Soares v. Brockton Credit, 1st Cir. (1997)

7/26/2019 Soares v. Brockton Credit, 1st Cir. (1997)

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USCA1 Opinion

UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT

_________________________

No. 96-2110

IN RE: NAPOLEON G. SOARES,

Debtor.

_________________________

NAPOLEON G. SOARES,

Appellant,


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v.

BROCKTON CREDIT UNION,

Appellee.

_________________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Joseph L. Tauro, U.S. District Judge] ___________________

_________________________

Before

Selya, Circuit Judge, _____________

Aldrich, Senior Circuit Judge, ____________________

and Boudin, Circuit Judge. _____________


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_________________________

Michael P. Cashman for appellant. __________________

Gary W. Cruickshank for appellee.

___________________

_________________________

March 10, 1997

_________________________

SELYA, Circuit Judge. "[T]he dead tree givesSELYA, Circuit Judge.

______________


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shelter." T.S. Eliot, The Waste Land, I, The Burial of the______________ _________________

(1922). Like a shade tree, the automatic stay which attends

initiation of bankruptcy proceedings, 11 U.S.C. 362(a) (19

must be nurtured if it is to retain its vitality. This app

which pits a Chapter 13 debtor bent on saving his home again

creditor bent on enforcing its rights under a mortgage, ra

issues which touch upon the degree of judicial protection

the automatic stay invites. These issues are whether

automatic stay precludes a state court from underta

ministerial acts after a bankruptcy filing; if not, what acts

exempt under that rubric; whether a bankruptcy court may

retroactive relief from the automatic stay; and if so, what l

standard it should apply in prescribing such an anodyne.


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I. LAYING THE FOUNDATION I. LAYING THE FOUNDATION

We begin by retracing the labyrinthine corri

through which this litigation has passed. In 1990 the deb

Napoleon G. Soares, purchased a home in Brockton, Massachuse

He executed a $70,000 promissory note to the Brockton Cr

Union (BCU) and secured the note by a first mortgage on the

estate. After sustaining injuries in a motorcycle acci

Soares lagged in his monthly payments. BCU grew restive

commenced foreclosure proceedings in the state superior co

Soares did not file an answer. On March 22, 1995, BCU se

letter to the clerk of court seeking an order of default a

judgment authorizing foreclosure. Two days later Soares fil

2


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bankruptcy petition, thus triggering the automatic stay.

immediately gave notice to BCU, but neither party alerte

state court. On April 10, with the stay still firmly in plac

judge of that court issued the requested default order. One

later, she authorized the entry of a foreclosure judgment.

Soares missed some post-petition mortgage payments.

June 14, 1995, BCU, without apprising the bankruptcy court of


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orders previously obtained in the state proceedings, file

motion seeking relief from the automatic stay. The debt

then-counsel, Gerard Williamson, neglected to oppose B

motion. The bankruptcy court granted the unopposed motio

June 29 (the same day, coincidentally, that Soares, unbekno

to the judge, paid the post-petition arrearage). The c

subsequently refused to entertain a belated objection file

Williamson.

When Soares missed his November payment, BCU acti

the state court judgment. At the ensuing foreclosure sale,

on November 29, BCU itself bid in the mortgaged premises and

approximately $14,200 in overdue municipal taxes to clear

title. Soares thereafter sought relief in the state court on

ground that the foreclosure judgment had been issue


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contravention of the automatic stay. The court denied

motion, saying that its post-petition actions had

"ministerial" and that any error was harmless.1

____________________

1Although Soares did not appeal from this ruling, BC

never urged it as a basis for res judicata or collat

estoppel. Hence, we deem any such asseveration waived.

3

Soares' unsuccessful foray apparently rang war


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bells for BCU, which asked the bankruptcy court to cla

whether the June 29 order (lifting the automatic stay) rati

the earlier state court judgment. BCU served this so-ca

clarification motion on the attorney, Williamson, but not

Soares.2 In a margin order entered on February 9, 1996,

Kenner addressed the question of retroactivity for the first

and vacated the automatic stay retroactive to March 24, 1

"such that the [state] judgment and movant's foreclosure s

not be deemed to have violated the automatic stay."

Less than three weeks later Soares, through n

retained counsel, filed a motion to reconsider both the Febr

9 order and the original grant of relief from the automatic s

Judge Kenner denied the reconsideration motion on the merits3


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also denied a companion motion to void the foreclosure sale.

judge advanced three reasons for having lifted the automatic

____________________

2The title "clarification motion" is a misnomer. Nei

the June 29 order nor the motion leading up to it mentione

state court judgment, and the order clearly had not been mean

ratify the judgment.

3The judge was wise to reach the merits. The so-ca

clarification motion had been served in derogation of a stan

order promulgated by the bankruptcy judges in the District

Massachusetts, which provides in pertinent part:

(a) All motions and requests for orders must

be served on the Chapter 13 trustee, the

debtor, the debtor's attorney, persons who

have requested notice, and all creditors . .

. .

Joint Procedural Order 13.5 (Sept. 1, 1994). Despite

order, BCU had not served the motion on the debtor.

4


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retroactively on February 9. First, because BCU "had

everything right," it would be inequitable to upset

expectations. Second, because the foreclosure had wiped

junior lienholders, it would be too complicated to "unscra

the egg." Third, because Soares could not immediately repay

funds that BCU had expended to clear title to the property,

economic realities favored ratification of the foreclosure.


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Soares appealed. The district court temporarily st

further proceedings (blocking both a planned eviction an

possible resale of the property). Eventually, however,

district court although finding that BCU had neglected

responsibility to apprise the state tribunal of Soa

bankruptcy (an error which it termed "harmless") deter

that the retroactive lifting of the automatic stay di

constitute an abuse of discretion.

Soares again appealed. We enlarged the earlier sta

condition that Soares make monthly payments to BCU for use

occupancy of the premises (to be credited against the mort

indebtedness, should Soares prevail on appeal).

II. DISCUSSION

II. DISCUSSION

To the extent that the threshold inquiries in this


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involve questions of statutory interpretation, we exer

plenary review.4 See In re Jarvis, 53 F.3d 416, 419 (1st

___ _____________

____________________

4A different standard of review applies to the bankru

court's discretionary decision to lift the automatic

retroactively. See Part II(B)(4), infra. We review that ru ___ _____

for abuse of discretion. See Tringali v. Hathaway Mach. Co.,___ ________ __________________

F.2d 553, 561 (1st Cir. 1986).

5


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1995). From this vantage point we first address the purpo

exemption for "ministerial acts," as it is only necessary

reach the retroactivity question if a violation of the auto

stay in fact occurred.

A. The Nature of the State Court's Actions. A. The Nature of the State Court's Actions. _______________________________________

The parties clash head-on in respect to classifica

of the state court's actions. The debtor claims that the s

court order and judgment transgressed the automatic stay.

creditor claims that these entries, though occurring p

petition, were purely ministerial and, thus, not offensive to

stay. The debtor has the better argument.

Section 362(a)(1) of the Bankruptcy Code provides

the filing of a bankruptcy petition stays the commencement


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continuation of all nonbankruptcy judicial proceedings aga

the debtor.5 Here, the state court default order eventuated

than two weeks after Soares filed for bankruptcy and_____

____________________

5Leaving to one side exceptions inapplicable to this app

the statute provides that a filed bankruptcy petition

operates as a stay, applicable to all

entities, of

(1) the commencement or

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; . . . .


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11 U.S.C. 362(a)(1).

6

foreclosure judgment one week later. The issue, then, is whe

these entries contravened the mandate of section 362(a)(1).

asserts that they did not because the stay was not in effect

the creditor requested the state court to act and because

state court's actions, when taken, constituted ministerial ac

The creditor's first assertion is mere buzznac


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The focus here is whether or not the state court's actions,

effected, transgressed the automatic stay. The date on whic

creditor asked the state court to act, while material t

assessment of the creditor's good faith (which is not serio

questioned here), does not bear on whether the activi

themselves constituted the forbidden continuation of a judi

proceeding.

BCU's second assertion is more substant

Ministerial acts, even if undertaken in a state judi

proceeding subsequent to a bankruptcy filing, do not fall wi

the proscription of the automatic stay. See Rexnord Holdi ___ ____________

Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir. 1994); Savers

____ _________ ______

Sav. & Loan Ass'n v. McCarthy Constr. Co. (In re Knightsbr


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__________________ ____________________ ______________

Dev. Co.), 884 F.2d 145, 148 (4th Cir. 1989). But the s ________

court's actions in this case cannot properly be characterize

ministerial.

A ministerial act is one that is essentially cler

in nature. See Black's Law Dictionary 996 (6th ed. 1990). T ___ ______________________

when an official's duty is delineated by, say, a law o

judicial decree with such crystalline clarity that nothin

7


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left to the exercise of the official's discretion or judg

the resultant act is ministerial. See United States ex___ _________________

McLennan v. Wilbur, 283 U.S. 414, 420 (1931) (indicating t________ ______

duty is ministerial if "the obligation to act [is] perempt

and plainly defined"); Neal v. Regan, 587 F. Supp. 1558,____ _____

(N.D. Ind. 1984) (describing a ministerial act as "one which

law prescribes and defines . . . with such precision as to l

nothing to the exercise of discretion or judgment'") (cita

omitted). Such acts can usefully be visualized as the antit

of judicial acts, inasmuch as the essence of a judicial ac

the exercise of discretion or judgment. See Black's


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___ _______

Dictionary, supra, at 846. __________ _____

Virtually by definition, a judicial proceeding does

conclude until the judicial function is completed, that is, u

the judicial decision is made. See, e.g., Bidermann, 21 F.3

___ ____ _________

528 (holding that the judicial function is completed "at

moment the judge direct[s] entry of judgment"). Frequen

routine scrivening, such as recordation or entry on the doc

follows on the heels of a judicial decision. Such actio

taken in obedience to the judge's peremptory instructions

otherwise precisely defined and nondiscretionary

ministerial and, consequently, do not themselves violate

automatic stay even if undertaken after an affected party f


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for bankruptcy. See, e.g., Knightsbridge Dev., 884 F.2d at___ ____ __________________

(suggesting that merely recording a previously decided a

would be a "clerical act" and therefore would not infract

8

automatic stay); In re Capgro Leasing Assocs., 169 B.R. 305,____________________________

16 (Bankr. E.D.N.Y. 1994) (stating that "entry of a judgment

constitute a `ministerial act' where the judicial function


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been completed and the clerk has merely to perform the

function of entering the judgment upon the court's docket").

the same token, however, acts undertaken in the course

carrying out the core judicial function are not ministerial

if essayed after bankruptcy filing, will be deemed to violate

automatic stay.

Bidermann captures this distinction. There,_________

district judge ruled ora sponte and endorsed the motion pap ___ ______

The defendant then sought refuge in bankruptcy. The Se

Circuit held the clerk's subsequent, post-petition entry of

judgment on the docket to be ministerial (and, theref

unaffected by the automatic stay). 21 F.3d at 528. Other c

are to the same effect. See Heikkila v. Carver (In re Car ___ ________ ______ _________


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828 F.2d 463, 464 (8th Cir. 1987) (holding that a "rou

certification" by the clerk, entered post-petition, did

transgress the automatic stay); Capgro Leasing, 169 B.R. at______________

16 (holding the clerk's entry of judgment on the docket to

ministerial when, prior to the bankruptcy filing, the court

ordered summary judgment). A parallel line of cases reinfo

the notion that the compendium of ministerial acts excludes t

involving deliberation, discretion, or judicial involve

See, e.g., Ellis v. Consolidated Diesel Elec. Corp., 894___ ____ _____ _________________________________

371, 372-73 (10th Cir. 1990) (invalidating a judicial deci

9


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that granted summary judgment two weeks after a bankru

filing); Knightsbridge Dev., 884 F.2d at 148 (voidin___________________

arbitration award because the bulk of the panel's deliberat

occurred after the stay arose); Ellison v. Northwest Eng'g_______ _______________

707 F.2d 1310, 1311 (11th Cir. 1983) (holding that while

automatic stay was in effect a court could not render a deci

in a case which had been briefed and argued pre-petition).

This line of demarcation makes perfectly good se


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The statutory proviso which gives rise to the automatic stay

what it means and means what it says. See ICC v. Holmes Tran ___ ___ __________

Inc., 931 F.2d 984, 987 (1st Cir. 1991). Confining the exemp ____

for ministerial acts to those actions which are essenti

clerical, as opposed to judicial, honors this principle bec

such an interpretation comports precisely with the text

section 362(a)(1). In the bargain, this interpretation

facilitates the statute's due administration.

Silhouetted against this legal landscape, it is rea

apparent that the state court's actions in ordering a default

directing the entry of a judgment possess a distinctly judic

rather than a ministerial, character. The record is tot

barren of any evidence that the state court judge decide


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grant BCU's request prior to the date of the bankruptcy fil

and all visible signs point in the opposite direction. The j

did not enter the default order until more than two weeks a

Soares sought the protection of the bankruptcy court and she

not direct the entry of a judgment authorizing foreclosure u

10

another week had elapsed. Moreover, the judge indicated a


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the fact that she waited to confirm Soares' nonmilitary st

before directing the entry of judgment. This indic

deliberativeness and a concomitant willingness to exer

discretion.

Nor does the fact that the judge later character

her entry of the foreclosure judgment as "ministerial" requi

different result. An appellate court is not bound by a t

judge's unsupported description, see, e.g., Estate of Sole___ ____ ______________

Rodriguez, 63 F.3d 45, 47 n.1 (1st Cir. 1995); In re G. _________ ________

Corp., 938 F.2d 1467, 1473-74 (1st Cir. 1991), and we are a _____

of no reason why that salutary principle would not apply

equal vigor to our assessment of a state court's actions when

underlying question relates to the effect of those actions u


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federal law. Hence, we decline to adopt the label that the s _______ ___

court judge chose in hindsight to affix to her activities.

We summarize succinctly. Because the decision

animated the entry of the order and judgment occurred after

stay was in force, those actions continued the state judi

proceeding within the meaning of section 362(a)

Consequently, the actions violated the automatic stay.

this infraction, we now must assess the availability o

retroactive cure.

B. The Operation of the Automatic Stay. B. The Operation of the Automatic Stay. ___________________________________

We subdivide this part of our discussion into

segments. In each segment, our comments reflect our aware


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11

that bankruptcy courts traditionally pay heed to equit

principles. See Bank of Marin v. England, 385 U.S. 99,___ ______________ _______

(1966); Jarvis, 53 F.3d at 419. ______

1. The Nature of the Stay. The automatic sta1. The Nature of the Stay.

________________________

among the most basic of debtor protections under bankruptcy


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See Midlantic Nat'l Bank v. New Jersey Dep't of En ___ ______________________ __________________________

Protection, 474 U.S. 494, 503 (1986); see also S. Rep. No.__________ ___ ____

989, at 54 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5840._________ __

is intended to give the debtor breathing room by "stop[ping]

collection efforts, all harassment, and all foreclosure actio

H.R. Rep. No. 95-595, at 340 (1977), reprinted in_________ __

U.S.C.C.A.N. 5963, 6296-97; see also Holmes Transp., 931 F.2___ ____ ______________

987; In re Smith Corset Shops, Inc., 696 F.2d 971, 977 (1st______________________________

1982).

The stay springs into being immediately upon the fi

of a bankruptcy petition: "[b]ecause the automatic sta

exactly what the name implies `automatic' it operates wit


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the necessity for judicial intervention." Sunshine Dev., Inc_________________

FDIC, 33 F.3d 106, 113 (1st Cir. 1994). It remains in f ____

until a federal court either disposes of the case, see 11 U. ___

362(c)(2), or lifts the stay, see id. 362(d)-(f).___ ___

respite enables debtors to resolve their debts in a more or

fashion, see In re Siciliano, 13 F.3d 748, 750 (3d Cir. 19 ___ ________________

and at the same time safeguards their creditors by preven

"different creditors from bringing different proceedings

different courts, thereby setting in motion a free-for-al

12


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which opposing interests maneuver to capture the lion's share

the debtor's assets." Sunshine Dev., 33 F.3d at 114;______________

generally 3 Collier on Bankruptcy 362.03 (15th rev. ed. 199 _________ _____________________

In order to secure these important protections, co

must display a certain rigor in reacting to violations of

automatic stay. See Kalb v. Feuerstein, 308 U.S. 433, 43 ___ ____ __________

(1940); Holmes Transp., 931 F.2d at 987-88; Smith Corset S ______________ _______________

696 F.2d at 976. The circuits are split on whether actions t

in derogation of the automatic stay are merely "voidable"


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more accurately, "void." Some courts characterize unauthor

post-petition proceedings as "voidable." See, e.g., Jone

___ ____ ___

Garcia (In re Jones), 63 F.3d 411, 412 & n.3 (5th Cir. 19 ______ ____________

cert. denied, 116 S. Ct. 1566 (1996); Bronson v. United Sta

_____ ______ _______ _________

46 F.3d 1573, 1578-79 (Fed. Cir. 1995); Easley v. Pettibone______ __________

Corp., 990 F.2d 905, 911 (6th Cir. 1993). Other courts_____

majority, insofar as we can tell call such actions "void,"

recognize that equitable considerations may alter some outco

See, e.g., Siciliano, 13 F.3d at 751; In re Schwartz, 954___ ____ _________ _______________

569, 571 (9th Cir. 1992); Job v. Calder (In re Calder), 907___ ______ _____________

953, 956 (10th Cir. 1990) (per curiam); 48th St. Steakhouse,____________________


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v. Rockefeller Group, Inc. (In re 48th St. Steakhouse, Inc.),_______________________ _______________________________

F.2d 427, 431 (2d Cir. 1987), cert. denied, 485 U.S. 1035 (19 _____ ______

Albany Partners Ltd. v. Westbrook (In re Albany Partners, Lt ____________________ _________ _________________________

749 F.2d 670, 675 (11th Cir. 1984).

Our earlier opinions which we today reaffirm a

us with the majority view. See Holmes Transp., 931 F.2d at___ ______________

13


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88; Smith Corset Shops, 696 F.2d at 976. This sema ____________________

difference has practical consequences because

characterization of an infringing action as "void" or "voida

influences the burden of going forward. Treating an action t

in contravention of the automatic stay as void places the bu

of validating the action after the fact squarely on the shoul

of the offending creditor. In contrast, treating an action t

in contravention of the automatic stay as voidable places

burden of challenging the action on the offended debtor.

think that the former paradigm, rather than the latter,

harmonizes with the nature of the automatic stay and

important purposes that it serves. See generally 3 Collie___ _________ _____


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Bankruptcy, supra, 362.11[1] & n.1 (observing that most co __________ _____

hold violations void and terming this the better view).

2. The Availability of Retroactive Relief. While2. The Availability of Retroactive Relief.

______________________________________

automatic stay is significant, it is not an immutable articl

faith. Indeed, the Bankruptcy Code, 11 U.S.C. 362

expressly authorizes courts to lift it in particular situati

Whether this statutory authorization encompasses retroac

relief is not entirely clear. We previously hinted that a c

may set aside the automatic stay retroactively in an appropr

case. See Smith Corset Shops, 696 F.2d at 976-77. We___ ____________________

confirm Smith's adumbration, holding that 11 U.S.C. 36 _____

permits bankruptcy courts to lift the automatic


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retroactively and thereby validate actions which otherwise

be void.

14

Section 362(d) confers upon courts discretionary p

in certain circumstances to terminate, annul, modify, or p

conditions upon the automatic stay.6 In drafting the

Congress chose to include both the power to terminate the


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and the power to annul it. When construing this language

must try to give independent meaning to each word. See Un ___ _

States Dep't of Treasury v. Fabe, 508 U.S. 491, 504 n.6 (19 ________________________ ____

United States v. Ven-Fuel, Inc., 758 F.2d 741, 751-52 (1st_____________ _______________

1985). The only plausible distinction between the two verb

this context is that terminating the stay blunts

prospectively, from the moment the court's order enters, whe

annulling the stay erases it retrospectively, as of some

prior to the entry of the court's order (reaching as far bac

the date when the debtor filed the bankruptcy petition, if

court so elects).

Seen from this perspective, Congress' grant of a p

of annulment is meaningful only if the court may thereby vali


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actions taken before the date on which the court rules. On______

other construction, annulment lacks any independent significa

____________________

6The statute provides in pertinent part:

On request of a party in interest and after

notice and a hearing, the court shall grant

relief from the stay . . ., such as by

terminating, annulling, modifying, or

conditioning such stay

(1) for cause, including the lack

of adequate protection of an

interest in property of such party

in interest; . . . .

11 U.S.C. 362(d).

15


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it merely replicates termination. It follows, therefore,

section 362(d) authorizes retroactive relief from the auto

stay. Accord Siciliano, 13 F.3d at 751; Albany Partners,______ _________ _______________

F.2d at 675; see also Franklin Sav. Ass'n v. Office of T ___ ____ ___________________ ____________

Supervision, 31 F.3d 1020, 1023 (10th Cir. 1994) (recognizin___________

authority to annul the stay and thereby grant retroac

relief); Sikes v. Global Marine, Inc., 881 F.2d 176, 178-79_____ ___________________

Cir. 1989) (same); see generally 3 Collier on Bankruptcy, su ___ _________ _____________________ _

362.11[1].


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3. The Limiting Principle. Recognizing3. The Limiting Principle.

_________________________

discretionary authority of bankruptcy courts to relieve credi

and other interested parties retroactively from the operatio

the automatic stay tells us nothing about the yardstick by

attempts to secure such relief should be measured. We turn

to this inquiry.

Once again, the overarching purpose of the auto

stay informs our analysis. Because the stay is a fundame

protection for all parties affected by the filing of a peti

in bankruptcy, it should not be dismantled without good rea

See, e.g., Little Creek Dev. Co. v. Commonwealth Mortgage C ___ ____ ______________________ ______________________

(In re Little Creek Dev. Co.), 779 F.2d 1068, 1072 (5th______________________________


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1986). Undoing the stay retroactively should requir

measurably greater showing. Congress intended the stay to af

debtors breathing room and to assure creditors of equit

distribution. See H.R. Rep. No. 95-595, supra, at 340,___ _____

U.S.C.C.A.N. at 6296-97. If retroactive relief bec

16

commonplace, creditors anticipating post facto validatio____ _____


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will be tempted to pursue claims against bankrupts heedles

the stay, leaving debtors with no choice but to defend for

that post-petition default judgments routinely may

resuscitated.

We believe that Congress created the automatic sta

ward off scenarios of this sort. Thus, if congressional in

is to be honored and the integrity of the automatic

preserved, retroactive relief should be the long-odds except

not the general rule. In our view, only a strict standard

ensure the accomplishment of these objectives. See Al

___ _

Partners, 749 F.2d at 675 (explaining that "the impor ________

congressional policy behind the automatic stay demands

courts be especially hesitant to validate acts committed du


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the pendency of the stay"). We conclude, therefore,

although courts possess a limited discretion to grant retroac

relief from the automatic stay, instances in which the exer

of that discretion is justified are likely to be few and

between.

We do not suggest that we can write a standard

lends itself to mechanical application. Each case is sui gen

and must be judged accordingly. But, while it is not pract

to anticipate and catalogue the varied circumstances in

retroactive relief from the automatic stay may be warranted,

examples may be helpful.

When a creditor inadvertently violates the auto

17


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stay in ignorance of a pending bankruptcy, courts sometimes

afforded retroactive relief. See, e.g., Jones, 63 F.3d at 41 ___ ____ _____

(affirming retroactive validation of a foreclosure sale where

mortgagee had no notice of the bankruptcy filing); Mutual Ben _________

Life Ins. Co. v. Pinetree, Ltd. (In re Pinetree, Ltd.), 876_____________ ______________ ____________________

34, 37 (5th Cir. 1989) (similar). By like token, debtors who

in bad faith may create situations that are ripe for retroac


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relief. See, e.g., Calder, 907 F.2d at 956; Easley, 990 F.2___ ____ ______ ______

911; Albany Partners, 749 F.2d at 675-76. _______________

These examples a creditor's lack of notice

debtor's bad faith clearly do not exhaust the possibilit

But they illustrate that a rarely dispensed remedy

retroactive relief from the automatic stay must rest on a se

facts that is both unusual and unusually compelling. The

law echoes this conclusion. See Mataya v. Kissinger (I___ ______ _________

Kissinger), 72 F.3d 107, 109 (9th Cir. 1995) (stating that co

_________

should indulge retroactive annulment only in ext

circumstances); In re Pulley, 196 B.R. 502, 504 (Bankr. W.D.____________

1996) (similar).


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4. Applying the Standard. Having constructed4. Applying the Standard.

_______________________

limiting principle, we now consider whether the bankruptcy c

erred in validating the foreclosure judgment which had

obtained in violation of the automatic stay. We conclude tha

proper predicate existed for doing so and that the bankru

court therefore abused its discretion in ordering retroac

relief. See Anderson v. Beatrice Foods Co., 900 F.2d 388,___ ________ __________________

18


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(1st Cir.) (equating abuse of discretion with a meaningful e

in judgment), cert. denied, 498 U.S. 891 (1990). _____ ______

Contrary to BCU's importunings, it is the credit

knowledge, not the state court's nescience, that is relevan

the question at hand. Bankruptcy law forbids creditors

continuing judicial proceedings against bankrupts, see 11 U. ___

362(a)(1), and, accordingly, it is the creditor's obligatio

inform other courts of the situation, see In re Timbs, 178___ ____________

989, 991 (Bankr. E.D. Tenn. 1989) (collecting cases). Here,

BCU's knowledge and its failure to act are undisputed; the de

immediately notified BCU of the bankruptcy filing, but BCU


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quiet and permitted the superior court to proceed in ignoranc

the stay. We are reluctant to reward creditors who, des

notice of a bankruptcy filing, fail for no discernible reaso

notify courts in which they have initiated proceedings of

changed circumstances.

The other facts are no more conducive to the best

of retroactive relief. The creditor was represented by cou

throughout and does not claim that it misapprehended the ef

of the filing. The bankruptcy court made no finding that So

acted in bad faith, and, at any rate, the record does not con

any basis for such a finding. The procedural errors committe

both parties, such as BCU's failure to serve Soares with the

called clarification motion and Soares' failure to lodge ti


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objections at various points in the proceedings, seemingly ca

each other out. And BCU's entreaty that the equities f

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retroactive relief rings unmistakably hollow; though BCU expe

funds to clear title and maintain the property after foreclos

this financial hardship is the natural consequence of its

failure to abide by the terms of the automatic stay. Thus, i


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unredressable. See K-Mart Corp. v. Oriental Plaza, Inc.,___ _____________ _____________________

F.2d 907, 916 (1st Cir. 1989) (declining to deny perma

injunctive relief which would require substantial demolition

an expensive structure where "appellant's wound, deep as

appears, was self-inflicted"). In the last analysis, BCU is

author of its own misfortune.

III. CONCLUSION III. CONCLUSION

To sum up, we hold that the state court's post-peti

issuance of a foreclosure judgment violated the automatic s

that bankruptcy courts ordinarily must hold those who defile

automatic stay to the predictable consequences of their act

and can grant retroactive relief only sparingly and in compel

circumstances; and that, because this case involves


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sufficiently unusual circumstances, the bankruptcy court ab

its discretion in granting retroactive relief from the auto

stay.7

In an abundance of caution, we note that our revie

confined to the order granting the so-called clarification mo

and the retroactive relief awarded therein. Although Soares

____________________

7We recognize the difficulties that attend the undoin

the foreclosure sale and the restoration of the pre-peti

status quo, but that problem cannot in and of itself jus

overlooking BCU's unexcused violation of the automatic stay.

K-Mart, 875 F.2d at 916. ______

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ask the bankruptcy court to reconsider its decision to lift

automatic stay, BCU can request a new foreclosure judgment in

state court unless and until the bankruptcy court reinstates

stay. For our part, we need go no further.

Reversed and remanded. Reversed and remanded. _____________________


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Documents

Soares v. Brockton Credit, 1st Cir. (1997)