Opinion
Case No. 99-21150
May 18, 2000
Clayton G. Andersen, Rathdrum, Idaho, for Debtor.
Les Bock, DILLON, BOSCH, DAW BOCK, CHTD., Boise, Idaho for Chase Mortgage Company.
C. Barry Zimmerman, Couer d'Alene, Idaho, chapter 13 Trustee.
MEMORANDUM OF DECISION AND ORDER
Background
Loree Kirkendall ("Debtor") filed her voluntary petition, schedules, statement of financial affairs and chapter 13 plan on September 20, 1999. Her amended plan of November 9, 1999 was confirmed by the Court on January 11, 2000.
Before confirmation, on December 14, 1999, Chase Mortgage Company ("Chase") had filed a motion requesting relief from the automatic stay pursuant to 11 U.S.C. § 362(d). Chase complied with LBR 4001.2 and contemporaneously provided the required notice that the stay would automatically terminate under § 362(e) in thirty-three days "unless a preliminary hearing is noticed and held within such thirty-three (33) day period." The record establishes that Chase's motion and the accompanying notice were properly served on the Debtor, Debtor's counsel, chapter 13 Trustee, and United States Trustee.
No timely response was filed by the Debtor to Chase's motion. On February 9, 2000, fifty-seven days after the motion was filed and served, the Court entered an order under § 362(e) granting Chase relief from the automatic stay (the "Order"). By virtue of the Order, Chase was authorized and entitled to proceed to foreclose on its interest in the Debtor's residential real property pursuant to applicable state law.
The Debtor doesn't dispute that the Order was served on her. Her affidavit indicates she received the Order within a few days of February 9. That affidavit also indicates that she met with her attorney on March 16 following her receipt on March 13 of a notice of the rescheduled foreclosure sale set for April 11. She states that her attorney advised her on March 16 that he would be filing a motion to set aside the Order.
The Debtor on April 7, 2000 filed a motion which sought to set aside the Order. This motion also sought a temporary stay of the Order in light of Chase's rescheduled foreclosure sale of the property on April 11, 2000. The Debtor scheduled her April 7 motion for hearing on April 25, 2000. The request for a stay pending hearing was not presented to the Court until after the Chase's scheduled trustee's sale had already occurred.
The request for injunction or temporary stay was merely ensconced within the text of the motion. No emergency hearing was sought to ensure the matter was presented before Chase's duly noticed foreclosure sale took place. While the Debtor's request did not address the several procedural requirements attending injunctive relief, Fed.R.Bankr.P. 7065, Fed.R.Civ.P. 65, the Court on April 12 entered an order temporarily staying the sale if it had not yet occurred until a telephone hearing could take place on April 17. As it turns out, the sale did occur on April 11. The Debtor did not proceed with the April 17 telephone hearing.
DISCUSSION
The Debtor alleges that grounds exist, pursuant to Fed.R.Civ.P. 60(b)(1), (3) and (6), made applicable here by Fed.R.Bankr.P. 9024, to set aside the Order granting stay relief to Chase. Whether relief should be granted pursuant to 60(b) is addressed to the sound discretion of the court. Zimmerman v. First Fidelity Bank (In re Silva), 97.4 I.B.C.R. 118, 119 aff'd, 85 F.3d 992 (9th Cir. 1999). The party seeking relief pursuant to Rule 60(b) bears the burden of proving justification for such remedy. Cassidy v. Tenorio, 856 F.2d 1412, 1415 (9th Cir. 1988).
The Debtor admits that it is her desire to "unring the bell" and that any order setting aside Chase's § 362(e) Order should also have the effect of voiding the nonjudicial foreclosure sale held on April 11 pursuant to the authority of the Order.
Setting aside default
The Debtor's request here is tantamount to a request for relief from a default judgment under Fed.R.Civ.P. 55(c) and 60(b), since § 362(e) stay relief in the absence of opposition is fundamentally relief by default. This Court has stated in regard to setting aside default judgments under these rules:
Rule 60(b) is remedial in nature and should be liberally applied. Gregorian v. Izvestia, 871 F.2d 1515, 1523 (9th Cir. 1989). The Court must address three factors in determining whether it will set aside a default judgment under Rule 60(b): (1) whether the judgment was entered as a result of the defendant's [i.e., here the moving party's] culpable conduct; (2) whether the defendant has shown a meritorious defense; and (3) whether the plaintiff would be prejudiced if the judgment is set aside. Hammer v. Drago (In re Hammer), 940 F.2d 524, 525-26 (9th Cir. 1991); Meadows v. Dominican Republic, 817 F.2d 517, 521 (9th Cir. 1987). This three-part test is disjunctive. Cassidy v. Tenorio, 856 F.2d 1412, 1415 (9th Cir. 1988). Thus, "a finding that the plaintiff will be prejudiced, or that the defendant lacks a meritorious defense, or that the defendant's own culpable conduct prompted the default is sufficient to justify the district court's refusal to vacate a default judgment." Id. at 1415.
In re Anderton, 00.1 I.B.C.R. 5, 6 (Bankr.D.Idaho 2000).
As discussed more fully below, in evaluating the subdivisions of Rule 60(b) urged by the Debtor, the Court concludes both that the default was based on the Debtor's own culpable conduct, and that relief would unfairly prejudice the non-moving party and others. The Court will therefore refuse to vacate the § 362(e) Order.
A party's conduct is culpable if he has received notice of the filing of the complaint yet fails to answer. Gregorian, 871 F.2d at 1523; Hammer, 940 F.2d at 526.
Timeliness of the motion
A Rule 60(b)(1) and (b)(3) motion must be made within one year of the entry of the contested order, and thus the Debtor's motion is not technically time barred. But that is not the same as finding that it is timely. Here the Debtor's motion was filed on April 7, some two months after the Debtor learned that the stay had been terminated by an Order (which itself was not entered until almost two months after Chase filed its motion). This four month delay is relevant to the Debtor's allegations of surprise and excusable neglect, as well as to her allegations that she (or the Court) was misled by Chase's initial stay relief allegations. The delay also goes to the question of the culpability of her conduct. And finally, but perhaps most importantly, the delay in asserting the motion until the eve of foreclosure implicates that portion of Rule 60(b) which expressly provides "A motion under this subdivision (b) does not affect the finality of a judgment or suspend its operation."
Rule 60(b)(1)
The Debtor requests relief pursuant to Rule 60(b)(1) which allows relief from an order on the grounds of "mistake, inadvertence, surprise, or excusable neglect." The Court finds that the submissions fail to disclose credible contentions of surprise, mistake or inadvertence. It will, however, evaluate the assertion of excusable neglect.
Briones v. Riviera Hotel Casino, 116 F.3d 379 (9th Cir. 1997) adopted for purposes of determining excusable neglect under Rule 60(b) the test announced in Pioneer Investment Services Co. v. Brunswick Associates Ltd., 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993) (addressing excusable neglect under Fed.R.Bankr.P. 9006(b)(1)). "Neglect" encompasses situations in which the failure to comply with a filing deadline is attributable to negligence. 507 U.S. at 394, 113 S.Ct. at 1497. The "excusable" portion of excusable neglect provides the limitations necessary to prevent abuse. Briones, 116 F.3d at 381. Pioneer outlined the following analysis, adopted by Briones, for determining what is "excusable":
Because Congress has provided no other guideposts for determining what sorts of neglect will be considered "excusable," we conclude that the determination is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission. These include, as the Court of Appeals found, the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.
507 U.S. at 395, 113 S.Ct. at 1498 (footnote omitted). See also, Anderton, 00.1 I.B.C.R. at 6-7.
The neglect or negligence aspect is evident here. But the record, including the affidavits of the Debtor and her counsel, does not establish that such neglect was excusable.
Section 362(e) of the Code and Local Bankruptcy Rule 4001.2 are sufficiently clear. If a motion [for stay relief] is properly filed and served, the automatic stay of § 362(a) will terminate in the absence of an order entered by the Court, upon an objection of the party resisting the stay [sic, motion] and hearing, continuing the stay in effect. If no response is filed, relief is essentially automatic.
In re Wahobin, 98.4 I.B.C.R. 97 (Bankr.D.Idaho 1998).
In this case no response was ever filed to Chase's stay relief motion, much less a timely response within 33 days of service. No excuse or justification is offered for the initial failure to contest the motion.
One might infer from the affidavit of the Debtor's counsel that Chase's withdrawal of its objection to confirmation was meant to signal a withdrawal of the request for stay relief as well, thus explaining why no response was filed. But the Debtor should have, and did not, make any such understanding clear at the time or immediately object to the February 9 Order on this basis. Additionally, confirmation would not necessarily resolve post-petition default issues.
In considering the elements of the Briones test, the Court finds that the reason for the delay was solely within the "reasonable control of the movant." There was no apparent reason why the disputes with Chase's § 362(d) representations were not timely raised before relief from stay was entered, or raised in the two month period between the receipt of the Order and the foreclosure sale.The Court must also, under Briones, take into consideration the possible prejudice if the relief were granted. Unwinding the Order would clearly prejudice this creditor. But here that prejudice would befall not only Chase but also a presumably innocent third party buyer of the property.
Chase's affidavit reflects the property was sold on April 11 to Dale C. Dennis and Barbara A. Dennis and transferred by trustee's deed.
In the context of yet another Briones factor, the impact of the delay on the judicial process is notable and negative. Not only has there already been a sale of the mortgaged property, the bankruptcy process operates on the assumption that stay lift matters will regularly and promptly be resolved under the well-established processes of § 362(e) and the Local Rules. Wahobin, 98.4 I.B.C.R. at 97.
Based upon the record presented, the Court finds that there has been no excusable neglect shown sufficient under Rule 60(b)(1) and the case law to justify entry of an order setting aside the stay relief previously granted to Chase.
Rule 60(b)(3)
The Debtor alleges that she is entitled to relief under Rule 60(b)(3) which provides that the court may provide relief from an order on the basis of "fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party[.]" Specifically, the Debtor alleges that Chase made fraudulent representations in the § 362(d) motion regarding the value of the Debtor's real property and the payments she has made.
The Court concludes that no fraud has been established. Chase's motion made no express allegation as to the value of the property but rather simply alleged a lack of adequate protection. The motion alleged a total debt of around $48,000. The Debtor's schedules asserted the value of the property was $95,000; her motion to set aside the Order alleged the value was $82,000 to $84,000. There thus was an apparent equity cushion for Chase, but no equity for the estate given the existence of the Debtor's claim of a homestead exemption. See, Schedules C, D.
Given these facts, it seems as if Chase's allegation of lack of adequate protection was wrong, but the creditor could still assert a claim for relief under § 362(d) because payments were not being maintained and confirmation had not been achieved. Though Chase may have been overly summary and inartfull in its allegations, the Court concludes that the Debtor has failed to establish that Chase, in making those allegations, knowingly and intentionally misrepresented matters of fact. Whether or not cause existed for stay relief under § 362(d)(1) or (d)(2) were legal conclusions and claims for relief, not facts. Whether there was sufficient cause for stay relief could be adjudicated after considering submissions from both parties at a preliminary hearing, as the rules contemplate.
The Debtor and her counsel also argue that Chase misrepresented the status of payments on the deed of trust note by failing to also note that at least one payment had been tendered but refused. This does not make the allegation of payment status false. If it arguably makes the allegation incomplete, the Debtor could have easily rectified the situation. Disputes over accountings and the transmittal or crediting of payments between mortgagor and mortgagee are by no means uncommon, and often arise in chapter 13 cases where the debtor seeks to cure mortgage defaults and maintain ongoing payments. As with the question of allegations related to equity, the Court is unconvinced by the Debtor that the parties' disagreement regarding payment status reflects an actual and intentional misrepresentation of known fact in Chase's pleading.
This isn't a question of Chase's inappropriate action as much as it is one of the absence of appropriate and timely action by the Debtor. The sad but inescapable conclusion is that prompt response to the original stay relief request, or to the February 9 Order, or to the early March notice of the April 11 foreclosure sale may have averted loss. Had opposition been timely presented, it is possible that § 362(d) relief would have been denied given the fact of confirmation, or at least that relief would have been delayed until the status of cure of defaults as called for under the plan or of additional post-confirmation defaults could have been determined.
Based on the record before it, the Court finds that Debtor is not entitled to relief pursuant to Rule 60(b)(3). Chase's allegations as to payment status and its less than artful assertion of grounds for stay relief were not proven to be fraudulent, and no other conduct of Chase is alleged as a basis for relief under Rule 60(b)(3).
It should be noted that the Debtor has leveled her Rule 60(b)(3) attack solely on the basis of Chase's allegations in the original § 362(d) motion. She has not contended that there was fraud or misconduct of Chase, for Rule 60(b)(3) purposes, in its submission of an order on the outstanding stay relief motion after Chase had withdrawn its objection to confirmation and the plan had been confirmed. The only allusion in this regard is a reference in the motion to a letter from Chase's counsel dated December 9. Ample opportunity existed after February 9 to attack the Order if it was inconsistent with any representation made on behalf of Chase in December.
Rule 60(b)(6)
Debtor also seeks relief under Rule 60(b)(6), which allows a court to relieve a party from judgment for "any other reason justifying relief from the operation of the judgment." Fed.R.Civ.P. 60(b)(6). Relief under this provision should only be granted in extraordinary circumstances. Liljeberg v. Health Services Acquisition Corp., 486 U.S. 847, 864, 108 S.Ct. 2194, 2204, 100 L.Ed.2d 855 (1988).
In this circuit a motion brought under clause (6) must be based on some other reason than the five reasons preceding it under the rule. Anderton, 00.1 I.B.C.R. at 8, citing Molloy v. Wilson, 878 F.2d 313, 316 (9th Cir. 1989). In the present case the Debtor's allegations fall under Fed.R.Civ.P. 60(b)(1) and (3) and have already been addressed. No separate or independent argument is asserted under Fed.R.Civ.P. 60(b)(6). Relief is not warranted.
CONCLUSION
Based on the foregoing the Debtor's Motion to Set Aside Order Granting Relief from Automatic Stay is DENIED.