In re Jonathan M. Webb

Summarized by Paul Hage , Taft, Stettinius & Hollister, LLP
13 years 10 months ago

Citation:

In re Jonathan M. Webb [No. 11-8016] (6th Cir. B.A.P. Apr. 9, 2012)

Tag(s):

Ruling:

The Sixth Circuit Bankruptcy Appellate Panel held that: (i) the doctrine of lis pendens did not preclude certain real property from becoming property of the debtor's bankruptcy estate, (ii) the imposition of sanctions by the bankruptcy court for willful violation of the automatic stay by a foreclosing creditor was not an abuse of discretion, and (iii) the bankruptcy court was not required to conduct an evidentiary hearing prior to imposition of such sanctions. The doctrine of lis pendens did not preclude the real property from becoming property of the estate under section 541 of the Bankrutpcy Code. Lis pendens does not prohibit transfer of the subject property but, rather, subjects such property to any rights or claims subsequently obtained through the litigation. Because the real property was property of the estate, it was subject to the automatic stay which stays, among other things, continuation of state court foreclosure proceedings. Willful violation of this stay, which does not require a wrongful intent by the creditor, results in the imposition of sanctions, including costs, attorneys' fees and punitive damages where appropriate. The bankruptcy court did not abuse its discretion in awarding attorneys' fees in this case as a sanction. Finally, a court is not required to conduct a full evidentiary hearing when imposing sanctions. Rather, the need for such a hearing falls squarely within the court's discretion. Because there were no disputed facts in this case, the bankruptcy court did not abuse its discretion in declining to hold such a hearing.

Procedural context:

The appellants appealed an order of the United States Bankruptcy Court for the Northern District of Ohio imposing sanctions against them in the amount of $4,405.23 for their willful violation of the automatic stay. The sanctions were based on an earlier order in which the bankruptcy court found the appellants in contempt for continuing to prosecute a state-court foreclosure action against the Debtor's real property post-petition.

Facts:

Pre-petition, a creditor obtained a judgment against the monther of the debtor. The judgment creditor obtained a judgment lien on certain real property owned by the mother under applicable Ohio law and commenced a foreclosure action. Thereafter, the property was transferred to the debtor. The debtor commenced a chapter 13 case prior to the completion of foreclosure proceedings. Upon the commencement of the bankruptcy case, the debtor provided the judgment creditor with notice of the bankruptcy filing. Despite this notice, the judgment creditor continued the foreclosure proceedings post-petition based on, among other things, its erroneous assumption that the residence was not property of the estate because of the doctrine of lis pendens.

Judge(s):

Emerson, Fulton and Preston.

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