In re Doud, Bankruptcy No. 83-00021T

• Decision Date: 16 June 1983
• Docket Number: Adv. No. A83-0069.,Bankruptcy No. 83-00021T
• Citation: 30 BR 731
• Parties: In re Catherine DOUD, d/b/a Inn at the 3 Flags and the Stew Pot, Debtor. UNITED MUTUAL SAVINGS BANK, Plaintiff, v. Catherine DOUD, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Washington

30 B.R. 731 (1983)

In re Catherine DOUD, d/b/a Inn at the 3 Flags and the Stew Pot, Debtor.

UNITED MUTUAL SAVINGS BANK, Plaintiff, v. Catherine DOUD, Defendant.

Bankruptcy No. 83-00021T, Adv. No. A83-0069.

United States Bankruptcy Court, W.D. Washington.

June 16, 1983.

Noel P. Shillito, Tacoma, Wash., for debtor/defendant.

John E. Sloan, Parker Cann, Tacoma, Wash., for United Mut. Sav. Bank.

David J. Manger, Tacoma, Wash., for Union Bank.

DECISION ON MOTION TO DETERMINE EFFECT OF ORDER GRANTING RELIEF FROM AUTOMATIC STAY

ROBERT W. SKIDMORE, District Judge.

This matter came on regularly for hearing upon the joint motion of Union Bank and the debtor for a determination of the effect of the Order Granting Relief from Automatic Stay entered February 23, 1983. Parker Cann and John E. Sloan appeared on behalf of plaintiff, United Mutual Savings Bank, David J. Manger appeared on behalf of Union Bank, and Noel P. Shillito appeared on behalf of the debtor.

The facts involved are not in dispute. Debtor, Catherine Doud filed a petition for relief under Chapter 7 of the Bankruptcy Code on January 6, 1983. The debtor had an interest in real property located in Pierce County subject to a first Deed of Trust in favor of United Mutual Savings Bank and a second and third mortgage in favor of Union Bank. A non-judicial foreclosure sale on said property under Mutual Savings Bank's Deed of Trust was scheduled for Friday, January 7, 1983 at 10:00 a.m. Said sale was continued by the trustee "from time to time" pursuant to R.C.W. 61.24.040(6).

Plaintiff United Mutual Savings Bank filed the above entitled action for relief from automatic stay on January 27, 1983. Paragraph 2 of plaintiff's prayer for relief requested "that the order for relief from stay be granted nunc pro tunc, effective from the date Catherine Doud filed her Chapter 7 petition herein, January 6, 1983." A preliminary hearing was held February 22, 1983 which was not attended by the debtor or debtor's counsel. Plaintiff secured entry of an order for relief from say by default on February 23, 1983. The last paragraph of said order states: "... this order from sic relief from stay is effective nunc pro tunc as of January 6, 1983, the date the debtor filed her Chapter 7 petition herein." Subsequently plaintiff's non-judicial foreclosure sale was held on February 25, 1983.

The trustee in the debtor's case, Karen Wood, was not joined as a party. However, the trustee did sign a stipulation agreeing to a relief from stay as to the subject property, which was filed with the court March 30, 1983.

The moving parties have raised three objections to the procedure utilized by plaintiff in obtaining its order for relief from automatic stay and conducting its non-judicial foreclosure sale: (1) the continuance of the sale amounted to a violation of the automatic stay, and as such is void; (2) the Chapter 7 trustee is an indispensable party who should have been joined; and (3) the plaintiff's order granting relief from automatic stay nunc pro tunc effective to the date the petition was filed is a misuse of the court's power to issue nunc pro tunc orders.

The record reflects that Union Bank has not moved to intervene in the above entitled case pursuant to F.R.C.P. 24. As such, the court finds that Union Bank does not have standing to seek a determination of the effect of the court's order granting relief from stay. Since the relief requested was granted by default, the court finds that the debtor may seek such a determination.

I. AUTOMATIC STAY-CONTINUANCE OF SALE

11 U.S.C. § 362(a) sets forth the basic statutory grant for the automatic stay.

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title operates as a stay, applicable to all entities, of—

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;

(3) any act to obtain possession of property of the estate or of property from the estate;

(4) any act to create, perfect, or enforce any lien against property of the estate;

(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 case under this title;

(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title....

The protection provided the debtor by the automatic stay is very fundamental—to grant the debtor immediate relief.

From the provisions of Section 362, which the court has emphasized, it is clear that the automatic stay prohibits the continuation of any judicial action against a debtor and prohibits any act to collect any debt which arose prior to the bankruptcy. The legislative history of Section 362 reveals that Congress intended this section to be one of the fundamental debtor protections provided by the bankruptcy laws, and that it was intended to stop all collection efforts, all harassment, and all foreclosure actions.... Matter of Dennis, 17 B.R. 558, 560 (Bkrtcy. 1982).

Therefore, the protection set forth in § 362 was intended to be broad to provide the debtor with complete relief.

Section 362(a) is drafted as a series of paragraphs which are to some extent repetitive but are, in fact, carefully drafted to be as inclusive as possible. Changes in status of the debtor or his assets may result in a cessation of the applicability of one paragraph but with another coming into effect. Paragraph (6) of section 362(a) is very general and applies to "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case...." This paragraph will apparently preclude any effort to realize upon a prepetition claim." Collier Bankruptcy Practice Guide, § 38.022, p. 38-9.

The issue presented is whether plaintiff's continuance of the non-judicial foreclosure sale amounted to a violation of the stay imposed by 11 U.S.C. § 362(a)(3), (4) or (5). Plaintiff has cited the only apparent authority on point, Matter of Roach, 660 F.2d 1316 (1981), where the Ninth Circuit Court of Appeals held that the publication of notices of postponement of a non-judicial foreclosure sale did not amount to a violation of the automatic stay. The court stated the reasoning for its decision as follows:

The purpose of the automatic stay is to give the debtor a breathing spell from his creditors, to stop all collection efforts, harassment and foreclosure actions. Notes of Committee on the Judiciary, Sen.Rep. No. 989, 95th Cong., 2d Sess. 54, reprinted in 1978 U.S.Code Cong. & Ad. News 5787, 5840. The automatic stay also prevents piecemeal diminution of the debtor\'s estate. See Bohack Corp. v. Borden, Inc., 599 F.2d 1160, 1167 (2d Cir. 1979). The automatic stay does not necessarily prevent all activity outside the bankruptcy forum. See David v. Hooker, Ltd., 560 F.2d 412, 417-18 (9th Cir.1977) (automatic stay under old bankruptcy act did not prevent trial judge in a separate case from requiring the debtor to comply with a discovery order issued prior to the filing of the insolvency petition).

Here, the Bank merely maintained the status quo, and did not harass, interfere or gain any advantage. This is consistent with the purpose of the automatic stay provision. See In re Decker, 465 F.2d 294, 297 (3d Cir.1972) (stay provisions of old act were designed to maintain status quo). Matter of Roach, supra, pp 1318-19.

The plaintiff continued the sale in the manner prescribed by the Deed of Trust statute.

The trustee may for any cause he deems advantageous continue the sale for a period or periods not exceeding a total of one hundred twenty days by a public proclamation at the time and place fixed in the notice of sale. No other notice of the postponed sale need be given. R.C.W. 61.24.040(6).

The court can see no distinction between postponement by publication and announcement of continuance in the manner prescribed by statute. The reasoning stated in Matter of Roach, supra, that a mere postponement of sale is not in and of itself adversarial and does not disrupt the status quo—is equally applicable in the instant case. Therefore, the court finds that the plaintiff's action did not violate the provisions of § 362(a).

II. TRUSTEE AS INDISPENSABLE PARTY

The debtor properly asserts that the Chapter 7 trustee is an...