Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-06060/USCOURTS-ca8-04-06060-0/pdf.json

Parties Involved:
Homecomings Financial Network
Appellee
Jacqueline P. L'Heureux
Appellant

Document Text:

United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

No. 04-6060EA

In re: *

*

Jacqueline P. L'Heureux, *

*

Debtor. *

*

* Appeal from the United States

Jacqueline P. L'Heureux, * Bankruptcy Court for the 

* Eastern District of Arkansas

Plaintiff - Appellant, *

*

v. *

*

Homecomings Financial Network, Inc., *

*

Defendant - Appellee. *

*

Submitted: January 25, 2005

Filed: February 25, 2005

Before KRESSEL, Chief Judge, DREHER, and MAHONEY, Bankruptcy Judges.

MAHONEY, Bankruptcy Judge.

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The Honorable James G. Mixon, United States Bankruptcy Judge for the

Eastern and Western Districts of Arkansas.

2

This is an appeal from an order of the bankruptcy court1

 dated October 12,

2004, dismissing an adversary proceeding in which the debtor alleged a violation of

the automatic stay of 11 U.S.C. § 362 and asserted actual and punitive damages

resulting from such violation. For the reasons stated below, we affirm.

Jurisdiction

We have jurisdiction pursuant to 28 U.S.C. § 158(b) and (c) to hear this appeal

of a final order issued by the bankruptcy court.

Background

Plaintiff filed a voluntary Chapter 13 bankruptcy petition on August 20, 2001.

On the petition date there was pending a foreclosure sale of the appellant's residence,

scheduled for August 27, 2001. The sale had been scheduled by counsel for

Homecomings Financial Network, a secured creditor with an interest in the residential

real property of the debtor.

On August 21, 2001, counsel for appellant, by written facsimile, notified

appellee Homecomings Financial Network, through its attorney, of the bankruptcy

filing. On August 22, 2001, counsel for appellee e-mailed the auctioneer and sent a

letter to the Circuit Clerk to cancel the sale. 

Notice of the sale had been posted at the county courthouse in White County,

Arkansas, prior to the bankruptcy petition date. Although appellant directly contacted

the office of counsel for the appellee and requested that the notice be removed, it was

not removed until the morning originally scheduled for the sale, August 27, 2001.

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Appellant testified that on August 27, 2001, several members of the public came to

her home to view the home prior to the scheduled sale, and she claims she became

ill over that event. She also testified that one or more members of the public to whom

she spoke on August 27, 2001, at her home specifically stated they saw the public

notice hanging on the wall at the White County Courthouse. 

The appellant filed a complaint containing, among others, paragraphs 7 through

30, which assert various factual matters, including matters totally unrelated to the

failure of the appellee to cause the removal of the foreclosure notice on a timely basis.

At trial, the bankruptcy court limited the issues to be tried to the alleged violation of

the automatic stay as a result of the failure to timely remove the sale notice, and

damages, if any, accruing therefrom.

The appellant testified and presented documentary evidence concerning the

date of the bankruptcy filing, the contacts she had with counsel for appellee with

regard to removal of the foreclosure notice, visits by individuals interested in bidding

at the foreclosure sale, illnesses and emotional distress caused to her and her son as

the result of the failure to remove the foreclosure notice, and the medical expenses

incurred as a result of the illnesses and emotional distress. 

At the close of appellant's case, appellee moved for dismissal on the basis that

the failure to remove the foreclosure notice was not a violation of the automatic stay

of 11 U.S.C. § 362(a) and that the debtor had failed to prove damages resulting from

the failure to remove the foreclosure notice prior to the date originally scheduled for

the sale. The bankruptcy judge granted the motion, and made findings of fact and

conclusions of law orally in open court. He then entered a written order dismissing

the complaint, from which this appeal has been taken.

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Standard of Review

We review the bankruptcy court’s interpretation of the Bankruptcy Code de

novo and its findings of fact for clear error. Official Comm. of Unsecured Creditors

v. Farmland Indus., Inc. (In re Farmland Indus., Inc.), ___ F.3d ___, 2005 WL

310075, at *2 (8th Cir. Feb. 10, 2005); Dove-Nation v. eCast Settlement Corp. (In re

Dove-Nation), 318 B.R. 147, 150 (B.A.P. 8th Cir. 2004); Fed. R. Bankr. P. 8013.

Since the 1991 amendments to the Federal Rules of Civil Procedure, Rule 52(c)

has subsumed the role formerly played by Rule 41. The advisory committee notes to

Rule 41 state that “[a] motion to dismiss under Rule 41 on the ground that a plaintiff’s

evidence is legally insufficient should now be treated as a motion for judgment on

partial findings as provided in Rule 52(c).” When a motion for judgment on partial

findings is granted, the review of that decision focuses on whether the bankruptcy

court’s factual findings were clearly erroneous. Cepelak v. Sears (In re Sears), 246

B.R. 341, 345 (B.A.P. 8th Cir. 2000).

The Sears opinion also notes that two circuits, in unpublished opinions, have

held that the grant or denial of a Rule 52(c) motion after the close of a plaintiff’s case

is discretionary with the trial court, based on the language of the rule. 246 B.R. at 346

n.6 (citing Caterpillar Fin’l Servs. Corp. v. Tincher (In re Tincher), 181 F.3d 104

(table), 1999 WL 266261, at *3 (6th Cir. Apr. 21, 1999) and Sovereign Partners v.

Lascu (In re Sovereign Partners), 110 F.3d 70 (table), 1997 WL 160279, at *3-4 (9th

Cir. Apr. 4, 1997)). A court may even render a judgment under Rule 52(c) sua sponte,

without the defendant having moved for such, if the plaintiff fails to establish a prima

facie case. In re Anthem Communities/RBG, L.L.C., 267 B.R. 867, 876-77 (Bankr.

D. Colo. 2001) (citing Legnani v. Alitalia Linee Aeree Italiane, S.P.A., 173 F.3d 845

(table), 1999 WL 132178 (2nd Cir. Mar. 9, 1999) (unpublished decision)).

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That section states: 

(a) Except as provided in subsection (b) of this section, a petition

filed under section 301, 302, or 303 of this title, or an application filed

under section 5(a)(3) of the Securities Investor Protection Act of 1970,

operates as a stay, applicable to all entities, of — 

(1) the commencement of continuation, including the

issuance or employment of process, of a judicial, administrative,

or other action or proceeding against the debtor that was or could

have been commenced before the commencement of the case

under this title, or to recover a claim against the debtor that arose

before the commencement of the case under this title[.]

5

Discussion

The bankruptcy judge determined that the failure to remove the notice of sale,

following the cancellation of the sale, for a few days after the petition date, was not

a stay violation and even if it technically was a stay violation, it was not willful. Such

a finding is a conclusion of law which we review de novo. We believe such a finding

is a correct statement of the law. The automatic stay of 11 U.S.C. § 362(a) generally

prohibits continuation of a judicial, administrative, or other action that commenced

before the commencement of the case. Although nowhere in the complaint can the

specific subsection of Section 362(a) which was allegedly violated be found, the

most logical provision is Section 362(a)(1).2

 

There is case law to the effect that a non-debtor party involved in such action

or proceeding, upon receiving notice of a bankruptcy filing, must take affirmative

action to make certain that the proceeding is stopped. However, we have found no

case law that requires the creditor in a foreclosure proceeding to remove a notice of

sale which has been cancelled. The case law, including Knaus v. Concordia Lumber

Co., Inc. (In re Knaus), 889 F.2d 773 (8th Cir. 1989) (creditor’s failure to turn over

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assets seized prepetition violated automatic stay); Johnson v. Credit Acceptance

Corp., 165 F. Supp. 2d 923 (D. Minn. 2001) (creditor who engages in self-help

repossession without relief from stay violates § 362); In re Hampton, 319 B.R. 163

(Bankr. E.D. Ark. 2005) (interference with debtor’s use of vehicle post-petition

constitutes exercise of control over estate property in violation of automatic stay); In

re See, 301 B.R. 549 (Bankr. N.D. Iowa 2003) (post-petition garnishment violates

automatic stay), concerns the obligation of the creditor to stop any and all activity

which affects the debtor or property of the debtor, or which permits the continuation

of the litigation concerning the collection of a prepetition debt. In this case, however,

it is clear from the testimony of a witness from the office of counsel for the

foreclosing creditor, a witness presented by the appellee, that upon receiving notice

of the bankruptcy petition, the sale was cancelled, and, in fact, did not occur. The

failure to remove the notice of sale is not similar to the actions or failure to act which

the courts referred to above have found to involve violations of the automatic stay.

In the alternative, the bankruptcy judge found that even if there was an

affirmative duty to remove the foreclosure notice, the debtor failed to prove damages

directly related to such failure to remove the notice. Such a determination is a finding

of fact which will not be set aside by an appellate court unless clearly erroneous.

Emotional distress damages for automatic stay violations are available if the

individual debtor puts on clear evidence establishing that significant harm occurred

as a result of the violation. Dawson v. Washington Mut. Bank (In re Dawson), 390

F.3d 1139, 1148-49 (9th Cir. 2004); Jackson v. Dan Holiday Furniture, L.L.C. (In re

Jackson), 309 B.R. 33 (Bankr. W.D. Mo. 2004). The evidence of illness, emotional

distress and medical expenses is voluminous. However, the bankruptcy judge, in

evaluating such evidence, determined that it was not related to the six-day delay in

failing to remove the foreclosure notice. Such a finding is not clearly erroneous. 

The granting of a motion to dismiss at the end of the plaintiff's case is

procedurally authorized by Federal Rule of Civil Procedure 52 and incorporated into

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Federal Rule of Bankruptcy Procedure 7052. Here, at the end of appellant's evidence,

appellee orally moved for a judgment of dismissal. The court found that the plaintiff

had been fully heard on the issue of whether there had been a violation of the

automatic stay for failure to remove the foreclosure notice and on damages related

thereto. Ruling on the motion, the court entered judgment against the appellant and

supported such judgment both orally and in writing by findings of fact and

conclusions of law. The procedure authorized by Rule 52 was properly followed.

Conclusion

The bankruptcy judge correctly determined, as a matter of law, that the appellee

had no affirmative duty to remove the foreclosure notice and that such failure to

remove the notice was not a violation of the automatic stay. The bankruptcy judge

further concluded as a fact that the damages asserted by the plaintiff did not result

from the failure to remove the foreclosure notice. Such a finding of fact is not clearly

erroneous.

Based upon the above findings, we affirm.

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