In re Soares

Napoleon Soares (defendant) purchased a home with a $70,000 loan from Brockton Credit Union (BCU) (plaintiff), which held a first mortgage on the property. When Soares fell behind on his payments, BCU initiated foreclosure proceedings in state court. On March 22, 1995, BCU requested that the court issue an order of default and a judgment authorizing foreclosure. On March 24, Soares filed a bankruptcy petition, thereby triggering the automatic stay. He immediately notified BCU of the filing, but neither party notified the state court. On April 10, the state court issued a default order. The following week, the court entered a foreclosure judgment. Soares continued to miss payments. In June, BCU sought relief from the automatic stay but did not alert the bankruptcy court to the previous activity in the state court. The bankruptcy court granted BCU’s motion; Soares coincidentally paid the postpetition arrearage to BCU on that same day. After Soares missed his November payment, BCU proceeded with the foreclosure sale and ultimately purchased the property. Soares moved for relief in the state court on the grounds that its foreclosure judgment had violated the stay. The court denied his motion, concluding that its April actions had been “ministerial.” BCU then requested that the bankruptcy court clarify whether its June order lifting the stay applied to the earlier state court decisions. The bankruptcy court responded by lifting the automatic stay retroactively to March 24, 1995, with the result that the state court’s default order and foreclosure judgment would not be in violation of the stay. The bankruptcy court denied Soares’ motions to reconsider its clarification order and to void the foreclosure sale. The district court affirmed. Soares appealed.