Bilal J. Sabir and Faatimah F. Sabir

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
In re: 	: 	Case No. 23-53103
:
Bilal J. Sabir and 	: 	Chapter 7
Faatimah F. Sabir, 	:
: 	Judge Cobb
Debtors. 	:
OPINION AND ORDER ON (A) MOTION FOR
SUMMARY JUDGMENT (DOC. 48), (B) THE
DEBTORS’ RESPONSE TO THE MOTION (DOC. 99) AND
(C) THE REPLY IN SUPPORT OF THE MOTION (DOC. 100)
I. Introduction
The law and the facts sometimes require courts to render decisions against parties despite
the respect and admiration they engender. This is such a case. Debtor Bilal J. Sabir (“Mr. Sabir”)
served this country admirably in the United States Marine Corp during the Vietnam War. During
his tour of duty, he sustained injuries that entitled him to benefits from the United States
Department of Veterans Affairs (“VA”), including a grant to finance a home renovation project
designed to accommodate his service-connected disabilities. When disputes arose between Mr.
Sabir and Metro Renovation 12, LLC (“Metro”), the company he hired to do the renovation
________________________________________________________________
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: September 29, 2026
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work, Metro filed a complaint in state court. The state court awarded Metro a judgment entitling
Metro to certain grant funds. That judgment became final and nonappealable before Mr. Sabir,
together with his wife, Faatimah Sabir (“Mrs. Sabir” and, collectively with Mr. Sabir, the
“Sabirs”), filed this bankruptcy case (the “Bankruptcy Case”). Then, after Mr. Sabir filed the
Bankruptcy Case, the escrow agent holding the grant funds distributed them to Metro in
accordance with the escrow agreement and the state court judgment. Mr. Sabir contends that the
payment of these funds to Metro violated the automatic stay. But Mr. Sabir had no legal or
equitable interest in the escrowed funds under the escrow agreement. The funds therefore were
not property of his bankruptcy estate, and the payment of the funds to Metro did not violate the
automatic stay.
II. Jurisdiction and Constitutional Authority
The Court has jurisdiction to hear and determine this matter under 28 U.S.C. § 1334(b)
and the general order of reference entered in this district in accordance with 28 U.S.C. § 157(a).
This is a core proceeding. 28 U.S.C. § 157(b)(2)(A) & (O). The matter before the Court is a
motion to hold a party liable for purportedly violating the automatic stay, and it therefore “stems
from the bankruptcy itself,” Stern v. Marshall, 564 U.S. 462, 499 (2011), meaning there is no
constitutional impediment to the entry of this order. See In re Nyamusevya, 644 B.R. 375 (Bankr.
S.D. Ohio 2022) (holding that constitutional authority existed to enter a final order on a claim for
violating the automatic stay). As discussed, infra, this Court has subject-matter jurisdiction
notwithstanding the Rooker-Feldman doctrine.
III. Procedural Background
After the Sabirs filed a motion alleging that Metro and its attorneys, Charles M. Elsea
and Mickellea M. Tennis of Stebelton Snider, LPA (collectively, the “Former Metro Counsel”),
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violated the automatic stay (“Stay Violation Motion”) (Doc. 27), Metro filed a motion for
summary judgment (“SJ Motion”) (Doc. 48) on the basis that $28,290 of the grant funds (the
“Funds”) distributed to Metro were not property of the Sabirs’ bankruptcy estates. The Sabirs
filed a response to the SJ Motion (“Response”) (Doc. 99) to which they attached the Affidavit of
Mr. Sabir (“Sabir Affidavit”). The Former Metro Counsel filed a reply in support of the SJ
Motion, further adopting the arguments in the SJ Motion (Doc. 100) (“Reply”).1
The Court held a hearing on the SJ Motion, the Response and the Reply; the transcript of
the hearing is docketed at Doc. 105 (“Hr’g Tr.”).
The exhibits attached to the Response, consisting of the Sabir Affidavit and attached
exhibits (Doc. 99-1), and the deposition transcripts at Docs. 96 & 97, were admitted into
evidence without objection. The Court also heard the Debtors’ testimony during the hearing.2
The Court permitted the parties to supplement the record with a joint stipulation attaching
relevant portions of the appeal to the Supreme Court of Ohio and relevant portions of the VA
Manual M26-12 (the “VA Manual”).
On June 30, 2026, the Debtors filed two notices: (1) a Notice of Supplementation of Record
Regarding Motion for Summary Judgment [Doc. 48] and Appeal of State Court Action (Doc. 111)
(the “Appeal Notice”); and (2) a Notice of Supplementation of Record Regarding Motion for
1 Metro was represented by the Former Metro Counsel when the SJ Motion was filed. Thereafter, the Former Metro
Counsel moved to withdraw from their representation of Metro, and the Court granted that motion. See Doc. 55. As
a limited liability company, Metro cannot participate in this contested matter pro se. Nonetheless, the Court has
considered the SJ Motion because the Former Metro Counsel was included along with Metro in that original filing,
and after counsel’s withdrawal, the Former Metro Counsel also separately adopted the arguments made in the SJ
Motion in the Reply on their own behalf. See Docs. 82 & 90.
2 Prior to the hearing, the Former Metro Counsel sought clarification as to whether the hearing would involve
testimony. In response, the Court relayed to the parties that while the primary purpose of the hearing was to take oral
argument, if either party believed testimony would be relevant to the motion for summary judgment, it would not be
prohibited. The Former Metro Counsel agreed that Mr. Sabir’s health issues constituted good cause and compelling
circumstances to permit the Sabirs’ testimony by virtual means under Rule 43(a) of the Federal Rules of Civil
Procedure, and the Court found that such cause existed. See Order Setting Hearing, Doc. 101 at 2.
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Summary Judgment [Doc. 48] and Department of Verterans [sic] Affairs Manual and Handbook
(the “Manual and Handbook Notice”) (Doc. 112). The Former Metro Counsel filed a response to
both notices (Doc. 116), in which they, rather than objecting to the notices, addressed whether the
dispute resolution procedures of the VA Manual were followed. The Sabirs filed a reply to that
response (Doc. 124).
IV. Factual Background
Having been awarded a Specially Adapted Housing (“SAH”) grant by the VA, Mr. Sabir
entered into a contract with Metro for construction services at his residence. Sabir Aff. ¶¶ 4–7.
The grant funds, which includes the Funds at issue here, were held in an escrow account
governed by the Escrow Agreement – Specially Adapted Housing (the “Escrow Agreement”),
which is attached as part of Exhibit B to the Sabir Affidavit. Id. ¶ 6. The Escrow Agreement
provided for Metro to receive payments from the VA in five installments as the project
progressed, with the fifth installment due at completion of the project. The payment
disbursements were as follows: (1) 12.33%, or $10,000.00; (2) 35.52%, or $28,800; (3) 17.27%,
or $14,000.00; (4) 14.8% or $12,000.00; and (5) 20.08% or $16,280.00. Under the Escrow
Agreement, Mr. Sabir had no interest in the grant funds (including the Funds); instead, the
escrowed funds could only be paid either to Metro or, if there was a surplus, back to the VA, but
in no event to Mr. Sabir. See Escrow Agreement ¶ 1.b (providing for payments “to the contractor
such sums as are otherwise due and payable under the terms of the construction agreement”) &
¶ 5 (“If, after disbursement, for all the purposes herein contemplated, there remains in the hands
of the Escrowee a surplus of the funds herewith deposited, such surplus shall be disbursed by the
Escrowee to the Veterans Administration.”).3
3 Capitalized terms not otherwise defined herein shall have the meaning so ascribed in the Escrow Agreement.
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When disputes between the parties arose and Mr. Sabir failed to pay all amounts due
under the contract, Metro filed a complaint in the Fairfield County Court of Common Pleas (the
“State Trial Court”) for breach of contract, seeking the remaining balance due under the Metro
contract. Sabir Aff. ¶ 11. The State Trial Court entered a judgment attached as Exhibit C to the
Sabir Affidavit (the “State Trial Court Judgment”) finding that Metro was entitled to the Funds.
Id. ¶ 12. The State Trial Court calculated this amount as follows:
The Court finds by a preponderance of the evidence that the
original contract was for $81,000 (not $81,800 which was the grant
distribution), and the Plaintiff was paid $38,800 (for satisfactorily
completing all work under Phase I and Phase 2). Plaintiff was
obligated to perform all work and provide all material before it could
receive under an escrow distribution. The Plaintiff was prevented
from 	completing 	the 	initial 	Phase 	3 	for 	$14,000 	due 	to
circumstances beyond its control (the deck and permit problem).
The Plaintiff completed ninety-five (95) percent of the remaining
contract under Phases 4 and 5. In addition, the Plaintiff completed
add-on work that it did not receive payment for ($1,500).
81,000 minus 14,000 = 67,000; Less 38,800 = 28,200; 95% of
28,200 = 26,790; Plus 1,500 = 28,290. This is the total amount that
the Plaintiff is owed under the contract as a result of the breach of
contract committed by Defendants.
State Trial Court J. at 4.
The State Trial Court also ruled that “[s]hould this money be covered by the [SAH] grant,
and the Court believes it should, then the SAH grant is ordered to pay $28,290 [i.e. the Funds] to
Plaintiff to satisfy this Judgment.” Id.
On June 6, 2023, the Ohio Fifth District Court of Appeals (the “State Appellate Court”)
affirmed the State Trial Court in part and reversed in part, reversing only on the limited issue of
attorneys’ fees and costs as they related to Mrs. Sabir. Sabir Aff. ¶ 13. The decision of the State
Appellate Court (“State Appellate Court Decision”) (Exhibit A to the Appeal Notice) became
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final and nonappealable no later than July 22, 2023. Hr’g Tr. at 55–56. The State Trial Court
Judgment and the State Appellate Court Decision are collectively referred to herein as the “State
Court Decisions.”
On September 11, 2023 (“Petition Date”), the Sabirs filed a Chapter 7 bankruptcy
petition. On November 10, 2023, in accordance with the State Trial Court Judgment, the escrow
agent distributed the Funds to Metro. In response, the Sabirs filed the Stay Violation Motion.
According to them, Metro and the Former Metro Counsel “willfully continued collection efforts
against [Mr. Sabir], including but not limited to asking the VA SAH for payment of [the
Funds].” Stay Violation Mot. at 4. The Sabirs further contend that the VA Manual required Mr.
Sabir’s consent to the disbursement of the Funds.
V. Legal Analysis
Under Rule 56(a) of the Federal Rules of Civil Procedure, made applicable here by Rule
7056 of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rule(s)”), a court “shall grant
summary judgment if the movant shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Fed. Civ. R. 56(a). At the summary
judgment stage, the Court must construe the evidence and draw all reasonable inferences in favor
of the non-movant.4 See Doe v. Univ. of Ky., 111 F.4th 705, 715 (6th Cir. 2024). Here that is the
Sabirs.
4 The Sabirs contend that a motion for summary judgment on their motion for sanctions is not appropriate. See
Resp. at 5. But under Bankruptcy Rule 9014(c), Bankruptcy Rule 7056 (summary judgment) applies in a contested
matter—such as the contested matter initiated by the Stay Violation Motion. Bankr. R. 9014(c) (incorporating Bankr.
R. 7056); see also In re Canoco Inc., 323 F. App’x 306, 308 (5th Cir. 2009) (“The bankruptcy court did not err.
[The] objection to the . . . proof of claim, although it did not initiate an adversary proceeding, created a contested
matter under Bankruptcy Rule 9014. See Notes to Bankr. R. 3007. Bankruptcy courts can render summary judgment
in contested matters. Bankr. R. 9014(c) (incorporating Bankr. R. 7056).”). The Sabirs also argue that the Stay
Violation Motion is moot because a separate adversary proceeding commenced against them by Metro has been
dismissed. See Resp. at 6. The adversary proceeding, however, was separate from the Stay Violation Motion.
Instead, in the adversary proceeding, which was dismissed because Metro had not retained counsel, Metro objected
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No Property of the Estate
The central legal issues are as follows. First, there is a threshold issue of whether the
Funds became property of Mr. Sabir’s bankruptcy estate to then trigger the automatic stay’s
protection. They did not. Under the Escrow Agreement, Mr. Sabir never had any interest in the
Funds; the Funds could be paid out of escrow either to Metro or, if there was a surplus, to the
VA, but in no event to Mr. Sabir. See Escrow Agreement ¶ 1.b (providing for payments “to the
contractor such sums as are otherwise due and payable under the terms of the construction
agreement”) & ¶ 5 (“If, after disbursement, for all the purposes herein contemplated, there
remains in the hands of the Escrowee a surplus of the funds herewith deposited, such surplus
shall be disbursed by the Escrowee to the Veterans Administration.”).
As the Reply says:
The plain language of this agreement directly contradicts [the
Debtors’] contention that the SAH grant funds here “are capable of
being withdrawn and made available for the veteran’s use.” [Doc.
99, p. 8]. The SAH program’s strict federal control over grant
disbursements demonstrates that the SAH funds are not estate
property. The funds remain in escrow, are only disbursed with VA
authorization, and are restricted to approved housing modifications.
Debtors do not possess unrestricted dominion or control over these
funds, and lack a transferable property interest sufficient to bring
the funds into the bankruptcy estate. In fact, the exclusive control of
the funds appears to rest with the VA Representative[.]
Reply at 4.
That the Funds are simply not property of the estate under the terms of the Escrow
Agreement is consistent with the relevant case law. For example, in Georgia Heritage
Associates, LP v. Westfields Apartments, LLC (In re Westfields Apartments, LLC), No. 08–
to the Sabirs’ discharge and the dischargeability of their purported debts to Metro. See Adv. Pro. No. 23-2075, Doc.
1. In light of the then pending adversary proceeding, Metro filed the SJ Motion as a motion for “partial” summary
judgment. During the hearing, however, Ms. Tennis clarified that, given the dismissal of the adversary proceeding,
Metro and the Former Metro Counsel are now “seeking complete dispositive relief.” Hr’g Tr. at 82.
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12573, 2010 WL 2179622, at *5 (Bankr. S.D. Ga. 2010), the court held that escrowed funds
were not property of the debtor’s bankruptcy estate because there were no circumstances in
which the debtor would be entitled to the funds. Such is the case here.
Because the Funds were not property of the estate, the Sabirs’ argument that the Funds
were exempt from property of the estate, Resp. at 8, is beside the point. See Spirtos v. Moreno
(In re Spirtos), 992 F.2d 1004, 1007 (9th Cir. 1993) (“The exemption question arises only if the
plans are first determined to be property of the estate. 11 U.S.C. § 522(b). In fact, if the plans are
not property of the estate, the bankruptcy court should not make a decision on the exemption
question.”).
Second, because the Funds were not property of Mr. Sabir’s bankruptcy estate, the
release of the Funds did not violate the automatic stay. “Where, as here, the property right in
question is not property of the estate because Debtor’s right thereto was terminated pre-
bankruptcy, the automatic stay does not apply.” In re DiGregorio, 458 B.R. 436, 443 (Bankr.
N.D. Ill. 2011). Acting in accordance with a state court judgment is appropriate where, for
example, a bond is not property of the estate, meaning that “the trustees of the bond were at
liberty to carry out the Order of the State Court and to pay over to National Bank the Money
Market Certificate.” In re N. Am. Mktg. Corp., Inc., 24 B.R. 16, 18 (Bankr. S.D. Fla. 1982). Just
so here. Because the Funds were not property of Mr. Sabir’s bankruptcy estate, the Escrowee
under the Escrow Agreement was permitted to “carry out” the State Court Decisions by
transferring the Funds to Metro.5
5 The Sabirs cite Crabtree v. Veterans Administration, 31 B.R. 95 (S.D. Ohio 1983), for the proposition that “the
Southern District of Ohio [has] found that the VA violated 11 U.S.C. § 362’s automatic bankruptcy stay provisions
by withholding VA benefits as a means to ‘collect’ on a debt owing by the debtor to the VA.” Resp. at 8–9. In
Crabtree, however, there was no question that the VA benefits were property of the debtor’s bankruptcy estate. Here,
the Funds were not property of Mr. Sabir’s bankruptcy estate.
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No Debtor Consent Required
The Sabirs next contend that “the VA Manual required Mr. Sabir’s approval for the
release of escrow funds to Metro.” Manual and Handbook Notice at 5. But that contention
contradicts the VA Manual and the Escrow Agreement. As explained by the State Trial Court:
Much of the argument from the Defendants was that the
contractor 	never 	had 	the 	Veteran 	(or 	Veteran’s 	personal
representative for that matter) approve and/or sign off on the work
performed 	in 	order 	for 	the 	Contractor 	to 	receive 	any 	grant
disbursements from the VA. However, in Exhibit 40, the Escrow
Agreement - Specially Adapted Housing states that “1. Out of said
funds the Escrowee agrees to make disbursements, all subject to the
written authorization of the VA Representative.” The Escrowee in
this contract is Northwest Title. Further, the Contract in Exhibit 1,
Section VI, specifically states that “Payment will be in accordance
with VA procedures and in accordance with the disbursement
schedule agreed to by the contractor and VA. It is understood that
no payment will be made ‘up-front’, and that there will be a hold
back of 20% after the job is complete subject to final approval by
VA and the veteran.” Therefore, the Court finds that the only
disbursement that required final approval by the veteran is the final
20% hold back money that also requires VA approval.
State Trial Court J. at 2. The Escrow Agreement also authorized the VA representative to
“consent on [Mr. Sabir’s] behalf to disbursements of escrowed funds by the Escrowee to such
payees, in such amounts and at such times as the VA Representative considers proper to fulfill
the purposes and conditions of this agreement.” Escrow Agreement ¶ 10. Read together, the
Escrow Agreement’s delegation of authority to the VA Representative then satisfies the VA
Manual’s consent requirement. More importantly, the point remains that at the time of the
disbursement, Mr. Sabir had no interest in the Funds; there is thus no property of the estate over
which action was taken; and in turn, there is no violation of the stay.
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The Rooker-Feldman Doctrine
Mr. Sabir’s arguments ultimately challenge the State Court Decisions, which first raise a
jurisdictional issue. See Saker v. Nat’l City Corp., 90 Fed. App’x 816, 818 n.1 (6th Cir. 2004)
(“Rooker–Feldman concerns federal subject matter jurisdiction[.]”). Although the Former Metro
Counsel did not raise Rooker-Feldman specifically (or the absence of this Court’s subject-matter
jurisdiction generally), the Court still is required to raise the doctrine sua sponte, because courts
“have an independent obligation to determine whether subject-matter jurisdiction exists, even in
the absence of a challenge from any party.” Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006)
(emphasis added). This independent responsibility to confirm subject-matter jurisdiction exists
even were one to conclude that the Former Metro Counsel fell short of presenting the issue and
distinguishes this case from Margolin v. National Association of Immigration Judges, 608 U.S.
339 (2026). See Doe v. Blanche, 172 F.4th 901, 912 (D.C. Cir. 2026) (“The party-presentation
principle does not apply to questions of subject-matter jurisdiction, which federal courts have an
‘independent obligation’ to raise and decide even when ‘the parties either overlook or elect not to
press’ them.”) (quoting Henderson v. Shinseki, 562 U.S. 428, 434 (2011)).
Under the Rooker-Feldman doctrine, this Court “lack[s] jurisdiction over ‘cases brought
by state-court losers complaining of injuries caused by state-court judgments rendered before the
[trial] court proceedings commenced and inviting [trial] court review and rejection of those
judgments.’” T.M. v. Univ. of Maryland Med. Sys. Corp., 146 S. Ct. 1739, 1739–44 (2026)
(quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp.), 544 U.S. 280, 284 (2005)). The
Rooker-Feldman doctrine applies if four requirements are met. See Anderson v. Ohio, No. 2:25-
CV-168, 2026 WL 1203742, at *2 (S.D. Ohio May 4, 2026). Those four requirements are that
the federal case is: “(1) ‘brought by state-court losers’; (2) who ‘complain[ ] of injuries caused
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by state-court judgments’; (3) when the state-court judgments were ‘rendered before the
[bankruptcy] court proceedings commenced’; and (4) ‘invit[e] [bankruptcy] court review and
rejection of those judgments.’” Id. (quoting Exxon Mobil, 544 U.S. at 284 (2005)). Here, it could
be argued that these four requirements are met: (1) the Sabirs lost in the State Trial Court and the
State Appellate Court, (2) the injuries of which they complain were caused by actions taken in
accordance with the State Court Decisions, (3) that judgment was rendered before this
proceeding commenced and (4) to obtain the relief requested, the Sabirs are necessarily inviting
this Court to review and reject the State Court Decisions. In arguing that he had an interest in the
Funds and that his consent was required before the Funds could be paid to Metro, Mr. Sabir is
necessarily asking this Court to review and reject the contrary rulings of the State Court
Decisions.6 Under this analysis, all four requirements for applying the Rooker-Feldman doctrine
are met here.
But not so fast. “[I]n bankruptcy, Rooker-Feldman applies only when two additional
conditions are met: (a) procedurally, the claim is alleged as part of an adversary proceeding (i.e.,
a complaint under Federal Rule of Bankruptcy Procedure 7003); and (b) the federal bankruptcy
plaintiff's claim, even if “one that denies a legal conclusion that a state court has reached in a
case to which [the plaintiff] was a party,” is not otherwise “independent” of her state-court
6 See Gill v. Ross, No. 24-CV-12761, 2026 WL 788799, at *3 (N.D. Ill. Mar. 20, 2026) (holding that the Rooker-
Feldman doctrine applied when a decision by the federal court would require it to “review the state court’s judgment
to determine whether the judgment was wrong at all”); Titusville-Cocoa Airport Auth. v. Islands Int’l Grp., Inc., No.
6:25-CV-01074-AGM, 2026 WL 2128538, at *4 (M.D. Fla. July 23, 2026) (holding that the court did not have “the
authority to ignore the explicit text of a state court judgment by simply pronouncing that the ‘effect’ of those words
is something different than what the words plainly say.”); Moise v. Ocwen Loan Servicing LLC (In re Moise), 575
B.R. 191, 201 (Bankr. E.D.N.Y. 2017) (“State court losers cannot hope to redeem themselves and obtain an
inconsistent result by commencing a federal action inviting a district court to review and reject a state court
judgment.”); Donaldson v. Williams, No. 2:12-CV-80-SU, 2012 WL 5398307, at *7 (D. Or. Sept. 6, 2012) (“This
court is unable to grant the requested relief without a careful examination and subsequent condemnation of the state
court proceedings challenged by Donaldson. The requested relief is necessarily incompatible with the state court’s
rulings and such an assertion of jurisdiction by this court would violate principles of federalism and comity and is
prohibited by the Rooker Feldman doctrine.”).
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claims. In re Adams, 151 F.4th 144, 154 (3d Cir. 2025) (quoting Exxon Mobil, 544 U.S. at 293).
These two conditions do not exist here. First, the Sabirs’ Stay Violation Motion is not made as
part of an adversary proceeding. Additionally, a claim that there has been a violation of the
automatic stay under 11 U.S.C. § 362 is squarely a bankruptcy claim, independent of the state-
court claims. Accordingly, the Rooker-Feldman doctrine does not apply, and the Court has
subject-matter jurisdiction to decide the Stay Violation Motion.
Issue Preclusion
Mr. Sabir’s challenges to the State Court Decisions lead to a consideration of issue
preclusion. “Preclusion, not Rooker-Feldman, is what typically prohibits a plaintiff’s efforts to
have her claims relitigated.” Adams, 151 F.4th at 152. Here, issue preclusion (also known as
collateral estoppel) created by the State Court Decisions would defeat Mr. Sabir’s stay-violation
contention. Because the State Court Decisions are those of an Ohio court, this Court must look to
Ohio law on issue preclusion. Determining whether Ohio courts would give preclusive effect to a
prior judgment requires this Court to find four elements:
1) A final judgment on the merits in the previous case after a full
and fair opportunity to litigate the issue; 2) The issue must have
been actually and directly litigated in the prior suit and must have
been necessary to the final judgment; 3) The issue in the present
suit must have been identical to the issue in the prior suit; [and]
4)The party against whom estoppel is sought was a party or in
privity with the party to the prior action.
Sill v. Sweeney (In re Sweeney), 276 B.R. 186, 189 (6th Cir. BAP 2002).
Here, the State Court Decisions were a final judgment on the merits issued after a full and
fair opportunity to litigate the issue of consent; the issue of consent was actually and directly
litigated in the State Trial Court and State Appellate Court and was necessary to the final
judgment; the issue of consent in this stay violation action is identical to the issue of consent in
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the State Trial Court and State Appellate Court; and the party being precluded from arguing that
consent was required—Mr. Sabir—was a party in the State Trial Court and State Appellate
Court. Each of the preclusion requirements is satisfied, and the State Court Decisions should be
given preclusive effect on the issues of whether the Funds were property of the estate or whether
pre-approval from Mr. Sabir was required.
Specifically, prior to this Bankruptcy Case, the State Trial Court Judgment already
directed the payment of the Funds out of escrow to Metro. Bankruptcy aside, there was simply
no scenario in which Mr. Sabir would have any interest in the Funds after the State Trial Court
Judgment became final and nonappealable. And because the State Trial Court Judgment became
final and nonappealable before the Petition Date, the Funds never became property of Mr.
Sabir’s bankruptcy estate. The contention that Mr. Sabir’s consent was required also contradicts
the State Appellate Court Decision, which found that “[t]he [VA] Manual does provide that a
signed letter of satisfaction from the Veteran is needed prior to the release of the final 20% of the
contract amount, but this contract stalled prior to the final compliance inspection, and no Final
Field Review was completed, so those provisions are not applicable.” State Appellate Court
Decision at ¶ 36. This Court’s hands are tied, or perhaps more appropriately bound by, the final
State Trial Court Judgment. Bankruptcy courts consistently apply prior state court rulings to
determine whether property of the estate is at play.7
7 In Thaler v. County of Nassau District Attorney (In re Wolfson), 261 B.R. 369 (Bankr. E.D.N.Y. 2001), the court
held that, because a prepetition state court forfeiture order divested the debtor of an interest in property before the
debtors filed their bankruptcy case, the property did not become property of their bankruptcy estate. Id. at 375. In
another case, the bankruptcy court held that a state court order divesting a Chapter 7 debtor of its equitable
ownership of a liquor license, accomplished by ordering the debtor to perform acts necessary to transfer the license,
meant that the license was not property of the debtor’s bankruptcy estate. See In re Green Lantern, Inc., 64 B.R. 356
(Bankr. W.D. Pa. 1986). In yet another case, the bankruptcy court held that a state court order “cut[ting] off the
Debtor’s legal and equitable interest” in property meant that the property was not property of the debtor’s estate. In
re Flores, No. 10-34546 DHS, 2011 WL 44910, at *3 (Bankr. D.N.J. Jan. 6, 2011). In In re Coco, 67 B.R. 365
(Bankr. S.D.N.Y. 1986), the court held that the release of funds from escrow was not a postpetition transfer subject
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Generally, preclusion doctrines are affirmative defenses. See Taylor v. Sturgell, 553 U.S.
880, 907 (2008) (“Claim preclusion, like issue preclusion, is an affirmative defense.”). The
Former Metro Counsel argued collateral estoppel in this contested matter (and separately had
raised this as an affirmative defense in the related adversary proceeding). But for argument’s
sake, one could say that Metro did not properly preserve a preclusion defense, and in turn, it is
either forfeited, waived or, alternatively, the Court is barred by the party-presentation principle
from relying on it. See Asset Co IM Rest, LLC v. Katzoff, No. 23 CIV. 9691 (JPC), 2025 WL
919489, at *7 (S.D.N.Y. Mar. 26, 2025) (“The Court will not raise a collateral estoppel argument
on Defendants’ behalf, and expresses no view as to its applicability here” because “‘trial courts
must be cautious about raising a preclusion bar sua sponte, thereby eroding the principle of party
presentation so basic to our system of adjudication’”) (quoting Arizona v. California, 530 U.S.
392, 412–13 (2000)).
The Full-Faith and Credit Act
Here, though, what is causing the preclusive effect is a state court judgment—the State
Court Decisions. This Court “must” give full faith and credit to that state court judgment
irrespective of whether a party otherwise preserved a preclusion defense and must be an
exception to the party presentation principle as well:
The Full Faith and Credit Act, 28 U.S.C. § 1738, originally enacted in
1790, . . . requires the federal court to ‘give the same preclusive effect to
a state-court judgment as another court of that State would give.’” Exxon
Mobil Corp., 544 U.S. at 293 (quoting Parsons Steel, Inc. v. First Alabama
Bank, 474 U.S. 518, 523, 106 S. Ct. 768, 88 L.Ed.2d 877 (1986)). And,
although preclusion is an affirmative defense—which typically means that
to avoidance under § 549 of the Bankruptcy Code because “[a]t the time the funds left the escrow account, the
debtor had no interest in them; whatever contingent right the debtor had had to the funds was lost when the Civil
Court decided for the landlord and Coco abandoned his appeal.” Coco, 67 B.R. at 373 n12. Finally, in Georgia
Heritage Associates, LP v. Westfields Apartments, LLC (In re Westfields Apartments., LLC), No. 08–12573, 2010
WL 2179622, at *5 (Bankr. S.D. Ga. 2010), the court held that escrowed funds were not property of the debtor’s
bankruptcy estate because there were no circumstances in which the debtor would be entitled to the funds.
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a party waives the defense by failing to raise it—courts may “act sua
sponte and interpose the defense if it has not been raised.”
Helgason v. Certain State of New York employees (unknown & known), No. 10 CIV. 5116 PAC
JCF, 2011 WL 4089913, at *6 n.2 (S.D.N.Y. June 24, 2011), report and recommendation
adopted sub nom. Helgason v. Doe, No. 10 CIV. 5116 PAC JCF, 2011 WL 4089943 (S.D.N.Y.
Sept. 13, 2011); see also Banner v. Mashburn, No. 86–6030, 1987 WL 37566 (6th Cir. June 1,
1987) (upholding a district court’s order sua sponte dismissing an action under 42 U.S.C. § 1983
as barred by res judicata).
Independent Review of the Escrow Agreement and the VA Manual
All this said, however, the Court need not decide this case on an estoppel, party
presentation, or full faith and credit analysis because the Court independently interprets the
Escrow Agreement to mean that under no scenario would the Funds be property of the estate and
in turn, no stay violation could exist. Rather, as the Court found above, the Funds would either
be property of the contractor (here, Metro) or would revert to the federal government. And,
independently interpreting the VA Manual in conjunction with the Escrow Agreement, the Court
finds that the VA Representative consented on Mr. Sabir’s behalf to the disbursement of the
Funds, thereby satisfying any VA Manual consent requirement.
No Attachment, Levy, or Seizure
The Sabirs further argue that the Funds “are comprehensively protected from collection
during pending bankruptcy proceedings” under 38 U.S.C. § 5301. Resp. at 1. In relevant part, 38
U.S.C. § 5301(a)(1) states: “Payments of benefits due or to become due under any law
administered by the Secretary shall not be assignable . . . and shall be exempt from the claim of
creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable
process whatever, either before or after receipt by the beneficiary.”
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For three reasons, the Court rejects the Sabirs’ argument that 38 U.S.C. § 5301 supports a
finding of a stay violation here. First, as already discussed, Mr. Sabir was already determined by
the State Court Decisions to have no interest in the Funds; in turn, by definition, no benefits to
him were due or to become due from those Funds. Distinguishable from this case, in the
Supreme Court’s Porter case on which the Sabirs rely, Resp. at 8, there was no question that the
veteran had an interest in the VA benefits at issue. See Porter v. Aetna Cas. & Sur. Co., 370 U.S.
159 (1962). Second, there was no pending creditor claim here; rather, the State Court Decisions
already adjudicated Metro’s claim to finality, ruling that Metro, not the Sabirs, had an interest in
the Funds. Third, 38 U.S.C. § 5301 expressly precludes liability “to attachment, levy, or seizure,”
all of which necessitate involuntariness. The disbursement of the Funds did not violate 38 U.S.C.
§ 5301 because the VA disbursed the Funds voluntarily in accordance with the Escrow
Agreement after receiving confirmation that the State Court Decisions determining that Metro
was entitled to the Funds had been issued and could no longer be appealed.8 Cf. In re Brah, 562
B.R. 922, 925 (Bankr. E.D. Wis. 2017). In Brah, the issue was whether the requirement that
veterans’ disability benefits be included in a Chapter 13 debtor’s disposable income for payment
to creditors under a Chapter 13 plan violated § 5301(a)(1). The Brah court held that it did not:
The Debtors’ argument that 38 U.S.C. § 5301(a)(1) precludes
counting the VA Benefits as disposable income also fails. The
Debtors contend that using the Bankruptcy Code to “force” them to
commit the VA Benefits to the plan violates the language of 38
U.S.C. 	§ 	5301(a)(1). 	That 	statute 	provides 	that 	the 	relevant
payments “shall be exempt from the claim of creditors, and shall not
be liable to attachment, levy, or seizure by or under any legal or
equitable process whatever, either before or after receipt by the
beneficiary.” . . . But the Debtors voluntarily chose to file Chapter
13, and counting their VA Benefits in disposable income does not
make the benefits liable for the claims of creditors. . . . Voluntarily
8 As already noted, the Escrow Agreement authorized the VA representative to “consent on [Mr. Sabir’s] behalf to
disbursements of escrowed funds by the Escrowee to such payees, in such amounts and at such times as the VA
Representative considers proper to fulfill the purposes and conditions of this agreement.” Escrow Agreement ¶ 10.
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seeking the relief available under Chapter 13 is different than the
involuntary legal procedures enumerated in the Veterans’ Benefits
statute.
Brah, 562 B.R. at 925.
The same logic applies here. Mr. Sabir voluntarily entered into the Escrow Agreement,
and under that agreement—as decided by this Court and as determined by the State Court
Decisions—he had no interest in the Funds. The voluntary payment of the Funds to Metro thus
did not constitute an attachment, levy or seizure of property in which Mr. Sabir had an interest
and did not violate 38 U.S.C. § 5301. Neither Metro nor the Former Metro Counsel attached,
levied or seized the Funds, and § 5301 does not prevent the VA from administering its programs.
That is, the payment of housing grant proceeds by an escrow agent to a contractor under an
escrow agreement does not constitute an attachment, levy, or seizure. Section 5301(a)(1) does
not prohibit the use of the Funds for their intended purposes, such as paying contractors for work
performed in connection with a housing grant program.
Finally, as for the Former Metro Counsel’s argument regarding whether the dispute
resolution procedures of the VA Manual were followed, the Court need not address that
argument because its resolution does not alter the Court’s core ruling.
VI. Conclusion
For the reasons set forth above, the SJ Motion is GRANTED. The Court will enter a
separate judgment entry in favor of Metro and the Former Metro Counsel and against the Sabirs.
IT IS SO ORDERED.
Copies to:
Matthew R Duncan, Counsel for Bilal J. Sabir and Faatimah F. Sabir
Charles M. Elsea, Stebelton Snider, LPA, 109 N. Broad Street, Suite 200, P.O. Box 130,
Lancaster, Ohio 43130
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Mickellea M. Tennis, Stebelton Snider, LPA, 109 N. Broad Street, Suite 200, P.O. Box 130,
Lancaster, Ohio 43130
Bilal J. Sabir and Faatimah F. Sabir, 7411 Callie Street, Canal Winchester, Ohio 43110
Metro Renovations 12, LLC, Highest Officer, 1015 E. Broad Street, Unit 108, Columbus, Ohio
43205
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