Kline v. Deutsche Bank National Trust Co. (In re Kline)
- Summarized by David Little , Miller & Law, P.C
- 12 years 7 months ago
- Citation:
- BAP No. NM-11-088 (B.A.P. 10th Cir. June 1, 2012)
- Tag(s):
-
- Ruling:
- AFFIRMING the Bankruptcy Court, a three judge panel of the 10th Circuit BAP held that (1) a foreclosing creditor did not willfully violate the automatic stay by serving an amended foreclosure complaint after a debtor filed a Chapter 13 petition, but without notice of the bankruptcy and ceasing all actions against the debtor upon learning of the bankruptcy; and (2) following the Rooker-Feldman doctrine, the Bankruptcy Court could not consider whether foreclosure after lifting the stay was proper based on service of the amended foreclosure complaint bring void. The panel ruled that the creditor’s actions of continuing the foreclosure action and not re-serving the amended complaint occurred after the automatic stay was lifted and thus by definition could not be violations. The panel further ruled that success on the debtor’s claim that the creditor willfully violated the automatic stay necessarily required review of a state court’s foreclosure judgment and thus barred the Bankruptcy Court from considering the effect of the void service of the amended foreclosure complaint.
- Procedural context:
- The debtor filed several pleadings in the state foreclosure action arguing that she was not in default and that the creditor and its attorney (together, the “defendants”), were required to re-serve the amended complaint, which the state court rejected. The debtor continued these arguments upon moving to set aside the foreclosure judgment, filing motions to reconsider, and filing an appeal to the New Mexico Court of Appeals, all of which were unsuccessful.
The debtor then filed an adversary proceeding against the defendants seeking damages for willful violation of the automatic stay, alleging that the defendants failed to take affirmative steps to stop the state foreclosure action after learning of her bankruptcy case. The Bankruptcy Court found that service of the amended foreclosure complaint was merely a technical violation of the automatic stay which did not become willful by failing to re-serve the amended complaint upon dismissal of the bankruptcy case. The Bankruptcy Court further found that the defendants complied with the Bankruptcy Code by ceasing prosecution of the state foreclosure action and that the Rooker-Feldman doctrine applied to bar consideration of the correctness of the foreclosure judgment of the state court.
- Facts:
- Prior to the debtor filing a Chapter 13 petition, the defendants filed and served a foreclosure complaint. The debtor did not list the defendants in her schedules and Notice of the Chapter 13 bankruptcy case was not mailed to the defendants. Subsequent to the debtor filing a petition, the defendants served an amended foreclosure complaint. Upon later learning of the bankruptcy case the defendants did not dismiss the foreclosure proceeding but stayed any action to further prosecute it against the debtor. The creditor was later granted relief from stay and the bankruptcy case was dismissed approximately four months after the debtor filed for bankruptcy protection.
After the stay was lifted and the bankruptcy case dismissed, the creditor filed a motion for summary judgment and application for entry of stipulated judgment and default judgment in the state foreclosure action. The creditor asserted that the debtor was in default by not filing an answer or responsive pleading to the amended foreclosure complaint and the state court granted the creditor's motion, declared the debtor in default, and the debtor’s property was later sold at public auction.
- Judge(s):
- Brown, Rasure, Romero
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