In Re: Marnitta L. King (King v. Wells Fargo Bank, N.A.) (U.S. Bankruptcy Court)

Filed March 20, 2007. Memorandum Opinion by Judge Thomas J. Catliota.

Marnitta L. King (the "Debtor") is a joint owner of the real property located at 5015 Cumberland Street, Capitol Heights, Maryland (the "Property"). Wells Fargo Bank, N.A. ("Wells Fargo") is a secured creditor by virtue of a promissory note, repayment of which is secured by a deed of trust duly recorded among the land records of Prince George's County. There was no dispute that both the note and the deed of trust were executed by the Debtor and the other joint owner (the "Codebtor").

The Debtor filed the instant bankruptcy case seeking relief under chapter 13 of the United States Bankruptcy Code (the "Code") on September 15, 2006, intending to stop a foreclosure sale of the Property scheduled for later that same day. The Debtor alerted Wells Fargo of the bankruptcy filing but Wells Fargo indicated that they would not stop the foreclosure sale because the Debtor had filed two previous bankruptcy cases within a one year period (both cases having been dismissed) and, consequently, there was no automatic stay by virtue of Section 362(c)(4)(A)(i) of the Code. The foreclosure sale was held, at which Wells Fargo was the successful bidder.

The Debtor subsequently filed a Motion to Set Aside Sell [sic], asserting that the foreclosure sale was held in violation of the codebtor stay of Section 1301(a) of the Code, which barred Wells Fargo from proceeding with a post-petition foreclosure sale even though the automatic stay did not arise as to the Debtor pursuant to Section 362(c)(4)(A)(i). Wells Fargo argued that the "vitality of the codebtor stay is at the mercy of the status of the automatic stay."

The Court held that the terms of Section 362(c)(4)(A) are unambiguous in that only the automatic stay of Section 362(a) is prevented from going into effect "when the factual predicate enumerated in Section 362(c)(4) exists. Section 362(c)(4)(A)(i) does not address the applicability of the codebtor stay that arises under Section 1301(a), and it certainly does not provide that the codebtor stay of Section 1301 does not come into effect if the circumstances of Section 362(c)(4) are met." Further, the Court found that, "Nowhere in Section 1301(a) is the codebtor stay limited, qualified, or effected by Section 362(c)(4)." The Court concluded that Wells Fargo's "foreclosure sale was in violation of the codebtor stay and is void."

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