Richard L Olejnik

1
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------X
In re:
Richard L. Olejnik, 	Case No. 09-76714-AST
Chapter 13
Debtor.
--------------------------------------------------------X
DECISION AND ORDER GRANTING MOTION TO REOPEN CASE
Pending before the Court is a motion (the “Motion”) filed on June 17, 2010, by HIH No.
1, LLC (“HIH”), seeking to both reopen this bankruptcy case under Section 350(b) of the
Bankruptcy Code
Issues Before the Court and Summary of Ruling
1 and to obtain relief from the automatic stay pursuant to Section 362 of the
Bankruptcy Code, nunc pro tunc, to validate HIH’s postpetition foreclosure sale of certain real
property.2
At the Hearing, Debtor opposed the Motion and alleged, inter alia, that cause has not
been shown to reopen the case or to grant stay relief. The Court established July 30, 2010, as a
deadline for the submission of responsive papers, and August 6, 2010, as a deadline for the
submission of reply papers. Debtor timely filed an Affirmation in Opposition on July 30, 2010
(“Opposition”). [dkt item 24] HIH timely filed a reply declaration on August 6, 2010 (“Reply”).
[dkt item 25]
[dkt item 22] On July 20, 2010, the Court held a hearing on the Motion (the
“Hearing”), wherein counsel for Richard L. Olejnik (the “Debtor”) and counsel for HIH
appeared.
1 All references to the Bankruptcy Code are to Title 11 of the United States Code.
2 The property is located at 107 Margaretta Avenue, Massapequa, New York 11758 (the “Real Property”). The
Motion was filed twice, as two separate docket items. Docket item 22 is listed as a motion to reopen the case and
docket item 23 as a motion to grant relief from the stay. Because the items are identical, the Court will treat them as
a single motion, making references only to docket item 22.
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25

2
For the reasons set forth herein, the Court concludes that the case should be reopened for
cause, and a submission schedule set to determine the request for relief from the automatic stay.
This Court has jurisdiction over this core proceeding pursuant to 28 U.S.C.
§§157(b)(2)(A) and (G), and 1334(b), and the Standing Order of Reference in effect in the
Eastern District of New York.
Jurisdiction
The material facts relevant to this decision are not controverted.
Facts and Background
The Note, the Mortgage, and the Foreclosure
On May 10, 2007, Joseph Ferrara, Jr., as borrower (the “Mortgagor”), executed a note
(the “Note”) and accompanying mortgage (the “Mortgage”) in favor of Mortgage Electronic
Registration Systems, Inc. (“MERS”) as nominee of HTFC Corporation, NY (“HTFC”) in the
original amount of $632,000.00. [dkt items 22-2, 22-3] These documents were recorded with the
Nassau County Clerk (the “Clerk”) on July 19, 2007. The Mortgage created a lien against the
Real Property in favor of the holder of the Note and Mortgage, to secure the repayment of the
Note.
On October 2, 2007, MERS, as nominee of HTFC, assigned its interests in the Note and
Mortgage to GMAC Mortgage, LLC (“GMAC”). The assignment was recorded with the Clerk
on October 17, 2007. [dkt item 22-4]
In September 2007, GMAC commenced an action in the Supreme Court of the State of
New York, Nassau County (the “State Court”) seeking to foreclose under the Mortgage (the
“Foreclosure Action”). The State Court appointed Frank Doddato, Esq. to act as referee (the
“Referee”) in the Foreclosure Action.
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25

3
On June 10, 2008, following the Mortgagor’s failure to appear in the Foreclosure Action,
the State Court entered a Judgment of Foreclosure and Sale of the Real Property (the
“Judgment”).3
On November 14, 2008, before the occurrence of a foreclosure sale, GMAC assigned its
interests in the Note and Mortgage to HIH. The assignment was recorded with the Clerk on
December 2, 2008. [dkt item 22-5]
On April 29, 2009, the State Court entered an order substituting HIH as the real party-in-
interest for GMAC in the Foreclosure Action.
On September 15, 2009, the Referee filed a Notice of Foreclosure and Sale with the
Clerk, pursuant to the Judgment. The Referee proceeded to sell the Real Property. HIH was the
successful bidder.
On September 29, 2009, the Referee executed a deed for the benefit of HIH (the
“Referee’s Deed”) in consideration of the foreclosure bid amount of $275,000.00. The deed was
then recorded with the Clerk on November 10, 2009. [dkt item 22-6]
On July 1, 2008, prior to the foreclosure sale but after entry of the Judgment, the
Mortgagor transferred tax lot 18, consisting of a portion of the Real Property, to Richard L.
Olejnik, the Debtor herein (the “First Transfer”). However, the deed was not recorded with the
Clerk until September 24, 2009.
This Bankruptcy Case
On September 8, 2009, Debtor filed a voluntary petition under Chapter 13 of the
Bankruptcy Code. [dkt item 1] In the few documents that were filed with the petition, Debtor
neither disclosed any interest in the Real Property nor listed either HIH or any other predecessor-
3 The Judgment was filed as part of a previous motion that was denied for failure to comply with formal
requirements. [dkt items 19-21] The Judgment was not filed with the present Motion, but its existence and potential
effect are not controverted.
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25

4
owner of the Note or Mortgage as a creditor. Debtor also failed to file all of the statements,
schedules, and declarations required by Section 521 of the Bankruptcy Code, and the Clerk’s
Office sent notices of these deficiencies. [dkt items 3, 9] These notices informed Debtor that
failure to file the required documents would subject this case to automatic dismissal.
Debtor failed to cure the deficiencies. Thus, on October 26, 2009, this case was
automatically dismissed under Section 521(i)(1) of the Bankruptcy Code. [dkt item 14] On
November 20, 2009, this case was closed.
On November 30, 2009, after the foreclosure sale and after dismissal of the case, Debtor
reconveyed a 50% interest in tax lot 18 to the Mortgagor (the “Second Transfer”).
The State Court Eviction Action
On January 4, 2010, HIH commenced a holdover summary proceeding (the “Summary
Proceeding”) with the District Court of Nassau County, seeking to obtain a Judgment of
Possession and Warrant of Eviction against the occupants of the Real Property.
On January 26, 2010, Debtor filed a motion in the Foreclosure Action seeking, inter alia,
that the Referee’s Deed be vacated and declared a nullity on the ground that Debtor was entitled
to the protections of the automatic stay pursuant to Section 362 of the Code at the time the
foreclosure sale was held. Debtor relied on the fact that the Referee’s Deed was executed during
the pendency of this bankruptcy case. The State Court entered an order adjourning Debtor’s
motion to vacate the Referee’s Deed pending a decision by this Court on the present Motion.
The Present Motion
The Motion requests that this Court reopen this case, grant relief from the automatic stay,
nunc pro tunc so as to validate the foreclosure sale, and grant any other relief the Court may
deem just and proper. [dkt items 22] HIH alleges that little or no consideration was exchanged in
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25

5
either the First Transfer or the Second Transfer, and that when the foreclosure sale was
conducted, it had no knowledge of the First Transfer. [dkt item 22] Debtor claims he purchased
an interest in the Real Property for investment purposes, and that he tried to enter into a short-
sale deal which did not materialize. [dkt item 24]
The parties dispute whether HIH was aware of the pendency of this bankruptcy case.
HIH states that it was unaware of the case until December 29, 2009, two months after this case
was dismissed. [dkt item 22]
Section 350(b) of the Bankruptcy Code provides that “[a] case may be reopened in the
court in which such case was closed to administer assets, to accord relief to the debtor, or for
other cause.” 11 U.S.C. § 350(b). This Section immediately follows Section 350(a), which
provides that a case shall be closed “[a]fter an estate is fully administered and the court has
discharged the trustee[.]” 11 U.S.C. § 350(a).
Analysis
Courts in this and other districts have held that Section 350(b) of the Bankruptcy Code
should not be read independently of Section 350(a). Stated otherwise, Section 350(b) permits
reopening only of those cases that were properly closed under Section 350(a). See In re Wassah,
417 B.R. 175, 182 (Bankr. E.D.N.Y. 2009); see also Critical Care Support Servs. v. United
States (In re Critical Care Support Servs.), 236 B.R. 137, 140-41 (E.D.N.Y. 1999) (holding that
a bankruptcy case may be reopened pursuant to § 350(b) only if it was originally closed pursuant
to § 350(a), after the estate was fully administered); Armel Laminates, Inc. v. Lomas & Nettleton
Co. (In re Income Prop. Builders, Inc.), 699 F.2d 963, 965 (9th Cir. 1982) (per curiam) (“The
word ‘reopened’ used in Section 350(b) obviously relates to the word ‘closed’ used in the same
section.”).
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25

6
The closing of a case under Section 350(a) and dismissal of a case are two distinct events.
Section 350(a) expressly provides for closing a case after the estate has been fully administered
and the case trustee has been discharged. At that stage, the debtor’s dischargeable prebankruptcy
debts have usually been discharged, the debtor’s nonexempt assets have been dedicated to
payment of creditors, and the debtor has received a fresh start. See Armel Laminates, 699 F.2d at
965. Upon dismissal, on the other hand, property of the estate generally reverts to the debtor
under circumstances that existed pre-filing, and no debts are discharged. See 11 U.S.C. § 349;
see also In re Kent Funding Corp., 290 B.R. 471 (Bankr. E.D.N.Y. 2003) (“Dismissal of a case
under § 349(b) of the Bankruptcy Code is an event distinct from closure of a case.”); Critical
Care, 236 B.R. at 140-41 (citing Armel Laminates, 699 F.2d at 965).
This case was automatically dismissed pursuant to Section 521(i)(1) of the Bankruptcy
Code and not closed pursuant to Section 350(a). Accordingly, this case may not be reopened
under Section 350(b).
This Court, therefore, considers and treats the Motion as a motion for relief from a
judgment or order under Rule 60 of the Federal Rules of Civil Procedure, which is incorporated
by Rule 9024 of the Federal Rules of Bankruptcy Procedure. See FED. R. C IV. P. 60; FED. R.
BANKR . P. 9024.
Rule 60(b) provides:
On 	motion 	and 	just 	terms, 	the 	court 	may relieve 	a 	party or 	its 	legal
representative from a final judgment, order, or proceeding for the following
reasons: (1) mistake, inadvertence, surprise, or excusable neglect; . . . (3) fraud
(whether 	previously 	called 	intrinsic 	or 	extrinsic), 	misrepresentation, 	or
misconduct by an opposing party; . . . or (6) any other reason that justifies
relief.
FED. R. C IV. P. 60(b). Rule 60(c) provides that “[a] motion under Rule 60(b) must be
made within a reasonable time—and for reasons (1), (2), and (3) no more than a year
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25

7
after the entry of the judgment or order or the date of the proceeding.”4
Timeliness
FED. R. C IV. P.
60(c). In determining timeliness of a motion brought pursuant to Rule 60(b), courts
look at the particular circumstances of the case, and balance the interests in finality of a
judgment with the reasons for any delay. Grace v. Bank Leumi Trust Co. of N.Y., 443
F.3d 180, 190 n.8 (2d Cir. 2006) (citing Kotlicky v. U.S. Fid. & Guar. Co., 817 F.2d 6, 9
(2d Cir. 1987)). Courts generally require a movant to “show good cause for the failure
to act sooner.” Kotlicky, 817 F.2d at 9 (citing Kontoulas v. A.H. Robins Co., 745 F.2d
312, 316 (4th Cir. 1984)).
This Court will first address timeliness. The Motion was filed less than seven months
after the case was closed and less than five months after Debtor challenged the propriety of the
foreclosure sale in state court. The Real Property was not listed in Debtor’s bankruptcy filings.
HIH and its predecessors-in-title were not listed as creditors. The deed conveying an interest in
the Real Property to Debtor was not recorded until September 24, 2009, five days prior to the
foreclosure sale. Debtor provided no written evidence that he put HIH on notice of this case or
his interest in the Real Property prior to the foreclosure sale.
Based on HIH’s apparent lack of knowledge of Debtor’s interest in the Real Property and
this case prior to the foreclosure sale, and the relatively short period between the closing of this
case and the filing of this Motion to Reopen it, the Court finds that the Motion was timely.
Grounds for Relief from the Dismissal Order
This Court next addresses Rule 60(b)(3) and authority thereunder to grant relief from a
judgment for fraud, misrepresentation, and misconduct. Rule 60(b)(3) is remedial and should be
4 Reason (1) being mistake, inadvertence, surprise, or excusable neglect; (2) is newly discovered evidence; and (3) is
fraud, misrepresentation, or misconduct by an opposing party. FED. R. C IV. P. 60(b).
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25

8
construed liberally. Rozier v. Ford Motor Co., 573 F.2d 1332, 1346 (5th Cir. 1978) (citing
Atchison, Toreka & Santa Fe Ry. Co. v. Barrett, 246 F.2d 846, 849 (9th Cir. 1957)). “One who
asserts that an adverse party has obtained a verdict through fraud, misrepresentation or other
misconduct has the burden of proving the assertion by clear and convincing evidence. The
conduct complained of must be such as prevented the losing party from fully and fairly
presenting his case or defense.” Id. (citations omitted).
Here, Debtor acquired an interest in the Real Property after the Judgment had been
signed. Debtor failed to disclose any interest in the Real Property and did not list HIH as a
creditor despite HIH having become the real party in interest under the Judgment. Debtor did
not list MERS, HTFC, or GMAC, the prior holders of the Note and Mortgage, as creditors. “A
long standing tenet of bankruptcy law requires that one seeking its benefits satisfy a companion
duty to schedule all his interests and property rights.” In re Lowery, 398 B.R. 512, 515 (Bankr.
E.D.N.Y. 2008) (citing Hannan v. Charness (In re Hannan), 127 F.2d 894 (7th Cir. 1942)). In
this case Debtor did not comply with this duty.
Courts have broad discretion in determining whether to grant relief under Rule 60(b).
See Critical Care, 236 B.R. at 141-42 (citing Branum v. Clark, 927 F.2d 698, 704 (2d Cir.
1991)). In deciding the issue, a court should balance the policy in favor of finality against the
policy of hearing the underlying motion on the merits. Kotlicky, 817 F.2d at 9.
Here, HIH has shown good cause to reopen this case under Rule 60(b)(3) so that this
Court can hear the request for stay relief. Debtor misrepresented his assets and creditors and
failed to file his mandatory disclosure documents, showing complete disregard for his
obligations as a debtor under the Bankruptcy Code, which led to the dismissal of this case.
Further, in the Second Circuit, a foreclosure sale held in violation of the stay is generally void,
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25

9
even if the violation is unknowing. In re Bresler, 119 B.R. 400, 402 (Bankr. E.D.N.Y. 1990) (“A
foreclosure sale conducted after the commencement of the Bankruptcy Case violates the
automatic stay. This is true even if the party conducting the sale has no notice or knowledge that
a petition in bankruptcy has been filed.”); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522,
527 (2d Cir. 1994) (citing 48th St. Steakhouse, Inc. v. Rockefeller Group, Inc. (In re 48th St.
Steakhouse, Inc.), 835 F.2d 427, 431 (2d Cir 1987)) (“[A]ny proceedings or actions described in
section 362(a)(1) are void and without vitality if they occur after the automatic stay takes
effect.”).
If the Referee conducted the foreclosure sale and executed the deed to HIH at a time
when HIH had no knowledge of this case, it would be inequitable to allow the foreclosure sale
and deed to be void, and thereby reward Debtor for his misconduct and punish HIH for its
unknowing violations. This Court can remedy such a wrong by granting retroactive stay relief to
validate a foreclosure sale held in an unknowing violation of the stay, Bresler, 119 B.R. at 403-
04, but this case would first have to be reopened to do so. Alternatively, if HIH allowed a
foreclosure sale to be conducted in knowing violation of the stay, that conduct should also be
properly addressed by this Court.
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25

10
For the reasons stated herein, the Motion is hereby granted in part. This case is to be
reopened, for the limited purpose of considering the request for stay relief nunc pro tunc. The
parties shall have fourteen (14) days following entry of this Order to submit any further
pleadings and affidavits in connection with the request for stay relief. Thereafter, the request for
nunc pro tunc stay relief shall be on submission with the Court.
Conclusion and Order
SO ORDERED.
____________________________
Alan S. Trust
United States Bankruptcy Judge
Dated: October 28, 2010
Central Islip, New York
Case 8-09-76714-ast Doc 27 Filed 10/28/10 Entered 10/28/10 17:42:25