JANET C. HALL, District Judge.
Debtor-appellee, Shaftuga S. Toor, filed a Chapter 11 Petition in the United States Bankruptcy Court for the District of Connecticut after having two prior filings dismissed within the previous year. She named appellant Eastern Savings Bank ("ESB") as a creditor. ESB appeals from an Order of the Bankruptcy Court (Shiff, J.) granting Toor's Motion to Impose the Automatic Stay, contending that the Bankruptcy Court erred by imposing an automatic stay retroactively and by ruling that Toor had filed the instant Petition in good faith. For the reasons discussed below, the Order of the Bankruptcy Court is affirmed.
In July 2007, appellee Shaftuga S. Toor and her husband, Muhammad J. Toor, executed a mortgage granting appellant ESB a security interest in the property at 8-10 Sunshine Avenue, Greenwich, Connecticut. ¶ 4.
Since 2009, Toor has filed for bankruptcy a total of four times. On December 23, 2009, she filed under Chapter 7, and was granted a discharge on April 22, 2010. ¶ 7. She filed under Chapter 13 on July 25, 2010, which case was dismissed without prejudice on October 25, 2010. ¶ 8; Order Dismissing Case, Appendix to Appellant's Br. at A4. On February 27, 2011, Toor filed under Chapter 11, which case was dismissed upon her motion on June 14, 2011. ¶ 9.
ESB commenced a foreclosure in the Superior Court for the Judicial District of Stamford. ¶ 12. On May 2, 2011, the Superior Court found that Toor's total debt to ESB was $1,835,789.26, and the fair market value of the property was $1,040,000. ¶ 12. The Superior Court also set the last law day for July 12, 2011. ¶ 12.
On July 8, 2011, Toor filed the instant Chapter 11 Petition. ¶ 1. On July 10, she filed a Motion to Impose an Automatic Stay. ¶ 14. The Bankruptcy Court held a hearing on Toor's Motion on July 26, 2011, and determined that an evidentiary hearing would be necessary to establish whether clear and convincing evidence showed that Toor's fourth bankruptcy had been filed in good faith. See Tr. Hr'g held July 26, 2011 (Doc. No. 1-35) at 14-15. The Bankruptcy Court imposed a stay until the evidentiary hearing could be held. See Tr. Hr'g held July 26, 2011 at 17.
An evidentiary hearing was held on Toor's Motion on October 5, 2011. See Tr. Hr'g held Oct. 5 Hearing (Doc. No. 1-35). Mr. Toor, the debtor-appellee's husband, was the only witness to testify. Id. He testified that his son, who lives at the house at 8 Sunshine Avenue, had become a doctor of internal medicine and earns about $250,000 per year. Id. at 48, 51. He also testified that the unimproved lot at 10 Sunshine Avenue had last been assessed at around $400,000. Id. at 50. After hearing testimony, the Bankruptcy Court concluded that Toor had "sustained the burden of showing by clear and convincing evidence that there is enough money to ... get a plan confirmed," and therefore that the current case had been filed in good faith. Id. at 74-75. Based on that finding, the Bankruptcy Court was "satisfied... that the debtor should be given the opportunity ... to take advantage of the automatic stay" pursuant to section
After the Bankruptcy Court ruled, it had the following exchange with counsel for ESB:
Id. at 77-80. On October 17, the Bankruptcy Court entered a written Order Imposing
This appeal followed. On appeal, ESB contends that the Bankruptcy Court erred by imposing a stay retroactively, to be effective on a date prior to the written Order on October 17, and that the Bankruptcy Court erred in finding that Toor's instant bankruptcy Petition was filed in good faith. See Statement of Issues on Appeal (Doc. No. 6).
This court has jurisdiction to review final judgments, orders, and decrees of the bankruptcy court under 28 U.S.C. § 158(a)(1). On appeal, a district court will review de novo a bankruptcy court's conclusions of law, including its determination of the legal standards applicable. Fed. R. Bankr.P. 8013; In re Refco Inc., 505 F.3d 109, 116 (2d Cir.2007); In re Northeastern Contracting Co., 233 B.R. 15, 18 (D.Conn.1999). Mixed questions of law and fact are also subject to de novo review. Travellers Intern., A.G. v. Trans World Airlines, Inc., 41 F.3d 1570, 1575 (2d Cir. 1994).
Findings of fact are reviewed for clear error. In re Stoltz, 315 F.3d 80, 87 (2d Cir.2002). A finding is clearly erroneous when the reviewing court is left with the definite and firm conviction that a mistake has been made. In re Ames Dept. Stores, Inc., 582 F.3d 422, 426 (2d Cir. 2009) (citing United States v. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)).
The issues on appeal as stated by ESB are:
Statement of Issues on Appeal (Doc. No. 6).
ESB argues that the Bankruptcy Court committed reversible error by imposing an automatic stay on October 17, 2011, retroactive to July 8, 2011. See Appellant's Br. (Doc. No. 9) at 4-5. Toor contends that the effective date of the Order imposing an automatic stay does not affect the substantial rights of the parties, and that therefore any error by the Bankruptcy Court as to the effective date of the stay is harmless error. See Appellee's Br. (Doc. No. 13) at 5-9.
As a preliminary matter, this court notes that, at the hearing held July 26, the Bankruptcy Court purported to order the imposition of the automatic stay, to be effective until a full evidentiary hearing could be held. See Tr. Hr'g Held July 26 (Doc. No. 1-35) at 17. There is nothing in the record to indicate that a written order to that effect was ever entered on the docket. Bankruptcy Rule 5003(a) provides:
Fed. R. Bankr.P. 5003(a). Rule 9021 provides: "[a] judgment or order is effective when entered under Rule 5003." Fed. R. Bankr.P. 9021. Thus, although the court purported to impose the automatic stay on July 26, no such order became effective prior to the hearing on October 5. See In re Barbieri, 199 F.3d 616, 622 (2d Cir. 1999) (noting that a conversion was not yet effective where it had not yet been entered on the docket pursuant to Rule 5003).
At the hearing held on October 5, the Bankruptcy Court found that the Petition had been filed in good faith and ordered a stay imposed pursuant section 362(c)(4). See Tr. Hr'g Held Oct. 5 at 76. Responding to an inquiry from counsel for ESB, the Bankruptcy Court first that a temporary stay had been in place since July 26, 2011, and, after counsel for ESB noted that the law day in the state court bankruptcy action had passed on July 12, 2011, the Bankruptcy Court responded that the law day could not defeat the opportunity provided by Congress in the Bankruptcy Code, implying that the imposition of the stay defeated the running of the law day. See id. at 78-79. On October 17, 2011, the Bankruptcy Court entered an Order imposing the automatic stay against all creditors. See Order Imposing Stay (Doc. No. 1-16). The Order is dated October 17, 2011, and reads in full:
Id. Toor's Motion to Impose Automatic Stay does not request that the stay be imposed as of any specific date. See Mot. to Impose Automatic Stay (Doc. No. 1-3). Given the Rules' insistence on docketed orders, any language from the bench suggesting that a stay would be imposed retroactively is unavailing to create an inference that a retroactive stay was imposed in light of the text of the written Order. Therefore, this court finds that the Bankruptcy Court imposed the stay on the date of the entry of the Order on the docket — October 17, 2011 — as authorized by 11 U.S.C. § 362(c)(4)(C) and Fed. R. Bankr.P. 5003(a) and 9021. Because it does not appear from the record that the Bankruptcy Court imposed a retroactive stay by its October 17 Order, this court need not decide whether such an order would be valid.
Toor argues that the Bankruptcy Court's stay, retroactive or otherwise, worked no effect upon the running of her law days because Connecticut mortgage law had "automatically reopened" the Superior Court's judgment of foreclosure when she filed the instant Petition on July 8, 2011, requiring ESB to reestablish her law day by motion to the Superior Court. See Appellee's Br. at 6-8. Connecticut law provides that, upon filing of a bankruptcy petition:
Conn. Gen.Stat. § 49-15(b). ESB responds that Toor may not raise this argument for the first time on appeal, see Appellant's Reply Br. (Doc. No. 14) at 1-5, and that the Connecticut statute at issue is preempted by federal bankruptcy law, see Appellant's Reply Br. at 5-9.
The question — of whether the law day had, in fact, passed and Toor had lost her equity of redemption — was raised at the July 26 hearing. See Tr. Hr'g Held July 26 at 7. At that hearing, ESB claimed that it had title to the property as of the passage of the law day on July 12, and Toor responded that she had filed a motion with the Superior Court to stay the running of the law day based on her Chapter 11 filing and her pending Motion to Impose Automatic Stay in the Bankruptcy Court. Id. Although Toor claimed that title remained with her, apparently the Superior Court had not yet acted on Toor's Motion to Stay the law day as of July 26. See id. at 8, 13.
On October 5, although ESB brought up — two times — its assertion that Toor's July 12 law day had passed, see Tr. Hr'g Held Oct. 5 at 17, 78, neither party made any representation to the Bankruptcy Court as to whether the Superior Court had made any ruling on Toor's Motion to Stay the law day, nor did the Bankruptcy Court inquire. Further, the Bankruptcy Court was not asked to, and did not rule on, the effect of section 49-15(b) on the parties' state court action, or on who held title to the property, nor is there evidence to support such a determination in the record on this appeal. Therefore, insofar as the parties seem to invite this court to consider the effect of section 49-15(b) upon the action in state court, see Appellee's Br. at 6-8; Appellant's Reply Br. at 1-5, this court declines to do so. The court further rejects the parties' suggestion that section 49-15(b) is relevant to this court's review of the Bankruptcy Court's imposition of an allegedly retroactive stay or to the Bankruptcy Court's determination that Toor's instant Petition was filed in good faith.
The second issue ESB raises on appeal is whether the Bankruptcy Court erred in ruling that Toor met her burden of proving by clear and convincing evidence that she filed her fourth bankruptcy Petition in good faith,
The Second Circuit has treated bankruptcy courts' findings of bad faith based on serial bankruptcy filings as finding of fact reviewable for clear error. In re
This court first notes that the Bankruptcy Court applied the proper legal standard to its determination of good faith: a showing of clear and convincing evidence. See, e.g., Tr. Hr'g Held Oct. 5 at 8 ("the Court may order the stay to take effect ... only if the ... debtor[] demonstrates that the filing of a latter case is in good faith ... by clear and convincing evidence"); Id. at 13 ("[Toor must] show by clear and convincing evidence that [she] could satisfy the obligations of [her] debt"); Id. at 16 ("if [Toor] could show by clear and convincing evidence that [she could get a plan approved, she] should have an opportunity to file the plan"); Id. at 45 ("the only issue before me ... [is] the burden, and it's a heavy burden, of [Toor] to show that a plan is feasible by clear and convincing evidence"); Id. at 73 ("[t]he heavy burden is upon the debtor... to [rebut the presumption of bad faith] by clear and convincing evidence").
Courts dispute the appropriate substantive considerations for a showing of good faith under section 362(c)(4)(B). See In re Ferguson, 376 B.R. 109, 119-20 (Bankr.E.D.Pa.2007) ("[t]he appropriate methodology for determining good faith under § 362(c)(3) and § 362(c)(4) has been the subject of debate in the courts and there is some division of authority on the issue"); see also In re Whitaker, 341 B.R. 336, 345 (Bankr.S.D.Ga.2006) (using the statutory indicators found in sections 362(c)(3)(C) and 362(c)(4)(D) as the determinants of good faith); In re Sarafoglou, 345 B.R. 19, 24 (Bankr.D.Mass.2006) (construing good faith under section 362(c)(4) "to require that the Debtor demonstrate that she filed the Current Case to obtain legitimate bankruptcy law protection and relief, that she has sufficient resources to render her pursuit thereof meaningful, and that she is pursuing such protection and relief honestly"); In re Montoya, 333 B.R. 449, 457 (Bankr.D.Utah 2005) (interpreting "the substance of what it means to file a case in good faith" by "draw[ing] on prior cases interpreting the phrase `good faith' because Congress was presumptively aware of such case law when it [enacted this provision]"). In the context of confirming a plan filed under Chapter 11, the Second Circuit has held that "the good faith standard in the bankruptcy context... require[es] a showing that the plan was proposed with honesty and good intentions and with a basis for expecting that a reorganization can be effective." In re Koelbl, 751 F.2d 137, 139 (2d Cir.1984).
In this case, the Bankruptcy Court based its determination of good faith on Toor's evidence that she could propose a confirmable plan, sufficient to satisfy her obligations to ESB. See Tr. Hr'g Held Oct. 5 at 13; 16; 45. Toor offered testimony that 8-10 Sunshine Avenue consists of two separate properties: one a primary residence, and the other an unimproved lot assessed at around $400,000. Id. at 22-24; 36-37; 50. Mr. Toor testified that he had always planned to build on the unimproved lot, and sell that building to repay ESB, but had been unable to do so. Id. at 28. The Bankruptcy Court observed that the loan secured by property that was not the Toor's primary residence was potentially modifiable, while the loan secured by the
Mr. Toor's testified regarding his household's monthly income, and his son's role in that income. Mr. Toor testified that this son, who lives at 8 Sunshine Avenue, is a medical doctor and earns approximately $250,000 per year or $20,000 per month. Id. at 48, 51. The court excluded as hearsay Mr. Toor's testimony that his son had committed to contributing to household expenses, and the amount of that contribution, see id. at 51, 52, but allowed over ESB's objection Mr. Toor's testimony that the total combined income of members of his household was about $20,000 per month, see id. at 54, 55 ("The head of the household has firsthand information of what money comes into the household each month."). Mr. Toor further testified that the bank appraised the property at $1,040,000, and that he thought that between $4,000 and $6,000 could be paid toward the mortgage monthly.
Having heard the testimony of Mr. Toor, the Bankruptcy Court credited his assertion that the household had an income of about $20,000 a month. Id. at 75. The Bankruptcy Court further noted that there had been "[n]o suggestion that that wouldn't be enough. No suggestion was made that that would not continue." Id. Based on all of the evidence discussed above, the Bankruptcy Court concluded that Toor had "sustained the burden of showing by clear and convincing evidence that there is enough money to approve or to get a plan confirmed. It doesn't have to be beyond a reasonable doubt.... I heard nothing that disputed the case put on by [Toor] that there was enough family income to file and have a shot at confirming a plan." Id. at 74-75. This finding of clear and convincing evidence of good faith is supported by the record and is not clearly erroneous.
The Order of the Bankruptcy Court is hereby
