Soares, In re, 96-2110

Citation107 F.3d 969
Decision Date08 January 1997
Docket NumberNo. 96-2110,96-2110
Parties37 Collier Bankr.Cas.2d 1281, Bankr. L. Rep. P 77,333 In re Napoleon G. SOARES, Debtor. Napoleon G. SOARES, Appellant, v. BROCKTON CREDIT UNION, Appellee. . Heard
CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)

Michael P. Cashman, Boston, MA, for appellant.

Gary W. Cruickshank, Boston, MA, for appellee.

Before SELYA, Circuit Judge, ALDRICH, Senior Circuit Judge, and BOUDIN, Circuit Judge.

SELYA, Circuit Judge.

"[T]he dead tree gives no shelter." T.S. Eliot, The Waste Land, I, The Burial of the Dead (1922). Like a shade tree, the automatic stay which attends the initiation of bankruptcy proceedings, 11 U.S.C. § 362(a) (1994), must be nurtured if it is to retain its vitality. This appeal, which pits a Chapter 13 debtor bent on saving his home against a creditor bent on enforcing its rights under a mortgage, raises issues which touch upon the degree of judicial protection that the automatic stay invites. These issues are whether the automatic stay precludes a state court from undertaking ministerial acts after a bankruptcy filing; if not, what acts are exempt under that rubric; whether a bankruptcy court may grant retroactive relief from the automatic stay; and if so, what legal standard it should apply in prescribing such an anodyne.

I. LAYING THE FOUNDATION

We begin by retracing the labyrinthine corridors through which this litigation has passed. In 1990 the debtor, Napoleon G. Soares, purchased a home in Brockton, Massachusetts. He executed a $70,000 promissory note to the Brockton Credit Union (BCU) and secured the note by a first mortgage on the real estate. After sustaining injuries in a motorcycle accident, Soares lagged in his monthly payments. BCU grew restive and commenced foreclosure proceedings in the state superior court. Soares did not file an answer. On March 22, 1995, BCU sent a letter to the clerk of court seeking an order of default and a judgment authorizing foreclosure. Two days later Soares filed a bankruptcy petition, thus triggering the automatic stay. He immediately gave notice to BCU, but neither party alerted the state court. On April 10, with the stay still firmly in place, a judge of that court issued the requested default order. One week later, she authorized the entry of a foreclosure judgment.

Soares missed some post-petition mortgage payments. On June 14, 1995, BCU, without apprising the bankruptcy court of the orders previously obtained in the state proceedings, filed a motion seeking relief from the automatic stay. The debtor's then-counsel, Gerard Williamson, neglected to oppose BCU's motion. The bankruptcy court granted the unopposed motion on June 29 (the same day, coincidentally, that Soares, unbeknownst to the judge, paid the post-petition arrearage). The court subsequently refused to entertain a belated objection filed by Williamson.

When Soares missed his November payment, BCU activated the state court judgment. At the ensuing foreclosure sale, held on November 29, BCU itself bid in the mortgaged premises and paid approximately $14,200 in overdue municipal taxes to clear the title. Soares thereafter 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. 1

Soares' unsuccessful foray apparently rang warning bells for BCU, which asked the bankruptcy court to clarify whether the June 29 order (lifting the automatic stay) ratified the earlier state court judgment. BCU served this so-called clarification motion on the attorney, Williamson, but not on Soares. 2 In a margin order entered on February 9, 1996, Judge Kenner addressed the question of retroactivity for the first time and vacated the automatic stay retroactive to March 24, 1995, "such that the [state] judgment and movant's foreclosure shall not be deemed to have violated the automatic stay."

Less than three weeks later Soares, through newly retained counsel, filed a motion to reconsider both the February 9 order and the original grant of relief from the automatic stay. Judge Kenner denied the reconsideration motion on the merits 3 and also denied a companion motion to void the foreclosure sale. The judge advanced three reasons for having lifted the automatic stay retroactively on February 9. First, because BCU "had done everything right," it would be inequitable to upset its expectations. Second, because the foreclosure had wiped out junior lienholders, it would be too complicated to "unscramble the egg." Third, because Soares could not immediately repay the funds that BCU had expended to clear title to the property, the economic realities favored ratification of the foreclosure.

Soares appealed. The district court temporarily stayed further proceedings (blocking both a planned eviction and a possible resale of the property). Eventually, however, the district court--although finding that BCU had neglected its responsibility to apprise the state tribunal of Soares' bankruptcy (an error which it termed "harmless")--determined that the retroactive lifting of the automatic stay did not constitute an abuse of discretion.

Soares again appealed. We enlarged the earlier stay on condition that Soares make monthly payments to BCU for use and occupancy of the premises (to be credited against the mortgage indebtedness, should Soares prevail on appeal).

II. DISCUSSION

To the extent that the threshold inquiries in this case involve questions of statutory interpretation, we exercise plenary review. 4 See In re Jarvis, 53 F.3d 416, 419 (1st Cir.1995). From this vantage point we first address the purported exemption for "ministerial acts," as it is only necessary to reach the retroactivity question if a violation of the automatic stay in fact occurred.

A. The Nature of the State Court's Actions.

The parties clash head-on in respect to classification of the state court's actions. The debtor claims that the state court order and judgment transgressed the automatic stay. The creditor claims that these entries, though occurring post-petition, were purely ministerial and, thus, not offensive to the stay. The debtor has the better argument.

Section 362(a)(1) of the Bankruptcy Code provides that the filing of a bankruptcy petition stays the commencement or continuation of all nonbankruptcy judicial proceedings against the debtor. 5 Here, the state court default order eventuated more than two weeks after Soares filed for bankruptcy and the foreclosure judgment one week later. The issue, then, is whether these entries contravened the mandate of section 362(a)(1). BCU asserts that they did not because the stay was not in effect when the creditor requested the state court to act and because the state court's actions, when taken, constituted ministerial acts.

The creditor's first assertion is mere buzznacking. The focus here is whether or not the state court's actions, when effected, transgressed the automatic stay. The date on which the creditor asked the state court to act, while material to an assessment of the creditor's good faith (which is not seriously questioned here), does not bear on whether the activities themselves constituted the forbidden continuation of a judicial proceeding.

BCU's second assertion is more substantial. Ministerial acts, even if undertaken in a state judicial proceeding subsequent to a bankruptcy filing, do not fall within the proscription of the automatic stay. See Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir.1994); Savers Fed. Sav. & Loan Ass'n v. McCarthy Constr. Co. (In re Knightsbridge Dev. Co.), 884 F.2d 145, 148 (4th Cir.1989). But the state court's actions in this case cannot properly be characterized as ministerial.

A ministerial act is one that is essentially clerical in nature. See Black's Law Dictionary 996 (6th ed. 1990). Thus, when an official's duty is delineated by, say, a law or a judicial decree with such crystalline clarity that nothing is left to the exercise of the official's discretion or judgment, the resultant act is ministerial. See United States ex rel. McLennan v. Wilbur, 283 U.S. 414, 420, 51 S.Ct. 502, 504, 75 L.Ed. 1148 (1931) (indicating that a duty is ministerial if "the obligation to act [is] peremptory, and plainly defined"); Neal v. Regan, 587 F.Supp. 1558, 1562 (N.D.Ind.1984) (describing a ministerial act as "one which 'the law prescribes and defines ... with such precision as to leave nothing to the exercise of discretion or judgment' ") (citation omitted). Such acts can usefully be visualized as the antithesis of judicial acts, inasmuch as the essence of a judicial act is the exercise of discretion or judgment. See Black's Law Dictionary, supra, at 846.

Virtually by definition, a judicial proceeding does not conclude until the judicial function is completed, that is, until the judicial decision is made. See, e.g., Bidermann, 21 F.3d at 528 (holding that the judicial function is completed "at the moment the judge direct[s] entry of judgment"). Frequently, routine scrivening, such as recordation or entry on the docket, follows on the heels of a judicial decision. Such actions--taken in obedience to the judge's peremptory instructions or otherwise precisely defined and nondiscretionary--are ministerial and, consequently, do not themselves violate the automatic stay even if undertaken after an affected party files for bankruptcy. See, e.g., Knightsbridge Dev., 884 F.2d at 148 (suggesting that merely recording a previously decided award would be a "clerical act" and therefore would not infract the automatic stay); In re Capgro Leasing Assocs., 169 B.R. 305, 315-16 (Bankr.E.D.N.Y.1994) (stating that "entry of a judgment will constitute a 'ministerial act' where the judicial function has been completed and the clerk has merely to perform the rote function of entering the...

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