In Re Dominguez
- Reporters:
- , ,
- Before:
- Morris
MEMORANDUM DECISION HOLDING CITY OF NEWBURGH IN VIOLATION OF
Debtor’s counsel brought a “Motion to Compel Enforcement of the Provisions of the
JURISDICTION
The Court has jurisdiction under
BACKGROUND FACTS
Debtor, a single mother of three children who works as a light machine opera
On August 14, 2003, the City of New-burgh filed a Petition and Notice of Foreclosure in Orange County Supreme Court (the “Foreclosure Petition”) with respect to, inter alia, Debtor’s property. The Foreclosure Petition indicates that December 1, 2003 was the last date for redemption. See the City’s Affirmation in Support of Opposition, Exhibit B. After the Debtor filed her bankruptcy petition the City of Newburgh proceeded with its foreclosure action in state court against Debt- or’s property, without seeking stay relief from this Court or giving notice to the Debtor and security holders. Specifically, the City submitted an Affirmation, dated May 12, 2004, in support of the entry of a default judgment against the Property 3 to Orange County Supreme Court, detailing the City’s compliance with New York State Real Property Tax Law. See Exhibit E to the Opposition. On May 25, 2004, in reb-anee on the May 12, 2004 Affirmation submitted by the City and upon the City’s motion, Justice Lawrence Ivan Horowitz of the Orange County Supreme Court signed, and the Orange County Clerk entered, a Judgment awarding the City of Newburgh possession of the Property. See Exhibit F to the Opposition.
On June 15, 2004 a representative of the City of Newburgh arrived at Debtor’s home to serve a Notice, annexed to Debt- or’s Motion as Exhibit C, declaring the City the owner of the Property, informing Debtor that the City reserved the right to access the property and, upon notice to the occupants, to perform repairs and show the property to potential buyers. Shortly thereafter, the Debtor made the instant Motion, in which she indicated that she had been unaware of the City’s continuation of its efforts to foreclose on her home, in spite of her bankruptcy filing; that she continued to receive tax and water bills
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from the City; and had continued to make mortgage payments to secured lien holders. Debtor further stated that the City had made no effort to address the liens on her Property that are held by the first and
The City of Newburgh filed opposition to the Debtor’s Motion. The City’s position was that the Debtor’s right to redeem the property expired on December 1, 2003, pursuant to New York Real Property Tax Law Section 1131 (“N.Y.R.P.T.L.”).
The Court heard oral argument on August 3, 2004. At the hearing, corporation counsel for the City of Newburgh argued that the procurement of the post-petition judgment was merely a “ministerial” act that did not implicate the automatic stay. Debtor took the stand and gave testimony that she attempted to pay her taxes on the last day to redeem, December 1, 2003, but that her tender of payment, in the form of $7,500 in cash and a personal check for the remaining $864.48, was refused, because ostensibly a personal check was not acceptable. Debtor testified that she presented a personal check because although the funds were available in her account, due to bank bureaucracy, the funds could not be released in the form of a bank check. She was told by the City to “come back tomorrow.” Of course, “tomorrow” was too late, the redemption period had lapsed and the Debtor filed the instant case on December 19, 2003 in an attempt to save her home.
DISCUSSION
Ministerial Acts Distinguished from Judicial Functions
The City’s contention that their procurement of a state court default judgment post-petition constitutes a “mere ministerial act” that does not implicate the automatic stay is clearly wrong.
See Rexnord Holdings, Inc. v. Bidermann,
For the proposition that its actions were merely ministerial in nature, the City relies on
In re Rodgers,
The
Rodgers
case does define a critical inquiry as to whether Debtor had any equitable or legal interest that survived the expiration of the redemption period. “Property interests are created and defined by state law.”
In re Rodgers, supra,
at 66.
Cause for Stay Relief Distinguished from The Inapplicability of the Provisions of
A Motion for Stay Relief is not a mere formality that may be ignored in a party’s discretion. Only a bankruptcy court has jurisdiction to terminate, annul, or modify the automatic stay. “Central to the bankruptcy case as to which exclusive Article I federal jurisdiction lies is the automatic stay imposed by
The Court assumes, without deciding, for the sole purpose of this opinion, and giving the City every possible favorable factual assumption, that the Debtor’s right to redemption expired on December 1, 2003.
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Even if the City is correct in their assumption that Debtor’s right to redeem the property had expired and her bankruptcy filing did not restore those rights, the City nonetheless skipped a significant step by proceeding, postpetition, to obtain a judgment of foreclosure and sale, and then by taking action to enforce that judgment, without proving to this Court that it was entitled to stay relief. Although the City maintains that it did not need to seek stay relief because the Debt-
The burden was on the City to seek stay relief. The Court notes that “[i]t is not the debtor’s responsibility to take action that ensures that she receive the protection of the automatic stay; rather the creditor bears the burden of seeking relief from the automatic stay before taking post petition collection actions.”
In re Braught, supra,
at 401 (Bankr.S.D.N.Y.2004). Nevertheless, in this ease the Debtor was put to the trouble and expense of filing a motion to preserve her rights under the Bankruptcy Code. The City now advances in opposition to that motion facts and law that were more properly brought before this Court on the City’s own motion for stay relief prior to obtaining a state court judgment. The City may or may not have been entitled to stay relief had it bothered to make a motion before this Court. Debtor has now spent nine months in bankruptcy, and gone through the laborious Chapter 13 confirmation process. Debtor has remained current with her plan to pay all other creditors. The City has also expended time and resources for a judgment that is void. A timely lift stay motion would have afforded this Court the opportunity to rule and would have shown Debtor what actions were necessary, or not, as the case may be, to preserve her home.
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The Court desires to make it
In the case cited by the City in support of its own argument that the stay was not implicated,
In re Haynes, supra,
the Bankruptcy Court found the municipality in violation of the stay for transferring Debtor’s property without stay relief.
See Haynes, supra,
at 151. In ruling on a subsequent Motion seeking
nunc pro tunc
stay relief, Judge Blackshear held in
Haynes
that “... cause exists to grant relief from the automatic stay as the Debtor has no interest that warrants
continued stay protection
...”
Id.
at 156 (emphasis supplied). The
Haynes
decision stands for the proposition that a lapse of a right to redemption pre-petition gives a moving party
cause
for stay .relief. The Court does not read
Haynes
to mean that the automatic stay
never applied
to debtor’s possessory interest in the property, particularly since the
Haynes
court determined that the creditor was in violation of the stay for making just that assumption. Indeed, had the City more carefully read the authorities it cites to this Court in its memorandum of law, it would have realized that in each case upon which it relies, a motion for stay relief was brought in the bankruptcy court prior to any affirmative creditor action being taken.
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In re Canney, III,
In this Court’s decision in
In re Braught, supra,
the County of Sullivan, New York was held in violation of the automatic stay by attaining a judicial signature on their tax foreclosure judgment post-petition; additionally, the municipality’s failure to vacate the judgment constituted a violation of the automatic stay. In this case, the petition was filed on December 19, 2003 and the Foreclosure Judgment was signed on May 25, 2004. No Motion seeking relief from the automatic stay was ever filed. By securing a judgment against the Debtor post petition the City violated the automatic stay.
In the Second Circuit, “if a party charged with violating the stay knows that the stay is in effect, any deliberate act taken in violation of the stay justifies an award of damages.”
Ford Motor Credit Co. v. Florio (In re Florio),
Debtor’s counsel has asked for $2,500 in legal fees and $150 in expenses fer making the motion to enforce the stay. See
CONCLUSION
Debtor’s counsel is directed to submit an Order consistent with this opinion.
Notes
. Thus, although Debtor has almost $80,000 in equity in the premises, the City is attempting to foreclose on her property for less than $10,000 in back due taxes.
. As the City did not file a proof of claim the taxes are not to be paid through Debtor’s plan.
. Debtor's property is known as In Rem No. 277 in the State Court proceeding. Although the Affirmation excepts certain property as being "subject of a stay under the Bankruptcy Laws," Debtor's property was not among those excluded from the May 25, 2004 judgment.
.Debtor did not testify as to whether or not these tax and water bills had or had not been paid.
. Green Tree’s argument that they did not receive notice of the foreclosure action because the Ci1y sent documents to an old address, and any potential stay violation in the Illinois bankruptcy proceeding, is not considered herein, as the issues raised by Green Tree are not necessary to the Court's holding. The Court is gravely concerned, however, with regard to the allegations that the City has not complied with notice procedures and did not seek stay relief in yet another bankruptcy proceeding tangentially connected to this case.
. The Court does not find that these two acts were the only actions taken by the City that were violation of the automatic stay. Rather, these are merely two examples of the City's actions that in the Court's opinion are particularly egregious violations of the stay.
. Even if the City had merely allowed the state proceeding to go forward, as corporation counsel suggested was the circumstance during oral argument, the City had the affirmative obligation to seek to void entry of any judgment issued in violation of the automatic stay.
See In re Braught,
.The Court makes no determination as to whether Debtor's redemptions rights expired pre-petition.
. The Court heard testimony from the Debtor that she tendered payment of the taxes on the redemption date and that the City refused payment. Debtor was told to "come back tomorrow.” Query: does the State of New York not have an "excusable neglect” standard for taxpayers? In this regard, it is also not clear to the Court that the Debtor's right to redemption had expired pre-petition, as
. Again, the Court does not make any determination as to the expiration of the redemp-
. The exception is the case
In re Rodgers, supra.
In that case, the only act taken after the bankruptcy petition was filed, delivery of the deed, was ministerial in nature and thus, was not subject to the automatic stay.
Rodgers,
at 69. As discussed
supra,
the complained of activity is far from ministerial in nature. This Court has held that the procurement of a judge's signature on a tax foreclosure judgment post petition is a judicial function subject to the automatic stay.
See Braught, supra,
at 404.
See also Rexnord Holdings, supra,
at 527 (issuance of a judicial decision is clearly prohibited by the automatic stay). Thus, the City’s procurement of a judgment post petition was not a mere ministerial act, but rather a "commencement or continuation ... of a judicial action against the debt- or that was ... commenced before the commencement of [this] case ...”
.