In re Moore, 00-34272 KJC.
| Decision Date | 14 September 2001 |
| Docket Number | No. 00-34272 KJC.,00-34272 KJC. |
| Parties | In re Vera H. MOORE, Debtor. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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David A. Scholl, Media, PA, for debtor.
Heidi R. Spivak, Mark J. Udren & Associates, Cherry Hill, NJ, for Ocwen Federal Bank, FSB.
Frederic J. Baker, Sr., Philadelphia, PA, Assistant United States Trustee.
Before this Court is the motion of Ocwen Federal Bank, FSB ("Ocwen") for relief from the automatic stay imposed by 11 U.S.C. § 362 (the "Stay Motion"). A hearing on the Stay Motion was held on April 17, 2001, at which time the parties introduced evidence and argued their respective positions. The parties subsequently briefed the issues, with Ocwen filing its brief on May 1, 2001, and the debtor filing her memorandum of law on May 2, 2001 and a reply memorandum on May 8, 2001.
The undisputed facts of this matter are as follows: Ocwen is the holder of a note and first mortgage on real property owned by the debtor, Vera H. Moore, located at 206 E. Claremont Road, Philadelphia, PA (the "Property"). After the debtor defaulted in her payments on the note and mortgage, Ocwen commenced a mortgage foreclosure action on January 7, 1999, obtaining a judgment against her on February 24, 1999. The Property was scheduled to be sold at sheriff's sale on November 14, 2000 at 10:00 a.m., on which date Ms. Moore filed a pro se chapter 13 bankruptcy petition. The petition was time-stamped by the Bankruptcy Court clerk's office as being filed at 4:37 p.m.
The parties disagree about the effect of what occurred on November 14, 2000. Each party presented testimony at the hearing on the Stay Motion to supply facts in support of their respective positions. Ocwen's attorney in the foreclosure action testified that he attended the November 14, 2000 sheriff's sale and, because there was no bidding on the Property, Ocwen was the purchaser of the Property at the sale.2 Captain Jedelle Baxter, Jr. of the Philadelphia Sheriff's Office also testified that the records of the sheriff's office indicated that the property was sold at the November 14, 2000 sale to Ocwen.3 Captain Baxter then testified that, after the sheriff's office received notice of Ms. Moore's bankruptcy petition filing, which occurred later that day, the sheriff's office subsequently designated the sale as postponed and rescheduled it for February 2001.4 Captain Baxter testified that if a bankruptcy petition is filed that affects a property scheduled for sheriff's sale, the sheriff's office's practice is to postpone the scheduled sale for 90 days to allow the plaintiff's attorney time to obtain relief from the automatic stay.5 Captain Baxter testified that this practice is followed even when the sale is concluded prior to filing of the bankruptcy petition.6 The debtor also introduced into evidence as Exhibit D-1 a copy of the state court docket for the foreclosure proceeding, reflecting no docket entries or notes evidencing the occurrence of a sheriff's sale on November 14, 2000.7
Ocwen's attorney estimated that the sale of the Property occurred between 10 a.m. and 12 noon on November 14, 2000.8 Captain Baxter testified that the sales on November 14, 2000 ended sometime around 2:00 or 2:30 p.m.9 Although the debtor testified that she could not recall what time her bankruptcy petition was filed on November 14, 2000,10 the petition was time-stamped at 4:37 p.m. and the debtor is not disputing that the bankruptcy filing occurred after the sheriff's sale was concluded.11
For the reasons set forth below, I find that, pursuant to Pennsylvania law, a valid sheriff's sale occurred on November 14, 2000 and that cause exists to grant Ocwen relief from the automatic stay.12
Accordingly, the Stay Motion will be granted.
Under Pennsylvania law, the "sale" of a property in the context of a sheriff's sale takes place when the hammer falls. Pennsylvania Co. for Insurances on Lives and Granting Annuities, to Use of Jefferson Medical College of Philadelphia v. Broad Street Hospital, 354 Pa. 123, 128, 47 A.2d 281, 283 (1946).13 The testimony of both Ocwen's attorney and Captain Baxter support the finding that the property was sold to the attorney on the writ, i.e. to Ocwen as the foreclosing creditor, at the November 14, 2000 sheriff's sale. The question posed is whether the subsequent action of the sheriff's office (i.e., treating the sale as postponed) had the effect of undoing the sale.
Despite the testimony, the debtor argues that the docket for the state court foreclosure action provides evidence that no valid sheriff's sale occurred on November 14, 2000 because there is no entry on the docket for that date. (Presumably, when a sheriff's sale occurs, such an event is noted on the docket.) In reviewing the docket, I consider two things: (1) should the lack of docket entry be given greater weight than the testimony of the witnesses at the hearing on the Stay Motion; and (2) whether the lack of a docket entry provides a basis for finding that the state court, at least tacitly, agreed that the sheriff's office nullified the sale.
First, as the debtor readily agreed (Tr. at p. 32 and Debtor's Memorandum of Law, May 2, 2001, at p. 3), and as my own experience as a practicing attorney and particularly now as a judge informs me, dockets sometimes contain inaccuracies or mistakes. Therefore, I am not willing to give greater weight to the docket entries (or lack thereof) when they are contrary to the undisputed testimony (and the records of the office which conducted the sale) presented at the hearing on the Stay Motion. The evidence presented by both parties demonstrated that a sale of the Property did, in fact, occur between 10:00 a.m. and 2:30 p.m. on November 14, 2000. The lack of a docket entry reflecting the sale does not create any doubt as to the occurrence of the sheriff's sale.
Second, the debtor argues that the docket does not contain a mistake, but is consistent with the testimony of Captain Baxter that any sale was administratively nullified by the sheriff's office upon receipt of the later-filed bankruptcy petition. The debtor further argues that bankruptcy courts cannot reconsider and vacate a state court judgment. (Debtor's Memorandum of Law, May 2, 2001, p. 3). While I agree that a bankruptcy court may not reconsider or vacate a state court judgment under these circumstances (In re James, 940 F.2d 46 (3d Cir.1991)), there is no evidence that the action by the sheriff's office possesses any characteristics of a judicial determination or was anything more than an act based upon the sheriff's office's prior administrative practices. Further, in the Pennsylvania Co. for Insurances decision, the Pennsylvania Supreme Court relied upon early caselaw in which the court decided that lower courts should not subsequently alter the rights of a purchaser at a sheriff's sale absent a finding of fraud or abuse of power in the sheriff. Pennsylvania Co. for Insurances, 354 Pa. at 129-130, 47 A.2d at 284.14
Finding no basis to set aside the sheriff's sale under state law, I turn to federal bankruptcy law. Captain Baxter testified that it was the filing of the debtor's bankruptcy petition that caused the sheriff's office to "postpone" the sale. Therefore, I will analyze whether the automatic stay of Section 362(a)15 provides a basis for staying a sheriff's sale that occurred on the same date of the bankruptcy filing, even though the bankruptcy petition was filed after the sale was completed.
A similar issue was considered by the court in the case In re McLouth, 257 B.R. 316 (Bankr.D.Mont.2000), in which a debtor argued that her bankruptcy petition stayed a trustee sale, even though the sale was held several hours before she filed her chapter 13 petition. McLouth, 257 B.R. at 318. The debtor in McLouth had filed a motion against the mortgagee for turnover and for sanctions due to an alleged violation of the automatic stay. After looking to the plain language of Section 362(a), the McLouth court declined "to adopt the `indivisible day' rule urged by the Debtor, i.e., that the petition stayed the trustee's sale even though the sale took place several hours before the Debtor filed her petition." McLouth, 257 B.R. at 319. The McLouth court wrote:
Section 362(a) states that a petition filed operates as a stay. It does not state that a stay arises on the date of the filing of the petition, as urged by the Debtor. Courts should disfavor interpretations of statutes that render language superfluous. Connecticut National Bank v. Germain, 503 U.S. at 253-54, 112 S.Ct. at 1149, 117 L.Ed.2d 391 (1992). If Congress intended for the automatic stay to arise on the "date of the filing of the petition", it would have drafted § 362(a) to make the stay effective on the date of the filing of the petition, as it drafted the statute for determining exemptions, 11 U .S.C. § 522(b)(2)(A), and other subsections of the Code.
McLouth, 257 B.R. at 320.16 Based upon the plain language of Section 362(a), the automatic stay took effect as of 4:37 p.m. on November 14, 2000, i.e., the time the petition was filed.
Ocwen agrees that the automatic stay applied to the Property as of the filing of the petition and that the stay prevents Ocwen from completing the sheriff sale process, (i.e., settling with the sheriff, obtaining a sheriff's deed, and obtaining possession of the property). See Brown, 75 B.R. at 1012. Ocwen is seeking relief from the stay for "cause" pursuant to Section 362(d)(1).17 Whether Ocwen is entitled to relief from the stay for "cause" depends upon the extent of the parties' respective interests in the Property as of the filing of the petition.
Bankruptcy Code Section 541, 11 U.S.C. § 541, describes the debtor's "e...
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