Aquanetta Anderson

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
AQUANETTA ANDERSON,
Debtor.
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)
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Case No. 05-02389
(Chapter 13)
SUPPLEMENTAL OPINION REGARDING ANNULMENT OF AUTOMATIC STAY
This supplements the court’s oral decisions of January 5,
2006, and January 20, 2006, regarding the Motion Seeking
Annulment of Automatic Stay and Co-Debtor Stay or for a
Determination That No Stay Exists filed by GRP Realty, LLC
(“GRP”). Claiming that through a foreclosure sale it owns the
residence occupied by the debtor and her husband, GRP has been
attempting to evict them pursuant to an action in the Superior
Court of the District of Columbia. By its motion GRP seeks to
keep in place a ruling in its favor by the Superior Court and a
writ of possession, which were both issued after Mrs. Anderson
filed the petition commencing this bankruptcy case.
The opinion below is hereby signed. Dated: February
6, 2006.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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I
The co-debtor stay of 11 U.S.C. § 1301 does not apply in
this case. GRP is not attempting to enforce a claim against the
debtor for which a co-debtor is also liable. Instead, GRP is
attempting to evict Mrs. Anderson and her husband, Ronald
Anderson, from real property on the basis of GRP’s asserted
ownership of the real property. That is not a “claim” as defined
in 11 U.S.C. § 101(5) and thus § 1301 does not apply. Even if
the co-debtor stay did apply, the grounds for annulling the
automatic stay of 11 U.S.C. § 1301 would justify annulling the
co-debtor stay. See In re Allen, 300 B.R. 105, 122 (Bankr.
D.D.C. 2003), aff’d sub nom. Allen v. Wells Fargo Bank Minn.,
N.A., 2005 WL 3370432 (D.D.C. Dec. 13, 2005).
II
One factor weighing in favor of annulling the automatic stay
is Mrs. Anderson’s bad faith. See In re Soares, 107 F.3d 969,
977 (1st Cir. 1997) (“[D]ebtors who act in bad faith may create
situations that are ripe for retroactive relief.”); In re
Kissinger, 72 F.3d 107, 109 (9th Cir. 1995); Sonnax Indus., Inc.
v. Tri Component Products Corp., 907 F.2d 1280, 1286 (2d Cir.
1990).
A.
Mrs. Anderson was ineligible to be a debtor in this case
because she filed the petition commencing the case without having
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“received from an approved nonprofit budget and credit counseling
agency described in section 111(a) an individual or group
briefing . . . that outlined the opportunities for available
credit counseling and assisted such individual in performing a
related budget analysis” as required by 11 U.S.C. § 109(h)(1).
Cynthia A. Niklas, the chapter 13 trustee, moved to dismiss the
case based on the debtor’s ineligibility to file the case. In an
effort to defeat the trustee’s motion to dismiss, Mrs. Anderson
submitted false evidence purporting to establish that she had
obtained credit counseling and a budget analysis prior to the
commencement of the case.
B.
In addition, it is apparent that Mrs. Anderson's motivation
in filing her bankruptcy petition was not to advance a legitimate
bankruptcy purpose, but instead was to defeat the rights that GRP
was pursuing in the eviction proceeding against her and Mr.
Anderson in the Superior Court of the District of Columbia. She
filed her bankruptcy petition on the same day as--and sometime
after--the hearing on GRP’s motion for summary judgment in the
Superior Court. That was too close in time to be just a
coincidence, particularly given the Andersons’ long history of
delaying GRP in obtaining possession of the property, including
through Mr. Anderson’s prior bankruptcy filing. Significantly,
the Andersons had already unsuccessfully opposed GRP’s motion
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1 GRP’s rights arose from a foreclosure sale, not pursuant
to a lease, so there was no right to cure defaults under a lease
under 11 U.S.C. § 365. The Andersons’ defenses to eviction
challenge either the foreclosure sale, which preceded the filing
of Mr. Anderson’s case, or the propriety of GRP’s being found to
have rights pursuant to that sale, defenses that arise under non-
bankruptcy law and that are not enhanced by the intervention of
bankruptcy.
4
filed in Mr. Anderson’s case to obtain relief from the automatic
stay to permit GRP to pursue the eviction proceeding in the
Superior Court. This court determined in Mr. Anderson’s
bankruptcy case that there was no bankruptcy reason to stay the
Superior Court litigation from going forward to adjudicate GRP’s
asserted right to (and the Andersons’ defenses against) eviction.
Nothing about Mrs. Anderson’s new case has presented any reason
to keep in place a stay of the eviction proceeding in the
Superior Court. This bankruptcy case could not enhance Mrs.
Anderson’s non-bankruptcy law defenses to eviction.1 What she
gained was the benefit of the automatic stay (when it served no
legitimate bankruptcy purpose) and another opportunity to ask
this court to address her non-bankruptcy law defenses to
eviction, which this court had already refused to address in Mr.
Anderson’s case and which, upon the filing of Mrs. Anderson’s new
case, were much closer to resolution in the Superior Court than
they had been when relief from the stay was granted in Mr.
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2 The court notes that there may have been yet a third
bankruptcy filing to frustrate GRP’s eviction remedy. On January
22, 2006–-two days after the court issued its oral decision
ruling in GRP’s favor on January 20, 2006--Rosemary McCray filed
a petition in this court commencing a case under chapter 13 of
the Bankruptcy Code, Case No. 06-00017. On her petition, Ms.
McCray indicated that she is a “co-owner of property and
occupant” at the address that is the Andersons’ residence, and
GRP has filed a motion for relief from the automatic stay in that
case. The court has not taken that new filing into account in
deciding this matter as it was obviously not part of the
evidentiary record.
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Anderson’s case.2
C.
A third instance of bad faith occurred when Mrs. Anderson
presented false testimony at the initial hearing on GRP’s motion
to annul the automatic stay that she had notified GRP’s counsel
of the pendency of the bankruptcy case prior to the issuance of
the writ of attachment. In fact, Anderson gave no such notice to
the counsel who was representing GRP in the Superior Court
litigation, and that counsel had no notice or actual knowledge of
this bankruptcy case prior to the issuance of the writ.
III
Seldom if ever will a court annul the automatic stay when a
creditor has actual knowledge of a bankruptcy case and undertakes
an act that it knows violates the automatic stay despite such
knowledge, but that situation is not present here. Although the
Bankruptcy Noticing Center of the United States Courts mailed
notice of the bankruptcy case to GRP in New York on November 12,
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3 Not until the hearing on GRP’s motion for annulment did
Mrs. Anderson produce an unrecorded instrument in which Mr.
Anderson purportedly conveyed to her an interest in the real
property. Mrs. Anderson had no dower interest in the real
property when it was sold at foreclosure. See D.C. Code § 19-
102; In re Lawson, 333 B.R. 105 (Bankr. D.D.C. 2005).
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2005, Mrs. Anderson did not point to that notice at the initial
hearing of GRP’s motion, with the result that after that hearing
the issue left for resolution at the final hearing was whether
counsel for GRP was given notice of the bankruptcy case prior to
the issuance of the writ.
Even if the issues are expanded to address the notice mailed
to GRP itself, that notice to GRP did not mention Ronald
Anderson, who was the only obligor on the debt that had given
rise to the foreclosure sale, and who had been the only owner of
record of the real property when it was sold at foreclosure.3
Further, the notice did not make mention of the pending eviction
proceeding. Mrs. Anderson has failed to introduce evidence to
demonstrate, and has failed to explain, how GRP could reasonably
be expected to be able to ascertain that Mrs. Anderson was the
subject of an eviction proceeding arising from a foreclosure sale
enforcing an obligation of Ronald Anderson.
In any event, even if GRP had some way of ascertaining what
connection, if any, it had to Mrs. Anderson, it would not have
received the notice mailed on November 12, 2005, in sufficient
time to have been reasonably expected to ascertain that
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litigation brought by it was pending in Washington, D.C.,
regarding Mrs. Anderson and to notify its counsel in Leesburg,
Virginia, of the notice in sufficient time for counsel to take
steps to file papers to withdraw the request for issuance of the
writ prior to its issuance on November 16, 2005. Mrs. Anderson
was well aware that GRP’s counsel in Leesburg, Virginia, was
handling the Superior Court eviction proceeding and ought to have
taken steps to assure that such counsel received notice, but
failed to do so, and she has only herself to blame for his not
learning of the case in time for him to withdraw the request for
issuance of the writ.
V
Even if Mrs. Anderson had been eligible to be a debtor in
this bankruptcy case, no bankruptcy purpose would be served by
staying GRP from pursuing eviction in the Superior Court.
Accordingly, it would make no sense to keep the automatic stay or
the co-debtor stay in place on a prospective basis as to the writ
even if this case were not being dismissed as barred by § 109(h).
Annulling the automatic stay retroactively is a form of
relief not as readily granted as prospective relief from the
stay. Soares, 107 F.3d at 977 (“strict standard” must be applied
to a motion to annul the stay). However, because no meaningful
bankruptcy purpose would be served by failing to annul the stay
(and by thus rendering the writ of possession void as in
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violation of the stay), and because GRP’s counsel was not aware
that this bankruptcy case was filed prior to the issuance of the
writ, it is appropriate to annul the stay to keep the writ in
place. “Bankruptcy courts have the power to annul an automatic
stay retroactively for cause pursuant to 11 U.S.C. § 362(d)(1) in
order to rehabilitate stay violations.” Bunch v. Hoffinger
Indus. (In re Hoffinger Indus.), 329 F.3d 948, 951-52 (8th Cir.
2003) (citing In re Siciliano, 13 F.3d 748, 751 (3d Cir. 1994)).
The circumstances here fully justify annulling the stays. See
Mutual Benefit Life Insur. Co. v. Pinetree, Ltd. (In re Pinetree,
Ltd.), 876 F.2d 34 (5th Cir. 1989) (mortgagee proceeded to
foreclose not knowing that the debtor had filed a bankruptcy
case, in circumstances in which a lifting of the automatic stay
would have been appropriate, and the court of appeals–-noting
that “[f]urther redundancy and delay would needlessly result”--
directed the bankruptcy court to annul the automatic stay);
Albany Partners, Ltd. v. Westbrook (In re Albany Partners, Ltd.),
749 F.2d 670, 675-76 (11th Cir.1984) (stay annulled where
petition was filed in bad faith and the mortgagee had reason to
believe that the property was not part of the bankruptcy estate).
Although motions for annulment of the automatic stay must be
addressed on a case by case basis, such that the court should
eschew adopting a set of factors that must be present for
annulment to be granted, it is useful to note that relevant
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factors to consider in addressing annulment of the automatic stay
include:
(1) if the creditor had actual or constructive
knowledge of the bankruptcy filing and, therefore, of
the stay, (2) if the debtor has acted in bad faith, (3)
if there was equity in the property of the estate, (4)
if the property was necessary for an effective
reorganization, (5) if grounds for relief from the stay
existed and a motion, if filed, would likely have been
granted prior to the automatic stay violation, (6) if
failure to grant retroactive relief would cause
unnecessary expense to the creditor, and (7) if the
creditor has detrimentally changed its position on the
basis of the action taken.
In re Stockwell, 262 B.R. 275, 281 (Bankr. D. Vt. 2001) (citing
In re Lett, 238 B.R. 167, 195 (Bankr. W.D. Mo. 1999)). Other
than the seventh factor, which is not present, the factors weigh
here in favor of annulling the automatic stay: GRP was not on
adequate notice of the bankruptcy case; Mrs. Anderson has acted
in bad faith; GRP claims a right to eviction based only on the
Superior Court’s upholding its claim of ownership, and that
ownership (the predicate to GRP’s pursuing eviction) necessarily
will mean that there is no equity for the bankruptcy estate in
the property and that the property is not estate property
necessary for an effective reorganization; relief from the stay
would have been granted had a motion for such relief had been
heard before the writ issued (and, indeed a similar motion had
already been granted in Mr. Anderson’s case); and requiring GRP
to incur attorney’s fees anew in pursuing issuance of a new writ
would impose an unnecessary expense on GRP. The evidence weighs
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4 Accord, In re McKay, 268 B.R. 908, 911 (Bankr. W.D. Va.
2001); In re Walker, 171 B.R. 197, 202 (Bankr. E.D. Pa. 1994); In
re Prud'homme, 161 B.R. 747, 751 (Bankr. E.D.N.Y. 1993); Miller
v. First Fed. Sav. and Loan Ass'n of Monessen (In re Miller), 143
B.R. 815, 820 (Bankr. W.D. Pa. 1992). Cf. Casse v. Key Bank
Nat'l Ass'n (In re Casse), 198 F.3d 327 (2d Cir. 1999) (two-year
bar against refiling barred automatic stay from arising:
alternative holding to annulling stay if one did arise); Rowe v.
Ocwen Fed. Bank & Trust (In re Rowe), 220 B.R. 591 (E.D. Tex.
1997) (similar alternative holding), aff’d, 178 F.3d 1290 (5th
Cir. 1999). But see In re Flores, 291 B.R. 44 (Bankr. S.D.N.Y.
2003).
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clearly and heavily in favor of annulling the automatic stay.
VI
Mrs. Anderson was not eligible to be a debtor in this case
as she had not complied with 11 U.S.C. § 109(h). Because
annulment of any stay that arose in this case is appropriate, the
court need not decide whether under In re Hollberg, 208 B.R. 755
(Bankr. D.D.C. 1997) (case barred by 11 U.S.C. § 109(g) did not
give rise to automatic stay),4 Mrs. Anderson’s ineligibility to
be a debtor under 11 U.S.C. § 109(h) resulted in no stay having
arisen in this case, or whether instead Hollberg and similar
decisions are no longer good law in light of 11 U.S.C. §
362(b)(21), a provision which the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (“BAPCPA”) added to the
Bankruptcy Code (effective as to cases filed on or after October
17, 2005), and which arguably treats a barred case as
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5 Section 362(b)(21) excepts from the automatic stay of §
362(a):
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; or
(B) if the case under this title was
filed in violation of a bankruptcy court
order in a prior case under this title
prohibiting the debtor from being a debtor in
another case under this title[.]
6 Both Mr. and Mrs. Anderson filed the opposition to GRP's
motion, and Mr. Anderson's case is still pending in this court.
7 It is uncertain whether any exceptions in § 362(b) to the
automatic stay of § 362(a) would apply in favor of GRP in such a
future case: GRP does not appear to have a lease with the
Andersons (see § 362(b)(22)) and it arguably is not proceeding to
enforce a lien on real property (see § 362(b)(20) and (21)) but
instead an eviction based on its ownership of the property.
Nothing in the BAPCPA suggests that Congress intended to
eliminate a bankruptcy court’s power under 11 U.S.C. § 105 to
issue, when necessary and appropriate, an order precluding an
automatic stay from arising in a subsequent case. That it
effectively codified such protective orders in 11 U.S.C. §
362(b)(20) and (21) in some instances in the case of real estate
lien foreclosures does not demonstrate that it intended to
deprive a bankruptcy judge of crafting such protective orders
when warranted in other circumstances. If anything, BAPCPA
suggests an intention that bankruptcy cases not be used as an
instrument of abuse.
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nevertheless giving rise to an automatic stay.5
However, if necessary to prevent an abuse of the bankruptcy
system, the court has the inherent authority to preclude any
future petition filed by or against Mrs. Anderson or Mr. Anderson
(who is a party to this contest)6 from giving rise to an
automatic stay or co-debtor stay.7 The circumstances present a
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12	O:\JUDGTEMP\Anderson (Aquanetta) Decsn re Annulment of Stay v5 (adds no stay future case by d).wpd
case of abuse in which such relief is appropriate. The court
will direct that any bankruptcy petition filed by or against Mr.
or Mrs. Anderson within the next 365 days shall not give rise to
an automatic stay or co-debtor stay against GRP's eviction
efforts.
VII
An order follows.
[Signed and dated above.]
Copies to: James E. Clarke; Steve Kushnir; debtor; Ronald
Anderson (same address as debtor); Office of U.S. Trustee;
Cynthia A. Niklas, chapter 13 trustee.
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