In re Rellstab

622 B.R. 495

IN RE: Caroline Joyce RELLSTAB, Debtor.

Case No. 17-40210-CJP

United States Bankruptcy Court, D. Massachusetts.

Signed November 10, 2020

Vladimir von Timroth, Law Office of Vladimir von Timroth, Worcester, for Caroline Joyce Rellstab.

David M. Bizar, Michael Jusczyk, Seyfarth Shaw LLP, Boston, Jason Giguere, Orlans PC, Tatyana P. Tabachnik, Orlans PC, Waltham, for U.S. Bank National Association, as Trustee for SASCO Mortgage Loan Trust 2006-WF3.

David T. Mazzuchelli, MA Dept. Of Revenue, Litigation Bureau, Boston, for Massachusetts Department of Revenue.

ORDER ON DEBTOR'S MOTION PURSUANT TO 11 U.S.C. § 362(K) AGAINST U.S. BANK N.A. SEEKING THE ASSESSMENT OF DAMAGES FOR WILLFUL VIOLATION OF THE AUTOMATIC STAY

Christopher J. Panos, United States Bankruptcy Judge

Before the Court is the motion [Dkt. No. 200] (the "Motion") filed by the debtor Caroline Joyce Rellstab (the "Debtor") seeking an award of actual and punitive damages pursuant to 11 U.S.C. § 362(k)¹ against U.S. Bank National Association, as Trustee for SASCO Mortgage Loan Trust 2006-WF3 (the "Bank"). The Debtor alleges the Bank willfully violated the automatic stay based on the Bank's postponements of and eventual conduct of the foreclosure of the Debtor's investment property located at 27 Maple Street, Spencer, MA (the "Property"). The Bank objected to the Motion on the grounds that the Debtor did not allege facts that state a claim for a willful violation of the automatic stay [Dkt. No. 215] (the "Objection"). For the reasons below, the Court DENIES the Motion.²

BACKGROUND

The Debtor filed a petition for relief under Chapter 13 of the Bankruptcy Code on February 3, 2017 (the "Petition Date"), prior to a foreclosure sale that had been scheduled by the Bank for that same day with respect to its mortgage on the Debtor's Property. After it received notice that the Debtor had filed her bankruptcy petition, the Bank postponed the foreclosure sale by announcing "upon the mortgaged premises" that the sale would be postponed to March 15, 2017, as reflected in an affidavit of sale signed by the Bank's representative (the "Affidavit of Sale"). See Aff. of Sale, Mot. Ex A. After the first postponement, and prior to filing a motion for relief from the automatic stay, the Bank postponed the foreclosure sale two other times: from March 15, 2017 to May 15, 2017, and again from May 15, 2017 to July 15, 2017. See id. On May 17, 2017, the Bank filed a motion for relief from the automatic stay under § 362(d)(1), (2), and (4) (the "Motion for Relief"), seeking, among other things, to exercise its rights under its mortgage covering the Property.³ Following a hearing on June 13, 2017, the Court granted the Motion for Relief in part [Dkt. No. 85] (the "Stay Relief Order"), denying in rem relief under § 362(d)(4), but permitting the Bank to exercise its rights under the mortgage and applicable law to conduct a foreclosure sale, apply the proceeds of such sale to the loan balance, and bring an eviction action, if necessary. The Court's Stay Relief Order provided that the Bank shall act in accordance with applicable state and federal law.⁴

POSITIONS OF THE PARTIES

The Debtor asserts that each of the three postponements of the foreclosure sale are void under state and federal law and violated the automatic stay. Since a public proclamation was not statutorily required to postpone the first scheduled date,⁵ the Debtor contends that the Bank, by physically entering onto the Property and publicly proclaiming the postponement as recited in its Affidavit of Sale, chose the "most intrusive method" to give notice and that such action thereby violated the stay as an act of exercising control over the property and of enforcing its lien in violation of § 362(a)(3) and (4), respectively. Mot. ¶¶ 20-21. The Debtor further asserts that there is evidence that the Affidavit of Sale is false in violation of Massachusetts law, because the first postponement was not announced at the Property as claimed therein.⁶ The Debtor argues that the foreclosure sale that the Bank ultimately conducted on October 20, 2017 is also void under Massachusetts law because the Bank's Affidavit of Sale does not comply with M.G.L. ch. 244 § 15 since it purportedly contains a false statement regarding Bank's postponement by public proclamation, and such false statement constitutes perjury. See id. at ¶¶ 25-27.⁷

Citing Lynn-Weaver v. ABN-AMRO Mortg. Grp., Inc. (In re Lynn-Weaver), 385 B.R. 7 (Bankr. D. Mass. 2008), the Debtor further asserts that the second and third postponements in March and May also violated the automatic stay because the Bank had not obtained relief from the automatic stay prior to postponing the sale and because, according to Bank's Affidavit of Sale, those postponements were similarly made by public proclamation "upon the mortgaged premises," which constituted acts to exercise of control over property of the estate and to enforce a lien in violation of § 362(a)(3) and (a)(4). See Aff. of Sale. The Debtor argues that the Court should find that the Bank intentionally violated the automatic stay because of its actions in postponing the sale.

After the Court entered the Stay Relief Order on June 14, 2017, the Bank conducted a foreclosure auction on October 20, 2017.⁸ The Debtor contends that the foreclosure sale, itself, violated Massachusetts law because the postponement announcements were either insufficient under Massachusetts law or were void because they violated the automatic stay and, therefore, could not constitute sufficient notice of the sale. Building on this, the Debtor contends that the auction violated the automatic stay because it did not comply with the Court's Stay Relief Order, which required the Bank to comply with Massachusetts law.

The Bank asserts that that Lynn-Weaver is not binding precedent and urges the Court to follow the line of cases holding that continuing a foreclosure sale, without more, does not advance the foreclosure process and, therefore, does not violate the automatic stay. See, e.g., Witkowski v. Knight (In re Witkowski), 523 B.R. 291, 300 (B.A.P. 1st Cir. 2014), abrogated on other grounds by Smith v. Me. Bureau of Revenue Services (In re Smith) , 910 F.3d 576 (1st Cir. 2018). Moreover, the Bank maintains that this Court is bound to reach this result by the holding of the First Circuit Court of Appeals in Martir Lugo v. De Jesus Saez (In re De Jesus Saez) , 721 F.2d 848 (1st Cir. 1983), citing Perez v. Deutsche Bank Nat'l Trust Co. (In re Perez), 556 B.R. 527 (B.A.P. 1st Cir. 2016). See In re Perez , 556 B.R. at 534-35 (concluding that In re De Jesus Saez was binding precedent and that a second post-petition postponement of a Massachusetts non-judicial foreclosure sale did not, by itself, violate the automatic stay).

DISCUSSION

Under § 362(k), a debtor must prove by a preponderance of the evidence that the creditor took action that violated the stay, the act was committed willfully, and the debtor suffered damages. See In re Steenstra , 280 B.R. 560, 566 (Bankr. D. Mass. 2002) (citations omitted); see also Fleet Mortg. Grp., Inc. v. Kaneb, 196 F.3d 265, 269 (1st Cir. 1999) (explaining that no specific intent to commit violation required); Vázquez Laboy v. Doral Mortg. Corp. (In re Vázquez Laboy) , 647 F.3d 367, 371 n.7 (1st Cir. 2011) (recognizing that § 362(k), not (h), now governs damages for willful stay violations and that the standard is unchanged). "[C]ommencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case" violates the automatic stay pursuant to § 362(a)(1). 11 U.S.C. § 362(a)(1). Additionally, "any act to create, perfect, or enforce against the property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case" constitutes a stay violation under § 362(a)(5). Id. at § 362(a)(5) ; see also id. at § 362(a)(4) (prohibiting acts to enforce a lien against property of the estate).

Postponing the date of a foreclosure sale is not a per se violation of any of the automatic stay provisions of § 362(a). Rather, it is an act that, without more, merely maintains the status quo between the parties.⁹ See, e.g., In re De Jesus Saez , 721 F.2d at 853 (addressing whether the act of postponing and re-advertising a sheriff's sale post-petition violated the stay and determining it did not because the mortgagee "did little more than reschedule the auction and advertise the new date from the time he learned of the petition until its dismissal" and "that these preparatory acts [neither] harassed [the debtor nor] revived the financial pressures that drove [the debtor] into bankruptcy") (internal quotations and citations omitted); In re Perez, 556 B.R. at 534-36 (applying In re De Jesus Saez and concluding the creditor did not violate the automatic stay when it announced a second post-petition postponement without having obtained relief from stay); In re Witkowski , 523 B.R. at 300 (post-petition foreclosure postponement from month to month did not violate the stay pursuant to § 362(a)(1) as a continuation of an action because the postponement only maintained the status quo without prejudice to the debtor). The Court agrees with the conclusion of the First Circuit Bankruptcy Appellate Panel in Perez that the reasoning of In re De Jesus Saez applies equally to cases involving the post-petition postponement of a non-judicial foreclosure sale, regardless of whether In re De Jesus Saez should be considered binding precedent on the issue instead of just analogous or persuasive authority. See In re Perez, 556 B.R. at 535-36.

The Debtor relies on Lynn-Weaver to support her position that the Bank violated the stay when it postponed the sale more than once before moving for relief from the automatic stay. See 385 B.R. at 11-12. In Lynn–Weaver , J...