingly, we find no error in the Bankruptcy Court’s exercise
of “related to” jurisdiction over the deficiency petition, which
involved Mrs. Zinchiak. 14 Having determined that the DJA

supported by the case law.
13
We note in passing that Mrs. Zinchiak’s possible role in
the deficiency proceeding arose by virtue of the DJA. As a co-
mortgagor on the residential property, Mrs. Zinchiak was likely
vested with certain rights under the DJA, including the right to
notice and an opportunity to be heard at any deficiency proceeding,
because she granted to Newcourt a mortgage that would permit it
to collect from the residence any deficiency on the business loan
remaining after liquidation of the business property. See 42 Pa.
Cons. Stat. Ann § 8103(b). Failure to name Mrs. Zinchiak as a
party “indirectly liable” to Newcourt might have discharged her
from all personal liability to the creditor on the debt. See 42 Pa.
Cons. Stat. Ann. § 8103(d). Thus, Mrs. Zinchiak was a proper
party to the disposition of Newcourt’s deficiency claim.
14
Zinchiak seems to suggest that Newcourt could have
pursued any deficiency petition against Mrs. Zinchiak separately in
state court, and thus an exercise of “related to” jurisdiction was not
necessary. See Appellant’s Br. at 14-15 (citing In re Wilkins, 150
B.R. 127 (Bankr. M.D. Pa. 1992); United States v. Dos Cabezas
Corp., 995 F.2d 1486 (9th Cir. 1993); and In re Russell Corp., 156

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proceeding properly falls within the congressional grant of “related
to” jurisdiction, we must reject Zinchiak’s assertions with respect
to his wife’s inclusion in the proceeding as irrelevant. Although
perhaps those assertions could form the basis of some other
argument unrelated to subject matter jurisdiction, Zinchiak makes
no such arguments.

C.

Zinchiak argues that the Bankruptcy Court erroneously
calculated the start date for the six-month limitation period under
the DJA in which a creditor is required to petition a court to fix the
fair market value of the collateral sold. See 42 Pa. Cons. Stat. Ann.
§ 5522(b); see also McCartney, 106 F.3d at 509 (noting that failure
to timely file a petition “creates an irrebuttable presumption that the
creditor was paid in full” and “serves to discharge all parties either
directly or indirectly liable to the judgment creditor for payment of
the debt”) (citing 42 Pa. Cons. Stat. Ann. § 8103(d)). As we noted
previously, Newcourt did not file a petition to fix the fair market
value of the business property within six months of the sheriff’s
sale, but did so more than a year later. Thus, unless there was a
basis to toll the limitation period under the DJA, Newcourt’s
petition would be untimely, and the claim on the Debtor’s estate
would be deemed to be paid in full.

In this matter, Pennsylvania law provides the basis to toll the
limitation period under the DJA. 42 Pa. Cons. Stat. Ann. § 5535(b)
states:

Where the commencement of a civil action or
proceeding has been stayed by a court or by statutory

B.R. 347 (Bankr. N.D. Ga. 1993)). However, the test in this matter
is not whether Newcourt could have filed separate and distinct
deficiency claims against Mr. and Mrs. Zinchiak in state and
federal court. Rather, for the Bankruptcy Court to exercise “related
to” jurisdiction over the DJA proceeding, only the “conceivable
effects” test needs to be satisfied, and it is clear from the record
that it is satisfied here.

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 prohibition, the duration of the stay is not a part of
the time within which the action or proceeding must
be commenced.

The Bankruptcy Court concluded that the automatic stay is
precisely the type of “statutory prohibition” referenced in
§ 5535(b). See In re Zinchiak, 280 B.R. at 127. We agree.
Accordingly, the six-month limitation period under the DJA was
tolled by § 5535(b) while the automatic stay remained in place.15

Zinchiak contends, however, that once the automatic stay
was partially lifted to permit Newcourt to pursue state law remedies
against the business property, the remaining stay as to the
residential property did not bar Newcourt from filing a deficiency
petition seeking a fair market valuation of the business property.
In other words, the dispositive issue is whether the order of the
Bankruptcy Court lifting the automatic stay with respect to the
business property also lifted the automatic stay with respect to the
filing of a petition to fix the fair market value of the business
property, as required by the DJA.

In this case, we conclude that the partial relief from the
automatic stay as to the business property did not necessarily imply
a duty on the part of Newcourt to file a deficiency petition
thereafter with respect to that property. This is so because it was

15
The District Court appeared to suggest that 11 U.S.C.
§ 108(c) provides a separate and independent federal basis for
tolling the six month limitation period of the DJA. (App. at 15-16).
See also Interbusiness Bank, N.A. v. First Nat’l Bank of
Mifflintown, 328 F. Supp. 2d 522, 526-27 (M.D. Pa. 2004) (finding
that DJA limitation period was tolled by virtue of 11 U.S.C.
§ 108(c)); In re Wilkens, 150 B.R. 127, 128-29 (Bankr. M.D. Pa.
1992) (same). In McCartney, we expressly reserved the question
of whether § 108(c) “operated to suspend the limitation period for
initiating a deficiency judgment action in state court pursuant to the
DJA.” 106 F.3d at 513. In light of the state law basis for tolling
the limitation period in this matter, on which the Bankruptcy Court
relied, we see no need to decide the issue.

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clear to the Bankruptcy Court and all parties involved that the only
asset that remained for satisfaction of any potential deficiency
claim brought by Newcourt would be the residential property. And
it was clear in the Bankruptcy Court’s step-by-step approach that
Newcourt could not proceed on a deficiency claim against the
residential property without first gaining additional relief from the
automatic stay from the Bankruptcy Court. See In re Zinchiak, 280
B.R. at 127 (“Prior to the granting of relief from stay to allow
Newcourt (and the other lenders) to pursue the Residence, any
action to pursue a deficiency judgment would have been viewed as
an action to enforce Newcourt’s claim against the Residence, an
action that, despite repeated requests from Newcourt, had been
forbidden by this Court until January 9, 2001.”). As the District
Court noted, the order lifting the automatic stay as to the business
property “did not permit Newcourt to pursue all rights on the
underlying debt, but instead granted Newcourt only limited relief
to ‘exercise its rights to the [business] property under non-
bankruptcy law.’” (App. at 213) (alteration in original). The order
in question deferred any matters relating to the residential property
and did not permit Newcourt to submit the Debtor to further
litigation emanating from the underlying debt secured by the
business property. Cf. McCartney, 106 F.3d at 511.

Zinchiak contends that the Bankruptcy Court’s decision on
this issue places it in conflict with the recent decision in
Interbusiness Bank, N.A. v. First Nat’l Bank of Mifflintown, 328
F. Supp. 2d 522 (M.D. Pa. 2004), issued after the appeal was filed
in this matter. In holding that the plaintiff-creditor had failed to
timely file a petition to fix the fair market value under the DJA
following the foreclosure of certain real property, the Interbusiness
Bank court rejected the argument that “the six month limitations
period of the [DJA] was [] tolled during the pendency of the
bankruptcy action.” 328 F. Supp. 2d at 529. However, we find no
conflict between the Bankruptcy Court’s decision in this matter and
Interbusiness Bank. Unlike the present case, in Interbusiness Bank,
there was no indication that the bankruptcy court was using a
narrow step-by-step approach to grant relief from the automatic
stay, that there was consensus among the parties as to which asset
of the Debtor the creditor would turn to in the event of a
deficiency, or that there was otherwise agreement that the creditor

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could not proceed on a deficiency claim against the residential
property without first gaining additional relief from the automatic
stay from the bankruptcy court. Rather, in Interbusiness Bank, the
bankruptcy court granted broad relief from the stay, permitting the
plaintiff-creditor to “exercise its rights and remedies under state
law” against the debtor’s real property in which it had a secured
interest. Thus, given the narrow and piecemeal lifting of the
automatic stay as well as the expectations of the Bankruptcy Court
and the parties involved in this matter, we find Interbusiness Bank
to be distinguishable.16

As a final consideration, we note that Appellants were not
harmed by Newcourt’s purported failure to file a deficiency
petition at an earlier date or otherwise proceed on its petition in
state court. Indeed, Zinchiak received the same opportunity to be
heard on all matters relevant to the fixing of the fair market value
of the business property that he otherwise would have “been
granted in a state court deficiency judgment action commenced
under the DJA.” McCartney, 106 F.3d at 512. Zinchiak’s
argument appears to be nothing more than an effort to escape full
liability for Newcourt’s deficiency claim, but, as we have cautioned
before, a court is not to “transmogrify the DJA into a means for
guarantors to escape liability from their guarantees.” Id.

IV. Conclusion

We have considered all of the other arguments advanced by
the Appellants and conclude that they are without merit. For the
foregoing reasons, we will affirm.

16
The other cases relied on by Zinchiak – In re Tarbuck, 304
B.R. 712 (Bankr. W.D. Pa. 2004); In re Abston, III, 115 B.R. 508
(Bankr. W.D. Pa. 1990) – may also be similarly distinguished. Of
course, we are not bound by these cases in any event.

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