Monday, January 13, 2014

Actions in State Court Foreclosure Case After Reinstatement of Bankruptcy Case Held Void

In the case of In re Clarke, 373 B.R. 769 (Bkrtcy.S.D.Fla.2006)(Isicoff, J.) the Florida bankruptcy court addressed a situation where property was old at foreclosure sale between dismissal of case and an order reinstating the case. The court noted that the Rooker-Feldman doctrine bars thecollateral review of state court judgments by a federal court. See Rooker v. Fid. Trust Co., 263 U.S. 413 (1923). But the court held that the Rooker-Feldman does not abrogate the bankruptcy court's authority to enforce the automatic stay citing In re Gruntz, 202 F.3d 1074 (9th Cir. 2000).

In this case, during the 10 days after foreclosure sale, debtor filed in the state court foreclosure case, an objection to the foreclosure sale and a motion to set aside foreclosure sale. After the bankruptcy case was reinstated, the state court denied the motions and granted motion for issuance of writ of possession. The Court noted that pursuant to  Florida statute section 45.0315, if an objection to sale is filed, the objecting party is entitled to have his objection heard before certificate of title can be issued.

In this case, the court held that due to the post-sale reinstatement state of the bankruptcy case, the court order was void as in violation of the automatic stay and that the debtor retained the potential right to revest the right of redemption until the state court confirms the sale.