487 B.R. 331
Bankr. D.C.2013Background
- In 2005, Rufus and Delores Stancil and their son Gary borrowed $280,000 from Greg Friedman as trustee for the Lien Holders, secured by a deed of trust on the Property.
- Foreclosure was scheduled for June 17, 2011 after default; Gary and Delores filed a joint Chapter 13 petition on that day, and the sale proceeded later that day with 12th Street purchasing the Property.
- Delores Stancil’s bankruptcy case was dismissed the same day for ineligibility/joint-petition issues; Gary’s case later proceeded and was dismissed for lack of prepetition credit counseling.
- At the time of the sale, the Friedmans knew of the bankruptcy filing (via statements/admissions) but believed the petition was invalid and did not seek relief from the automatic stay.
- The sale occurred despite the bankruptcy filing, and the Trustee’s Deed later issued to 12th Street; the stay subsequently was found to have arisen as to Gary Stancil due to the improper joint petition.
- Gary Stancil filed this adversary proceeding seeking turnover of the Property and, separately, monetary sanctions and damages for willful stay violation; 12th Street sought annulment of the stay and related relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the automatic stay arise and was the foreclosure sale void? | Stancil: stay existed and was violated by the sale; sale void and turnover appropriate. | Friedmans: relied on counsel; believed stay not violated; no stay awareness defense is lacking. | Yes; stay arose and sale void; turnover granted. |
| Should the automatic stay be annulled to validate the sale retroactively? | Stancil argues annulment appropriate due to bad-faith filing and knowledge by creditors. | 12th Street contends annulment warranted given circumstances and delay. | Annulment denied; stay not annulled. |
| What damages and sanctions are warranted under § 362(k) for willful stay violation? | Stancil seeks actual damages and, potentially, punitive damages against Friedmans. | Friedmans argue lack of willfulness/defense, or at least unresolved punitive issue. | Partial summary judgment for actual damages against Friedmans; punitive damages reserved; some defendants denied damages. |
| Is turnover of the Property proper under state law after voiding the sale? | Stancil is entitled to possession/turnover of Property and rents. | 12th Street challenges turnover on the basis of value/estate interest issues. | Turnover awarded; Gary to recover possession and rents. |
Key Cases Cited
- Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969 (1st Cir. 1997) (violation of stay voids enforcement actions)
- In re Albany Partners, Ltd., 749 F.2d 670 (11th Cir. 1984) (unsettled law defense not controlling where no prior adjudication on estate status)
- Albany Partners, Ltd. v. Westbrook, 749 F.2d 670 (11th Cir. 1984) (good faith not defense to willfulness when law unsettled)
- In re Univ. Med. Ctr., 973 F.2d 1065 (3d Cir. 1992) (good faith is not defense to stay violation unless unsettled law)
- In re Mu’min, 374 B.R. 149 (Bankr.E.D. Pa. 2007) ( legislative changes to 362(k) and good faith defense discussed)
- In re Stanwyck, 450 B.R. 181 (Bankr.C.D. Cal. 2011) (willfulness doctrine and stay violation standard)
- McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949) (civil contempt analogy to stay violations)
- Farmland Indus., Inc. v. Grain Bd. of Iraq, 904 F.2d 732 (D.C.Cir. 1990) (bench decision on summary judgment and record considerations)
- Nat’l Envtl. Waste Corp. v. City of Riverside (In re Nat’l Envtl. Waste Corp.), 129 F.3d 1052 (9th Cir. 1997) (two-factor approach to stay relief: knowledge and conduct)
- Armstrong v. Exec. Office of the President, O.A.O., 1 F.3d 1274 (D.C. Cir. 1993) (fair warning and ambiguity principles in contempt-like contexts)