Laboy v. Doral Mortgage Corp. (In re Laboy)
- Summarized by Bruce Harwood , US Bankruptcy Court - District of New Hampshire
- 13 years 7 months ago
- Citation:
- No. 09-9022 (1st Cir. May 27, 2011)
- Tag(s):
-
- Ruling:
- Bankruptcy court’s previous granting of partial summary judgment in favor of debtors (in context of debtors' motion for reconsideration of dismissal of their adversary complaint) that mortgagee and its attorneys/notaries committed willful violation of automatic stay was not “final judgment” from which debtors were required to appeal in order to preserve their right to prove and recover statutory damages for willful violation of automatic stay. Bankruptcy court’s later determination (at pretrial conference on debtors’ subsequent petition for stay violation damages) that cancellation of bank’s mortgage was “sufficient remedy” for willful stay violation, without affording debtors an evidentiary hearing, improperly deprived debtors of their right to prove and recover full statutory damages, and deprived appellate courts of an adequate record on which to measure sufficiency of remedy. Additionally, mortgagee and its attorneys/notaries were jointly responsible for willful violation of stay as a matter of law.
- Procedural context:
- Phase I: Debtors commenced first adversary proceeding against mortgagee and its attorneys seeking damages for willful violation of automatic stay for post-petition recording of “corrective” deed and mortgage. Bankruptcy court dismissed complaint on grounds that recording was permitted by stay exception provided in Section 362(b)(3). Debtors moved for reconsideration of complaint’s dismissal. Three years later, bankruptcy court granted partial summary judgment on motion for reconsideration, ordering mortgagee to cancel recorded mortgage, with no mention of attorneys’ fees or other damages. Mortgagee’s attorneys appeal dismissed by Bankruptcy Appellate Panel as untimely, without cross-appeal by mortgagee. Phase II: Debtors filed "petition" for damages under Section 362(h) [now Section 362(k)], requesting a pretrial conference and full evidentiary hearing. Court conducted pretrial conference, but never scheduled hearing on damages, ruling instead (based on parties’ argument at pretrial conference) that cancellation of mortgage was sufficient remedy. Bankruptcy Appellate Panel summarily affirmed bankruptcy court’s denial of evidentiary hearing, based on Debtors’ failure to file a transcript of the pretrial conference below with the BAP. Debtors appealed BAP’s summary affirmance of bankruptcy court's denial of evidentiary hearing.
- Facts:
- Debtors (individuals) purchased real property in Corozal, Puerto Rico, and timely submitted the conveyance deed to the local Registry of Deedsfor recording. Under applicable law, the Registry has 60 days from submission to either record the deed, or provide notice of any defects. If the Registry gives notice of defects, the submitters have an additional 60 days to correct the defects, failing which the Registry rejects the deed. Within 60 days of submitting the still unrecorded deed to the Registry, the Debtors borrowed $25,000 from Doral Mortgage Corp., secured by a mortgage on the Corozal property. Doral’s attorneys/notaries promptly presented the mortgage to the Registry for recording. However, the Registry ultimately (and timely) rejected the conveyancing deed as defective. The Debtors rightfully withdrew that deed, leaving the still-unrecorded Doral mortgage “in limbo,” a fact which Doral later discovered but took no immediate steps to address--until nearly a year after the Debtors filed a chapter 13 petition. Doral then instructed its notaries to present a corrected deed (which the Debtors had apparently signed long ago) to the Registry for recording. This time, the Registry accepted the corrected deed, and recorded both it and the Doral mortgage--albeit post-petition.
- Judge(s):
- Torruella, Lipez, Thompson
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