In re Fritz
| Citation | 225 BR 218 |
| Decision Date | 20 February 1998 |
| Docket Number | No. CS-96-391-FVS.,CS-96-391-FVS. |
| Parties | In re Sharon L. FRITZ, Debtor. WASHINGTON MUTUAL et al., Appellants, v. Sharon L. FRITZ, Appellee. |
| Court | U.S. District Court — District of Washington |
Bernard William McNallen, Frank C. King, Spokane, WA, for Plaintiff.
Laurin Shirley Schweet, Suttell & Schweet, Mercer Island, WA, for Washington Mutual Savings Bank.
Willard Hatch, Foster Pepper & Shefelman, for Defendants.
Michael Ramsey Scott, Gary M. Fallon, Hillis Clark Martin & Peterson, Seattle, WA, for Washington Savings League and Washington Mortgage Lenders Association, amicus.
ORDER REVERSING DECISION TO AWARD DAMAGES
THIS MATTER involves cross appeals from the decision of a bankruptcy court judge. Sharon L. Fritz is represented by Bernard W. McNallen and Frank C. King. Washington Mutual Bank and H & L Services, Inc. are represented by Laurin S. Schweet and Laura J. Brackett. Arthur R. Thompson and Darlene D. Thompson are represented by Michael J. Paukert. Amici Curiae Washington Mortgage Lenders Association and Washington Savings League are represented by Michael R. Scott, Gary M. Fallon, and Joseph M. Ahern.
Washington Mutual Bank loaned money to Ms. Sharon L. Fritz to purchase a house. The note was secured by a deed of trust. When Ms. Fritz defaulted on the loan, the trustee, H & L Services, Inc., scheduled a foreclosure sale for July 1, 1994.
On May 20, 1994, Ms. Fritz filed a Chapter 13 bankruptcy.
On July 1, 1994, a representative of H & L Services appeared at the place scheduled for the foreclosure sale. Although Ms. Fritz was aware of the sale, she did not attend. The H & L representative issued a public proclamation continuing the sale until August 26, 1994.
On July 13, 1994, Ms. Fritz's Chapter 13 bankruptcy case was dismissed.
On August 26, 1994, H & L Services conducted a foreclosure sale. Ms. Fritz was unaware of the sale and did not attend. Her house was purchased by Arthur R. Thompson and Darlene D. Thompson.
On October 24, 1994, Ms. Fritz filed a Chapter 7 bankruptcy. She instituted an adversary proceeding two months later seeking to void the foreclosure sale.
Ms. Fritz's adversary proceeding was tried before Judge John M. Klobucher. He ruled that Washington Mutual and H & L Services violated the automatic stay by using a public proclamation to continue the foreclosure sale. (Letter Opinion of September 18, 1995, at 11.) As a result, he went on to award damages to Ms. Fritz. Both sides appeal. This Court has jurisdiction under 28 U.S.C. § 158(a).
Washington Mutual and H & L Services (together with amici curiae) argue that Judge Klobucher erred by ruling that they violated the automatic stay. According to them, his ruling is contrary to Ninth Circuit precedent and the decisions of a majority of district and bankruptcy courts. In addition, they argue that his ruling is contrary to public policy because it would make the process of foreclosing on deeds of trust in this state unduly expensive and time consuming.
In First Nat'l Bank of Anchorage v. Roach (In re Roach), 660 F.2d 1316, 1318 (9th Cir. 1981), the Ninth Circuit held that a creditor who published notice postponing a foreclosure sale did not violate the automatic stay because doing so "merely maintained the status quo. . . ." Judge Klobucher acknowledged that Roach is the law of this circuit, but questioned whether the circuit court would extend that case beyond its facts. Instead, he looked to Tome v. Baer (In re Tome), 113 B.R. 626 (Bankr.C.D.Cal.1990), and In re Acosta, 181 B.R. 477 (Bankr. D.Ariz.1995). In the former, the creditor postponed a foreclosure sale several times — conducting the sale after obtaining relief from the automatic stay. In re Tome, 113 B.R. at 628. Because the bankruptcy case was still pending, Judge Bufford reasoned that the estate had a continuing interest in the property. Id. at 632. Given those facts, he held that a creditor must satisfy bankruptcy notice requirements before conducting a foreclosure sale, even after obtaining relief from the automatic stay. Id. at 636. Acosta differed from Tome in an important respect. In Acosta, the bankruptcy case was dismissed after an oral postponement but before the foreclosure sale. 181 B.R. at 478. Nevertheless, Judge Mooreman ruled, "Due process requires actual notice be given to a debtor prior to a Trustee's Sale which is scheduled to occur after stay relief or the dismissal of a bankruptcy case." In re Acosta, 181 B.R. at 479.
After Judge Klobucher issued his opinion, the Ninth Circuit emphasized the continuing validity of Roach. Quoting from Barry v. BA Properties, Inc. (In re Barry), 201 B.R. 820, 823 (C.D.Cal.1996), the circuit court said, "`A creditor may postpone a foreclosure sale after a debtor files a bankruptcy petition without violating the automatic stay.'" Mason-McDuffie Mortgage Corp. v. Peters (In re Peters), 101 F.3d 618, 619 (9th Cir.1996) (per curiam). Thus, with all due respect, Judge Klobucher erred by minimizing the effect of Roach. Moreover, both Tome and Acosta have been criticized sharply. See, e.g., Jauregui v. Ricci (In re Jauregui), 197 B.R. 673, 675 (Bankr.E.D.Cal.1996) (collecting cases Tome); In re Stober, 193 B.R. 5, 10 (Bankr.D.Ariz.1996) ().
Here, Washington Mutual and H & L Services did no more than maintain the status quo by continuing the foreclosure sale by public proclamation. After Peters, such a course of conduct cannot be viewed as a violation of the automatic stay.
Furthermore, even if Tome can be reconciled with Roach and Peters, Tome is factually distinguishable from this case. In Tome, the Chapter 13 case was pending when the foreclosure sale occurred. 113 B.R. at 627-28. Thus, it was at least arguable that the bankruptcy estate had a continuing interest in the property. In re Barry, 201 B.R. at 824-25. Here, by contrast, Ms. Fritz's case was dismissed before H & L Services conducted the sale. As a result, "the rational underpinning Tome does not apply." Id. at 825.
In view of the foregoing it is unnecessary to address the policy considerations cited by Washington Mutual, H & L Services, and amici curiae. Judge Klobucher's decision awarding damages to Ms. Fritz based upon a violation of the automatic stay must be reversed.
Ms. Fritz alleges that H & L Services failed to comply with Washington's foreclosure statutes. See Koegel v. Prudential Mut. Sav. Bank, 51 Wash.App. 108, 113, 752 P.2d 385, rev. denied, 111 Wash.2d 1004 (1988) (). She argues that Judge Klobucher erred by ruling that the foreclosure sale complied with Washington law.
The Court questions whether the matter of compliance with state foreclosure law should be reviewed at this juncture given Judge Klobucher's comments about that issue. His first said, "It is not disputed by the plaintiff that the sale was conducted in accord with applicable Washington statutes." (Letter Opinion of September 18, 1995, at 2.) Because Judge Klobucher assumed that Ms. Fritz was not challenging H & L Services' compliance with Washington foreclosure law, he focused on whether continuing the foreclosure sale by public proclamation violated the automatic stay. Indeed, he made the following comment in that regard, "The sole issue addressed is this opinion is whether or not the `public proclamation' process of continuing foreclosure sales during the pendency of a bankruptcy proceeding is violative of the automatic stay imposed by 11 U.S.C. § 362." Id. at 3. Now, it is true that Judge Klobucher returned to the subject near the end of his opinion. He wrote, "This Court has found and concluded that the deed of trust foreclosure statutes were literally complied with in this case." Id. However, since Judge Klobucher specifically refrained from discussing the matter of H & L Services' compliance with Washington foreclosure law, and Ms. Fritz has cited no findings or conclusions in that regard, it would be difficult to conduct meaningful review. The better course is to remand the matter to Judge Klobucher for entry of findings and conclusions.
IT IS HEREBY ORDERED:
1. Judge Klobucher's decision awarding damages to Ms. Fritz based upon a violation of the automatic stay is reversed.
2. This matter is remanded to Judge Klobucher for entry of findings and conclusions with respect to whether H & L Services, Inc., complied with Washington's foreclosure statutes in conducting the foreclosure sale challenged by Ms. Fritz.
IT IS SO ORDERED. The District Court Executive is hereby directed to enter this Order and furnish copies to counsel.
ORDER RE MOTION FOR RECONSIDERATIONTHIS MATTER comes before the Court based upon Sharon L. Fritz's motion for reconsideration (Ct. Rec. 34). She is represented by Bernard W. McNallen and Frank C. King. Washington Mutual Bank and H & L Services, Inc. are represented by Laurin S. Schweet and Willard Hatch.
Sharon L. Fritz argues that Bankruptcy Judge John M. Klobucher issued two rulings with respect to the nonjudicial foreclosure sale she challenges: (1) that Washington Mutual Bank and H & L Services violated the automatic stay by continuing the sale by means of a public proclamation; (2) that H & L conducted the sale in accordance with Washington law. In its order of June 6, 1997, the Court reversed Judge Klobucher's ruling with respect to the automatic stay, and remanded the second matter to bankruptcy court for entry of findings and conclusions. Ms. Fritz moves the Court...
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