Witkowski v. Knight (In re Witkowski)

• Decision Date: 13 November 2014
• Docket Number: Bankruptcy No. 14–10149–DF.,BAP No. RI 14–034.
• Citation: 523 B.R. 291
• Court: U.S. Bankruptcy Appellate Panel, First Circuit
• Parties: Mary E. WITKOWSKI, Debtor. Mary E. Witkowski, Appellant, v. Kevin Knight, Appellee.

523 B.R. 291

Mary E. WITKOWSKI, Debtor.

Mary E. Witkowski, Appellant

v.Kevin Knight, Appellee.

BAP No. RI 14–034.

Bankruptcy No. 14–10149–DF.

United States Bankruptcy Appellate Panel of the First Circuit.

Nov. 13, 2014.

Mary E. Witkowski, Coventry, RI, pro se, on brief for Appellant.

Jules J. D'Alessandro, Esq., Providence, RI, on brief for Appellee.

Before TESTER, GODOY, and HARWOOD, United States Bankruptcy Appellate Panel Judges.

Opinion

TESTER, Bankruptcy Appellate Panel Judge.

Mary E. Witkowski (the “Debtor”) appeals from the bankruptcy court's April 16, 2014 order denying her motion for the imposition of sanctions against Kevin Knight (“Knight”) for his alleged violation of the automatic stay. For the reasons discussed below, we AFFIRM the order.

BACKGROUND

In 2011, the Debtor and her husband, Dennis Witkowski (“Mr. Witkowski”) (collectively the “Witkowskis”), executed a promissory note in the amount of $212,000.00 in favor of Knight. In order to secure the note, the Witkowskis granted a mortgage to Knight on their Coventry, Rhode Island residence (the “Property”). The note provided for monthly payments of interest until June 2012, when the entire remaining balance became due.

The Witkowskis failed to make any payments on the note, to maintain insurance on the Property, and to pay real estate taxes for the 2011, 2012, and 2013 tax years. Accordingly, on March 27, 2013, Knight demanded payment of the note. When the Witkowskis failed to pay the sum due notwithstanding demand, Knight commenced a foreclosure. A foreclosure sale was scheduled for July 29, 2013. On July 24, 2013, Mr. Witkowski, co-owner of the Property, filed his first of two chapter 13 bankruptcy petitions (Case No. 13–11932) and Knight therefore cancelled the foreclosure. The bankruptcy court dismissed Mr. Witkowki's bankruptcy petition the following month, due to his failure to comply with a court order and to file his missing documents. Thereafter, Knight commenced a second foreclosure proceeding, with a scheduled foreclosure sale date of November 4, 2013. However, on November 1, 2013, the Debtor filed her first chapter 13 petition (Case No. 13–12897), and Knight continued the foreclosure noticed for November 4, 2013, to November 26, 2013. The bankruptcy court dismissed the Debtor's case on November 20, 2013, for her failure to comply with a court order to file her missing documents. Mr. Witkowski then filed his second chapter 13 case (Case No. 13–13083) on November 25, 2013, and Knight continued the November 26, 2013 foreclosure to December 17, 2013. On December 11, 2013, Mr. Witkowski's second case was dismissed, like the first, for failure to file missing documents.

In response to the Witkowskis' request to remain in the Property through the holidays, Knight continued the December 17, 2013 foreclosure first to January 7, 2014, and then to January 28, 2014. The Debtor filed the instant bankruptcy case (her second, and the fourth in the series of cases filed by either the Debtor or Mr. Witkowski) on January 28, 2014. Knight then continued the January 28, 2014 foreclosure to February 18, 2014. On February 18, 2014, because the Debtor's bankruptcy case was still pending, Knight continued the foreclosure to March 18, 2014. The record reflects that during the pendency of the instant bankruptcy case, Knight advertised the March 18, 2014 sale for four consecutive weeks, on February 24, 2014, March 3, 2014, March 10, 2014, and March 17, 2014, in the classified section of the Kent County (RI) Daily Times.

The Debtor did not file a motion for continuation of the automatic stay. However, on March 7, 2014, she filed a Motion for Violation of Automatic Stay and Creditor Misconduct (the “Sanctions Motion”) against Knight, asserting that he violated the automatic stay by “continuing to foreclose” the Property, notwithstanding his knowledge of the pendency of her chapter 13 case. Arguing that Knight's “actions to collect the debt” caused her injury, such as loss of time from her personal and professional life, she asked the court for an award of damages, including costs and attorneys' fees. The Debtor also sought to enjoin the March 18, 2014 foreclosure by filing a state court complaint against Knight, together with an application for a temporary restraining order. On March 18, 2014, the state court granted the Debtor's application.¹ Knight therefore postponed the foreclosure to April 1, 2014, and continued to advertise the foreclosure sale through that date, when he finally cancelled the foreclosure and ceased all advertising.

On March 21, 2014, Knight filed an objection to the Sanctions Motion, disputing that he violated the automatic stay and challenging the Debtor's request for the imposition of sanctions. He argued that because the Debtor filed a second chapter 13 bankruptcy petition within one year of the dismissal of her first petition, pursuant to § 362(c)(3)(A)² the stay terminated in its entirety thirty days from the petition date—i.e., on February 27, 2014. In support of this position, he cited St. Anne's Credit Union v. Ackell, 490 B.R. 141 (D.Mass.2013), and Reswick v. Reswick (In re Reswick), 446 B.R. 362 (9th Cir. BAP 2011). Additionally, relying on First Nat'l Bank of Anchorage v. Roach (In re Roach), 660 F.2d 1316 (9th Cir.1981), and Hart v. GMAC Mortg. Corp. (In re Hart), 246 B.R. 709 (Bankr.D.Mass.2000), Knight argued that the continuation of the foreclosure sale from February 18, 2014, to March 18, 2014, did not violate the automatic stay but, rather, merely “maintained the status quo between the Debtor and her creditors.”

During the course of the April 16, 2014 hearing on the Sanctions Motion, Knight's counsel acknowledged that Knight advertised the foreclosure during the pendency of the Debtor's two bankruptcy cases and did not terminate the advertising until April 1, 2014, when he cancelled the foreclosure. When the bankruptcy court asked Knight's attorney if he had advertised while the stay was in effect, he answered in the affirmative, but maintained that the mere continuation and advertising of the foreclosure did not violate the stay but, rather, preserved the status quo of the Property. When the court asked why he did not seek an emergency determination that “the stay [wa]s no longer in effect the thirtieth day after the filing,” he replied that he did not think such a determination was necessary.

The bankruptcy court responded to this argument by admonishing: “You can't just continue and continue to harass” a debtor. Knight's counsel denied that there was any harassment, arguing:

We've never entered onto the property. We merely advertised the property.

[W]e didn't contact them. [ ] All we did was simply advertise a continued foreclosure sale without any harassment whatsoever. And that was the cheapest alternative. Again, each one of these continuances, each time we cancel, all of those costs just end up going to the debtor's estate.

So in the ... event that there is any equity ..., they are going to lose it based on these costs.

Persuaded by Knight's arguments, the bankruptcy court entered an order denying the Sanctions Motion (the “Sanctions Order”) from the bench, relying largely on Jumpp v. Chase Home Fin., LLC (In re Jumpp), 356 B.R. 789 (1st Cir. BAP 2006), and Lugo v. de Jesus Saez (In re de Jesus Saez), 721 F.2d 848 (1st Cir.1983). In declining to award sanctions to the Debtor, the court also took into consideration the state law of Rhode Island governing the continuation of foreclosures, and found that Knight had not harassed the Debtor. The court reasoned:

[T]here is a good-faith basis for doing a continuation rather than a cancellation when you have a multiple debtor.... [I]t just saves money. It saves the expense, and—from a creditor's standpoint, particularly in Rhode Island, you have to go through a new mediation process.

You have to go through a new default. It's about a hundred and twenty days to foreclose. So I can understand a creditor, and I don't think it's harassment to continue advertising a postponement of the foreclosure sale rather than a cancellation with a multiple debtor as this debtor....

Creditor obviously hasn't taken—hasn't followed through with the foreclosure and has cancelled the foreclosure sale.... So I'm going to deny the motion of the [D]ebtor. I just don't find enough facts here to show that it was anything more than to preserve the status quo and justified on the fact that we've had multiple filings all dismissed affecting this property.

The Debtor timely appealed the Sanctions Order. On appeal, the parties reiterate the arguments that they presented in the proceedings below.

JURISDICTION

A bankruptcy appellate panel is “ ‘duty-bound’ ” to determine its jurisdiction before proceeding to the merits, even if not raised by the litigants. Boylan v. George E. Bumpus, Jr. Constr. Co. (In re George E. Bumpus, Jr. Constr. Co.), 226 B.R. 724, 725–26 (1st Cir. BAP 1998) (quoting Fleet Data Processing Corp v. Branch (In re Bank of New Eng. Corp.), 218 B.R. 643, 645 (1st Cir. BAP 1998) ). A bankruptcy appellate panel may hear appeals from “final judgments, orders, and decrees.” 28 U.S.C. § 158(a)(1). “Generally, a bankruptcy court order determining whether there was a violation of the automatic stay is a final order.” In re DeSouza, 493 B.R. 669, 671 (1st Cir. BAP 2013) (citations omitted). Accordingly, we have jurisdiction.

STANDARD OF REVIEW

A bankruptcy court's findings of fact are reviewed for clear error and its conclusions of law are reviewed de novo . Lessard v. Wilton–Lyndeborough Coop. Sch. Dist., 592 F.3d 267, 269 (1st Cir.2010). “Generally, a bankruptcy court's determination as to whether the automatic stay provisions of § 362 have been violated involves a question of law that is subject to de novo review.” In re DeSouza, 493 B.R. at 672 (citation omitted).

DISCUSSION

The question presented on appeal is two-fold: (1) whether § 362(c)(3)(A) terminated the automatic stay with regard to the Debtor, property of the...