499 B.R. 225
Bankr. D.P.R.2013Background
- Debtor José L. Vélez Arcay filed a Chapter 13 petition on August 13, 2011; Banco Santander held a prepetition mortgage and filed a secured proof of claim.
- The Debtor’s confirmed amended Chapter 13 plan (Mar. 2012) expressly modified the automatic stay to permit Banco Santander to proceed only with in rem foreclosure against the collateral.
- On July 18, 2012 Santander filed motions in the pre-petition state foreclosure case asking the state court to reopen the case and enter default judgment; Santander’s filings were captioned “Foreclosure of Mortgage (In Rem).”
- Santander prepared and submitted a draft default judgment to the state court; the signed July 24, 2012 judgment ordered sale of the property and, if sale proceeds were insufficient, permitted seizure of other debtor goods (i.e., in personam relief).
- Debtor commenced this adversary proceeding alleging Santander willfully violated the automatic stay by obtaining relief beyond the in rem foreclosure allowed by the confirmed plan; Santander moved for summary judgment asserting it only sought in rem relief and is not responsible for the state court’s judgment wording.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Santander violate the automatic stay by pursuing relief beyond in rem foreclosure? | Santander sought and caused a judgment that included in personam remedies, exceeding the plan’s limited stay modification. | Santander contends it only sought in rem relief; the state judge (not Santander) is responsible for any defective judgment language. | Court held Santander’s motions substantively requested default judgment including in personam relief and thereby violated the stay. |
| Was the violation willful? | Santander had actual knowledge of the bankruptcy and the plan-limited stay; its actions were deliberate. | Santander argued inadvertence and blamed the state court’s signing of the draft judgment. | Court found Santander had actual notice and that its conduct in seeking judgment was deliberate enough to satisfy willfulness for summary-judgment purposes. |
| Is Santander entitled to summary judgment (dismissal)? | N/A (Santander sought judgment in its favor). | Santander argued no liability because it sought only in rem relief and cannot be held for the state court’s judgment wording. | Court denied Santander’s summary judgment motion and ordered Santander to show cause why partial summary judgment should not be entered for Debtor on willful stay violation. |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaint)
- Ashcroft v. Iqbal, 556 U.S. 662 (application of Twombly plausibility framework)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden-shifting rules)
- Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969 (purpose and scope of the automatic stay)
- Fleet Mortgage Group v. Kaneb, 196 F.3d 265 (willfulness standard for stay violations)
- ICC v. Holmes Transp., Inc., 931 F.2d 984 (automatic stay prevents continuation of prepetition proceedings)
- Peñalbert-Rosa v. Fortuño-Burset, 631 F.3d 592 (pleading standards; distinguishing conclusory allegations)