Equity One, Inc. v. Shivers

• Decision Date: 10 June 2014
• Docket Number: No. 30600.,30600.
• Citation: 150 Conn.App. 745,93 A.3d 1167
• Court: Connecticut Court of Appeals
• Parties: EQUITY ONE, INC. v. Thomas J. SHIVERS.

150 Conn.App. 745

93 A.3d 1167

EQUITY ONE, INC.

v.Thomas J. SHIVERS.

No. 30600.

Appellate Court of Connecticut.

Submitted on Briefs Nov. 12, 2013.

Decided June 10, 2014.

J. Hanson Guest and Jeremy Baver filed a brief for the appellant (defendant).

Robert J. Wichowski and David F. Borrino, Farmington, filed a brief for the appellant (plaintiff).

BEACH, ROBINSON and MIHALAKOS, Js.^*

BEACH, J.

This case comes to us on remand from our Supreme Court. We previously remanded the case to the trial court for an evidentiary hearing to determine whether the plaintiff, Equity One, Inc., had standing. Equity One, Inc. v. Shivers, 125 Conn.App. 201, 9 A.3d 379 (2010). Our Supreme Court reversed our decision and determined that the trial court properly found that the plaintiff had standing to bring the action. Equity One, Inc. v. Shivers, 310 Conn. 119, 74 A.3d 1225 (2013). Our Supreme Court remanded the case to us with direction to address the defendant's remaining claim, that action had been taken in the trial court in violation of the automatic bankruptcy stay. Id., at 125 n. 2, 74 A.3d 1225. The defendant, Thomas J. Shivers, claims on appeal that the trial court improperly rendered judgment in violation of the stay.¹ We reverse in part the judgment of the trial court and remand the case for further proceedings.

The following facts and procedural history, as set forth in Equity One, Inc. v. Shivers, supra, 310 Conn. at 119, 74 A.3d 1225 are relevant: “On November 28, 2006, the defendant executed a promissory note in favor of ResMAE Mortgage Corporation in the principal amount of $201,600. That note was secured by a mortgage deed on property located at 27 Mountain Street in the town of Vernon, which the defendant also executed on November 28, 2006, and delivered to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for ResMAE Mortgage Corporation.² On June 27, 2007, the plaintiff commenced this action, seeking to foreclose on the mortgage. The plaintiff alleged that, because the defendant had failed to make payments as required by the note, the plaintiff, as the holder of the note and mortgage, had elected to declare the entire balance of the note due and payable and to foreclose on the mortgage.

“On July 19, 2007, the plaintiff filed a motion for default for the defendant's failure to file a responsive pleading and a motion for a judgment of strict foreclosure. On July 23, 2007, the court granted the plaintiff's motion for default. On September 24, 2007, the court rendered judgment of foreclosure by sale, with a sale date of January 5, 2008. The sale date was extended twice: the first time it was extended to May 3, 2008, at the request of the plaintiff; the second time it was extended to May 10, 2008, at the request of the committee appointed to conduct the sale. The May 10, 2008 foreclosure sale did not go forward because the defendant filed a bankruptcy petition on May 8, 2008.

“[Thereafter, on October 9, 2008, the automatic stay that had been imposed following the defendant's bankruptcy filing was lifted.] After the bankruptcy stay was lifted, the plaintiff filed a motion to reopen and to reenter the judgment on November 7,2008. On November 21, 2008, the defendant filed an objection to the foreclosure, asserting that he was no longer in default and ... that the plaintiff did not have standing to foreclose the mortgage.... On November 24, 2008, the court ... heard argument from the parties [on] the motion to reopen and to reenter the judgment. At the conclusion of that hearing, the court ... rendered judgment of strict foreclosure with the law days commencing on January 12, 2009.” (Internal quotation marks omitted.) Id., at 122–23, 74 A.3d 1225.

On appeal to this court, the defendant claimed, inter alia, that the trial court erred in failing to conduct an evidentiary hearing to ascertain whether the court had subject matter jurisdiction after the defendant raised the issue of the plaintiff's standing. This court reversed the judgment of the trial court and remanded the case for an evidentiary hearing on the issue of standing. Equity One, Inc. v. Shivers, supra, 125 Conn.App. at 201, 9 A.3d 379. Our Supreme Court reversed that decision and determined that the trial court had properly found that the plaintiff had standing. Equity One, Inc. v. Shivers, supra, 310 Conn. at 136, 74 A.3d 1225. Our Supreme Court remanded the case to us for consideration of the defendant's remaining claim. Id., at 137, 74 A.3d 1225.

The defendant claims that the automatic stay provisions of 11 U.S.C. § 362(a)(5) were triggered when he filed a bankruptcy petition on May 8, 2008, and that the stay was in effect through December 9, 2008, when the bankruptcy case was dismissed. He argues that all actions taken by the trial court and all pleadings filed by the parties during that time frame were void. Such actions and pleadings include the following: (1) the plaintiff's motion to award committee fees and expenses filed on May 13, 2008; (2) the trial court's granting on May 27, 2008, of the plaintiff's motion to award committee fees and expenses; (3) the plaintiff's motion to open judgment filed on November 7, 2008; 4) the defendant's objection to the plaintiff's motion to open judgment filed on November 21, 2008, and the defendant's motion to compel filed on November 21, 2008; (5) the plaintiff's military affidavit filed on November 24, 2008; and (6) the court's judgment of strict foreclosure on November 24, 2008. The defendant posits that, although the Bankruptcy Court granted a termination of the stay on October 8, 2008, the termination of stay did not apply to the plaintiff because the termination was granted only with respect to JP Morgan Acquisition Corp. (JP Morgan) “and/or its successors and assigns,” and the plaintiff was not a successor or assign with respect to JP Morgan. We agree with the defendant's claim only as to the proceedings regarding the motion for committee fees and expenses.³

The automatic stay provision in bankruptcy proceedings, 11 U.S.C. § 362(a), provides in relevant part that the filing of a bankruptcy petition with the Bankruptcy Court “operates as a stay, applicable to all entities, of—(1) the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the [bankruptcy case], or to recover a claim against the debtor that arose before the commencement of [the bankruptcy case] ... (5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the [bankruptcy case].” 11 U.S.C. § 362(a)(1) and (5). “The automatic stay provision in ... 11 U.S.C. § 362 ... stays any and all postpetition filing. Any filing constitutes a judicial act directed toward the disposition of the case in violation of the automatic stay.... The stay of [§] 362 is extremely broad in scope and ... should apply to almost any type of formal or informal action against the debtor or the [debtor's] property....” (Citations omitted; footnote omitted; internal quotation marks omitted.) Krondes v. O'Boy, 69 Conn.App. 802, 808, 796 A.2d 625 (2002). The Bankruptcy Court has the power to grant relief from the automatic stay. See 11 U.S.C. § 362(d) through (g).

We nonetheless must consider actions that occurred between May 8, 2008, and October 8, 2008, while the stay was in effect as to this foreclosure action. The committee's motion to award committee fees and expenses was filed on May 13, 2008, and the trial court's granting of the motion occurred on May 27, 2008.⁴ The committee of sale, in its May 13, 2008 motion, requested that the court approve the expenses and fees requested pursuant to General Statutes § 49–25. Section 49–25 provides in relevant part: “[I]f for any reason the [foreclosure by] sale does not take place, the expense of the sale and appraisal or appraisals shall be paid by the plaintiff and be taxed with the costs of the case.” (Emphasis added.) “Committee fees are a component of the expense of the sale.... It is clear from the language of § 49–25 that it is the plaintiff, and not the defendant, that is liable for the expense of an aborted sale, which may then be taxed as part of the plaintiff's costs.” (Citation omitted; emphasis omitted; internal quotation marks omitted.) Norwalk v. Farrell, 80 Conn.App. 399, 408, 835 A.2d 117 (2003).

The first inquiry is whether the committee's motion for fees and expenses directly affected the defendant debtor. It did not. The automatic stay provision provides that the filing of a bankruptcy petition operates as a stay “of ... the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor.” ⁵ (Emphasis added.) 11 U.S.C. § 362(a)(1).

“Generally, the filing of a bankruptcy petition does not stay actions against nondebtors.... Nondebtors seeking protection of an automatic stay must move for the extension of the stay in the Bankruptcy Court.” (Citation omitted.) Krondes v. O'Boy, supra, 69 Conn.App. at 809, 796 A.2d 625; see also In re Metal Center, 31 B.R. 458, 462 (Bankr.D.Conn.1983) ( “[t]he plain language of [§] 362 ... clearly and repeatedly refers to actions against the debtor; it nowhere purports to encompass other related interparty claims”); Murnane Associates, Inc. v. Harrison Garage Parking Corp., 217 App.Div.2d 1003, 630 N.Y.S.2d 187 (1995) (automatic stay did not apply to suit against nondebtors, where debtor under no obligation to indemnify nondebtor); 3 Collier on Bankruptcy § 362.03[3] [d], p. 362–17 (15th Ed. Rev. 2010) (“[t]he stay of litigation [as a result of the filing of a bankruptcy action] does not protect nondebtor parties ...”). Therefore, strictly and narrowly speaking, because the defendant was not a party to the committee's motion, neither the filing of the motion nor the court's...