Perez v. Deutsche Bank Nat'l Trust Co.

556 B.R. 527

Robert Perez, a/k/a Robert Perez, Jr., Debtor.

Robert Perez, Appellant,

v.Deutsche Bank National Trust Company, as Trustee on behalf of Certificate Holders of Morgan Stanley ABS Capital I Inc. Trust 2003-NC10, Mortgage Pass-Through Certificates, Series 2003-NC10, Appellee.

BAP NO. MS 16-007

Bankruptcy Case No. 15-30108-MSH

United States Bankruptcy Appellate Panel of the First Circuit.

Signed September 28, 2016

Louis S. Robin, Esq., on brief for Appellant.

Lindsay Kyser, Esq., Reneau J. Longoria, Esq., Brian C. Linehan, Esq., and John A. Doonan, Esq. on brief for Appellee.

Before Lamoutte, Deasy, and Cary, United States Bankruptcy Appellate Panel Judges.

Cary, U.S. Bankruptcy Appellate Panel Judge.

Robert Perez (the “Debtor”) appeals the order denying his Motion for Finding of Breaches of the Automatic Stay and Damages (the “Motion”). Despite the overwhelming number of courts that have ruled to the contrary, the Debtor sought to have Deutsche Bank National Trust Company, as Trustee on behalf of Certificate Holders of Morgan Stanley ABS Capital I Inc. Trust 2003-NC10, Mortgage Pass-Through Certificates, Series 2003-NC10 (the “Creditor”), sanctioned for having twice postponed its foreclosure sale post-petition. For the reasons set forth below, we conclude that we are bound by First Circuit precedent and therefore AFFIRM.

BACKGROUND

The Debtor entered into an adjustable rate mortgage loan with New Century Mortgage Corporation in July 2003 which loan was later assigned to the Creditor. The Debtor defaulted on the loan in 2010 and the Creditor subsequently commenced foreclosure proceedings. The initial foreclosure sale was scheduled for October 16, 2013, but after several postponements, it was rescheduled to February 10, 2015, at 10:00 AM.

On Sunday, February 8, 2015, the Debtor filed a petition under chapter 13. Counsel for the Debtor left a voice message to that effect at the office of the Creditor's counsel. Given a state of emergency due to extreme weather, however, the Creditor's counsel did not receive the voice message until after 12:00 PM on Tuesday, February 10, 2015.

In the meantime, at 10:00 AM on February 10, 2015, a representative for the Creditor was present at the Debtor's property to continue the foreclosure sale. The Debtor's ex-wife, who was at the property, called the Debtor to express her concern that the sale was going forward. The Debtor then called his counsel who explained that the Creditor's action was standard protocol following the filing of a bankruptcy case. The Debtor's counsel contacted the Creditor that afternoon in an effort to clarify the situation. The Creditor offered that, due to the inclement weather, it had rescheduled the foreclosure sale for one day, at which time it planned to reschedule the auction for at least thirty additional days.

On February 11, 2015, the Creditor's auctioneer appeared at the property and postponed the foreclosure sale until April 15, 2015. In her Foreclosure Postponement Description Form, the auctioneer reported there were no witnesses to the postponement. The Creditor later cancelled the sale.¹

On June 30, 2015, the Debtor filed the Motion. The Debtor alleged, inter alia, that the Creditor's two post-petition continuances of the foreclosure sale violated § 362(a)(1),² the continuances revived financial pressure on him, acted to harass and damage him, caused him to lose one day of pay and incur added attorneys' fees, disturbed his ex-wife, and, as a result, “they” were entitled to damages for injuries including costs and legal fees.³ In the accompanying memorandum, the Debtor explained why applicable First Circuit precedent and the majority of case law was wrongly decided with respect to the issue of whether a post-petition postponement of a foreclosure sale is a violation of the automatic stay. The Debtor also appended to the Motion one affidavit, that of his ex-wife. In it, she explained she was “taken aback” by the events and it worried her that “a bank representative gave the impression that a foreclosure sale was to take place.”

In its response and memorandum of law in opposition, the Creditor explained it did not know of the Debtor's case “prior to initially postponing the foreclosure sale.” It admitted scheduling the foreclosure sale for February 10, 2015, and postponing it until February 11, 2015. It also admitted postponing the February 11, 2015 foreclosure sale until April 15, 2015, and subsequently cancelling the sale. The Creditor further denied that the postponements violated § 362, that they were intended to harass or damage the Debtor, or that they gave rise to the same financial pressures the Debtor experienced prior to filing bankruptcy. Thus, it argued the Debtor was not entitled to any relief.

The bankruptcy court held a non-evidentiary hearing on September 9, 2015, to consider, inter alia, the Motion and the Creditor's opposition. The Creditor's counsel described the typical procedure an auctioneer follows in making a public proclamation when a sale is postponed. She represented that the Creditor's foreclosure practices were not violative of the Bankruptcy Code, and explained the postponements served the purpose of preserving the status quo until the automatic stay is lifted.

The Debtor's counsel effectively conceded that the Creditor did not have notice of the bankruptcy before the first continuance, and that while the continuance was a violation of the automatic stay, it was not willful.⁴ He maintained, however, that the second continuance was a willful violation of automatic stay. The Creditor's counsel denied these arguments, and agreed with the Debtor that an evidentiary hearing was unnecessary.

The bankruptcy court took the matter under advisement and subsequently issued an order denying the Motion after finding and ruling that: (a) the postponement of the foreclosure sale on February 10, 2015, did not violate the automatic stay because the Debtor did not establish the Creditor had knowledge of the bankruptcy filing at that time; (b) the postponement of the foreclosure sale on February 11, 2015, did not violate the automatic stay as it “merely preserved the status quo”; and (c) the Debtor failed to demonstrate the Creditor intended to harass the Debtor.

The Debtor filed a timely appeal. The Debtor listed two issues for appeal, both of which concerned whether the bankruptcy court erred in denying his “request for finding of breaches of the automatic stay provisions of the Bankruptcy Code ....”

On March 9, 2016, the bankruptcy court dismissed the Debtor's main case for failure to maintain plan payments.

JURISDICTION

The Panel may hear appeals from “final judgments, orders, and decrees” of the bankruptcy court. See 28 U.S.C. § 158(a)(1). An order is final when it “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Fleet Data Processing Corp. v . Branch (In re Bank of New Eng. Corp.), 218 B.R. 643, 646 (1st Cir. BAP 1998) (citations omitted) (footnote omitted). The Panel has concluded that a bankruptcy court's order deciding whether a violation of the automatic stay occurred and whether sanctions for the violation are warranted is a final appealable order. See Heghmann v. Indorf (In re Heghmann), 316 B.R. 395, 400 (1st Cir. BAP 2004). It has also ruled that the dismissal of an underlying case does not otherwise moot an appeal of an order regarding a stay violation motion. See Jones v. Boston Gas Co. (In re Jones), 369 B.R. 745, 748 (1st Cir. BAP 2007).

Therefore, the Panel has jurisdiction to consider this appeal.

STANDARD OF REVIEW

The Panel reviews a bankruptcy court's findings of fact for clear error and conclusions of questions of law de novo. See Slabicki v. Gleason (In re Slabicki), 466 B.R. 572, 577 (1st Cir. BAP 2012) (explaining bankruptcy court's determination as to whether the automatic stay provisions were violated involved question of law subject to de novo review) (citation omitted); see also Douglas v. Kosinski (In re Kosinski), 424 B.R. 599, 607 (1st Cir. BAP 2010) (explaining “a finding is clearly erroneous when, although there is evidence to support it, the Panel is left with the definite impression that a mistake has been made”) (citation omitted).

DISCUSSION

I. The Statute

Section 362(a)(1) provides, in relevant part, that:

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of—

(1) the commencement 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 under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title ....

11 U.S.C. § 362(a)(1).

Section 362(k)(1) further provides: “Except as provided in paragraph (2), an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages.” 11 U.S.C. § 362(k)(1).

“A debtor seeking damages under [§ 362(k) ] bears the burden of proving by a preponderance of the evidence ... three elements: (1) that a violation of the automatic stay occurred; (2) that the violation was willfully committed; and (3) that the debtor suffered damages as a result of the violation.” In re Slabicki, 466 B.R. at 577–578 (citation omitted).

II. Arguments of the Parties

In his brief, the Debtor starts with the proposition that the stay provisions must be interpreted broadly, similar to other broad protections offered in the Bankruptcy Code such as § 542(a). He then argues the bankruptcy court erred in concluding the two post-petition postponements of the foreclosure sale were not a...