In re Carpio
| Decision Date | 02 October 1997 |
| Docket Number | Adversary No. 97-2022.,Bankruptcy No. 97-20353-FWK |
| Citation | 213 BR 744 |
| Court | U.S. Bankruptcy Court — Western District of Missouri |
| Parties | In re Angelo n/m/n CARPIO, Debtor. Angelo CARPIO, Plaintiff, v. Bonnie SMITH, Reid Smith, J.E. Barnes, Jr., and Nevada Investments, LLC, Defendants. |
Gary W. Smith, Sedalia, MO, for Angelo Carpio.
Joel B. Laner, Kansas City, MO, for Nevada Investments, LLC.
Dewey Crepeau, Columbia, MO, for Bonnie M. Smith, Reid Smith, and J.E. Barnes, Jr.
Rick Fink, Chapter 13 Trustee.
This matter is before the Court on the complaint to void and set aside the post-petition foreclosure sale of real estate belonging to the debtor, and seeking damages for a willful violation of the automatic stay. A trial was held on July 29, 1997, after which the Court took the matter under advisement and granted the parties additional time to submit post-trial briefs. The Court has read the briefs submitted by the parties, has conducted its own independent research and is now ready to rule. The Court determines that all of the elements of 11 U.S.C. § 549(c) have been satisfied and, therefore, the debtor cannot recover his real estate from the purchaser. However, the Court will allow the bankruptcy estate to recover the collection fee and all of the costs and expenses of the foreclosure sale that were withheld from the sale proceeds plus interest, and will award the debtor damages, including attorney's fees, costs and punitive damages, for the mortgagee's willful and flagrant violation of the automatic stay.
On October 19, 1993, Angelo Carpio and his wife, Lydia Ann Carpio, executed a promissory note in the amount of $47,135.01 in favor of Bonnie M. Smith for the purchase of 143 acres of real property described as:
The promissory note was secured by a deed of trust on the Property entered into between the Carpios, Bonnie Smith, and the trustee, Kevin Schehr. The promissory note provided for interest at the rate often percent per annum and for monthly payments in the amount of $477.83 beginning November 15, 1993, and payable on the 15th day of each month thereafter until the note was paid in full. The deed of trust and promissory note were recorded on March 15, 1994, in the Recorder's Office of Morgan County, Missouri.
In September 1996, Angelo Carpio moved out of the residence located on the Property in connection with the dissolution of his marriage. Carpio continued to make the mortgage payments until November 1996. Thereafter, Carpio ceased making payments because he thought that his wife's parents were going to make the payments on the note. However, the payments were not being made and on February 24, 1997, separate notices were sent to Angelo Carpio and to Lydia Carpio by certified mail from William G. Johnson; who was the attorney representing Bonnie Smith in the foreclosure proceedings, informing them that the successor trustee, J.E. Barnes, Jr., was going to sell the Property on March 18, 1997. Each notice was sent to the street address of the Property. One of the receipts for certified mail purports to have Angelo Carpio's signature, but at trial Angelo Carpio could not say for sure that it was his signature on the receipt.
At some point after the notice of sale was sent by Johnson, Marvin Opie, who is the attorney representing Angelo Carpio in the dissolution proceedings, contacted Johnson concerning the proposed foreclosure sale. On March 7, 1997, Johnson responded by letter to Opie's inquiry and stated that the promissory note could be purchased before the scheduled foreclosure sale for the amount of $50,253.40. That figure included $4500.00 for attorney's fees, $255.60 for the cost of publishing the notice of the foreclosure sale three times, and the amount of $100.00 designated as "O & E."
The foreclosure sale was scheduled to be held at 1:00 p.m. on March 18, 1997. On the morning of March 18, 1997, Carpio contacted the law office of Gary W. Smith to discuss with him the possibility of filing bankruptcy. An emergency quick-file bankruptcy petition under Chapter 13 of the Bankruptcy Code was prepared and Carpio drove to Kansas City, Missouri to personally file the petition before the scheduled foreclosure sale. Carpio was successful in that endeavor. The Chapter 13 petition is file stamped 12:15 p.m. on March 18, 1997. However, neither Smith nor Carpio have ever filed a copy or notice of the bankruptcy petition in the Recorder's Office of Morgan County, Missouri.
At approximately 12:40 p.m. on March 18, 1997, Carpio called Johnson at his office and told him his name, that he had just filed bankruptcy in Kansas City, Missouri, gave him the bankruptcy case number three times and told him to stop the sale of the Property. At trial, Johnson acknowledged that he talked to Carpio by telephone about fifteen minutes prior to the scheduled foreclosure sale. Johnson explained that he was a little confused at first because he thought it was someone calling to make an appointment to speak to attorney Dewey Crepeau, who was handling bankruptcies in his office, about filing for bankruptcy. When Johnson realized that he was talking to Carpio, he did not believe that Carpio had filed a quick-file bankruptcy petition and told Carpio that he was not going to stop the foreclosure sale. Johnson stated that if Carpio's lawyer had called, he would have believed the lawyer. Johnson testified that he thought it would be best to allow the sale to proceed and that once the sale was out of the way he would then seek to lift the automatic stay. The foreclosure sale proceeded as scheduled. Johnson attended the foreclosure sale, but he did not tell anyone, including the prospective bidders or Opie, who was attending the sale, that he had talked to Carpio or that Carpio claimed to have filed bankruptcy. After the sale, Johnson conducted no investigation and, surprisingly, never even called the bankruptcy court to find out if Carpio had indeed filed for bankruptcy protection. Since the foreclosure sale neither Johnson nor Bonnie Smith through other counsel have taken any action seeking retroactive relief from the automatic stay.
Nevada Investments, LLC ("Nevada") purchased the Property at the foreclosure sale for the sum of $52,000.00. There is absolutely no evidence that Nevada had knowledge of Carpio's bankruptcy filing prior to the foreclosure sale or prior to recording the Trustee's Deed Under Sale in the Recorder's Office of Morgan County, Missouri on March 25, 1997. Nevada first learned of Carpio's bankruptcy filing when it was served with the complaint in this adversary proceeding.
Johnson retained $4500.00 of the sale proceeds as his collection fee. After payment of the promissory note and other expenses, there was a surplus in the amount of $927.96 that Johnson sent to the Clerk of the Circuit Court of Morgan County to be held by the Clerk pending distribution in the Carpios' dissolution proceedings.
Nevada presented evidence through a real estate appraiser, Jesse E. Bagby, that the fair market value of the Property was $46,500.00 as of July 9, 1997. The only other evidence concerning value was Carpio's testimony that an individual, identified as Zac Zaremba in Carpio's interrogatory answer number nine, offered to buy the Property in March 1996 for $1000.00 per acre for a total purchase price of $143,000.00. No other evidence of value was offered by Carpio at trial. The Court finds Bagby's appraisal to be the more credible evidence of value and finds that the Property was worth $46,500.00 on the date of the foreclosure sale.
On May 5, 1997, Angelo Carpio filed a two count complaint against Bonnie Smith; Reid Smith, who is Bonnie Smith's son; J.E. Barnes, Jr.; and Nevada. In Count I Carpio requests that the Court void and set aside the foreclosure sale of the Property because the sale occurred in violation of the automatic stay. In Count II Carpio seeks an award of damages for the defendants' willful violation of the automatic stay. Although Lydia Carpio may have had an interest in the Property at the time of the foreclosure sale, she has not sought to intervene in this adversary proceeding. At the close of Carpio's evidence, the Court dismissed Reid Smith from both counts of the complaint because he was not a party to the promissory note or deed of trust, and dismissed Barnes from Count 11 because there was absolutely no evidence that he had any knowledge of Carpio's bankruptcy filing prior to holding the foreclosure sale.1
The remaining defendants contend that the automatic stay is not applicable here and the Court cannot set aside the sale of the Property because all of the elements of 11 U.S.C. § 549(c) have been satisfied. Smith and Nevada further assert that the Court cannot assess damages against either of them for a willful violation of the automatic stay because neither of them had actual knowledge of Carpio's bankruptcy filing prior to the foreclosure sale.
Section 362(a)(3) of the Bankruptcy Code provides that a petition filed in bankruptcy "operates as a stay, applicable to all entities, of . . . any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. § 362(a)(3). In In re Eugene...
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