In re Crichlow

• Decision Date: 16 February 2004
• Docket Number: No. 04-18735-RS.,04-18735-RS.
• Citation: 322 B.R. 229
• Parties: In re Marie Maud CRICHLOW, Debtor.
• Court: U.S. Bankruptcy Court — District of Massachusetts

322 B.R. 229

In re Marie Maud CRICHLOW, Debtor.

No. 04-18735-RS.

United States Bankruptcy Court, D. Massachusetts, Eastern Division.

February 16, 2004.

COPYRIGHT MATERIAL OMITTED

David G. Baker, Boston, MA, for debtor.

Leslie C. Sammon, Esq., Boston, MA, for DaSilva.

MEMORANDUM OF DECISION ON MOTION FOR RELIEF FROM AUTOMATIC STAY

WILLIAM C. HILLMAN, Bankruptcy Judge.

I. Introduction

The matter before the Court is whether Marie Maud Crichlow (the "Debtor") retains a post-foreclosure interest in real property such that she can cure a default under 11 U.S.C. § 1322(c)(1). Sandra DaSilva ("DaSilva"), the high bidder at the foreclosure auction, filed a motion for relief seeking authority to evict the Debtor. The Debtor objected arguing that she is entitled to cure her default and maintain possession of the premises. For the reasons set forth below, I will enter an order granting the motion for relief. The following constitute my findings of fact and conclusions of law.

II. Background

The facts in this case are not in dispute.¹ On October 21, 2004, DaSilva was the prevailing bidder at a properly conducted foreclosure sale of real property located at 59 Amor Road, Milton, Massachusetts (the "Property"). On that date, the foreclosing mortgagee (the "Mortgagee") and DaSilva signed the Memorandum of Terms and Conditions of Sale (the "Memorandum") which verified that DaSilva had paid the requisite deposit. The Memorandum provided on page one that the "sale shall not be deemed completed until the Buyer has made his or her deposit and has signed this Memorandum of Sale." The Memorandum contained further provisions for the subsequent payment of the balance.

On October 27, 2004, the Mortgagee signed a Massachusetts Foreclosure Deed by Corporation in favor of DaSilva. Late that afternoon, the Debtor filed for relief under Chapter 13 of the United States Bankruptcy Code. On November 15, 2004, the deed was recorded at the registry of deeds. On November 17, 2004, the Debtor filed her Chapter 13 Plan which provided for payment of the default under her mortgage with the Mortgagee.

Thereafter, DaSilva filed her motion for relief from automatic stay (the "Motion") to evict the Debtor and obtain possession of the Property. As grounds, DaSilva explained that the Debtor no longer had an interest in the Property and was no longer entitled to reside there as a result of the foreclosure sale.

The Debtor filed an objection and incorporated a memorandum of law in support. In these pleadings, the Debtor asserts that the steps that the Mortgagee took pre-petition to foreclose on its mortgage did not result in a sale of the Property as that term is defined in Massachusetts. As such, she argues that § 1322(c)(1) permits her to file a plan which provides for the cure of her defaults under the mortgage. That subsection provides:

(c) Notwithstanding subsection (b)(2) [modification of the rights of secured claim holders] and applicable nonbankruptcy law —

(1) a default with respect to, or that gave rise to, a lien on the debtor's principal residence may be cured under paragraph (3) or (5) of subsection (b) until such residence is sold at a foreclosure sale that is conducted in accordance with applicable nonbankruptcy law ...

11 U.S.C. § 1322(c)(1).

The Debtor urges that this case does not rest on whether or when the Debtor lost her equity of redemption. Indeed, the Debtor does not offer any grounds to refute that the Debtor lost her equity of redemption. She explains that the issue is at what point is a property considered sold and that the definition must be subject to case law of Massachusetts which is in disarray on this subject.

The Debtor urges the Court to follow the cases of Schanberg v. Automobile Ins. Co. Of Hartford, 285 Mass. 316, 189 N.E. 105 (1934) and Beal v. Attleboro Sav. Bank, 248 Mass. 342, 142 N.E. 789 (1924). She contends that these cases stand for the proposition that a property cannot be considered sold at foreclosure until the deed has been recorded, consistent with Mass Gen. Laws ch. 183 § 1.² Even if I were to rule that under state law the Property was sold, she contends that 11 U.S.C. § 1322(c) preempts contrary state law and requires a completed sale, the delivery of a deed, in order to satisfy the statute, citing for support In re Beeman, 235 B.R. 519 (Bankr.D.N.H.1999). The Debtor argues that, because after the foreclosure additional steps were required, the sale was not completed at the foreclosure sale, she retains an interest in the Property and is entitled to cure any defaults under the mortgage. As such, relief from stay should be denied because DaSilva has no interest in the Property and the recording of the deed post-petition violated the automatic stay.

In response, DaSilva filed a memorandum of law in which she asserts that under Massachusetts law, the Debtor's equitable interest in the Property terminated upon the execution of the Memorandum of Sale, citing for support In re Grassie, 293 B.R. 829, 831 (Bankr.D.Mass.2003), In re Dow, 250 B.R. 6, 8 (Bankr.D.Mass.2000), Williams v. Resolution GGF, OY, 417 Mass. 377, 630 N.E.2d 581 (1994) and Outpost Cafe Inc. v. Fairhaven Savings Bank, 3 Mass.App.Ct. 1, 322 N.E.2d 183 (1975). She also contends that such holdings comport with the language set forth in the Massachusetts foreclosure statute, Mass. Gen. Laws ch. 244 and the general practice governing foreclosure. She further argues that to inject an element of uncertainty into a process with existing firm procedures would be unsound.

III. Analysis

11 U.S.C. § 1322(c)(1) was enacted in 1994 in response to those cases which prevented a debtor from curing a default after a court order permitting foreclosure but prior to the foreclosure sale. See HR Rep 103-835, 103rd Cong., 2nd Sess 52 (Oct. 4, 1994): 140 Cong. Rec. H10769 (Oct. 4, 1994), U.S.Code Cong. & Admin.News 1994, pp. 3340, 3361. This portion of the legislative history refers to the "completion of a foreclosure sale under applicable nonbankruptcy law." Id. The Senate version explains that the statute "will preempt conflicting State laws, and permit homeowners to present a plan to pay off their mortgage debt until the foreclosure sale actually occurs." 140 Cong. Rec. S14462 (Oct. 6, 1994) (statement of Sen. Grassley).

Both the statute and the legislative history, to the extent relied upon by courts that have found the statute ambiguous, have created a great deal more discussion than the intended clarification. See generally, 2 Keith M. Lundin, Chapter 13 Bankruptcy § 130.1, at 130-13 through 130-26 (3d ed.2000). See also In re Beeman, 235 B.R. 519, 524 (Bankr.D.N.H.1999) ("There are generally two schools of thought with respect to § 1322(c)(1). On approach is to find that the language of § 1322(c)(1) is unambiguous and conclude that a Chapter 13 debtor's rights to cure and reinstate are cut off as of the date of the foreclosure auction.... The contrary approach is to find that the statutory language is ambiguous and thus turn to legislative history in an effort to determine the legislature's intent. Courts following the latter approach generally conclude that the statutory language is intended to cut off the debtor's right to cure and reinstate as of the point when a foreclosure sale is complete pursuant to state law."), In re Townsville, 268 B.R. 95, 112-115 (Bankr.E.D.Pa.2001) (examining collection of cases, concluding statute ambiguous and, after lengthy discussion of legislative history, that Congress intended default right terminated at foreclosure sale as determined by state law) and In re Bobo, 246 B.R. 453 (Bankr.D.C.2000) (reviewing cases and concluding statute is unambiguous and provides for termination of cure upon declaration of highest bidder)

The first step in determining the application of the statute is an examination of the language itself. U.S. v. Ron Pair Enter., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). If the text of the statute is "sufficiently clear, the text assumes overriding importance." In re Weinstein, 272 F.3d 39, 43 (1st Cir.2001). Due weight must be given to the words of the statute so that none are rendered superfluous. Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) ("It is our duty `to give effect, if possible, to every clause and word of a statute.'").

The subsection of the statute starts with an indication that relevant state law is inapplicable. 2 Keith M. Lundin, Chapter 13 Bankruptcy § 130.1, at 130-24 (3d ed.2000)(acknowledging introductory sentence "signaling a purely federal rule to follow."). It is followed by reference to state law, "sold at a foreclosure sale that is conducted in accordance with applicable nonbankruptcy law." Courts that have found the statute unambiguous have reached different conclusions as to how the subsequent reference to state law should be treated. Compare Homeside Lending, Inc. v. Denny (In re Denny), 242 B.R. 593, 597 (Bankr.D.Md.1999) (deciding modifying phrase requires "sale which complies with procedural regularity afforded under applicable law.") with In re Beeman, 235 B.R. 519, 526 (Bankr.D.N.H.1999) (concluding statute "modifies `sold at a foreclosure sale' with `that is conducted in accordance with applicable nonbankruptcy law.' This language indicates that Congress intended state law to be determinative of when a foreclosure sale is complete." Therefore, the latter part of the phrase mandates that the foreclosure sale must have been conducted in accordance with state law.), and M.C. Schinck v. Stephens (In re Stephens), 221 B.R. 290, 294 n. 10 (Bankr.D.Me.1998) (concluding entire phrase requires examination of state law because "I see no way of construing § 1322(c)(1) without looking to state foreclosure law."). Courts that have found the statute ambiguous have relied upon the potential different meanings of the state law reference. See Colon v. Option One Mortg. Corp., 319 F.3d 912, 917 (7th Cir.2003) (...