In re Siciliano

In September 1984, Leonard Siciliano (debtor) borrowed $17,000 from Prudential Savings and Loan Association (Prudential) (creditor). The loan was secured by a mortgage on Siciliano’s residence. Siciliano fell behind on his mortgage payments, and in May 1989, Prudential brought a state-court action to foreclose on the residence. The state court awarded Prudential $19,838.99, and a sheriff’s sale of the residence was scheduled for December 4, 1989. On December 1, 1989, Siciliano filed for Chapter 13 bankruptcy, triggering an automatic stay of Prudential’s foreclosure action. Siciliano again failed to make his required payments to Prudential, and Prudential sought relief from the automatic stay. The bankruptcy court held that if Siciliano defaulted on his payments again, Prudential could proceed with its foreclosure action. Siciliano subsequently defaulted again, and the bankruptcy court granted relief from the automatic stay in June 1991. Prudential began working to arrange the foreclosure. Meanwhile, on November 7, 1991, the bankruptcy court dismissed Siciliano’s bankruptcy case at the trustee’s request after Siciliano failed to make payments required under his Chapter 13 plan. Prudential scheduled a sheriff’s sale of Siciliano’s residence for December 2, 1991. However, Siciliano filed a second Chapter 13 bankruptcy petition on November 29, which triggered another automatic stay. Despite the bankruptcy filing, the sheriff’s sale occurred on December 2. The bankruptcy court subsequently held that the December 2 sale was void. Prudential asked the bankruptcy court to reconsider and moved for retroactive relief from the automatic stay to validate the December 2 sale. The bankruptcy court denied Prudential’s motion, holding that any sale held in violation of the automatic stay was void from the outset. The district court affirmed, and Prudential appealed.