DocketNumber: Bankruptcy No. 12-11553-WCH; Adversary No. 12-1081
Citation Numbers: 482 B.R. 697
Judges: Hillman
Filed Date: 11/6/2012
Status: Precedential
Modified Date: 11/22/2022
MEMORANDUM OF DECISION
I. INTRODUCTION
The matter before me is the “Defendants’ Motion to Dismiss the Complaint” (the “Motion to Dismiss”) filed by Bank of America, N.A. (“BAÑA”), as successor by merger to BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP, and Federal National Mortgage Association a/k/a Fannie Mae (“Fannie Mae”) (collectively, the “Defendants”) and the “Opposition to Defendants’ Motion to Dismiss” (the “Opposition”) filed by Gil-bertos Dos Anjos (the “Debtor”). The Defendants move to dismiss this adversary proceeding, though which the Debtor seeks a declaration that a post-petition foreclosure of certain real property violated the automatic stay, on the basis that the foreclosure was excepted from the stay pursuant to 11 U.S.C. § 362(b)(21) due to the Debtor’s ineligibility to file the present
II. BACKGROUND
The facts of this case are undisputed.
On January 31, 2012, BANA’s counsel, Harmon Law Offices (“Harmon”) notified the Debtor of BANA’s intent to foreclose on the mortgage with respect to the Debt- or’s residence located at 85 Spruce Street, Hyannis, Massachusetts (the “Property”).
Later that day, the Property was sold at a public auction.
On April 5, 2012, the Debtor commenced the present adversary proceeding seeking that: (1) the Court declare the foreclosure as void on the grounds that the Defendants violated the automatic stay under 11 U.S.C. § 362; and (2) the Court award the Debtor punitive damages and attorney’s fees based upon BANA’s knowing violation of the stay.
III. POSITIONS OF THE PARTIES
The Defendants
The Defendants argue that the Debtor has failed to state a claim because BANA did not violate the automatic stay when it foreclosed on the Debtor’s mortgage.
The Defendants rely on In re Colon Martinez for the proposition that the “the First Circuit infers willfulness from a pattern of failure to abide by court orders,” and they analogize the present case to the facts in In re Colon Martinez.
The Debtor argues that the automatic stay takes effect until the Court rules on eligibility.
The Debtor concedes that ineligibility requires a finding of “willfulness,” but he argues that such a finding should not be made absent an evidentiary hearing.
Finally, the Debtor contends that BANA cannot “unilaterally vacat[e] the automatic stay absent relief from the court.”
IV. DISCUSSION
A. Standard of Review Under Fed. R.Civ.P. 12(b)(6)
In Ashcroft v. Iqbal, the Supreme Court of the United States set forth the current standard for dismissal under Fed.R.Civ.P. 12(b)(6), made applicable in adversary proceedings by Fed. R. Bankr.P. 7012(b):
To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” ... A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.... The plausibility standard is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully.... Where a complaint pleads facts that are “merely consistent with” a defendant’s liability, it “stops short of the line be*702 tween possibility and plausibility of ‘entitlement to relief.’ ”
Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.... Second, only a complaint that states a plausible claim for relief survives a motion to dismiss.40
The Supreme Court qualified this proclamation, however, explaining that:
Although for the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched as a factual allegation.41
Along these same lines, “the First Circuit has explained that I need not ‘swallow the plaintiffs invective hook, line, and sinker; [and that] bald assertions, unsupportable conclusions, periphrastic circumlocutions, and the like need not be credited.’ ”
B. Applicability of the Automatic Stay
The issue presented by this adversary proceeding is whether the Defendants violated the automatic stay when they foreclosed on the Property post-petition. Generally, 11 U.S.C. § 362 governs the imposition and effects of the automatic stay.
The automatic stay is among the most basic of debtor protections under bankruptcy law. It is intended to give the debtor breathing room by stopping all collection efforts, all harassment, and all foreclosure actions.
The stay springs into being immediately upon the filing of a bankruptcy petition: because the automatic stay is exactly what the name implies — “automatic”—it operates without the necessity for judicial intervention. It remains in force until a federal court either disposes of the case ... or lifts the stay.44
The First Circuit has held that actions taken in violation of the automatic stay are void, which “places the burden of validating the action after the fact squarely on the shoulders of the offending creditor.”
Section 362(b) of the Bankruptcy Code, however, excepts certain acts from the automatic stay. In particular, 11 U.S.C. § 362(b)(21) provides that:
(b) The filing of a petition under section 301, 302, or 303 of this title ... does not operate as a stay — ■
*703 (21) under subsection (a), of any act to enforce any lien against or security interest in real property—
(A) if the debtor is ineligible under section 109(g) to be a debtor in a case under this title.46
Section § 109(g), in turn, provides that:
Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if—
(1) the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case;47
“Although the Bankruptcy Code does not prescribe what constitutes a ‘willful failure’ to abide by orders of the court, the First Circuit infers willfulness from ‘a pattern of failure to abide by court orders.’”
The party moving for dismissal under 11 U.S.C. § 109(g)(1) bears the burden of proving that the debtor willfully failed to comply with a court order or appear before the court.
A finding of willfulness may be made at the time of a dismissal. However, it can also be made in a subsequent case when the bankruptcy court is called up to determine if the earlier dismissal renders the debtor ineligible under [11 U.S.C.] § 109(g) to proceed in the subsequent case.”53
If addressed in a subsequent case, eligibility is theoretically a threshold determination that must be made at the outset of the case.
There is no question that upon filing the present petition, the Debtor effectively commenced a bankruptcy case and invoked the protections of the automatic stay. Nevertheless, if the Debtor was ineligible to file this case as the Defendants say, then the foreclosure would have been excepted from the automatic stay by 11 U.S.C. § 362(b)(21)(A).
Nothing in In re Colon Martinez, however, requires that a court draw an inference of “willfulness from a pattern of failure to abide by court orders.”
Ultimately, the Defendants are not contesting the plausibility of the allegations of the complaint, but instead are requesting an evidentiary ruling that would, despite those allegations, establish an affirmative defense entitling them to judgment as a matter of law. Such an affirmative defense is not appropriately brought as a motion to dismiss under Fed. R.Civ.P. 12(b)(6) and must be denied.
V. CONCLUSION
In light of the foregoing, I will enter an order denying the Motion to Dismiss.
. For purposes of the Motion to Dismiss, the Court must accept as true all allegations contained within the Debtor’s Complaint. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Still, while the parties are in agreement over what occurred, they disagree as to the legal import of those events.
. Case No. 11-10852, Docket No. 1.
. Case No. 11-10852, Docket No. 16.
. Case No. 11-18957, Docket No. 1.
. Case No. 11-18957, Docket No. 13.
. See Notice of Mortgage Foreclosure Sale and Notice of Intention to Foreclosure Mortgage and of Deficiency After Foreclosure of Mortgage, Debtor's Adversarial Proceeding for Violation of Automatic Stay (the "Complaint”), Case No. 12-01081, Docket No. 1, Exhibit "A”.
. See id.
. Complaint ¶ 10.
. Id. at ¶ 12. For a copy of the letter, see Complaint, Exhibit "B”.
. Id. at ¶ 13.
. Id. For a copy of the Debtor’s counsel's phone record with BANA’s counsel, see Complaint, Exhibit "C”.
. Id. at ¶ 14.
. Id.
. Id. at ¶ 15.
. Important Notice to Tenants, Complaint, Exhibit "D”.
. Complaint ¶ 17. For a copy of the online listing of the Property, see Complaint, Exhibit “E”.
. See Complaint.
. Case No. 12-01081, Docket No. 12.
. Case No. 12-01081, Docket No. 20.
. Case No. 12-01081, Docket No. 24.
. Case No. 12-01081, Docket No. 26.
. Motion to Dismiss at 4.
. Id.
. Id.
. Id. (quoting In re Colon Martinez, 472 B.R. 137, 146 (1st Cir. BAP 2012)).
. Id. at 6.
. Id.
. Reply at 4.
. See Opposition at 2.
. Id. at 4.
. Sur Reply at 2.
. Opposition at 4 (citing In re Durham, 461 B.R. 139 (Bankr.D.Mass.2011)).
. See id. (citing In re Williams, No. 1-09-44856-dem, 2010 WL 411108, at *2 (Bankr. E.D.N.Y. Jan. 27, 2010)).
. Id. at 5.
. Id. (citing In re Pappalardo, 109 B.R. 622, 625 (Bankr.S.D.N.Y.1990)).
. Id.
. Id. at 7-8 (citing In re Lundquist, 371 B.R. 183, 190 (Bankr.N.D.Tex.2007)).
. Id. at 8.
. Opposition at 8.
. Ashcroft v. Iqbal, 556 U.S. 662, 678-679, 129 S.Ct 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556-570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)) (citations omitted); see also DiVittorio v. HSBC Bank, USA, N.A. (In re DiVittorio), 430 B.R. 26, 42 (Bankr.D.Mass.2010), subsequently aff'd, 670 F.3d 273 (1st Cir.2012).
. Ashcroft v. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. at 555, 127 S.Ct. 1955) (internal quotations omitted).
. In re DiVittorio, 430 B.R. at 42-43, subsequently aff'd, 670 F.3d 273 (1st Cir.2012) (quoting Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996)).
. 11 U.S.C. § 362.
. Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 975 (1st Cir.1997) (internal citations and quotation marks omitted).
. In re Soares, 107 F.3d at 976 (distinguishing 'void” from "voidable,” and finding that characterizing violations as void "best harmonizes with the nature of the automatic stay and the important purposes it serves”).
. 11 U.S.C. § 362(b)(21)(A).
. 11 U.S.C. § 109(g)(1) (emphasis added).
. In re Colon Martinez, 472 B.R. at 146 (quoting Perez v. Fajardo Fed. Sav. Bank, 116 F.3d 464, No. 96-2116, 1997 WL 330410, at *1 (1st Cir. June 13, 1997)).
. Id. (quoting In re Lee, No. 11-8053, 2012 WL 1324234, at *9-10 (6th Cir. BAP Apr. 18, 2012)).
. In re Pappalardo, 109 B.R. at 625-626; In re Bono, 70 B.R. 339, 342 (Bankr.E.D.N.Y.1987); In re Correa, 58 B.R. 88, 90 (Bankr.N.D.Ill.1986); In re Ellis, 48 B.R. 178, 179 (Bankr.E.D.N.Y.1985); see also In re Fulton, 52 B.R. 627 (Bankr.D.Utah 1985) (finding the debtor's writing down the wrong date for a meeting of creditors under 11 U.S.C. § 341 was merely negligent and did not rise to the level of willfulness under 11 U.S.C. § 109(g)).
. See, e.g., In re King, 126 B.R. 777, 781 (Bankr.N.D.Ill.1991).
. In re Pike, 258 B.R. 876, 882 (Bankr.S.D.Ohio 2001) (citing In re Herrera, 194 B.R. 178, 188 (Bankr.N.D.Ill.1996)).
. Perez v. Fajardo Fed. Sav. Bank, 1997 WL 330410, at *1 (1st Cir.1997) (citing Montgomery v. Ryan (In re Montgomery), 37 F.3d 413, 415 (8th Cir.1994); In re Robinson, 198 B.R. 1017, 1023 n. 8 (Bankr.N.D.Ga.1996)).
. In re Durham, 461 B.R. at 141.
. Id.
. Under such circumstances, neither an evi-dentiary hearing on eligibility nor relief from stay would have been necessary to proceed with the foreclosure. This does not, as the Debtor argues, amount to permitting a creditor to unilaterally annul the automatic stay. A creditor is free to proceed with acts excepted from the stay pursuant to 11 U.S.C. § 362(b) without prior court approval, but is subject to strict liability for any mistakes regarding the applicability of any such exception.
. In re Colon Martinez, 472 B.R. at 146.
. Perez v. Fajardo Fed. Sav. Bank, 1997 WL 330410, at *1 (emphasis added).