150 Conn.App. 745
Conn. App. Ct.2014Background
- Foreclosure action by Equity One, Inc. based on a 2006 promissory note and mortgage against Shivers; MERS as nominal mortgagee; sale dates set and extended, but bankruptcy filed May 8, 2008 halted proceedings.
- Automatic bankruptcy stay (11 U.S.C. § 362) was invoked May–Oct 2008, potentially staying actions to create or enforce liens against the debtor’s property.
- Bankruptcy stay lifted on Oct 9, 2008, allowing actions against the debtor’s property to proceed; JP Morgan-related stay termination affected the case.
- Committee of sale sought fees/expenses under Conn. Gen. Stat. § 49-25 during the stay; trial court granted the motion on May 27, 2008.
- Question on appeal: whether the stay voided actions taken during May–Nov 2008, including the committee fees ruling, and whether the stay termination rendered those actions harmless.
- Court remanded for proceedings; the judgment was reversed only as to the committee fees and affirmed otherwise; new law days to be set on remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the automatic stay barred committee fees proceedings | Equity One urged stay applied to all actions affecting debtor’s property | Shivers argued actions were void under stay | Partial: stay applied to committee fees only to the extent actionable against debtor; void as to that act. |
| Whether the committee’s fees motion violated the stay | Fees were proper costs taxable to plaintiff | Motion violated stay protections | Void; the stay extended to the motion and its ruling. |
| Whether the stay termination allowed continued foreclosure actions | Termination allowed proceedings against debtor’s assets | Proceedings should have remained stayed | Stay terminated effectively; foreclosure could proceed on remand. |
| Whether § 49-25 creates an indemnity obligation for committee fees | Plaintiff liable to reimburse committee | Fees should be allocated differently under stay | Statutory framework supports plaintiff’s obligation to pay committee fees. |
| Whether any damages or harmlessness resulted from stay actions | Costs and dissipation of focus harmed debtor | No measurable damages proven | Harmlessness question to be revisited on remand; no damages determined. |
Key Cases Cited
- Krondes v. O’Boy, 69 Conn. App. 802 (Conn. App. 2002) (automatic stay applies to nondebtors only in limited contexts; broad stay protects debtor; extensions possible)
- In re Metal Center, 31 B.R. 458 (Bankr. D. Conn. 1983) (stay may extend to indemnification-like relationships in unusual circumstances)
- A. H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir. 1986) (to stay nondebtors when debtor is the real party defendant via indemnification)
- In re North Star Contracting Corp., 125 B.R. 368 (Bankr. S.D.N.Y. 1991) (indicia of identity of interest between debtor and nondebtor for stay extensions)
- Queenie, Ltd. v. Nygard International, 321 F.3d 282 (2d Cir. 2003) (stay can apply to nondebtors when there is immediate adverse economic consequence to debtor’s estate)
- Williford v. Armstrong World Industries, Inc., 715 F.2d 124 (4th Cir. 1983) (automatic stay policy rationale and creditor protections)
- Norwalk v. Farrell, 80 Conn. App. 399 (Conn. App. 2003) (committee of sale expenses are taxed as costs to plaintiff under §49-25)