Facts: The owner of a mortgaged property in default receives a notice of trustee’s sale (NOTS). On the same day of the trustee’s sale before the property is sold, the owner records a grant deed transferring a portion of their interest in the property to a buyer who recently filed for chapter 7 bankruptcy, resulting in an automatic stay against the buyer’s debt collection during the bankruptcy proceedings. The property is purchased by a different buyer at the trustee’s sale who later discovers the bankrupt buyer’s interest in the property and the automatic stay.
Claim: The buyer from the trustee’s sale seeks to annul the automatic stay from the previous buyer’s bankruptcy case, claiming the trustee’s sale is valid since the bankrupt buyer acquired interest in the property after they filed for bankruptcy.
Counter claim: The bankrupt buyer claims the foreclosure sale is not valid since they acquired interest in the property before the trustee’s sale took place while their bankruptcy claim was still pending and, thus, the trustee’s sale was subject to the enforceable automatic stay.
Holding: A bankruptcy court held the automatic stay was not enforceable and the trustee’s sale was valid since the bankrupt buyer acquired interest in the property after filing for bankruptcy and the transfer of interest in the property on the same day of the trustee’s sale was inequitable conduct supporting annulment of the stay. [In re Cruz (August 29, 2014)_BR_]
