January 22, 2014
Richard Kocher Jr., Petitioner,
Ralph Smith, Respondent.
Barry Howard Friedman, Esq. Attorney for the Plaintiff.
Ralph Smith Defendant, pro se.
FRANK M. MORA, J.
Via letter dated January 9, 2014, petitioner requests that the Court reconsider its Order dated January 6, 2014 which vacated a default judgment and warrant of eviction entered on December 16, 2013. The judgment was vacated sua sponte after discovering that the instant summary proceeding was filed after the respondent had already filed for bankruptcy. The Court vacated the judgment ruling that the action was void because the bankruptcy filing date automatically stays the action, including commencement. West's Practice Guide § 10:57. Petitioner seeks to have the judgment reinstated, arguing that he did not get a notice of the bankruptcy until after respondent filed the summary proceeding. Petitioner further argues that since this matter was commenced after the bankruptcy filing, the filing does not void the action altogether, but merely stays continuation of the action until the bankruptcy is resolved. This is not correct. Notwithstanding, the default judgment is reinstated for reasons explained herein.
As a preliminary matter, although not identified as such, petitioner's application is made pursuant to C.P.L.R. § 2221(d) - leave to reargue this Court's decision. A motion to reargue made pursuant to C.P.L.R. § 2221(d) is designed to afford a party the "opportunity to establish that the court overlooked or misapprehended the relevant facts, or misapplied a[ny] controlling principle of law. Its purpose is not to serve as a vehicle to permit the unsuccessful party to argue once again the very questions previously decided." McGill v. Goldman et al., 261 A.D.2d 593 (2d Dept. 1999); Pro Brokerage, Inc., v. Home Insurance Co., 99 A.D.2d 971 (1st Dept. 1984); C.P.L.R. § 2221(d).
The court hereby grants the motion to reargue, vacates its Order dated January 6, 2014, and reinstates the default judgment entered on December 16, 2013, as dictated by the controlling principles of law pertaining to this issue:
Contrary to petitioner's claim, it is well recognized that actions taken in violation of an automatic stay are void even when the acting party had no actual notice of the stay. Carr v. McGriff, 8 A.D.3d 420 (2d Dept. 2004); In re Morway, 2002 Bankr. Lexis 2065 (2002) citing Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 685, 691 (2nd Cir. 1994); In re 48th Street Steakhouse, Inc., 835 F.2d 427 (2nd Cir. 1987); Federal Ins. Co. v. Sheldon, 150 B.R. 314 (S.D.NY 1993); see also, Constitution Bank v. Tubbs, 68 F.3d 685, 691 (3d Circ. 1995)(automatic stay effective regardless of whether the other parties to the stayed proceeding are aware that a bankruptcy petition has been filed). In short, the bankruptcy stay takes effect immediately upon the filing of a bankruptcy petition. In re Morway, 2002 Bankr. Lexis 2065 (2002) citing In re Soares, 107 F.3d 969, 975 (1st Cir. 1997). As such, the Second Department has ruled that the mere commencement of an action against a debtor following a bankruptcy stay is prohibited and voids the action. Carr v. McGriff, 8 A.D.3d 420 (2d Dept. 2004). In particular, "[P]roceedings or actions described in section 362 (a)(1) [including the commencement of an action] are void and without vitality if they occur after the automatic stay takes effect." Carr v. McGriff, 8 A.D.3d 420 (2d Dept. 2004); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (1994). Accordingly, the Appellate Term for the Second Department also follows the rule that commencement of a summary proceeding after a petition in bankruptcy is filed renders the commencement of the action void too, and in effect, a nullity. Yen-Ching Chen et al v. Dickerson, 17 Misc.3d 61 (App. Term, 2d Dept. 2007).
In Yen-Ching Chen, petitioner filed a summary proceeding approximately three (3) weeks after respondent had filed for bankruptcy and sought to enforce a final judgment. The Appellate Term granted the respondent-tenant's motion to dismiss the petition and deemed the summary proceeding a nullity finding that the summary proceeding was commenced in violation of the automatic stay provisions of the United States Bankruptcy Code, and that any proceedings or actions described in section 362 (a)(1) are void if they occur after the automatic stay is in effect. Yen-Ching Chen et al v. Dickerson, 17 Misc.3d 61 (App. Term, 2d Dept. 2007).
Notwithstanding the foregoing, it is relevant to highlight that the Carr case had already carved out a narrow exception to this rule, which the Yen-Ching case did not fall within, but that the instant matter does. Specifically, the Carr Court ruled that where an action was commenced after the filing of a bankruptcy petition, the court was not deprived of jurisdiction over the action if plaintiff had "ceased prosecution of the action when informed of the bankruptcy proceeding." Carr v. McGriff, supra at 65. Instead, the proceedings would be suspended and could be revived after the stay was lifted. Carr v. McGriff, supra at 65; compare Yen-Ching Chen et al v. Dickerson, 16 Misc.3d 61, 64 (App. Term, 2d Dept. 2007) citing International Fid. Ins. Co. v. European Am. Bank, 129 A.D.2d 679 (1987).
Fatal to petitioner in the Yen-Ching case was that the petitioner pursued the matter even though petitioner knew the respondent had filed for bankruptcy. What preserves the instant action from dismissal is that the landlord here ceased prosecution of the instant action upon learning of the bankruptcy filing. The landlord in this case never sought to obtain a judgment for rent covering the rental period prior to the bankruptcy filing once he became aware of the bankruptcy proceeding. Compare, Yen-Ching Chen et al v. Dickerson, supra. In fact, no "action" [other than filing the petition] was taken by petitioner while the bankruptcy proceeding was pending. It was not until after the Bankruptcy Order of Final Decree was rendered [B.J. Cecelia G. Morris, dated November 17, 2013] that petitioner sought a default money judgment and warrant of eviction from the Court - which was for fair use and occupancy of the rent covering August 2013 through December 2013 - the period of time after the bankruptcy filing. Petitioner never attempted to seek a default judgment for rental arrears that included months prior to the bankruptcy filing (March 2013 - July 2013) - the period exempt from recovery due to the bankruptcy filing.
THEREFORE, based upon the particular facts of this case as set forth herein, it is now
ORDERED that petitioner's motion to reargue is granted; and it is further
ORDERED that the Order of this Court, dated January 6, 2014, is hereby vacated; and it is further
ORDERED that the matter is restored to the calendar and the default judgment and warrant of eviction entered on December 16, 2013 are hereby reinstated.