U.S. Bank Trust, N.A. v. Giblen

190 Conn.App. 221

209 A.3d 1266

U.S. BANK TRUST, N.A., Trustee

v.Gary M. GIBLEN et al.

AC 40664

Appellate Court of Connecticut.

Argued February 5, 2019

Officially released May 21, 2019

Christopher G. Brown, for the appellants (named defendant et al.).

Christopher J. Picard, Hartford, for the appellee (plaintiff).

Sheldon, Moll and Seeley, Js.^*

SHELDON, J.

In this foreclosure action, the defendant mortgagors, Gary M. Giblen, also known as Gary Giblen, and Anna-Marie L. Giblen, also known as Anna-Marie Giblen,¹ appeal from the judgment of the trial court approving the sale of their mortgaged property, on the motion of the committee of sale (committee), following the court's rendering of a judgment of foreclosure by sale in favor of the plaintiff mortgagee, U.S. Bank Trust, N.A., as Trustee for LSF9 Master Participation Trust. On appeal, the defendants claim that (1) the trial court's approval of the sale of the subject property was void ab initio because it exceeded the scope of the Bankruptcy Court's order annulling the automatic stay that was triggered by the defendants' filing for chapter 7 bankruptcy protection, and (2) the trial court abused its discretion in approving the sale of the subject property because there were "irregularities with the motion to approve the foreclosure sale" that were "injurious" to them. We affirm the judgment of the trial court.

The following procedural history is relevant to the defendants' claims on appeal. In March, 2016, the plaintiff commenced this action against the defendants to foreclose a mortgage on property owned by the defendants at 11 Top O'HiIl Road in Darien. On May 20, 2016, the defendants were defaulted for failure to appear in the action. On May 23, 2016, the court rendered a judgment of foreclosure by sale. The court found that, as of that date, the defendants owed the plaintiff $ 584,801.05, and the fair market value of the subject property was $ 1,750,000. The court appointed a committee to sell the property at a public auction on June 30, 2016. On June 14, 2016, the defendants filed a motion to the open judgment and extend the sale date. The court granted the motion to open the judgment and set the new sale date as December 3, 2016. On November 22, 2016, the defendants filed a second motion to open the judgment and extend the sale date, which was denied. The foreclosure sale was held on December 3, 2016, with a winning bid of $ 1,230,000. On December 7, 2016, the committee filed a motion for approval of the sale.

On December 18, 2016, prior to the hearing on the committee's motion for approval of the sale, the defendants filed for chapter 7 bankruptcy protection, triggering an automatic stay of the foreclosure proceedings pursuant to 11 U.S.C. § 362 (a) (2012). On March 7, 2017, the committee appeared before the Bankruptcy Court and informed it that a foreclosure sale of the subject property had been conducted on December 3, 2016. Because neither the foreclosure action nor the sale had been disclosed by the defendants, the Bankruptcy Court issued an order to appear and show cause to the defendants, their bankruptcy attorney, and the bankruptcy trustee. On March 23, 2017, an evidentiary hearing was held on the order to show cause to determine, inter alia, "why ... [a]n order should not enter terminating, annulling, modifying, and/or conditioning relief from the automatic stay pursuant to 11 U.S.C. § 362 (d) (1), 11 U.S.C. § 362 (d) (2) and/or 11 U.S.C. 362 (d) (4), to allow the Committee to continue to prosecute and complete the Foreclosure Action, including to complete the pre-petition foreclosure sale conducted on December 3, 2016." Following the show cause hearing, the Bankruptcy Court annulled the stay, retroactive to December 18, 2016, the date on which the defendants filed for bankruptcy protection.

On March 30, 2017, the committee filed a supplemental report with the trial court and reclaimed her motion for approval of the committee sale. On April 17, 2017, the defendants filed an objection to the motion for approval, arguing that (1) the appraised value of the subject property was substantially higher than the successful bid at the foreclosure auction because an interior appraisal of the property, which the court had ordered, had not been performed, (2) the committee had failed to advertise the sale in the newspaper two times, as the court had ordered, and (3) the committee had failed to ensure that the sign that she had posted on the property, pursuant to the court's order, remained there until the date of the sale. The defendants also challenged the amount of fees and expenses claimed by the committee.²

On May 9, 2017, the trial court ordered that a hearing on the motion for approval of the committee sale be held on July 6, 2017, to address the following limited issues: "(1) lack of interior inspection; (2) lack of a second sale advertisement; and (3) the intentional removal of the sale sign by the defendant[s]." On July 7, 2017, the trial court granted the committee's motion for approval of the sale.³ This appeal followed. Additional facts will be set forth as necessary.

I

The defendants first claim that the trial court's approval of the committee sale of the subject property was void ab initio because it exceeded the scope of the Bankruptcy Court's order annulling the bankruptcy stay. Specifically, the defendants claim that the Bankruptcy Court's order annulling the stay was intended only to permit the committee to recover fees and expenses, not to pursue approval of the December 3, 2016 foreclosure sale. We disagree.

"It is true that acts taken in violation of the automatic stay are generally deemed void and without effect.... Nonetheless, [ 11 U.S.C.] § 362 (d) expressly grants bankruptcy courts the option, in fashioning appropriate relief, of ‘annulling’ the automatic stay, in addition to merely ‘terminating’ it. The word ‘annulling’ in this provision evidently contemplates the power of bankruptcy courts to grant relief from the stay which has retroactive effect; otherwise its inclusion, next to ‘terminating’, would be superfluous. As is stated in 2 Collier's Bankruptcy Manual ¶ 362.06 (3d Ed.1983): ‘In addition to the obvious power to terminate the stay, [ § 362 (d) ] also gives the bankruptcy court the power to annul the stay. The difference between the two is that an order annulling the stay could operate retroactively to the date of the filing of the petition which gave rise to the stay, and thus validate actions taken by the party at a time when he may have been unaware of the existence of the stay. On the other hand, an order terminating the stay would be operative only from the date of its entry.’

"To similar effect is the advisory committee's note accompanying former Bankruptcy Rule 601 (c), a predecessor to § 362 (d), which explains the role of annullment as follows: ‘This rule consists with the view that ... an act or proceeding [against property in the bankruptcy court's custody taken in violation of the automatic stay] is void, but subdivision (c) recognizes that in appropriate cases the court may annul the stay so as to validate action taken during the pendency of the stay.’ Accordingly ... § 362 (d) permits bankruptcy courts, in appropriately limited circumstances, to grant retroactive relief from the automatic stay." In re Albany Partners, Ltd. , 749 F.2d 670, 675 (11th Cir. 1984).

Here, following the evidentiary hearing, the Bankruptcy Court found that "[n]o party has shown cause as to why an Order should not enter terminating, annulling, modifying, and/or conditioning relief from the automatic stay pursuant to 11 U.S.C. § 362 (d) (1), 11 U.S.C. § 362 (d) (2) and/or 11 U.S.C. § 362 (d) (4), to allow the Committee to continue to prosecute and complete the Foreclosure Action, including to complete the pre-petition foreclosure sale conducted on December 3, 2016....

"The testimony, evidence, and information presented at the show cause hearing supports a finding under 11 U.S.C. § 362 (d) (1) that cause exists to annul the automatic stay provisions of 11 U.S.C. § 362 (a) to December 18, 2016, the date of the filing of the [defendants'] case, to allow the Committee to take whatever actions are necessary and appropriate under applicable law in connection with the pending Foreclosure Action ...."

On the basis of those findings, the Bankruptcy Court ordered, inter alia: "Pursuant to 11 U.S.C. § 362 (d) (1), the automatic stay provided by 11 U.S.C. § 362 (a) is annulled for cause to December 18, 2016, the date of the filing of the [defendants'] case, to allow the Committee to exercise all rights or remedies it may have under applicable law ...."

The defendants contend that the Bankruptcy Court's order was not intended to allow the committee to pursue approval of the foreclosure sale. "The construction of a judgment is a question of law for the court.... We review such questions of law de novo.... As a general rule, judgments are construed in the same fashion as other written instruments.... The determinative factor is the intention of the court as gathered from all parts of the judgment.... The judgment should admit of a consistent construction as a whole.... To determine the meaning of a judgment, we must ascertain the intent of the court from the language used and, if necessary, the surrounding circumstances." (Internal quotation marks omitted.) Kent v. DiPaola , 178 Conn. App. 424, 436–37, 175 A.3d 601 (2017).

We reject the defendants' contention that the sole purpose of the Bankruptcy Court's annulment of the automatic stay was to permit the committee to recover fees and expenses. The court's intent is clearly expressed in its order, in which it specifically stated that the defendants failed to show cause as to why relief from the automatic stay should not be granted "to allow the [c]ommittee to continue to prosecute and complete the [f]oreclosure [a]ction, including to complete the pre-petition foreclosure sale conducted on December 3,...