Soares v. Brockton Credit Union

UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

No. 96-2110

IN RE: NAPOLEON G. SOARES,

Debtor.

NAPOLEON G. SOARES,

Appellant,

v.

BROCKTON CREDIT UNION,

Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Joseph L. Tauro, U.S. District Judge]

Before

Selya, Circuit Judge,

Aldrich, Senior Circuit Judge,

and Boudin, Circuit Judge.

Michael P. Cashman for appellant.

Gary W. Cruickshank for appellee.

March 10, 1997

SELYA, Circuit Judge. "[T]he dead tree gives no
SELYA, Circuit Judge.

shelter." T.S. Eliot, The Waste Land, I, The Burial of the Dead

(1922). Like a shade tree, the automatic stay which attends the

initiation of bankruptcy proceedings, 11 U.S.C. 362(a) (1994),

must be nurtured if it is to retain its vitality. This appeal,

which pits a Chapter 13 debtor bent on saving his home against a

creditor bent on enforcing its rights under a mortgage, raises

issues which touch upon the degree of judicial protection that

the automatic stay invites. These issues are whether the

automatic stay precludes a state court from undertaking

ministerial acts after a bankruptcy filing; if not, what acts are

exempt under that rubric; whether a bankruptcy court may grant

retroactive relief from the automatic stay; and if so, what legal

standard it should apply in prescribing such an anodyne.

I. LAYING THE FOUNDATION
I. LAYING THE FOUNDATION

We begin by retracing the labyrinthine corridors

through which this litigation has passed. In 1990 the debtor,

Napoleon G. Soares, purchased a home in Brockton, Massachusetts.

He executed a $70,000 promissory note to the Brockton Credit

Union (BCU) and secured the note by a first mortgage on the real

estate. After sustaining injuries in a motorcycle accident,

Soares lagged in his monthly payments. BCU grew restive and

commenced foreclosure proceedings in the state superior court.

Soares did not file an answer. On March 22, 1995, BCU sent a

letter to the clerk of court seeking an order of default and a

judgment authorizing foreclosure. Two days later Soares filed a

2

bankruptcy petition, thus triggering the automatic stay. He

immediately gave notice to BCU, but neither party alerted the

state court. On April 10, with the stay still firmly in place, a

judge of that court issued the requested default order. One week

later, she authorized the entry of a foreclosure judgment.

Soares missed some post-petition mortgage payments. On

June 14, 1995, BCU, without apprising the bankruptcy court of the

orders previously obtained in the state proceedings, filed a

motion seeking relief from the automatic stay. The debtor's

then-counsel, Gerard Williamson, neglected to oppose BCU's

motion. The bankruptcy court granted the unopposed motion on

June 29 (the same day, coincidentally, that Soares, unbeknownst

to the judge, paid the post-petition arrearage). The court

subsequently refused to entertain a belated objection filed by

Williamson.

When Soares missed his November payment, BCU activated

the state court judgment. At the ensuing foreclosure sale, held

on November 29, BCU itself bid in the mortgaged premises and paid

approximately $14,200 in overdue municipal taxes to clear the

title. Soares thereafter sought relief in the state court on the

ground that the foreclosure judgment had been issued in

contravention of the automatic stay. The court denied the

motion, saying that its post-petition actions had been

"ministerial" and that any error was harmless.1

1Although Soares did not appeal from this ruling, BCU has
never urged it as a basis for res judicata or collateral
estoppel. Hence, we deem any such asseveration waived.

3

Soares' unsuccessful foray apparently rang warning

bells for BCU, which asked the bankruptcy court to clarify

whether the June 29 order (lifting the automatic stay) ratified

the earlier state court judgment. BCU served this so-called

clarification motion on the attorney, Williamson, but not on

Soares.2 In a margin order entered on February 9, 1996, Judge

Kenner addressed the question of retroactivity for the first time

and vacated the automatic stay retroactive to March 24, 1995,

"such that the [state] judgment and movant's foreclosure shall

not be deemed to have violated the automatic stay."

Less than three weeks later Soares, through newly

retained counsel, filed a motion to reconsider both the February

9 order and the original grant of relief from the automatic stay.

Judge Kenner denied the reconsideration motion on the merits3 and

also denied a companion motion to void the foreclosure sale. The

judge advanced three reasons for having lifted the automatic stay

2The title "clarification motion" is a misnomer. Neither
the June 29 order nor the motion leading up to it mentioned the
state court judgment, and the order clearly had not been meant to
ratify the judgment.

3The judge was wise to reach the merits. The so-called
clarification motion had been served in derogation of a standing
order promulgated by the bankruptcy judges in the District of
Massachusetts, which provides in pertinent part:

(a) All motions and requests for orders must
be served on the Chapter 13 trustee, the
debtor, the debtor's attorney, persons who
have requested notice, and all creditors . .
. .

Joint Procedural Order 13.5 (Sept. 1, 1994). Despite this
order, BCU had not served the motion on the debtor.

4

retroactively on February 9. First, because BCU "had done

everything right," it would be inequitable to upset its

expectations. Second, because the foreclosure had wiped out

junior lienholders, it would be too complicated to "unscramble

the egg." Third, because Soares could not immediately repay the

funds that BCU had expended to clear title to the property, the

economic realities favored ratification of the foreclosure.

Soares appealed. The district court temporarily stayed

further proceedings (blocking both a planned eviction and a

possible resale of the property). Eventually, however, the

district court although finding that BCU had neglected its

responsibility to apprise the state tribunal of Soares'

bankruptcy (an error which it termed "harmless") determined

that the retroactive lifting of the automatic stay did not

constitute an abuse of discretion.

Soares again appealed. We enlarged the earlier stay on

condition that Soares make monthly payments to BCU for use and

occupancy of the premises (to be credited against the mortgage

indebtedness, should Soares prevail on appeal).

II. DISCUSSION
II. DISCUSSION

To the extent that the threshold inquiries in this case

involve questions of statutory interpretation, we exercise

plenary review.4 See In re Jarvis, 53 F.3d 416, 419 (1st Cir.

4A different standard of review applies to the bankruptcy
court's discretionary decision to lift the automatic stay
retroactively. See Part II(B)(4), infra. We review that ruling

for abuse of discretion. See Tringali v. Hathaway Mach. Co., 796

F.2d 553, 561 (1st Cir. 1986).

5

1995). From this vantage point we first address the purported

exemption for "ministerial acts," as it is only necessary to

reach the retroactivity question if a violation of the automatic

stay in fact occurred.

A. The Nature of the State Court's Actions.
A. The Nature of the State Court's Actions.

The parties clash head-on in respect to classification

of the state court's actions. The debtor claims that the state

court order and judgment transgressed the automatic stay. The

creditor claims that these entries, though occurring post-

petition, were purely ministerial and, thus, not offensive to the

stay. The debtor has the better argument.

Section 362(a)(1) of the Bankruptcy Code provides that

the filing of a bankruptcy petition stays the commencement or

continuation of all nonbankruptcy judicial proceedings against

the debtor.5 Here, the state court default order eventuated more

than two weeks after Soares filed for bankruptcy and the

5Leaving to one side exceptions inapplicable to this appeal,
the statute provides that a filed bankruptcy petition

operates as a stay, applicable to all
entities, of
(1) the commencement or
continuation, including the
issuance or employment of process,
of a judicial, administrative, or
other action or proceeding against
the debtor that was or could have
been commenced before the
commencement of the case under this
title, or to recover a claim
against the debtor that arose
before the commencement of the case
under this title; . . . .

11 U.S.C. 362(a)(1).

6

foreclosure judgment one week later. The issue, then, is whether

these entries contravened the mandate of section 362(a)(1). BCU

asserts that they did not because the stay was not in effect when

the creditor requested the state court to act and because the

state court's actions, when taken, constituted ministerial acts.

The creditor's first assertion is mere buzznacking.

The focus here is whether or not the state court's actions, when

effected, transgressed the automatic stay. The date on which the

creditor asked the state court to act, while material to an

assessment of the creditor's good faith (which is not seriously

questioned here), does not bear on whether the activities

themselves constituted the forbidden continuation of a judicial

proceeding.

BCU's second assertion is more substantial.

Ministerial acts, even if undertaken in a state judicial

proceeding subsequent to a bankruptcy filing, do not fall within

the proscription of the automatic stay. See Rexnord Holdings,

Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir. 1994); Savers Fed.

Sav. & Loan Ass'n v. McCarthy Constr. Co. (In re Knightsbridge

Dev. Co.), 884 F.2d 145, 148 (4th Cir. 1989). But the state

court's actions in this case cannot properly be characterized as

ministerial.

A ministerial act is one that is essentially clerical

in nature. See Black's Law Dictionary 996 (6th ed. 1990). Thus,

when an official's duty is delineated by, say, a law or a

judicial decree with such crystalline clarity that nothing is

7

left to the exercise of the official's discretion or judgment,

the resultant act is ministerial. See United States ex rel.

McLennan v. Wilbur, 283 U.S. 414, 420 (1931) (indicating that a

duty is ministerial if "the obligation to act [is] peremptory,

and plainly defined"); Neal v. Regan, 587 F. Supp. 1558, 1562

(N.D. Ind. 1984) (describing a ministerial act as "one which `the

law prescribes and defines . . . with such precision as to leave

nothing to the exercise of discretion or judgment'") (citation

omitted). Such acts can usefully be visualized as the antithesis

of judicial acts, inasmuch as the essence of a judicial act is

the exercise of discretion or judgment. See Black's Law

Dictionary, supra, at 846.

Virtually by definition, a judicial proceeding does not

conclude until the judicial function is completed, that is, until

the judicial decision is made. See, e.g., Bidermann, 21 F.3d at

528 (holding that the judicial function is completed "at the

moment the judge direct[s] entry of judgment"). Frequently,

routine scrivening, such as recordation or entry on the docket,

follows on the heels of a judicial decision. Such actions

taken in obedience to the judge's peremptory instructions or

otherwise precisely defined and nondiscretionary are

ministerial and, consequently, do not themselves violate the

automatic stay even if undertaken after an affected party files

for bankruptcy. See, e.g., Knightsbridge Dev., 884 F.2d at 148

(suggesting that merely recording a previously decided award

would be a "clerical act" and therefore would not infract the

8

automatic stay); In re Capgro Leasing Assocs., 169 B.R. 305, 315-

16 (Bankr. E.D.N.Y. 1994) (stating that "entry of a judgment will

constitute a `ministerial act' where the judicial function has

been completed and the clerk has merely to perform the rote

function of entering the judgment upon the court's docket"). By

the same token, however, acts undertaken in the course of

carrying out the core judicial function are not ministerial and,

if essayed after bankruptcy filing, will be deemed to violate the

automatic stay.

Bidermann captures this distinction. There, the

district judge ruled ora sponte and endorsed the motion papers.

The defendant then sought refuge in bankruptcy. The Second

Circuit held the clerk's subsequent, post-petition entry of the

judgment on the docket to be ministerial (and, therefore,

unaffected by the automatic stay). 21 F.3d at 528. Other cases

are to the same effect. See Heikkila v. Carver (In re Carver),

828 F.2d 463, 464 (8th Cir. 1987) (holding that a "routine

certification" by the clerk, entered post-petition, did not

transgress the automatic stay); Capgro Leasing, 169 B.R. at 315-

16 (holding the clerk's entry of judgment on the docket to be

ministerial when, prior to the bankruptcy filing, the court had

ordered summary judgment). A parallel line of cases reinforces

the notion that the compendium of ministerial acts excludes those

involving deliberation, discretion, or judicial involvement.

See, e.g., Ellis v. Consolidated Diesel Elec. Corp., 894 F.2d

371, 372-73 (10th Cir. 1990) (invalidating a judicial decision

9

that granted summary judgment two weeks after a bankruptcy

filing); Knightsbridge Dev., 884 F.2d at 148 (voiding an

arbitration award because the bulk of the panel's deliberations

occurred after the stay arose); Ellison v. Northwest Eng'g Co.,

707 F.2d 1310, 1311 (11th Cir. 1983) (holding that while the

automatic stay was in effect a court could not render a decision

in a case which had been briefed and argued pre-petition).

This line of demarcation makes perfectly good sense.

The statutory proviso which gives rise to the automatic stay says

what it means and means what it says. See ICC v. Holmes Transp.,

Inc., 931 F.2d 984, 987 (1st Cir. 1991). Confining the exemption

for ministerial acts to those actions which are essentially

clerical, as opposed to judicial, honors this principle because

such an interpretation comports precisely with the text of

section 362(a)(1). In the bargain, this interpretation also

facilitates the statute's due administration.

Silhouetted against this legal landscape, it is readily

apparent that the state court's actions in ordering a default and

directing the entry of a judgment possess a distinctly judicial,

rather than a ministerial, character. The record is totally

barren of any evidence that the state court judge decided to

grant BCU's request prior to the date of the bankruptcy filing,

and all visible signs point in the opposite direction. The judge

did not enter the default order until more than two weeks after

Soares sought the protection of the bankruptcy court and she did

not direct the entry of a judgment authorizing foreclosure until

10

another week had elapsed. Moreover, the judge indicated after

the fact that she waited to confirm Soares' nonmilitary status

before directing the entry of judgment. This indicates

deliberativeness and a concomitant willingness to exercise

discretion.

Nor does the fact that the judge later characterized

her entry of the foreclosure judgment as "ministerial" require a

different result. An appellate court is not bound by a trial

judge's unsupported description, see, e.g., Estate of Soler v.

Rodriguez, 63 F.3d 45, 47 n.1 (1st Cir. 1995); In re G.S.F.

Corp., 938 F.2d 1467, 1473-74 (1st Cir. 1991), and we are aware

of no reason why that salutary principle would not apply with

equal vigor to our assessment of a state court's actions when the

underlying question relates to the effect of those actions under

federal law. Hence, we decline to adopt the label that the state

court judge chose in hindsight to affix to her activities.

We summarize succinctly. Because the decision which

animated the entry of the order and judgment occurred after the

stay was in force, those actions continued the state judicial

proceeding within the meaning of section 362(a)(1).

Consequently, the actions violated the automatic stay. Given

this infraction, we now must assess the availability of a

retroactive cure.

B. The Operation of the Automatic Stay.
B. The Operation of the Automatic Stay.

We subdivide this part of our discussion into four

segments. In each segment, our comments reflect our awareness

11

that bankruptcy courts traditionally pay heed to equitable

principles. See Bank of Marin v. England, 385 U.S. 99, 103

(1966); Jarvis, 53 F.3d at 419.

1. The Nature of the Stay. The automatic stay is
1. The Nature of the Stay.

among the most basic of debtor protections under bankruptcy law.

See Midlantic Nat'l Bank v. New Jersey Dep't of Envtl.

Protection, 474 U.S. 494, 503 (1986); see also S. Rep. No. 95-

989, at 54 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5840. It

is intended to give the debtor breathing room by "stop[ping] all

collection efforts, all harassment, and all foreclosure actions."

H.R. Rep. No. 95-595, at 340 (1977), reprinted in 1978

U.S.C.C.A.N. 5963, 6296-97; see also Holmes Transp., 931 F.2d at

987; In re Smith Corset Shops, Inc., 696 F.2d 971, 977 (1st Cir.

1982).

The stay springs into being immediately upon the filing

of a bankruptcy petition: "[b]ecause the automatic stay is

exactly what the name implies `automatic' it operates without

the necessity for judicial intervention." Sunshine Dev., Inc. v.

FDIC, 33 F.3d 106, 113 (1st Cir. 1994). It remains in force

until a federal court either disposes of the case, see 11 U.S.C.

362(c)(2), or lifts the stay, see id. 362(d)-(f). This

respite enables debtors to resolve their debts in a more orderly

fashion, see In re Siciliano, 13 F.3d 748, 750 (3d Cir. 1994),

and at the same time safeguards their creditors by preventing

"different creditors from bringing different proceedings in

different courts, thereby setting in motion a free-for-all in

12

which opposing interests maneuver to capture the lion's share of

the debtor's assets." Sunshine Dev., 33 F.3d at 114; see

generally 3 Collier on Bankruptcy 362.03 (15th rev. ed. 1996).

In order to secure these important protections, courts

must display a certain rigor in reacting to violations of the

automatic stay. See Kalb v. Feuerstein, 308 U.S. 433, 438-39

(1940); Holmes Transp., 931 F.2d at 987-88; Smith Corset Shops,

696 F.2d at 976. The circuits are split on whether actions taken

in derogation of the automatic stay are merely "voidable" or,

more accurately, "void." Some courts characterize unauthorized

post-petition proceedings as "voidable." See, e.g., Jones v.

Garcia (In re Jones), 63 F.3d 411, 412 & n.3 (5th Cir. 1995),

cert. denied, 116 S. Ct. 1566 (1996); Bronson v. United States,

46 F.3d 1573, 1578-79 (Fed. Cir. 1995); Easley v. Pettibone Mich.

Corp., 990 F.2d 905, 911 (6th Cir. 1993). Other courts a

majority, insofar as we can tell call such actions "void," but

recognize that equitable considerations may alter some outcomes.

See, e.g., Siciliano, 13 F.3d at 751; In re Schwartz, 954 F.2d

569, 571 (9th Cir. 1992); Job v. Calder (In re Calder), 907 F.2d

953, 956 (10th Cir. 1990) (per curiam); 48th St. Steakhouse, Inc.

v. Rockefeller Group, Inc. (In re 48th St. Steakhouse, Inc.), 835

F.2d 427, 431 (2d Cir. 1987), cert. denied, 485 U.S. 1035 (1989);

Albany Partners Ltd. v. Westbrook (In re Albany Partners, Ltd.),

749 F.2d 670, 675 (11th Cir. 1984).

Our earlier opinions which we today reaffirm align

us with the majority view. See Holmes Transp., 931 F.2d at 987-

13

88; Smith Corset Shops, 696 F.2d at 976. This semantic

difference has practical consequences because the

characterization of an infringing action as "void" or "voidable"

influences the burden of going forward. Treating an action taken

in contravention of the automatic stay as void places the burden

of validating the action after the fact squarely on the shoulders

of the offending creditor. In contrast, treating an action taken

in contravention of the automatic stay as voidable places the

burden of challenging the action on the offended debtor. We

think that the former paradigm, rather than the latter, best

harmonizes with the nature of the automatic stay and the

important purposes that it serves. See generally 3 Collier on

Bankruptcy, supra, 362.11[1] & n.1 (observing that most courts

hold violations void and terming this the better view).

2. The Availability of Retroactive Relief. While the
2. The Availability of Retroactive Relief.

automatic stay is significant, it is not an immutable article of

faith. Indeed, the Bankruptcy Code, 11 U.S.C. 362(d),

expressly authorizes courts to lift it in particular situations.

Whether this statutory authorization encompasses retroactive

relief is not entirely clear. We previously hinted that a court

may set aside the automatic stay retroactively in an appropriate

case. See Smith Corset Shops, 696 F.2d at 976-77. We now

confirm Smith's adumbration, holding that 11 U.S.C. 362(d)

permits bankruptcy courts to lift the automatic stay

retroactively and thereby validate actions which otherwise would

be void.

14

Section 362(d) confers upon courts discretionary power

in certain circumstances to terminate, annul, modify, or place

conditions upon the automatic stay.6 In drafting the law,

Congress chose to include both the power to terminate the stay

and the power to annul it. When construing this language, we

must try to give independent meaning to each word. See United

States Dep't of Treasury v. Fabe, 508 U.S. 491, 504 n.6 (1993);

United States v. Ven-Fuel, Inc., 758 F.2d 741, 751-52 (1st Cir.

1985). The only plausible distinction between the two verbs in

this context is that terminating the stay blunts it

prospectively, from the moment the court's order enters, whereas

annulling the stay erases it retrospectively, as of some date

prior to the entry of the court's order (reaching as far back as

the date when the debtor filed the bankruptcy petition, if the

court so elects).

Seen from this perspective, Congress' grant of a power

of annulment is meaningful only if the court may thereby validate

actions taken before the date on which the court rules. On any

other construction, annulment lacks any independent significance;

6The statute provides in pertinent part:

On request of a party in interest and after
notice and a hearing, the court shall grant
relief from the stay . . ., such as by
terminating, annulling, modifying, or
conditioning such stay
(1) for cause, including the lack
of adequate protection of an
interest in property of such party
in interest; . . . .

11 U.S.C. 362(d).

15

it merely replicates termination. It follows, therefore, that

section 362(d) authorizes retroactive relief from the automatic

stay. Accord Siciliano, 13 F.3d at 751; Albany Partners, 749

F.2d at 675; see also Franklin Sav. Ass'n v. Office of Thrift

Supervision, 31 F.3d 1020, 1023 (10th Cir. 1994) (recognizing the

authority to annul the stay and thereby grant retroactive

relief); Sikes v. Global Marine, Inc., 881 F.2d 176, 178-79 (5th

Cir. 1989) (same); see generally 3 Collier on Bankruptcy, supra,

362.11[1].

3. The Limiting Principle. Recognizing the
3. The Limiting Principle.

discretionary authority of bankruptcy courts to relieve creditors

and other interested parties retroactively from the operation of

the automatic stay tells us nothing about the yardstick by which

attempts to secure such relief should be measured. We turn next

to this inquiry.

Once again, the overarching purpose of the automatic

stay informs our analysis. Because the stay is a fundamental

protection for all parties affected by the filing of a petition

in bankruptcy, it should not be dismantled without good reason.

See, e.g., Little Creek Dev. Co. v. Commonwealth Mortgage Corp.

(In re Little Creek Dev. Co.), 779 F.2d 1068, 1072 (5th Cir.

1986). Undoing the stay retroactively should require a

measurably greater showing. Congress intended the stay to afford

debtors breathing room and to assure creditors of equitable

distribution. See H.R. Rep. No. 95-595, supra, at 340, 1978

U.S.C.C.A.N. at 6296-97. If retroactive relief becomes

16

commonplace, creditors anticipating post facto validation

will be tempted to pursue claims against bankrupts heedless of

the stay, leaving debtors with no choice but to defend for fear

that post-petition default judgments routinely may be

resuscitated.

We believe that Congress created the automatic stay to

ward off scenarios of this sort. Thus, if congressional intent

is to be honored and the integrity of the automatic stay

preserved, retroactive relief should be the long-odds exception,

not the general rule. In our view, only a strict standard will

ensure the accomplishment of these objectives. See Albany

Partners, 749 F.2d at 675 (explaining that "the important

congressional policy behind the automatic stay demands that

courts be especially hesitant to validate acts committed during

the pendency of the stay"). We conclude, therefore, that

although courts possess a limited discretion to grant retroactive

relief from the automatic stay, instances in which the exercise

of that discretion is justified are likely to be few and far

between.

We do not suggest that we can write a standard that

lends itself to mechanical application. Each case is sui generis

and must be judged accordingly. But, while it is not practical

to anticipate and catalogue the varied circumstances in which

retroactive relief from the automatic stay may be warranted, some

examples may be helpful.

When a creditor inadvertently violates the automatic

17

stay in ignorance of a pending bankruptcy, courts sometimes have

afforded retroactive relief. See, e.g., Jones, 63 F.3d at 412-13

(affirming retroactive validation of a foreclosure sale where the

mortgagee had no notice of the bankruptcy filing); Mutual Benefit

Life Ins. Co. v. Pinetree, Ltd. (In re Pinetree, Ltd.), 876 F.2d

34, 37 (5th Cir. 1989) (similar). By like token, debtors who act

in bad faith may create situations that are ripe for retroactive

relief. See, e.g., Calder, 907 F.2d at 956; Easley, 990 F.2d at

911; Albany Partners, 749 F.2d at 675-76.

These examples a creditor's lack of notice or a

debtor's bad faith clearly do not exhaust the possibilities.

But they illustrate that a rarely dispensed remedy like

retroactive relief from the automatic stay must rest on a set of

facts that is both unusual and unusually compelling. The case

law echoes this conclusion. See Mataya v. Kissinger (In re

Kissinger), 72 F.3d 107, 109 (9th Cir. 1995) (stating that courts

should indulge retroactive annulment only in extreme

circumstances); In re Pulley, 196 B.R. 502, 504 (Bankr. W.D. Ark.

1996) (similar).

4. Applying the Standard. Having constructed the
4. Applying the Standard.

limiting principle, we now consider whether the bankruptcy court

erred in validating the foreclosure judgment which had been

obtained in violation of the automatic stay. We conclude that no

proper predicate existed for doing so and that the bankruptcy

court therefore abused its discretion in ordering retroactive

relief. See Anderson v. Beatrice Foods Co., 900 F.2d 388, 394

18

(1st Cir.) (equating abuse of discretion with a meaningful error

in judgment), cert. denied, 498 U.S. 891 (1990).

Contrary to BCU's importunings, it is the creditor's

knowledge, not the state court's nescience, that is relevant to

the question at hand. Bankruptcy law forbids creditors from

continuing judicial proceedings against bankrupts, see 11 U.S.C.

362(a)(1), and, accordingly, it is the creditor's obligation to

inform other courts of the situation, see In re Timbs, 178 B.R.

989, 991 (Bankr. E.D. Tenn. 1989) (collecting cases). Here, both

BCU's knowledge and its failure to act are undisputed; the debtor

immediately notified BCU of the bankruptcy filing, but BCU kept

quiet and permitted the superior court to proceed in ignorance of

the stay. We are reluctant to reward creditors who, despite

notice of a bankruptcy filing, fail for no discernible reason to

notify courts in which they have initiated proceedings of the

changed circumstances.

The other facts are no more conducive to the bestowal

of retroactive relief. The creditor was represented by counsel

throughout and does not claim that it misapprehended the effect

of the filing. The bankruptcy court made no finding that Soares

acted in bad faith, and, at any rate, the record does not contain

any basis for such a finding. The procedural errors committed by

both parties, such as BCU's failure to serve Soares with the so-

called clarification motion and Soares' failure to lodge timely

objections at various points in the proceedings, seemingly cancel

each other out. And BCU's entreaty that the equities favor

19

retroactive relief rings unmistakably hollow; though BCU expended

funds to clear title and maintain the property after foreclosing,

this financial hardship is the natural consequence of its own

failure to abide by the terms of the automatic stay. Thus, it is

unredressable. See K-Mart Corp. v. Oriental Plaza, Inc., 875

F.2d 907, 916 (1st Cir. 1989) (declining to deny permanent

injunctive relief which would require substantial demolition of

an expensive structure where "appellant's wound, deep as it

appears, was self-inflicted"). In the last analysis, BCU is the

author of its own misfortune.

III. CONCLUSION
III. CONCLUSION

To sum up, we hold that the state court's post-petition

issuance of a foreclosure judgment violated the automatic stay;

that bankruptcy courts ordinarily must hold those who defile the

automatic stay to the predictable consequences of their actions

and can grant retroactive relief only sparingly and in compelling

circumstances; and that, because this case involves no

sufficiently unusual circumstances, the bankruptcy court abused

its discretion in granting retroactive relief from the automatic

stay.7

In an abundance of caution, we note that our review is

confined to the order granting the so-called clarification motion

and the retroactive relief awarded therein. Although Soares may

7We recognize the difficulties that attend the undoing of
the foreclosure sale and the restoration of the pre-petition
status quo, but that problem cannot in and of itself justify
overlooking BCU's unexcused violation of the automatic stay. Cf.

K-Mart, 875 F.2d at 916.

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ask the bankruptcy court to reconsider its decision to lift the

automatic stay, BCU can request a new foreclosure judgment in the

state court unless and until the bankruptcy court reinstates the

stay. For our part, we need go no further.

Reversed and remanded.
Reversed and remanded.

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