On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civil Action No. 92-02753).
Before: Stapleton, Roth and Lewis, Circuit Judges.
This appeal arises from a mortgage foreclosure sale that took place after the filing of debtor's second Chapter 13 petition in bankruptcy. The debtor, Leonard J. Siciliano, had repeatedly defaulted on mortgage payments owed to Prudential Savings and Loan Association (Prudential). After much maneuvering by both Siciliano and Prudential, the sheriff finally held a foreclosure sale three days after Siciliano had filed his second bankruptcy petition, without notifying either Prudential or the sheriff of this filing. Subsequently, Prudential sought relief from the automatic stay in order to validate the sale. The bankruptcy court refused to grant this relief and the district court affirmed. In this appeal, Prudential contends that the bankruptcy court should have granted retroactive relief from the automatic stay. For the reasons set forth below, we will reverse and remand this case to the bankruptcy court for further proceedings consistent with this opinion.
Prudential is a savings and loan association with its principal office in Philadelphia, Pennsylvania. On September 4, 1984, Prudential secured a $17,000.00 loan to Siciliano with a mortgage on his residence located at 2027 South 24th Street, Philadelphia. Siciliano fell behind on his payments and on May 31, 1989, Prudential filed a complaint in the Philadelphia Court of Common Pleas to foreclose on the mortgaged property. In its complaint, Prudential alleged that Siciliano had failed to make his $169.00 monthly payments for the previous eight months. The debt and late charges amounted to $18,169.81. By order entered September 5, 1989, the state court awarded Prudential $19,838.99. A sheriff's sale of the property was scheduled for Monday, December 4, 1989.
On Friday, December 1, 1989, three days before the sheriff's sale, Siciliano filed the first Chapter 13 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania. Pursuant to the Bankruptcy Code, the petition triggered an automatic stay of all creditor proceedings. 11 U.S.C. § 362(a). Thereafter, Siciliano failed to make several post-petition mortgage payments to Prudential.
On February 19, 1991, Prudential filed a motion for relief from the automatic stay. By order entered April 4, 1991, the bankruptcy court held that Prudential could proceed with its state foreclosure action if Siciliano should default again on his payments. As a prerequisite to foreclosure, Prudential had to provide Siciliano with notice and a five day cure period. Siciliano, however, defaulted once more and by order entered June 20, 1991, the bankruptcy court granted Prudential relief from the automatic stay.
During this period, while Prudential was attempting to complete the foreclosure on the property, the United States Trustee had independently initiated steps to dismiss the bankruptcy proceeding because of Siciliano's failure to make the payments required by his Chapter 13 Plan. On October 4, 1991, the trustee filed a motion to dismiss the petition. A hearing on the trustee's motion was held on November 7, 1991, and the bankruptcy court granted the dismissal that same day.
Meanwhile, Prudential was still attempting to set up a sheriff's sale of the property. The sale was rescheduled for Monday, December 2, 1991. At that time, the mortgage debt amounted to $22,517.12. On Friday, November 29, 1991, once again just three days before the scheduled sale, Siciliano filed his second Chapter 13 bankruptcy petition. Despite this new filing, the December 2 foreclosure sale proceeded as scheduled. Prudential did not become aware of the second petition until December 4, when notice was published in a Philadelphia legal newspaper. Siciliano did not inform the sheriff of the second bankruptcy filing until December 5.
On December 23, 1991, Prudential filed a motion for relief from the automatic stay triggered by the November 29, 1991, petition. On January 6, 1992, while Prudential's motion was pending, the bankruptcy court dismissed Siciliano's second Chapter 13 petition because of Siciliano's failure to file the required documents. The court subsequently dismissed Prudential's motion for relief from the stay as moot.
On March 3, 1992, the bankruptcy court held a hearing to consider Siciliano's request for an opportunity to file a Chapter 7 petition, which the court construed as a motion to reconsider the January 6, 1992, dismissal of his second Chapter 13 petition. As a result of that hearing, the court entered an order on March 5, 1992, holding that any sale of the property on December 2, 1991, was void and that the dismissal of the bankruptcy petition would stand.*fn1 Prudential filed a motion to reconsider the order and for retroactive relief from the automatic stay in order to validate the sheriff's sale of the mortgaged property. After a hearing, the court denied ...