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Strayton v. Champion Mortgage (In re Strayton)
Citations: 360 B.R. 8; 2007 Bankr. LEXIS 177Docket: Bankruptcy No. 06-13703-RS; Adversary No. 06-1394
Court: United States Bankruptcy Court, D. Massachusetts; January 17, 2007; Us Bankruptcy; United States Bankruptcy Court
The Court, led by Bankruptcy Judge Robert Somma, has granted the Debtor/Plaintiff's request for continued injunctive relief to halt a foreclosure sale of his residence until the conclusion of an ongoing adversary proceeding. The Defendant, Champion Mortgage, conducted a foreclosure sale of a condominium unit on September 27, 2006, where it holds a second mortgage. The Debtor filed for Chapter 13 bankruptcy on October 16, 2006, claiming the property as co-owned with his wife under a Massachusetts homestead exemption and listing the Defendant as holding a second mortgage with a secured claim of $99,648, subordinate to a first mortgage from Middlesex Savings Bank valued at $99,962. On October 25, 2006, the Debtor initiated an adversary proceeding to challenge the foreclosure sale, alleging it was a fraudulent transfer and did not comply with Massachusetts law, also questioning the buyer's authority. An initial injunction against the Defendant's foreclosure efforts was granted on October 26, 2006, and followed by an evidentiary hearing on November 1, 2006, which included testimony and the submission of briefs. The Debtor and his wife have occupied the condominium since January 1998, securing a home equity line from the Defendant in October 2002. After defaulting on this line, the Debtor entered a forbearance agreement in August 2005, which was later breached. Following extended negotiations for further forbearance, the Defendant proceeded with foreclosure in August 2006. The Defendant met some notification requirements but failed to actively market the property or seek an appraisal prior to the foreclosure sale, which drew four bidders with the highest bid of $130,000. The sale has not closed due to the injunction. The Residence is determined to have a fair market value of at least $325,000. To issue a preliminary injunction, four factors are weighed: the likelihood of the Debtor's success in invalidating the foreclosure sale, potential irreparable harm to the Debtor without the injunction, the balance of harm between the Defendant and the Debtor, and the public interest. The analysis reveals a substantial likelihood that the Debtor will succeed on the merits due to the Defendant’s failure to demonstrate reasonable diligence in the foreclosure process, which under Massachusetts law requires good faith and thorough efforts beyond mere statutory compliance. The Defendant’s actions included insufficient advertising and a lack of marketing or appraisal efforts, indicating a disregard for the mandated diligence. The potential loss of the Debtor's home constitutes irreparable harm, which outweighs the Defendant's interests since they retain their lien and rights in the Chapter 13 case. The public interest is also at stake, emphasizing the importance of following legal requirements in public transactions. As a result, the Court issues a preliminary injunction prohibiting Champion Mortgage and its agents from selling or taking further action on the Debtor’s residence until the matter is resolved.