In Re Soares

107 F.3d 969 (1997)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

D purchased a home and executed a $70,000 promissory note to the Brockton Credit Union (P) and secured the note by a first mortgage on the real estate. D was injured in a motorcycle accident and fell behind on monthly payments. P commenced foreclosure proceedings in the state superior court. D did not file an answer. P sent a letter to the clerk of court seeking an order of default and a judgment authorizing foreclosure. Two days later P filed a bankruptcy petition, thus triggering the automatic stay. D gave notice to P, but neither party alerted the state court. A judge of that court issued the requested default order. One week later, she authorized the entry of a foreclosure judgment. P, without apprising the bankruptcy court of the orders previously obtained in the state proceedings, filed a motion seeking relief from the automatic stay. The bankruptcy court granted the unopposed motion on June 29. When D missed his November payment, P activated the state court judgment. P itself bid in the mortgaged premises and paid approximately $14,200 in overdue municipal taxes to clear the title. D sought relief in the state court on the ground that the foreclosure judgment had been issued in contravention of the automatic stay. The court denied the motion, saying that its post-petition actions had been 'ministerial' and that any error was harmless. The bankruptcy court vacated the automatic stay retroactively 'such that the [state] judgment and movant's foreclosure shall not be deemed to have violated the automatic stay.' D filed a motion to reconsider the issue. The court refused. The judge stated three reasons: (1) P 'had done everything right,' it would be inequitable to upset its expectation; (2) because the foreclosure had wiped out junior lienholders, it would be too complicated to 'unscramble the egg;' and (3) because D could not immediately repay the funds that P had expended to clear title to the property, the economic realities favored ratification of the foreclosure. D appealed. The district court determined that the retroactive lifting of the automatic stay did not constitute an abuse of discretion. D appealed.