In Re: Eileen Fogarty, 39 F.4th 62

Background

Eileen Fogarty lived at a house owned by 72 Grandview LLC; Fogarty owned 99% of the LLC and had a possessory interest in the property but was not personally liable on the LLC’s mortgage.
Bayview, as assignee of the note and mortgage, instituted a state-court foreclosure, ultimately obtaining a Foreclosure Judgment permitting a sale; the foreclosure caption named both the LLC and Fogarty as defendants.
Fogarty filed a Chapter 7 petition four days before the scheduled foreclosure sale and notified Bayview that the automatic stay under 11 U.S.C. § 362 applied.
Bayview proceeded with the foreclosure sale despite knowledge of the petition; the property sold to a third party and Fogarty was later evicted.
Fogarty moved for sanctions under § 362(k); the bankruptcy court denied relief, the district court reversed and remanded for damages, and the Second Circuit affirmed: the sale violated § 362(a)(1) and (a)(2) and Bayview willfully violated the stay.

Issues

Issue	Plaintiff's Argument (Fogarty)	Defendant's Argument (Bayview)	Held
Whether the foreclosure sale violated § 362(a)(1) and § 362(a)(2) when the debtor was a named defendant but held only a possessory interest	The automatic stay bars continuation of proceedings "against the debtor" and enforcement of prepetition judgments against the debtor; Fogarty was a named defendant so the sale continued and enforced a judgment against her and thus violated §§ 362(a)(1) and (a)(2).	Because the LLC, not Fogarty, owned the property and Fogarty had no personal liability, the foreclosure targeted only the LLC (in rem) and therefore did not fall within the stay as to Fogarty.	The court held the stay applied: naming the debtor in the foreclosure made the action and the sale subject to §§ 362(a)(1) and (a)(2), even if the debtor’s interest was only possessory.
Whether the foreclosure sale was a "ministerial act" exempt from the stay	A foreclosure sale is not merely clerical; it transfers ownership/possession and requires discretionary acts, so it is not ministerial.	The sale was a ministerial post-judgment act (e.g., administrative implementation of a prior judgment) and therefore not barred by the stay.	The court rejected the ministerial-act argument: foreclosure sales affect ownership/possession and involve discretionary steps, so they are not within the narrow ministerial exception.
Whether the foreclosing lender could have sought relief from the stay (party‑in‑interest/Comcoach issue)	Bayview, as the foreclosing party and direct adversary of Fogarty in the stayed proceeding, was a party in interest and could move for relief under § 362(d); it should have sought stay relief before proceeding.	Bayview contended that under Comcoach it would not qualify as a "party in interest" and therefore could not have sought relief under § 362(d).	The court held Comcoach is distinguishable: because Fogarty was a named defendant and the action was stayed as to her, Bayview was a direct party in the stayed proceedings and could (and should) have sought relief under § 362(d).
Whether Bayview’s conduct was "willful" such that § 362(k) sanctions are available	Bayview proceeded after receiving notice of the petition and warning; that knowledge plus the deliberate act of completing the sale supports a willful violation and § 362(k) relief.	Bayview did not contest willfulness on appeal.	The court accepted willfulness: knowing of the petition and intentionally completing the sale satisfies the standard for a willful violation under § 362.

Key Cases Cited

Picard v. Fairfield Greenwich Ltd., 762 F.3d 199 (2d Cir. 2014) (automatic stay protects estate by restraining actions that dissipate assets)
In re 48th St. Steakhouse, Inc., 835 F.2d 427 (2d Cir. 1987) (mere possessory interest can trigger the stay)
In re Comcoach Corp., 698 F.2d 571 (2d Cir. 1983) (distinguishable; action not stayed where debtor was not named defendant)
In re Colonial Realty Co., 980 F.2d 125 (2d Cir. 1992) (automatic stay effective without court order)
Eastern Refractories Co. v. Forty Eight Insulations Inc., 157 F.3d 169 (2d Cir. 1998) (automatic stay and bankruptcy court’s equitable relief powers)
In re Rodgers, 333 F.3d 64 (2d Cir. 2003) (delivery of deed after sale can be ministerial but sale itself is not)
In re Canney, 284 F.3d 362 (2d Cir. 2002) (ministerial acts exception to stay)
Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000) (statutory text controls when unambiguous)
Lamie v. U.S. Trustee, 540 U.S. 526 (2004) (courts cannot override unambiguous statutory text for equitable reasons)
In re Weber, 719 F.3d 72 (2d Cir. 2013) (definition of willful violation of § 362)
In re Ebadi, 448 B.R. 308 (Bankr. E.D.N.Y. 2011) (foreclosure sale violated stay where debtor was named defendant)