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Ford v. Board of Managers of Cameo Townhouses at Massapequa

February 18, 2009

MARGARET FORD APPELLANT
v.
BOARD OF MANAGERS OF CAMEO TOWNHOUSES AT MASSAPEQUA APPELLEE.



The opinion of the court was delivered by: Spatt, District Judge

MEMORANDUM OF DECISION AND ORDER

This is an appeal by Margaret Ford ("Ford" or the "Debtor") from a decision of the United States Bankruptcy Court for the Eastern District of New York (Craig, J.) granting a motion by the Board of Managers of Cameo Townhouses ("Cameo") to lift the automatic bankruptcy stay attaching to the action as dictated by 11 U.S.C. § 362(a)(3), (4), and (k)(1). Cameo seeks to name Ford in a foreclosure action with respect to certain condominium premises located at 75 Townhouse Drive, Massapequa Park, N.Y. 11752 (the "Premises").

I. BACKGROUND

On June 12, 2006, Ford filed a pro se voluntary petition for relief pursuant to Chapter 13 of the Bankruptcy Code because of an alleged attempt by a mortgage company, ZBT Holdings, Inc. ("ZBT"), to evict her and her husband from the Premises. By way of background, appellant states that in December 1999, she and her husband purchased the Premises for approximately $170,000 and have been continuously living there since that time. The appellant contends that acting under the guise of refinancing her mortgage, agents of First United Mortgage Banking Corp., a mortgage banking institution and an affiliate of ZBT, replaced Ford and her husband as the record owners of the Premises with its own designee and simultaneously secured both a first and second mortgage against the Premises. The appellant alleges that First United and ZBT then used their fraudulently acquired liens and title ownership to try to dispossess the Fords from the Premises. Ford's claims of fraud and forgery are presently the subject of an adversary proceeding to clear title to the Premises.

On October 3, 2006, the law firm of Hughes Hubbard & Reed LLP agreed to represent Ford in her bankruptcy proceeding on a pro bono basis. On December 13, 2006, the case was converted from a Chapter 13 proceeding to Chapter 11. On or about July 31, 2006, ZBT moved for relief from the automatic stay in order to execute a warrant of eviction that it allegedly obtained from New York City Landlord and Tenant Court. The Court finds no order from the Bankruptcy Court granting or denying ZBT's motion in the record of this case.

Instead, on July 12, 2007, the Bankruptcy Court entered a Stipulation and Order of Settlement between the Fords and ZBT regarding the disputed ownership of the Premises. The Settlement provided in essence that ZBT would pass legal title to the Fords for the amount of $205,000. However, the settlement was never consummated because the Fords were unable to obtain a loan for the settlement amount, which they attribute to the sub-prime mortgage crisis. The appellant contends that Cameo was aware of the settlement and her interest in the Premises throughout the underlying case.

On January 7, 2008, Cameo filed a Notice of Lien for Unpaid Common Charges against the Premises in the Nassau County Clerk's Office. Further, on February 13, 2008, Cameo filed a motion in the Bankruptcy Court, seeking an order lifting the automatic stay to permit Cameo to name the Fords in a foreclosure action based on its lien. According to Ford, Cameo sought to foreclose on its lien and recover condominium common charges in the amount of $3,540, late charges in the amount $1,020, and attorney fees and costs in the amount of $800.

On March 17, 2008, Judge Craig held a hearing on Cameo's motion and on the appellant's cross-motion for damages incurred by violation of the automatic bankruptcy stay. The court found that Cameo was not adequately protected in its interest; that it had a right to commence an action against ZBT to recover the common charges; and that if it needed to name Ford in order to foreclose, it should be so permitted. (Tr. of Hearing, March 17, 2008, at 16). Accordingly, on May 20, 2008, Chief United States Bankruptcy Judge Carla E. Craig entered an Order granting relief from the automatic stay, which provided:

* that application of Cameo Townhouses is granted modifying the automatic stay to allow Cameo Townhouses, its successors and/or assigns, to commence and/or continue with a foreclosure action against ZBT Holdings Inc., with respect to the Premises; and

* that application of Cameo Townhouses is granted modifying the automatic stay to allow Cameo Townhouses, its successors and/or assigns to name Debtor, Margaret Ford, as a Defendant in any foreclosure action with respect to the Premises.

Order, Case No. 806-71327, May 20, 2008.

The appellant contends that after the Order issued, she attempted to pay Cameo the outstanding common charges, but the funds were returned. The plaintiff asserts that this evidences Cameo's intention to seek funds beyond those owing as a result of the unpaid common charges.

In this appeal, Ford contends that the Bankruptcy Court should have determined that her interest in the Premises was protected by the automatic stay and that Cameo's creation of its lien was a violation of the automatic stay, rendering the lien void ab initio and subjecting Cameo to mandatory and punitive damages for the violation. Further, the appellant contends that Cameo was without standing to seek stay relief as ZBT was the sole party responsible for payment of the common charges. Finally, the appellant contends that the Bankruptcy Court should have, at the very least, circumscribed the relief from stay to the amounts sought to be collected. Ford alleges, that the open-ended relief granted by the Bankruptcy Court leaves her vulnerable to significant costs and expenses.

II. DISCUSSION

A. Standard of Review

A district court hearing an appeal from a bankruptcy court reviews that court's findings of fact under the "clearly erroneous" standard, see Fed. R. Bankr. P. 8013, while its conclusions of law are reviewed under the de novo standard. In re Vouzianas, 259 F.3d 103, 107 (2d Cir. 2001); In re Arochem Corp., 176 F.3d 610, 620 (2d Cir. 1999) (holding that "we review the bankruptcy court decision independently, accepting its factual findings unless clearly erroneous but reviewing its conclusions of law de novo") (citation omitted); In re Bennett Funding Group, Inc., 146 F.3d 136, 138 (2d Cir. 1998) (same) (citations omitted); see also In re Porges, 44 F.3d 159, 162 (2d Cir. 1995) (same) (citations omitted).

"On appeal, a district court 'may affirm, modify, or reverse a bankruptcy judge's judgment, order, or decree or remand with instructions for further proceedings.'" In re McNally, No. 02-CV-85, 2003 U.S. Dist. LEXIS 25856, at *3 (S.D.N.Y. June 2, 2003) (citing Fed. R. Bankr. P. 8013).

B. As to Whether the Automatic Stay Attached to Ford's Interest in the Premises

A petition filed under the Bankruptcy Code triggers an automatic stay, applicable to all entities, with regard to "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;" "any act to create, perfect, or enforce any lien against property of the estate;" and "any act to collect, assess, or recover a claim against the debtor that ...


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