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In re Vertullo

United States Bankruptcy Appellate Panel of the First Circuit

January 10, 2020

DARLENE MARIE VERTULLO, a/k/a Darlene M. Marie Underwood, Debtor.
DARLENE MARIE VERTULLO, Appellee. U.S. BANK NATIONAL ASSOCIATION, as Trustee for Credit Suisse First Boston Mortgage Securities Corp., CSFB Mortgage-Backed Pass-Through Certificates, Series 2005-8, Appellant,

          Appeals from the United States Bankruptcy Court for the District of New Hampshire (Hon. Bruce A. Harwood, U.S. Bankruptcy Judge).

          David M. Bizar, Esq., and J. Patrick Kennedy, Esq., on brief for Appellant.

          Leonard G. Deming, II, Esq., on brief for Appellee.

          Before Bailey, Hoffman, and Finkle, United States Bankruptcy Appellate Panel Judges.

          Hoffman, U.S. Bankruptcy Appellate Panel Judge

         U.S. Bank National Association, as Trustee for Credit Suisse First Boston Mortgage Securities Corp., CSFB Mortgage-Backed Pass-Through Certificates, Series 2005-8 ("U.S. Bank" or the "Bank"), appeals from two bankruptcy court orders: (1) the order denying its motion for relief from the automatic stay (the "Order Denying Stay Relief"); and (2) the order confirming the amended chapter 13 plan filed by the debtor, Darlene Marie Vertullo (the "Debtor"), as modified in open court (the "Confirmation Order").[1] For the reasons set forth below, we REVERSE both orders and REMAND to the bankruptcy court for further proceedings.


         I. The Bankruptcy Filings

         U.S. Bank was the holder of a mortgage, originally given by the Debtor and James E. Underwood to SLM Financial Corp., on certain real property located in Nashua, New Hampshire (the "Property"). Following the Debtor's default in her payment obligations under the note secured by that mortgage, U.S. Bank conducted a foreclosure by public auction on January 11, 2017, at which a third party purchased the Property. No foreclosure deed from the Bank to the third party purchaser was ever recorded in the local land records registry.

         On May 9, 2017, about four months after the foreclosure auction, the Debtor filed a petition under chapter 13 of the Bankruptcy Code in the New Hampshire bankruptcy court.[2] The bankruptcy court dismissed that case on March 29, 2018, due to the Debtor's failure to make plan payments. The Debtor filed the chapter 13 case from which these appeals arise, pro se, on April 26, 2018 (the "Current Chapter 13 Case").

         II. The Motion for Relief from Stay and the Debtor's Objection

         On May 22, 2018, U.S. Bank filed a motion for relief from the automatic stay pursuant to Bankruptcy Code § 362(d)(1) (the "Motion for Stay Relief").[3] Alleging that the Debtor continued to occupy the Property "without any claim of right or ownership," U.S. Bank requested authorization "to continue its state court rights" in order to gain possession of the Property. The Debtor filed an objection to the Motion for Stay Relief, asserting that the foreclosure sale was void because no foreclosure deed had been recorded before the filing of the Current Chapter 13 Case. In support, she quoted the following language from N.H. Rev. Stat. Ann. § 479:26 regarding foreclosure sales:

Failure to record said deed and affidavit within 60 days after the sale shall render the sale void and of no effect only as to liens or other encumbrances of record with the register of deeds said county [sic] intervening between the day of the sale and the time of recording of said deed and affidavit.

         The Debtor urged the bankruptcy court to follow In re Beeman, 235 B.R. 519 (Bankr. D.N.H. 1999), in which the court ruled that a foreclosure sale is completed upon recording of a deed, and until that time a debtor mortgagor retained rights in the property. She asked the bankruptcy court to eschew this court's holding in TD Bank, N.A. v. LaPointe (In re LaPointe), 505 B.R. 589, 595 (B.A.P. 1st Cir. 2014), that a chapter 13 debtor mortgagor no longer had any rights in the mortgaged property once the auctioneer's hammer fell irrespective of when or if a foreclosure deed was recorded.

         III. The Amended Chapter 13 Plan and U.S. Bank's Objection to Confirmation

         In her amended chapter 13 plan (the "Plan") filed in May 2018, the Debtor proposed to retain the Property, cure pre-petition defaults in the mortgage to U.S. Bank through the Plan, and make regular post-petition payments directly to U.S. Bank. The Bank filed an objection to confirmation of the Plan (the "Objection to Confirmation"), arguing that the Property was no longer part of the bankruptcy estate as it had been sold to a third party at a foreclosure auction. The Debtor countered by reiterating that U.S. Bank had failed to comply with N.H. Rev. Stat. Ann. § 479:26 by filing a foreclosure deed even though 470 days had passed since the auction. She asked the court to overrule the Objection to Confirmation.

         IV. The Orders

         On October 1, 2018, the bankruptcy court entered the Order Denying Stay Relief and a separate order overruling the Bank's Objection to Confirmation. In its accompanying memorandum, the court observed that the Motion for Stay Relief and the Objection to Confirmation raised the same legal issue: "whether the Debtor has a sufficient property interest in [the Property] that she may cure defaults under a mortgage that encumbers the Property and which U.S. Bank holds." In re Vertullo, 593 B.R. 92, 94 (Bankr. D.N.H. 2018). The court answered that question in the affirmative, stating: "[T]he Court finds that the Debtor does have a sufficient interest in the Property and so will deny the Motion for [Stay] Relief and schedule a continued confirmation hearing on the Chapter 13 Plan." Id.

         On December 4, 2018, the bankruptcy court entered the Confirmation Order, thereby confirming the Plan as orally modified in open court.[4]

         U.S. Bank timely appealed both the Order Denying Stay Relief and the Confirmation Order. As in the proceedings below, the issue is binary. U.S. Bank insists that LaPointe is correct, while the Debtor urges us to overturn LaPointe and follow Beeman.


         "Pursuant to 28 U.S.C. §§ 158(a) and (b), the Panel may hear appeals from 'final judgments, orders, and decrees,' § 158(a)(1), or 'with leave of the court, from interlocutory orders and decrees.' § 158(a)(3)." Fleet Data Processing Corp. v. Branch (In re Bank of New Eng. Corp.), 218 B.R. 643, 645 (B.A.P. 1st Cir. 1998); see also Bullard v. Blue Hills Bank, 135 S.Ct. 1686, 1692, 1695 (2015). Orders confirming plans of reorganization are final for purposes of appeal. See Whaley v. Tennyson (In re Tennyson), 611 F.3d 873, 875 (11th Cir. 2010) (citation omitted); AmeriCredit Fin. Servs., Inc. v. Padgett (In re Padgett), 408 B.R. 374, 377 (B.A.P. 10th Cir. 2009) (citation omitted); In re D2 Abatement, Inc., No. 10-45074, 2010 WL 4961705, at *5 (Bankr. E.D. Mich. Aug. 9, 2010). In this circuit, however, orders denying requests for relief from the automatic stay are not necessarily final and appealable. See Raymond C. Green, Inc. v. DeGiacomo (In re Inofin, Inc.), 466 B.R. 170, 174 (B.A.P. 1st Cir. 2012); Caterpillar Fin. Servs. Corp. v. Braunstein (In re Henriquez), 261 B.R. 67, 70 (B.A.P. 1st Cir. 2001). Because the First Circuit Court of Appeals has rejected an absolute rule with respect to the finality of orders denying stay relief, see Pinpoint IT Servs., LLC v. Landrau Rivera (In re Atlas IT Exp. Corp.), 761 F.3d 177, 185 (1st Cir. 2014), the Panel ordered U.S. Bank to show cause why the appeal should not be dismissed as interlocutory. After due consideration of U.S. Bank's response, the Panel concluded that, while the Order Denying Stay Relief was indeed interlocutory, it nonetheless satisfied the criteria for discretionary review under 28 U.S.C. § 1292(b). Accordingly, the Panel accepted jurisdiction over the appeal of the Order Denying Stay Relief. Thus, we have jurisdiction over both orders on appeal.


         The Panel reviews the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Jeffrey P. White & Assocs., P.C. v. Fessenden (In re Wheaton), 547 B.R. 490, 496 (B.A.P. 1st Cir. 2016) (citation omitted). "Issues of statutory interpretation are reviewed de novo." In re LaPointe, 505 B.R. at 593 (citation omitted). The appeal of the Order Denying Stay Relief presents a question of law; so, too, does the appeal of the Confirmation Order. The applicable standard of review pertaining to both orders, therefore, is de novo. See id. (reviewing denial of stay relief de novo); see also Viegelahn v. Essex, 452 B.R. 195, 199 (W.D. Tex. 2011) (stating the standard of review for confirmation orders is de novo); Kronemyer v. Am. Contractors Indem. Co. (In re Kronemyer), 405 B.R. 915, 919 (B.A.P. 9th Cir. 2009) ("We review de novo contentions that present an issue of law regarding stay relief.") (citation omitted).


         This appeal presents us with the two-fold task of examining the legal principles governing the bankruptcy court's orders and determining the extent to which we are bound by our own court's precedent in reviewing those orders. We begin with the legal principles.

         I. The Relevant Standards Regarding the Order Denying Stay Relief

         A. The Automatic Stay, Generally

         "Section 362(a)(1) provides that the filing of a bankruptcy petition automatically stays all acts against a debtor and property of the bankruptcy estate, subject to limited exceptions." In re LaPointe, 505 B.R. at 593 (citing 11 U.S.C. § 362(a)(1)). "For property to be protected by the automatic stay, it must be property of the bankruptcy estate." Id. (citing 11 U.S.C. § 362(c)(1); Donarumo v. Furlong (In re Furlong), 660 F.3d 81, 89 (1st Cir. 2011)). "Property of the bankruptcy estate includes all legal and equitable interests of the debtor in property as of the commencement of the case, subject to certain exceptions not applicable here." Id. (citing 11 U.S.C. § 541(a)(1)). "Statutory or equitable rights of redemption are included in the concept of property of the estate under § 541." Id. (citing 4 Collier on Bankruptcy, § 541.04[2] (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2013)). "Generally, state law determines whether the debtor has any legal or equitable interest in property that is included in the bankruptcy estate, unless federal law requires a different result." Id. (citing Butner v. United States, 440 U.S. 48, 55 (1979); NTA, LLC v. Concourse Holding Co. (In re NTA, LLC), 380 F.3d 523, 528 (1st Cir. 2004)).

         B. Relief from the Automatic Stay

         Section 362(d) governs relief from the automatic stay. That section provides:

On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, 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;
(2) with respect to a stay of an act against property . . ...

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