In Re: Jean S. Jean-Francois

Filing 6

ORDER DISMISSING APPEAL FROM ORDERS OF BANKRUPTCY COURT -- For the reasons set forth in the ATTACHED WRITTEN MEMORANDUM AND ORDER, the decisions and orders of the Bankruptcy Court for the Eastern District of New York are affirmed and this appeal is d ismissed. In violation of this Court's ECF requirements, counsel for the appellee never filed a notice of appearance and is not receiving notices of electronic filings. Appellant is directed to serve a copy of this Electronic Order and the Att ached Written Memorandum and Order on Appellee within five days of the date of this Order and immediately thereafter file proof of such service via ECF. The Clerk of the Court is directed to close this case. SO ORDERED by Judge Dora Lizette Irizarry on 9/29/2014. (Irizarry, Dora)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------x
:
In Re:
:
:
JEAN S. JEAN-FRANCOIS,
:
:
Debtor-Appellant. :
:
:
--------------------------------------------------------x

MEMORANDUM & ORDER
14-CV-434 (DLI)

DORA L. IRIZARRY, United States District Judge:
Debtor-Appellant Jean S. Jean-Francois appeals from an order of the United States
Bankruptcy Court for the Eastern District of New York (“Bankruptcy Court”) entered on
November 25, 2013, annulling the automatic stay that went into effect with Debtor-Appellant’s
chapter 13 bankruptcy filing on August 15, 2013, and from an order denying Debtor-Appellant’s
request for a continuance at the November 5, 2013 hearing on annulling the automatic stay. For
the reasons set forth below, the Bankruptcy Court’s decisions are affirmed.
BACKGROUND
Unless otherwise noted, the parties agree to the following facts.

Debtor-Appellant

purchased a mixed-use residential and commercial property located at 3502 Church Avenue,
Brooklyn, New York (the “property”) on February 28, 2007 for the sum of $750,000. (Br. of
Debtor-Appellant at 2, Dkt. Entry No. 2.) In connection with this purchase, Debtor-Appellant
used the property to secure a mortgage with Flushing Savings Bank in the amount of $562,500.
(Id.)
Debtor-Appellant eventually fell behind on his mortgage payments and Flushing Savings
Bank initiated a foreclosure action in New York State Supreme Court, Kings County. (Br. of
Appellee at 7, Dkt. Entry No. 3.) Appellee, Church Avenue Partners, LLC, purchased the loan

1

from Flushing Savings Bank and was substituted for Flushing Savings Bank in the ongoing state
foreclosure action. (Br. of Debtor-Appellant at 3.) A final Judgment of Foreclosure and Sale
was entered in the foreclosure action on February 7, 2012 and was amended on or about May 31,
2013. (Br. of Appellee at 8; Judgment of Foreclosure and Sale annexed to Mot. for Relief from
Stay attached to Notice of Appeal from Bankr. Ct. (“Notice of Appeal”) as Ex. 5, Dkt. Entry No.
1.) A foreclosure sale date was scheduled for August 15, 2013. (Br. of Debtor-Appellant at 3.)1
On August 13, 2013, Debtor-Appellant attempted to file for chapter 13 bankruptcy in the
Bankruptcy Court by filing a credit counseling certificate. He then sent a letter to Appellee
indicating that he had filed for bankruptcy. (Id. at 4.) However, as the filing did not have an
actual bankruptcy petition attached to it, the Clerk of the Bankruptcy Court issued a Notice of
Defective Filing. (Id. at 4; Notice of Defective Filing attached to Notice of Appeal as Ex. 2.)
Twenty minutes before the foreclosure sale, Debtor-Appellant learned of his mistake and refiled
properly for chapter 13 bankruptcy giving effect to the automatic stay that attaches to all
bankruptcy filings. (Br. of Debtor-Appellant at 4; Refiled Petition attached to Notice of Appeal
as Ex. 3.) Meanwhile, Appellee went forward with the foreclosure sale and sold the property to a
third party. (Br. of Debtor-Appellant at 4.)2
On September 17, 2013, the Chapter 13 Trustee filed a Motion to Dismiss DebtorAppellant’s bankruptcy because Debtor-Appellant had failed to: 1) submit any monthly pre                                                            
1

Appellee indicates that Debtor-Appellant may no longer be the rightful owner of this property. Debtor-Appellant,
in his papers, fails to address Appellee’s allegations that he transferred title to the property to Sheza J. Alizai on May
15, 2011 for no consideration and in violation of the mortgage terms. (Br. of Appellee at 7-8.) The Bankruptcy
Court found that “the property is currently owned by another person.” (Transcript of Amended Mot. for Violation
of Automatic Stay, Mot. For Relief from Stay attached to Br. of Debtor-Appellant as Ex. A at 6.) However, as the
Bankruptcy Court continued to analyze the annulment of the stay as if Debtor-Appellant had title to the property,
this Court will do the same.
2
Appellee asserts that he checked the PACER system for Debtor-Appellant’s bankruptcy filing upon receiving
Debtor-Appellant’s letter and again on the morning of the foreclosure sale, but did not find the petition, only the
credit counseling certificate. Appellee therefore “believed that it could still proceed with the foreclosure sale, since
no case was commenced and no automatic stay arose.” (Br. of Appellee at 8.)

2

confirmation payments to the Trustee; 2) file copies of pay statements from employers, written
appraisals for properties, and lease agreements or affidavits from tenants; 3) provide the Trustee
with his previous year’s State and Federal Tax Returns; and 4) appear at the initial §341 meeting
of creditors. (Mot. to Dismiss3 attached to Notice of Appeal as Ex. 4.)
On September 24, 2013, Appellee filed a Motion for Order Modifying and Annulling the
Automatic Stay (“Motion for Relief from Stay”). (Mot. for Relief from Stay attached to Notice
of Appeal as Ex. 5.)

Debtor-Appellant responded to the Motion on October 29, 2013.

(Affirmation in Opposition attached to Notice of Appeal as Ex. 8.) The Bankruptcy Court heard
oral argument on the Motion on November 5, 2013, and issued a verbal order at oral argument
followed by a written order on November 25, 2013 annulling nunc pro tunc the automatic stay to
August 15, 2013, and allowing the foreclosure sale to go through. (Transcript of Mot. For Relief
from Stay attached to Br. of Debtor-Appellant as Ex. A at 16-17; Order Annulling the Automatic
Stay attached to Notice of Appeal as Ex. 10.) Debtor-Appellant also requested an adjournment
at oral argument because he had retained new counsel only several days prior and new counsel
wanted more time to familiarize himself with the case. The Bankruptcy Court denied DebtorAppellant’s request for an adjournment. (Transcript of Mot. For Relief from Stay attached to Br.
of Debtor-Appellant as Ex. A at 9-10.) Debtor-Appellant timely filed a Notice of Appeal as to
both rulings on December 9, 2013. (Notice of Appeal at 1-2.)
Debtor-Appellant asserts that the Bankruptcy Court erred in annulling the automatic stay
because: 1) Appellee had constructive notice of the bankruptcy and automatic stay;4 2) Appellee

3

To clarify, this Court is not addressing a ruling on the Motion to Dismiss. The Motion to Dismiss was filed filed
before the Bankruptcy Court and provided to the Court as part of the record below.
4
In his appeal, Debtor-Appellant refers to the “absolutely outrageous and willful behaviors” of Appellee and
discusses an incident on September 12, 2013 where Appellee allegedly evicted Debtor-Appellant and prevented him
from using the property for church services. Debtor-Appellant asserts that these actions are indications that
Appellee intentionally violated the automatic stay. (Br. of Debtor-Appellant at 10). Considering that there is

3

lacked a clear interest in the property in need of protection that justified exempting it from the
automatic stay; 3) Debtor-Appellant did not file the bankruptcy action in bad faith; 4) DebtorAppellant may have had equity in the property; 5) the property was necessary for DebtorAppellant’s effective reorganization; 6) relief from the automatic stay would not have been
granted prior to the stay violation; and 7) Appellee’s position did not detrimentally change due to
Debtor-Appellant’s actions. (Br. of Debtor-Appellant at 10-17.) Debtor-Appellant also asserts
that the Bankruptcy Court abused its discretion when it refused to adjourn the case in order to
allow Debtor-Appellant, who had hired new counsel one week earlier, to submit a “proper
opposition” to Appellee’s Motion for Relief from Stay. (Br. of Debtor-Appellant at 17-18.)
Debtor-Appellant concedes that failure to grant retroactive relief from the automatic stay would
have caused unnecessary expense to the creditor. (Br. of Debtor-Appellant at 16.)
DISCUSSION
I.

Standard of Review
Although the Second Circuit has addressed the standard of review for lifting automatic

stays, it has not addressed directly the standard of review that should apply to decisions to annul
automatic stays. Courts within this Circuit have reviewed these decisions for abuse of discretion.
In re Marketxt Holdings, Corp., 428 B.R. 579, 585 (S.D.N.Y. 2010) (citing to Sonnax Industries,
Inc. v. Tri Component Products Corp. (In re Sonnax Industries, Inc.), 907 F. 2d 1280, 1286 (2d
Cir. 1990) (bankruptcy court decisions to lift automatic stays should be reviewed for abuse of
discretion)); Koutsagelos v. PII SAM, LLC, 2013 WL 2898120, at *3 (E.D.N.Y. 2013), see also
Schwartz v. Aquatic Dev. Grp., Inc. (In re Aquatic Dev. Grp., Inc.), 352 F. 3d 671, 677-78 (2d

absolutely no evidence in the record to support these accusations, and that Debtor-Appellant withdrew his Motion
for Sanctions against Appellee regarding this matter when it was before the Bankruptcy Court, the Court is unable
and unwilling to address these allegations. (Transcript of Mot. For Relief from Stay attached to Br. of DebtorAppellant as Ex. A at 17). 

4

Cir. 2003) (bankruptcy court decisions to provide nunc pro tunc relief should be reviewed for
abuse of discretion). Abuse of discretion “exists when a bankruptcy court's decision either
‘rest[s] on an error of law (such as application of the wrong legal principle) or a clearly
erroneous factual finding’ or ‘cannot be located within the range of permissible decisions.’”
Koutsagelos, 2013 WL 2898120, at *3 (quoting In re Aquatic Dev. Grp., Inc., 352 F. 3d at 678).
Similarly, a bankruptcy court’s decision whether or not to adjourn the case is also
reviewed for abuse of discretion. Earl Realty, Inc. v. Leonetti (In re Leonetti), 28 B.R. 1003,
1008 (E.D. Pa. 1983) (citing to Lamb v. Globe Seaways, Inc., 516 F. 2d 1352 (2d Cir. 1975)).
“This Court will affirm orders denying continuances unless there is a showing both of
arbitrariness and of prejudice to the defendant.” Farias v. Instructional Systems, Inc., 259 F. 3d
91, 100.
II.

The Bankruptcy Court Did Not Err in Annulling the Automatic Stay
The Bankruptcy Court did not abuse its discretion when it annulled the automatic stay to

August 15, 2013, as it applied the appropriate legal standard and made the correct factual
findings.
Section 362(a)(1) of the Bankruptcy Code provides that the filing of a bankruptcy
petition “triggers [an] automatic stay which protects the debtor from enforcement of pre-petition
judgments obtained against the debtor or against property of the estate.” In re Bresler, 119 B.R.
400, 402 (Bankr. E.D.N.Y. 1990) (citing to 11 U.S.C. § 362). “The automatic stay is ‘effective
immediately upon the filing of the petition, and any proceedings or actions described in section
362(a)(1) are void . . . if they occur after the automatic stay takes effect.’” Koutsagelos, 2013
WL 2898120, at *3 (quoting Rexnord Holdings, Inc. v. Bidermann, 21 F. 3d 522, 527 (2d Cir.
1994)). Therefore, a “foreclosure sale conducted after the commencement of the [b]ankruptcy

5

[c]ase violates the automatic stay. This is true even if the party conducting the sale has no notice
or knowledge that a petition in bankruptcy has been filed.” In re Bresler, 119 B.R. at 402.
However, a bankruptcy court may take certain measures, including order an annulment,
to grant relief from the automatic stay. 11 U.S.C. § 362(d). “An ‘annulment’ of the automatic
stay grants retroactive relief, thereby validating past proceedings or actions that would otherwise
be deemed void.” Koutsagelos, 2013 WL 2898120, at *3. The Second Circuit has not set forth a
test or specified particular factors that bankruptcy courts should use when evaluating whether to
annul an automatic stay. In re Marketxt Holdings, Corp., 428 B.R. at 586; Koutsagelos, 2013
WL 2898120, at *4. “Rather, bankruptcy courts are advised to adopt a holistic approach, where
‘the facts of each [case] will determine whether relief is appropriate under the circumstances.’”
Koutsagelos, 2013 WL 2898120, at *4 (quoting In re Mazzeo, 167 F. 3d 139, 142 (2d Cir.
1999)). In In re Stockwell, “the court set forth a list of factors courts should consider in
determining whether circumstances are sufficiently compelling to warrant retroactive relief.” In
re Marketxt Holdings, Corp., 428 B.R. at 587. The Stockwell factors recommend that courts
examine:
(1) if the creditor had actual or constructive knowledge of the bankruptcy filing and,
therefore, of the stay; (2) if the debtor has acted in bad faith; (3) if there was equity in the
property of the estate; (4) if the property was necessary for an effective reorganization;
(5) if grounds for relief from the stay existed and a motion, if filed, would likely have
been granted prior to the automatic stay violation; (6) if failure to grant retroactive relief
would cause unnecessary expense to the creditor; and (7) if the creditor has detrimentally
changed its position on the basis of the action taken.
In re Stockwell, 262 B.R. 275, 281 (Bankr. D. Vt. 2001).
Courts within this Citcuit have relied on the Stockwell factors to determine whether to
annul the automatic stay. See, e.g. In re Marketxt Holdings, Corp., 428 B.R. at 587; In re
Cunningham, 506 B.R. 334, 343-44 (Bankr. E.D.N.Y. 2014); In re Ebadi, 448 B.R. 308, 319

6

(Bankr. E.D.N.Y. 2011); In re Pomerance, 2011 WL 1403034, at *4 (Bankr. S.D.N.Y. 2011). In
the instant case, the Bankruptcy Court relied on the first six Stockwell factors to determine that
the stay should be annulled. (Transcript of Mot. For Relief from Stay attached to Br. of DebtorAppellant as Ex. A at 16-17; Order Annulling the Automatic Stay attached to Notice of Appeal
as Ex. 10.) The Court will analyze each of the Stockwell factors in turn.
First, the Bankruptcy Court correctly held that Appellee had no actual knowledge of the
bankruptcy filing. Despite Debtor-Appellant’s argument that the filing of the credit counseling
certificate and mailing of a letter to Appellee on August 13, 2013, two days before the
foreclosure, amounted to “constructive knowledge” of Debtor-Appellant’s chapter 13
bankruptcy, the record clearly shows that the actual bankruptcy petition was not filed until
twenty minutes prior to the foreclosure sale on August 15, 2013. Appellee asserted before the
Bankruptcy Court that it checked the PACER system when it received the letter from DebtorAppellant and again on the morning of the foreclosure sale. Appellee did not find DebtorAppellant’s bankruptcy petition in the system. (Application of Church Avenue Patners, LLC in
Support of Mot. for Relief from Stay attached to Notice of Appeal as Ex. 5 at 3; Transcript of
Mot. For Relief from Stay attached to Br. of Debtor-Appellant as Ex. A at 11-12.) Appellee
could not have been expected to monitor constantly the PACER system for the filing of the
bankruptcy petition, as Debtor-Appellant unreasonably asserts in his appeal. Furthermore, “a
debtor is under a duty to exercise due diligence in protecting and pursuing his or her rights and in
mitigating any damages with regard to a creditor's violation of the automatic stay.” In re
Stockwell, 262 B.R. at 281 (citing In re Sammon, 253 B.R. 672 (Bankr. D.S.C.2000)). DebtorAppellant did not submit any evidence that he tried to alert Appellee about the automatic stay

7

after the bankruptcy petition was filed properly. Therefore, the Bankruptcy Court properly held
that Appellee had no actual knowledge of the bankruptcy filing.
Second, the record amply supports the Bankruptcy Court’s determination that DebtorAppellant acted in bad faith. Debtor-Appellant asserts that the Bankruptcy Court did not find that he
had acted in “bad faith.” (Br. of Debtor-Appellant at 8.) This Court disagrees. Although the Bankruptcy
Court found that it did not have to “really rule on good faith” to reach the decision to annul the stay, the
Bankruptcy Court also stated that Debtor-Appellant’s bankruptcy plan did not have the “hallmarks of a
good faith effort to pursue a Chapter 13” and that, according to what the Bankruptcy Court had on the
docket, it was “not a good faith effort, not a good faith filing.” (Transcript of Amended Mot. for
Violation of Automatic Stay, Mot. For Relief from Stay attached to Br. of Debtor-Appellant as Ex. A at
13.)

In In re C-TC 9th Ave. P’ship, the Second Circuit identified several factors that indicate a
bad faith filing. In re C-TC 9th Ave. P’ship, 113 F. 3d 1304, 1310-11 (2d Cir. 1997). The factors
that are relevant to this case are: (1) the debtor’s inability to effectuate a plan; (2) the debtor's
financial condition is a two-party dispute between the debtor and secured creditor that can be
resolved in the pending state foreclosure action; (3) the timing of the debtor's filing evidences an
intent to frustrate the legitimate efforts of the debtor's secured creditor to enforce its rights; and
(4) the debtor has little or no cash flow. Id. Here, as evidenced in the Trustee’s Motion to
Dismiss, Debtor-Appellant did not take any steps after he filed the petition to move forward with
his chapter 13 bankruptcy. He did not create a bankruptcy repayment plan, did not file his tax
returns with the Trustee, did not make any payments to the Trustee, and even missed the initial
§341 meeting of creditors. As Debtor-Appellant’s main asset is the property, this clearly is a
dispute between Debtor-Appellant and Appellee, which should be resolved through the pending
state foreclosure action. In filing the bankruptcy petition twenty minutes before the foreclosure

8

sale, Debtor-Appellant undoubtedly was trying to prevent Appellee from selling the property and
enforcing their rights. Lastly, Debtor-Appellant has provided scant evidence demonstrating his
actual income and ability to effectuate a reorganization plan as he has not provided the Trustee
with any of the requested information about his current financial situation.

Although the

Bankruptcy Court did not cite to specific case law in its decision, it used these factors to find that
Debtor-Appellant acted in bad faith, findings with which this Court concurs.
Third, the Bankruptcy Court properly found that there was no equity in the property. The
property is encumbered by debts that exceed its value. Debtor-Appellant argues that Appellee
misclassified the property’s worth as $750,000 in the state foreclosure action, when it actually
sold at auction for $850,000. (Br. of Debtor-Appellant at 11.) He also asserts that Appellee
deprived him of rental payments that he would have used towards mortgage payments.
However, to use the Bankruptcy Court’s words, “[t]here’s no revisiting that in this court.”
(Transcript of Amended Mot. for Violation of Automatic Stay, Mot. For Relief from Stay
attached to Br. of Debtor-Appellant as Ex. A at 6.)

Regardless, under the Judgment of

Foreclosure and Sale, Debtor-Appellant owes $1,131,973.80, which is $280,000 more than the
property was sold for at auction. (Judgment of Foreclosure and Sale annexed to Mot. for Relief
from Stay attached to Notice of Appeal as Ex. 5; Br. of Appellee at 9-10.) Therefore, DebtorAppellant has no equity in the property.
Fourth, the Bankruptcy Court correctly held that there “is no indication whatsoever that
there is any kind of reorganization in prospect.” As stated earlier, the Debtor-Appellant has not
taken any steps with the Trustee to reorganize and create a repayment plan. Consequently, the
property could not possibly be necessary for reorganization. (Transcript of Amended Mot. for

9

Violation of Automatic Stay, Mot. For Relief from Stay attached to Br. of Debtor-Appellant as
Ex. A at 16.)
Fifth, the Bankruptcy Court correctly concluded that a motion for relief from the
automatic stay would have been granted, if filed before the violation. Sections 362(d)(1) and (2)
state that relief from an automatic stay should be granted for cause (e.g., if there is a bad faith
filing), if the debtor does not have equity in the property, and if the property is not necessary to
an effective reorganization. 11 U.S.C. § 362(d)(1) and (2). As all three of those factors are
present here, relief from the stay would have been granted.
Sixth, as the Debtor-Appellant has conceded, the Bankruptcy Court properly found that
failure to grant retroactive relief would cause unnecessary expense to the creditor, not only in
advertising and auction fees, but also in losing its good faith purchaser and possibly having to
sell the property for a lesser value at a later date.
The Bankruptcy Court did not rely on the seventh Stockwell factor when making its
decision to annul the automatic stay, but not every Stockwell factor must be met in order for the
bankruptcy court to annul the stay. See In re Marketxt Holdings, Corp., 428 B.R. at 589.
Although Appellee did not change its position detrimentally because of Debtor-Appellant’s
actions, sufficient grounds to annul the stay existed under the other six factors. 
After reviewing the Bankruptcy Court’s analysis and factual determinations under the
correctly applied Stockwell factors, this Court holds that the Bankruptcy Court did not abuse its
discretion in annulling the automatic stay nunc pro tunc to August 15, 2013 and allowing the
foreclosure sale to proceed.

10

III.

The Bankruptcy Court Did Not Err in Denying Appellant’s Request for
Adjournment
The Bankruptcy Court did not abuse its discretion in denying Debtor-Appellant’s motion

for adjournment.

Debtor-Appellant filed his bankruptcy petition on August 15, 2013.

Appellee’s Motion for Relief from Stay was filed on September 24, 2013. Oral arguments were
heard on the Motion over a month later, on November 5, 2013. Therefore, as correctly noted by
the Bankruptcy Court, Debtor-Appellant had ample time to pursue both his bankruptcy petition
and respond to Appellee’s Motion. Debtor-Appellant’s argument that he retained new counsel
only one week prior to the oral argument date is not a sufficient showing of prejudice to overturn
the Bankruptcy Court’s decision, especially where Debtor-Appellant’s attorney responded to the
Motion.5 Furthermore, one week should have been adequate time for Debtor-Appellant’s new
lawyer to become familiar with this case. As such, this Court finds that Debtor-Appellant has
not shown that the Bankruptcy Court acted arbitrarily or that he was prejudiced, and the
Bankruptcy Court’s decision is affirmed.

5

Debtor-Appellant also argues that the Bankruptcy Court did not recognize that he lacked counsel “at a critical
phase of these proceedings, a time when opposition to the motion to annul the automatic stay was to [b]e filed.” (Br.
of Debtor-Appellant at 18.) As an initial matter, this is not an issue squarely before this Court. Debtor-Appellant’s
appeal asserts that the Bankruptcy Court erred in denying his motion to adjourn the hearing on the Motion for Relief
from Stay, not that he was harmed because he was without counsel. Furthermore, the assertion is untrue as DebtorAppellant did not lack counsel at any stage during the Bankruptcy Court proceedings and Debtor-Appellant’s
counsel timely responded to Appellee’s Motion for Relief from Stay that is the subject of this appeal. (Id. at 9-10,
17-18; Affirmation in Opposition attached to Notice of Appeal as Ex. 8.) The Court cannot and will not address
Debtor-Appellant’s dissatisfaction with his counsel’s representation.

11

CONCLUSION
For the reasons set forth above, the decisions of the Bankruptcy Court are affirmed and
the appeal is dismissed.

SO ORDERED.
Dated: Brooklyn, New York
September 29, 2014
_____________/s/______________
DORA L. IRIZARRY
United States District Judge

12