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Clarifying 'Usual Place of Abode' in SCRA Collection Cases

Posted By USFN, Tuesday, February 4, 2020
Updated: Monday, February 3, 2020


by Blair Gisi, ESQ. 
SouthLaw, P.C. 
USFN Member (IA, KS, MO, NE)

In overturning the default judgment granted against the debtor in Coastal Credit, LLC v. McNair, 446 P.3d 495 (Kan. Ct. App. 2019), the Kansas Court of Appeals has recently made an important ruling regarding service of process on active military debtors.

The debtor in McNair was in active status in the Army and stationed in Africa when the financing contract he had entered into to purchase a car went into default.  After the default, the creditor repossessed the car, sold it, and then filed a limited action against the debtor to pursue the remaining deficiency.

While the debtor was stationed in Africa, his family was living in Manhattan, KS and in February 2014, the process server executed service upon the debtor’s family at the “usual place of abode” per the process server’s field notes.  It was also noted that that the debtor was in the military and stationed in Africa until June 2014.

The debtor failed to respond or appear to any of the subsequent pleadings and hearings and after complying with the relevant Servicemembers Civil Relief Act (SCRA) requirements, default judgment was granted against the debtor in August 2015.  When the debtor noticed his wages being garnished in October 2017, he sought to set aside the judgment and disgorge the garnished funds.

To support his motion, the debtor argued that the service was ineffective since the debtor was not served at his “usual place of abode” as defined by Coleman v. Wilson, 1995 Kan. App. Unpub. LEXIS 932 (Ct. App. Dec. 1, 1995).  In that case, this court held that a military service person's usual place of abode is where the person lives, eats, sleeps, and works at the time of the attempted service.  However, the district court denied debtor’s motion on the grounds that service on the debtor’s wife at their Manhattan, Kansas residence as the usual place of abode and that the service was valid.  Debtor timely appealed that ruling.

Focusing on the “usual place of abode” argument, which comes from Kan. Stat. Ann. § 61-3003, the Court of Appeals overturned the district court. 

The Court of Appeals began its analysis with the legislative intent of K.S.A. 2018 Supp. 77-201 which provides:

Usual place of residence' and 'usual place of abode,' when applied to the service of any process or notice, means the place usually occupied by a person. If a person has no family, or does not have family with the person, the person's office or place of business or, if the person has no place of business, the room or place where the person usually sleeps shall be construed to be the person's place of residence or abode.

Finding that the legislative intent of the statute was clear and unambiguous, the Court of Appeals applied the statute to mean that the debtor’s usual place of abode in this situation was “the room or place where he usually slept,” which at the time, was in Africa.  The Court of Appeals went on to further state that a person’s usual place of abode may be determined on a case-by-case basis and had the debtor been on vacation or brief business trip to Africa, for instance, then the Manhattan would have constituted his usual place of abode.  Here, the active military deployment to Africa for six months was enough to shift his usual place of abode from his family’s residence to Africa.

The Court of Appeals also made an interesting distinction between a family’s usual place of abode the debtor’s usual place of abode in finding that that there was ineffective service on the debtor, stating that they are not necessarily the same and that the family’s usual place of abode does not control the debtor’s usual place of abode.

When attempting service on an active military debtor, the McNair case serves as an outline for both the scrutiny the debt collector may face in obtaining a default judgment as well as the additional steps that may be necessary in ensuring the judgment can withstand that scrutiny.

Copyright © 2020 USFN. All rights reserved.

Winter USFN Report

 

Tags:  Bankruptcy  Kansas  Servicemembers Civil Relief Act (SCRA) 

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Central District of California Loan Modification Management Pilot Program Streamlines Review Process

Posted By USFN, Wednesday, December 18, 2019



by Joseph C. Delmotte, Esq. and Gilbert R. Yabes, Esq.
Aldridge Pite, LLP
USFN Member (CA, GA, HI, ID, NY, OR, UT, WA)

Over the past several years, a growing number of districts across the country have identified an opportunity to provide an additional avenue for borrowers to pursue their loss mitigation options under the supervision of the bankruptcy courts resulting in the creation of numerous programs. Although the broad purpose of these loss mitigation programs is the same and there are similarities in the way they’re structured and implemented by the bankruptcy courts, there are also a number of differences amongst the programs. The states and districts which recently adopted such programs have had the benefit of observing more long-standing programs to determine what works and what does not in order to implement more functional and efficient programs.

The United States Bankruptcy Court for the Central District of California is one of the recent districts to implement a court supervised loss mitigation program and in so doing; it has incorporated several distinct features which offer the potential for an improved, more streamlined review process.  As indicated by its name, the Loan Modification Management Pilot Program (“LMM Program”) is currently only a pilot program with a small number of selected judges participating though the program recently expanded to include several additional judges. According to the LMM Program procedures, the goal of the program is to facilitate communication and the exchange of information in a confidential setting and to encourage the parties to finalize a feasible and beneficial agreement under the supervision of the Bankruptcy Court for the Central District of California.

One of the primary distinguishing characteristics of the LMM Program is the role of the program manager. The person in this role is both experienced in bankruptcy loss mitigation and actively involved from the commencement of the program in facilitating the exchange of information and documentation between the parties to ensure the process moves forward in an expeditious manner. Furthermore, unlike many other districts which appoint a mediator at the outset and permit multiple mediation hearings, the LMM Program does not appoint a mediator unless mediation is requested at the completion of the review process which likely results in fewer required mediation hearings.

The LMM Program also utilizes mandatory forms for its motions and orders which simplifies the process required to commence and terminate the LMM Program, as well as the process for obtaining court approval to enter into a finalized loan modification agreement. All of these factors combine to make the LMM Program one of the most efficient and user-friendly court supervised loss mitigation programs available.

Given their popularity and unique ability to provide a transparent yet confidential forum to conduct the loss mitigation review process under the supervision of the bankruptcy courts, loss mitigation programs similar to the LMM Program in the Central District of California will likely continue to expand to other districts and states across the country. Furthermore, if the LMM Program is any indication, bankruptcy courts interested in adopting similar loss mitigation programs in the future will have a strong vantage point to design better, more efficient processes based on their ability to analyze and review the successful features of currently existing programs. 
 


Copyright © 2019 USFN. All rights reserved.

December e-Update

 

Tags:  Bankruptcy  Loan Modification Management Pilot Program  United States Bankruptcy Court for the Central Dis 

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Connecticut Case Addresses Bankruptcy Stay’s Impact on Judgments of Strict Foreclosure

Posted By USFN, Wednesday, December 18, 2019



by Joseph Dunaj, Esq
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)


In the case of Seminole Realty, LLC v. Sekretaev, 192 Conn. App. 405 (2019), the Connecticut Appellate Court has released an important opinion concerning the intersection of federal bankruptcy law and judgments of strict foreclosure; specifically, the effect of a bankruptcy court order imposing a stay on a pending law day.  In Seminole Realty, a judgment of strict foreclosure had initially entered in 2014, with a law day being set.  The defendant, however, engaged in a scheme to delay the foreclosure by filing multiple bankruptcy petitions to gain the benefit of the automatic bankruptcy stay under 11 U.S.C. § 362(a).  In 2018, the foreclosing plaintiff obtained an order of in rem relief under 11 U.S.C. § 362(d)(4), so that any further petition filed within two years would not impose a stay on the foreclosure.  The plaintiff then filed a Motion to Reset the law days. 

Prior to the scheduled hearing, the defendant filed another Chapter 13 Bankruptcy Petition, which did not impose a stay because of the in rem relief order.  At the hearing on the Motion to Reset, the court scheduled a law day of August 15, 2018.  On July 10, 2018, the bankruptcy court entered an order suspending the prior in rem relief order.  On September 18, 2018, the bankruptcy court then vacated its July order.  The foreclosing plaintiff then applied for an execution for ejectment, to gain possession of the premises, which was issued on November 29, 2018, from which the defendant appealed, claiming that the law days became ineffective upon the bankruptcy court’s July 10th order imposing a stay, and thus title never vested in the plaintiff.

Prior to 2002, the general presumption in Connecticut was that a law day in a judgment of strict foreclosure was indefinitely stayed by a bankruptcy petition 11 U.S.C. § 362(a).  Citicorp Mortgage v. Mehta, 39 Conn. App. 822, 824 (1995).  That changed with the Second Circuit decision of Canney v. Merchs. Bank (In re Canney), 284 F.3d 362 (2nd Cir. 2002).  In In re Canney, the Second Circuit held that because a strict foreclosure was merely a time limitation on a particular action (the time to redeem), and not a positive act to enforce a judgment, the limited stay of 11 U.S.C. § 108(b) applied instead.  In Provident Bank v. Lewitt, 84 Conn. App. 204 (2004), the Connecticut Appellate Court adopted the holding of In re Canney, and held that a judgment of strict foreclosure is subject to 11 U.S.C. § 108(b), and the filing of a bankruptcy petition serves to only extend a law day 60 days, rather than stay the law days indefinitely. 

The state legislature adopted Conn. Gen. Stat. § 49-15(b) in response to In re Canney and Lewitt.  Under that statute, when a mortgagor files a bankruptcy petition under any title of the Bankruptcy Code, the judgment of strict foreclosure is automatically opened by operation of law, but only as to the law days, with the other terms of the judgment remaining in place.  The effect of the statute is to prevent the passage of the law days upon the filing of a bankruptcy petition and avoid the result of In re Canney & Lewitt.  At that time (pre-BAPCPA), all bankruptcy petitions imposed a stay, and while efforts have been made to correct the now-outdated statute, the state legislature has been slow to act.

In Seminole Realty, the issue before the Appellate Court was the impact of the bankruptcy court’s July 10th order on the pending law day.  The Appellate Court held that Conn. Gen. Stat. § 49-15(b) only applies upon the filing of a bankruptcy petition, and only applies when a petition is filed after a court sets a law day pursuant to a judgment of strict foreclosure.  Further, the Appellate Court held that when the statute does not apply, the prior case law of In re Canney and Lewitt applies.  The Appellate Court found that when the bankruptcy court imposed a stay on July 10th, the law day was automatically extended 60 days under 11 U.S.C. § 108(b), and when the defendant failed to redeem by the expiration of his law day, title vested absolutely to the Plaintiff.

The Appellate Court’s holding in Seminole Realty has potentially broad implications.  As stated above, the court has re-affirmed the validity of the prior case law, when the strictures of Conn. Gen. Stat. § 49-15(b) do not expressly apply.  A foreclosing plaintiff would be mindful to review Seminole Realty and whether or not its holding would be beneficial to argue, especially in an aged foreclosure case with multiple bankruptcy filings.  Further, the Appellate Court in Seminole Realty, by highlighting some of the shortcomings of Conn. Gen. Stat. § 49-15(b), appears to either show its willingness to address the statute in future cases or seeks to invite the legislature to further amend the statute.  Surely, time will show how the statute will further evolve.

 

Copyright © 2019 USFN. All rights reserved.

December e-Update

 

Tags:  Bankruptcy  Connecticut  Connecticut Appellate Court  Foreclosure  Seminole Realty LLC v. Sekretaev 

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