Houck v. Substitute Tr. Servs., Inc.

• Decision Date: 01 July 2015
• Docket Number: No. 13–2326.,13–2326.
• Parties: Diana Louise HOUCK; Steven G. Tate, Plaintiffs–Appellants, v. SUBSTITUTE TRUSTEE SERVICES, INC., Defendant–Appellee, and Lifestore Bank; Grid Financial Services, Inc., Defendants. Paula Steinhilber Beran, Court–Assigned Amicus Counsel.
• Court: U.S. Court of Appeals — Fourth Circuit

791 F.3d 473

Diana Louise HOUCK; Steven G. Tate, Plaintiffs–Appellants

v. SUBSTITUTE TRUSTEE SERVICES, INC., Defendant–AppelleeandLifestore Bank; Grid Financial Services, Inc., Defendants.Paula Steinhilber Beran, Court–Assigned Amicus Counsel.

No. 13–2326.

United States Court of Appeals, Fourth Circuit.

Argued: May 12, 2015.

Decided: July 1, 2015.

M. Shane Perry, Collum & Perry, Mooresville, North Carolina, for Appellants. Jeffrey Allen Bunda, Hutchens Law Firm, Charlotte, North Carolina, for Appellee. Paula Steinhilber Beran, Tavenner & Beran, PLC, Richmond, Virginia, as Court–Assigned Amicus Counsel.

Before NIEMEYER, DIAZ, and FLOYD, Circuit Judges.

Opinion

Vacated, reversed in part, and remanded by published opinion. Judge NIEMEYER wrote the opinion, in which Judge DIAZ and Judge FLOYD joined.

NIEMEYER, Circuit Judge:

Diana Houck commenced this action under 11 U.S.C. § 362(k), alleging that the defendants foreclosed on and sold her homestead in violation of the automatic stay triggered by her filing of a Chapter 13 bankruptcy petition. The district court granted the motion to dismiss filed by one of the defendants, Substitute Trustee Services, Inc. (the “Substitute Trustee”), concluding that Houck failed to allege facts that plausibly supported her allegation that the violation of the automatic stay was willful, a necessary element of a § 362(k) claim. Because we find to the contrary, we vacate the district court's judgment, reverse its order dismissing Houck's claims against the Substitute Trustee, and remand for further proceedings.

I

In 2000, Houck's father deeded to her part of the family farm located in Ashe County, North Carolina. After Houck had secured financing from a predecessor to LifeStore Bank, F.S.A., she and her then-fiancé, Ricky Penley, placed a mobile home on part of the homestead.

In 2007, Houck refinanced the loan so that she and Penley could remodel the family farmhouse, but within a year, she lost her job and began having difficulty making her loan payments. In the summer of 2009, after she and Penley were married, Houck asked LifeStore for a loan modification. LifeStore, however, referred her to Grid Financial Services, Inc., a debt collection agency, which denied her request because she was unemployed. Houck thereafter defaulted on her loan.

In July 2011, the Hutchens Law Firm (formerly Hutchens, Senter, Kellam & Pettit, P.A.) served Penley with a notice of foreclosure. To stop the foreclosure proceedings, Houck, acting pro se, filed a Chapter 13 bankruptcy petition on September 12, 2011. The next day, the Hutchens Law Firm notified the Clerk of the Superior Court of Ashe County that Houck had filed a bankruptcy petition and consequently that all foreclosure proceedings had to be stayed. A few weeks later, however, the bankruptcy court dismissed Houck's petition because she had failed to file certain schedules and statements in accordance with applicable bankruptcy rules, and the Substitute Trustee, by its counsel, the Hutchens Law Firm, reactivated the foreclosure proceedings.

On December 16, 2011, Houck, again acting pro se, filed a second Chapter 13 bankruptcy petition, again to stop the foreclosure proceedings. On that same day, Penley called the Hutchens Law Firm to notify it of the bankruptcy filing. The employee of the Firm with whom Penley spoke acknowledged that the Firm had a file for Houck. Penley told the employee that Houck had filed a second bankruptcy petition earlier that day, and he provided the employee with the new case number. On that same day, Penley also contacted LifeStore to notify it of the new bankruptcy petition. LifeStore told Penley that it intended to wait for notice from the bankruptcy court before taking any action.

On December 18, 2011, two days after Houck had filed her second bankruptcy petition, the bankruptcy court ordered Houck to appear and show cause why her petition should not be dismissed. Two days later, on December 20, 2011, the Substitute Trustee, represented by the Hutchens Law Firm, sold Houck's homestead at a foreclosure sale. The following day, the bankruptcy court dismissed Houck's second bankruptcy petition. Because Houck had filed the second petition with the purpose of preventing the sale of her homestead and it had already been sold, she did not object to the petition's dismissal. Thereafter, Penley endeavored unsuccessfully to undo the sale. In March 2012, after the sheriff issued a notice to vacate, Houck and Penley left the homestead and moved into a small cabin.

Houck retained counsel and commenced this action, naming as defendants LifeStore, Grid Financial, and the Substitute Trustee and asserting a claim against them under 11 U.S.C. § 362(k) for violation of the automatic stay. She also asserted several related state law claims.

The Substitute Trustee filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), contending that the complaint had failed to allege that the Substitute Trustee was aware of the second bankruptcy petition's filing at the time it conducted the foreclosure sale of Houck's homestead. The district court granted the motion by order dated October 1, 2013, concluding that Houck had “failed to allege that [she] sent notice of the second petition to [the Substitute Trustee] or that [the Substitute Trustee] had any notice of the [bankruptcy] petition.” Based on that deficiency, the court also dismissed Houck's related state law claims. On October 28, 2013, Houck filed an interlocutory appeal from the district court's order dismissing her claims against the Substitute Trustee.

The remaining defendants, LifeStore and Grid Financial, thereafter filed various motions to dismiss or for summary judgment. In one of those motions, Grid Financial contended that the district court lacked subject matter jurisdiction over Houck's § 362(k) claim, maintaining that the provision did not create a private cause of action that could be adjudicated outside of the bankruptcy court. By order dated February 20, 2014, the district court granted Grid Financial's motion and dismissed Houck's complaint, agreeing that it lacked subject matter jurisdiction over Houck's federal claim for violation of the automatic stay and declining to exercise its discretion to adjudicate her state law claims. The Clerk of Court thereafter entered judgment and closed the case.

Subsequently, we, sua sponte, dismissed Houck's pending appeal of the district court's October 1, 2013 order dismissing the Substitute Trustee because it had been taken from an interlocutory order. Houck v. Substitute Tr. Servs., Inc., 582 Fed.Appx. 230, 230 (4th Cir.2014) (per curiam). We concluded further that the jurisdictional defect was not cured by the district court's February 20, 2014 order granting Grid Financial's motion to dismiss for lack of subject matter jurisdiction, as that order was also not final. Id. at 230 n. *.

Thereafter, Houck filed motions requesting that the district court reopen the case and reconsider its February 20, 2014 order. The district court denied the motions, reiterating that it had finally decided the case with that order. Houck then filed an unopposed motion in our court for clarification, seeking to resolve her procedural predicament created by the district court's statement that its February 20, 2014 order finally closed the case and our contrary statement that that order was not final. In response, we recalled the mandate issued on our dismissal of Houck's appeal and granted panel rehearing.

In her now-reopened appeal, Houck contends that, in dismissing her § 362(k) claim against the Substitute Trustee, the district court applied the wrong legal standard for ruling on a Rule 12(b)(6) motion and erroneously concluded that her complaint failed to allege sufficient facts to state a plausible claim for relief.

II

At the outset, we determine whether we have jurisdiction to hear Houck's appeal. See, e.g., Chevron Corp. v. Page (In re Naranjo), 768 F.3d 332, 342 (4th Cir.2014).

In its October 1, 2013 order, the district court granted the Substitute Trustee's motion to dismiss on the ground that Houck's complaint failed to allege that she had given the Substitute Trustee notice of her bankruptcy petition before the Substitute Trustee sold her homestead, thus precluding any claim that the Substitute Trustee's conduct was willful. But because LifeStore and Grid Financial were not parties to that motion and remained defendants in the action, Houck's appeal of the October 1 dismissal order was interlocutory. Moreover, Houck made no request that the district court certify the order as a final judgment under Federal Rule of Civil Procedure 54(b), although it appears that she could have satisfied that rule's requirement. See, e.g., Nystedt v. Nigro, 700 F.3d 25, 29 (1st Cir.2012) (upholding a Rule 54(b) certification of an order granting a Rule 12(b)(6) motion to dismiss filed by some but not all of the defendants). Consequently, we dismissed Houck's appeal sua sponte because it was not taken from a final decision, as required by 28 U.S.C. § 1291(a). Houck, 582 Fed.Appx. at 230.

After Houck requested that we reconsider the effect of the district court's February 20, 2014 order granting Grid Financial's motion to dismiss for lack of subject matter jurisdiction, we recalled our mandate and now hear this appeal to consider her arguments.

If the district court's February 20, 2014 order, entered several months after the court had dismissed Houck's claims against the Substitute Trustee, was a final judgment, then Houck's appeal might be reviewable under the doctrine of cumulative finality—a finality achieved by the cumulative effect of the October 1, 2013 dismissal order and the February 20, 2014 dismissal order.See Equip. Fin. Grp., Inc. v. Traverse Computer Brokers, 973 F.2d 345, 347 (4th Cir.1992) (recognizing cumulative finality in circumstances where all claims are dismissed, albeit at different times, before the appeal taken from the first dismissal...