Taylor v. Slick

• Decision Date: 02 June 1999
• Docket Number: No. 98-3341,98-3341
• Citation: 178 F.3d 698
• Parties: Harvey TAYLOR, Appellant v. Thomas McCune SLICK, individually and as Executor of the Estate of Dorothy M. Ballantine, Deceased
• Court: U.S. Court of Appeals — Third Circuit

178 F.3d 698

Harvey TAYLOR, Appellant v. Thomas McCune SLICK, individually and as Executor of the Estate of Dorothy M. Ballantine, Deceased

No. 98-3341.

United States Court of Appeals Third Circuit.

Argued May 5, 1999.

Decided June 2, 1999.

Robert O. Lampl, John P. Lacher (argued), Pittsburgh, PA, for Appellant.

Terence O'Halloran (argued), Greensburg, PA, for Appellee.

Before: STAPLETON, LEWIS and ALDISERT, Circuit Judges,

OPINION OF THE COURT

ALDISERT, Circuit Judge.

We are to determine whether the continuation of a sheriff's sale, following the filing of a bankruptcy petition, violates the automatic stay provisions of 11 U.S.C. § 362(a), and whether a Pennsylvania rule of civil procedure that permits oral notice of the continuation and rescheduled sale date is sufficient to protect a debtor's due process rights. The bankruptcy court held that the postponement of the sale of property owned by the debtor, Harvey Taylor, did not violate § 362(a) and that Taylor's due process rights had not been violated by a subsequent sheriff's sale. The district court dismissed Taylor's appeal. We will affirm.

I.

Taylor and his wife purchased 20 acres of land in Westmoreland County from Martha Ballantine for $72,450.00. A note and mortgage were executed on December 16, 1981, with the entire purchase price to be paid by September 18, 1982. Thomas McCune Slick, as Ballantine's executor, instituted foreclosure proceedings in 1989 because Taylor had defaulted on the mortgage.

Several unsuccessful attempts were made to effectuate personal service of the complaint in mortgage foreclosure. An order was entered, on August 31, 1990, permitting Slick to make substitute service on Taylor by certified and regular mail and by posting the property. The order further stated:

Should this case proceed to execution and sale, this Order for Service shall apply to the Notice pursuant to Rule 3129 [of the Pennsylvania Rules of Civil Procedure] which is required to be served upon [Taylor], allowing perfection of service in the same manner as provided for herein. [Slick] ha[s] conducted a reasonable search for [Taylor] but ha[s] been unable to further locate [him] beyond [his] residence in McKeesport, Pennsylvania. The manner of service provided for herein is the most reasonably likely method of achieving service in this case.

App. at 176a. The sheriff served the notice and complaint in accordance with this order. A default judgment was entered against Taylor on October 24, 1990, in the amount of $43,863.61. A Writ of Execution in Mortgage Foreclosure was issued and served by certified and regular mail and posted on the property. The Writ was stayed and reissued on several occasions, as a result of agreements between the parties that Taylor would make payment. Taylor made only sporadic payments from 1990 through 1994.

Taylor filed a Chapter 13 bankruptcy petition on February 3, 1995. The petition was dismissed on February 22 for failure to file required documents. Slick filed another Writ of Execution on May 31, 1995, in accordance with the requirements of the August 31, 1990 order and Taylor received notice of the filing of the writ.

A sheriff's sale was scheduled for September 5, 1995, but on September 1, 1995, Taylor filed a Chapter 11 bankruptcy petition. By oral public announcement at the time and location of the proposed sheriff's sale, the sale was continued to October 23, 1995, in accordance with Rule 3129.3(b), Pennsylvania Rules of Civil Procedure, which states:

If the sale is stayed, continued, postponed or adjourned to a date certain within one hundred days of the scheduled sale, and public announcement thereof, including the new date, is made to the bidders assembled at the time and place originally fixed for the sale, no new notice shall be required, but there may be only one such stay, continuance, postponement or adjournment without new notice.

On October 17, 1995, Slick sought relief from the automatic stay of the sale. Although Taylor received notice of Slick's motion for relief which did not state that the sale was scheduled for October 23, he did not respond or attend the hearing before the bankruptcy court. Slick obtained relief from the stay, and the sale took place as scheduled. Slick was the high bidder for the property. The sheriff's deed was executed on January 16, 1996, and recorded the following day. Taylor's bankruptcy petition was dismissed on December 21, 1995, reopened and reinstated nunc pro tunc on January 8, 1996, and dismissed again on July 9, 1996.

Taylor filed an adversary complaint in the bankruptcy court on December 31, 1996, and contended, inter alia, that the continuance of the sheriff's sale, after he had filed his bankruptcy petition, violated 11 U.S.C. § 362(a)(1) and therefore voided the sale, and that the subsequent sale was conducted without proper notice, in violation of his due process rights.

The bankruptcy court granted Slick's motion to dismiss the adversary complaint on the basis that there had been no violation of the automatic stay rule set forth in 11 U.S.C. § 362(a)(1), and that Appellant had received adequate notice under bankruptcy rules and Pennsylvania law. Appellant withdrew his remaining claims in order to appeal the issues presented here. After oral argument, the district court dismissed Appellant's appeal.

We have jurisdiction pursuant to 28 U.S.C. § 1291 and 28 U.S.C. § 158(d). We review the bankruptcy court's factual findings for clear error, but conduct plenary review of the bankruptcy court's and district court's legal conclusions. In re Cohen, 106 F.3d 52, 55 (3d Cir.1997).

II.

This court has not previously addressed whether the postponement or continuation of a sheriff's sale violates the automatic stay provisions of 11 U.S.C. § 362(a). We are persuaded by a consistent line of cases from other courts, however, and hold that the continuance of a sheriff's sale in accordance with state law procedure during the pendency of an automatic stay does not violate § 362(a)(1). See, e.g., In re Peters, 101 F.3d 618 (9th Cir.1996); In re Roach, 660 F.2d 1316 (9th Cir.1981); In re Fritz, 225 B.R. 218 (E.D.Wash.1997); Zeoli v. RIHT Mortgage Corp., 148 B.R. 698 (D.N.H.1993); In re Tome, 113 B.R. 626 (Bankr.C.D.Cal.1990); Workingmen's Savings and Loan Ass'n of Dellwood Corp. v. Kestner, 438 Pa.Super. 186, 652 A.2d 327 (1994); see also In re Roche, 228 B.R. 102, 103-104 (Bankr. M.D. Pa.1998) ("[E]very court that has studied this specific issue (and has not been reversed) has found no violation.").

In relevant part, 11 U.S.C. § 362(a)(1) provides:

(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 action or proceeding against the Debtor that was or could have been commenced before the commencement of the case.

11 U.S.C. § 362(a)(1) (emphasis added). "The primary purposes of the automatic stay provisions are to effectively stop all creditor collection efforts, stop all harassment of a debtor seeking relief, and to maintain the status quo between the debtor and [his] creditors, thereby affording the parties and the Court an opportunity to appropriately resolve competing economic interests in an orderly and effective way." Zeoli, 148 B.R. at 700 (emphasis added). We must therefore decide whether a continuation of a sheriff's sale serves to maintain the status quo between the debtor and his creditors or whether it constitutes "a judicial, administrative, or other action or proceeding" prohibited by § 362(a)(1).

According to the principle of noscitur a sociis, the word "continuation," as used in § 362(a)(1), must be read in conjunction with other words that surround it, such as "commencement." Upon such examination, it becomes apparent that the filing of a bankruptcy petition prohibits the beginning ("commencement") of a judicial proceeding and the carrying forward ("continuation") of a proceeding that has already begun.

The "continuation" of a sheriff's sale, on the other hand, connotes the postponement of a proceeding, and effectuates the purposes of § 362(a)(1) by preserving the status quo until the bankruptcy process is completed or until the creditor obtains relief from the automatic stay. See Workingmen's Savings, 652 A.2d at 328 ("Postponement notices which specify a new sale date merely preserve the status quo between creditor and debtor."); see also Zeoli, 148 B.R. at 701 ("The postponement of a foreclosure sale is certainly an 'act.' But it is not an act in 'continuation' of a proceeding 'against the debtor' prohibited by § 362(a)(1). Rather, it is more appropriately characterized as an act in preservation of a stayed proceeding."). A postponement notice does not, by itself, permit the rescheduled sheriff's sale to occur. So long as the bankruptcy petition is pending before the bankruptcy court, a creditor must apply for and obtain relief from the stay before it can proceed with the sale on the date certain. Rule 3129.3(b), Pennsylvania Rules of Civil Procedure, preserves the status quo and permits the creditor to avoid duplicative foreclosure costs that would eventually be deducted from the proceeds of the sale (to the disadvantage of the debtor). See Zeoli, 148 B.R. at 701. It is therefore clear that Rule 3129.3(b) comports with § 362(a)(1).

Once Taylor filed his bankruptcy petition here, the sale was postponed. Although a new proposed sale date was announced, no act had occurred that prejudiced Taylor or otherwise altered his position with respect to the property. In accordance with the Bankruptcy Code, Slick then sought relief from the stay and served notice on Taylor. Taylor did not respond to the motion for relief, and relief was granted Slick pursuant to 11 U.S.C. § 362(d). ¹ Upon receiving relief from the...