CONTESTED MATTER

ORDER (I) DENYING DEBTOR'S MOTION TO SET ASIDE FORECLOSURE SALE AND (II) GRANTING MOVANT'S MOTION FOR AN ORDER ANULLING AUTOMATIC STAY NUNC PRO TUNC TO FILING DATE

Paul Baisier, U.S. Bankruptcy Court Judge.

This case was filed on June 5, 2017 (the "Filing Date"). On June 30, 2017, the Debtor filed a Motion to Set Aside Foreclosure Sale (Docket No. 12)(the "Motion to Set Aside").1 On July 26, 2017, this Court, after an evidentiary hearing, entered an Order (Docket No. 23)(the "Prior Order") dismissing this case because the Debtor is not an eligible debtor under 11 U.S.C. § 109.2 The Court in the Prior Order retained jurisdiction to determine any issues regarding the automatic stay in this case, including any resolution of the Motion to Set Aside.3

On September 1, 2017, Wells Fargo Bank, N.A. and U.S. Bank National Association (collectively, "Movant") filed a Motion for An Order Confirming No Automatic Stay Is In Effect, Or In The Alternative, Motion For Relief from the Automatic Stay Nunc Pro Tunc (Docket No. 40) (the "Stay Motion"; with the Motion to Set Aside, collectively, the "Motions"). On the same day, the Debtor filed a Brief to [sic] Support of Motion to Set Aside Foreclosure Sale (Docket No. 41).

The Court held an evidentiary hearing on the Motions on September 25, 2017, at 1:30 p.m. (the "Hearing"). The Debtor was represented at the Hearing by its counsel and by D. Michelle Smith, the trustee of the Debtor trust (the "Trustee"). Movant was represented at the hearing by counsel. Also represented by counsel at the Hearing was Robin Warren Properties, an entity that claims to have purchased the property located at 1278 Village Run, Brookhaven, Georgia (the "Property") at a foreclosure sale conducted by Movant on June 6, 2017 (the "Foreclosure Sale"). Two (2) witnesses testified at the Hearing — the Trustee and Matthew Suber ("Mr. Suber"), an attorney with the law firm of Aldridge Pite, LLP ("AP").

FINDINGS OF FACTS AND CONCLUSIONS OF LAW4

There is no dispute that Movant conducted the Foreclosure Sale on June 6, 2017, while the automatic stay of 11 U.S.C. § 362(a) was in effect in this case. The Debtor asserts that the Foreclosure Sale is void as a result.5 Movant admits that it violated the automatic stay by conducting the Foreclosure Sale, but asserts that the Court should annul the stay nunc pro tunc to the Filing Date, citing to In re Howard, 391 B.R. 511 (Bankr. N.D. Ga. 2008), because (i) Movant was unaware of the bankruptcy filing when it conducted the Foreclosure Sale, (ii) the Debtor's conduct in this case, the Prior Case, and with respect to the loan secured by the Property (the "Loan") has been inequitable, and (iii) there is no equity in the Property that could benefit either the Chapter 7 estate or the Debtor.

The Debtor, both at the Hearing and in its brief, directed the Court to In re Cruz, 516 B.R. 594 (9th Cir. BAP 2014). The Debtor asserted that Cruz stands for the proposition that Movant was required to act immediately to seek nunc pro tunc relief, and having failed to do so, is foreclosed from obtaining that relief. Rather than standing for that proposition, however, Cruz utilizes the same two (2) focus points as Howard (i.e. notice and inequitable conduct), but then provides a non-exhaustive list of twelve (12) additional factors to be considered in connection with a request for nunc pro tunc relief. Cruz, at 603-604. Two (2) of those factors, numbers 9 and 10, include the timeliness of the request. Cruz, at 604. Otherwise, the test set forth in Cruz is not materially different from the method of analysis outlined in Howard.

This Court agrees with Howard and Cruz that requests to annul the stay are sui generis, and require a close examination of all of the facts. Important to that examination, but not by themselves determinative, are whether the party requesting the annulment was aware of the stay, and whether the debtor has engaged in inequitable conduct. Cruz, at 603; Howard, at 518. In the end, the Court has to "balance the equities", or look at the "totality of the circumstances", to determine whether the stay should be annulled nunc pro tunc.

Notice

As to the issue of notice of the bankruptcy filing, the evidence presented at the Hearing is in equipoise. The Trustee testified that she called AP, the law firm that conducted the Foreclosure Sale, between 8:30 and 9:00 a.m. on the day of the Foreclosure Sale (June 6) to advise AP, as counsel for Movant, that the Debtor had filed for bankruptcy protection the day before (on June 5). She presented telephone records that showed those calls, one of which was thirteen (13) minutes long (the others were much shorter). By contrast, Mr. Suber testified that AP schedules approximately three hundred (300) foreclosure sales per month, only proceeds with about half of those (i.e. reschedules or otherwise does not proceed with the other half), and has procedures for addressing telephone calls received on foreclosure day in which a borrower claims to have filed for bankruptcy protection. Those procedures require the telephone call to be routed to Mr. Suber (or one of his attorney colleagues if he is not available), and noted in AP's records. No such call was routed to Mr. Suber. Based on AP's records, Mr. Suber testified that the Trustee did call AP at around 8:30 a.m. on June 6 but only mentioned a state court lawsuit in that call. That was followed by an e-mail from the Trustee at around 8:45 a.m. with a copy of a state court complaint attached. Mr. Suber further stated that the first time that AP was advised of a bankruptcy filing was at 11:03 a.m., when AP received an e-mail from the Trustee with the filing information attached. By that time, the Foreclosure Sale, which occurred between 10:32 and 10:42 a.m., had already been cried and the Property sold.

The same e-mails from the Trustee to AP were presented by both Movant and the Debtor. They showed an e-mail of the state court lawsuit around 8:45 a.m. on June 6 and an e-mail of the bankruptcy information just after 11:00 a.m. that same day, all consistent with AP's records. The Trustee explained that she sent those documents at those times because that is what the person at AP that she spoke to (not Mr. Suber) asked for at those times.

The evidence presented did not resolve the question of whether Movant had notice of the bankruptcy filing before the Foreclosure Sale. It is possible that the Trustee initially did not mention the bankruptcy filing, and only mentioned it later — but that seems unlikely, given that this case was filed just the day before and should have been the reason for the calls. On the other hand, it does not seem likely that a professional foreclosure firm like AP that was advised of a bankruptcy filing would proceed in the face of the filing, and Mr. Suber testified that it would not have. Both witnesses were credible. Consequently, it is not clear from the evidence presented whether Movant had notice of the filing of this bankruptcy case at the time the Foreclosure Sale took place.

Conduct of the Debtor

The issue of the conduct of the Debtor militates in favor of Movant. Although the Trustee testified that Movant induced her to default on the Loan6 in 2009 and has not adequately assisted her since that time in pursuing a modification of the Loan,7 it is undisputed that the Debtor has made few payments on the Loan since 2009, and none since 2011. The Trustee lives in the Property, and has since 2004, so she has occupied the Property for almost six (6) years without making any payments on the Loan.

Further, when Movant finally scheduled a foreclosure sale for the first Tuesday in January, 2017, the Trustee filed a pro se Chapter 7 bankruptcy case on behalf of the Debtor. When that bankruptcy case was dismissed because this Court determined that the Debtor was not an eligible Chapter 7 debtor and the Debtor, an entity, was not represented by counsel, and Movant advertised a second foreclosure sale for June 6, 2017, the Trustee filed this Chapter 7 case, again pro se and with precisely the same infirmities as the first case.8 These facts support the grant of the relief requested by Movant in the Stay Motion.

Equity in the Property

Based on the evidence presented, there is no equity in the Property over and above the amount of the Loan. The Debtor admitted as much in a letter she sent to the Movant in May of 2017 suggesting, among other things, that the Loan could be resolved by a "short sale", a term that means that the Property would not sell for enough to pay the Loan in full.9 It is no surprise that there is no equity in the Property, however, given that over $200,000 in interest on the $414,400 Loan would have accrued since the Debtor stopped making regular payments in 2009.10 Based on the evidence presented, the amount of the Loan exceeds $500,000, and may be closer to $600,000. The Debtor scheduled the Property value at $430,000. That lack of equity11 also means that, had Movant come to the Court on June 6 and requested immediate relief from the automatic stay to conduct the Foreclosure Sale that day, the request would likely have been granted.12 These facts also support the grant of the relief requested by Movant in the Stay Motion.13

Goals of the Debtor

Finally, there is the question of whether the Trustee has any hope of achieving in a bankruptcy setting the goals that she has — to retain the Property and reorganize the Loan. In filing a Chapter 7 case, the Debtor has foreclosed the possibility of doing either of those things here. Chapter 7 does not contemplate a reorganization and generally does not permit the retention of secured property in the absence of reaffirmation by the Debtor of the related secured debt,14 which does not appear possible here. If retention of the Property and reorganization of the Loan were the goals, a Chapter 11 or Chapter 13 case would have been the appropriate vehicle.15 The Trustee did not pursue a reorganization case, and the time for her to have done so has now passed.

In light of the foregoing, it is hereby ORDERED that the Motion to Set Aside is DENIED; and it is further

ORDERED that the Stay Motion is GRANTED, and the automatic stay is hereby ANULLED nunc pro tunc to the Filing Date.

The Clerk is directed to serve this Order and Notice on the Debtor, Debtor's Counsel, Respondent, Respondent's Counsel, the Chapter 13 Trustee, all creditors, and all parties in interest in this case.

IT IS ORDERED.