Second Circuit: Bayview Loan Servicing Foreclosure Sale is Void

CARNEY and BIANCO, Circuit Judges, and GARAUFIS, District Judge.†

JOHN E. BRIGANDI, Knuckles, Komosinski & Manfro, LLP, Upper Saddle River, NJ, for Bayview Loan Servicing LLC.

Debtor-Appellee Eileen Fogarty held a 99% interest in 72 Grandview LLC, which in turn owned a residential property that Fogarty occupied as her primary residence.

Appellant Bayview Loan Servicing LLC initiated a foreclosure action in which both 72 Grandview LLC and Fogarty were named as defendants.

After Bayview obtained a judgment that authorized it to proceed with a foreclosure sale, Fogarty filed a Chapter 7 bankruptcy petition and notified Bayview that, in her view, proceeding with the foreclosure sale would violate the automatic stay that took effect when she filed her bankruptcy petition.

See 11 U.S.C. § 362.

Nonetheless, Bayview proceeded with the foreclosure sale without relief from the automatic stay from the bankruptcy court.

Fogarty then sought sanctions against Bayview, see id. § 362(k), arguing that Bayview willfully violated the automatic stay.

The bankruptcy court denied Fogarty’s motion, but the district court reversed that decision and remanded for the calculation of fees and other damages that would be charged as sanctions.

Bayview now appeals. We hold that two of the Bankruptcy Code’s automatic stay provisions, 11 U.S.C. § 362(a)(1) and (a)(2), are violated by an entity that proceeds with the foreclosure sale of a property when the debtor is a named party in the foreclosure proceedings, even if the debtor holds only a possessory interest in the property.

Bayview willfully violated the automatic stay when it proceeded with the foreclosure sale while knowing that Fogarty had filed a bankruptcy petition.

We therefore affirm the district court’s order.

AFFIRMED AND REMANDED.