Jerome I. Sobel v. MBank Waco, N.A.--Appeal from 19th District Court of McLennan County

IN THE

TENTH COURT OF APPEALS

NO. 10-90-188-CV

JEROME I. SOBEL,

Appellant

v.

MBANK WACO, N.A.,

Appellee

From the 19th District Court

McLennan County, Texas

Trial Court # 90-823-1

O P I N I O N

Jerome Sobel sued MBank Waco for the wrongful foreclosure of a deed of trust. He alleged that the foreclosure violated a bankruptcy stay order. MBank counterclaimed for a deficiency judgment on the note secured by the deed of trust. Following a bench trial, the court concluded that the stay expired prior to the foreclosure. It entered a judgment that Sobel take nothing and that the bank recover on its counterclaim. We will affirm.

A stay automatically arose when Sobel filed for bankruptcy on May 1, 1989. See 11 U.S.C.A. 362(a) (West 1979 and West Supp. 1991). This prevented the enforcement of liens against property of his estate. See id. at 362(a)(4) (West 1979). MBank filed a motion on May 3 to lift the stay, but no preliminary or final hearing was ever held on the motion. On May 3 the bank also filed a separate motion, asking the court to issue an ex parte order to modify the stay so that notice of foreclosure could be posted under the deed of trust. The court entered this ex parte order on May 12:

IT IS, THEREFORE, ORDERED that the Automatic Stay of 11 U.S.C 362 is hereby modified as to MBank Waco . . . to permit [the bank] to post the real property described in its Motion For Relief from Automatic Stay for foreclosure sale continuously until its Motion for Relief is heard and decided and to notify appropriate parties pursuant to state law. However, in no event shall [the bank] be authorized to proceed with foreclosure sale unless and until this Court issues an Order to that effect.

(Emphasis added). The bank proceeded with the foreclosure on June 6 without a court order "to that effect."

A stay automatically terminates thirty days after a motion is filed to lift it unless, "after notice and a hearing," the court orders the stay continued pending a final hearing on the motion. 11 U.S.C.A. 362(e) (West Supp. 1991). MBank argues that the stay expired on June 3 the thirtieth day after the motion to lift it was filed because no hearing was held on the motion. Sobel contends, however, that the effect of the May 12 order was to continue the stay until the court issued an order authorizing the bank to proceed with foreclosure. Because the court never issued an order authorizing the foreclosure sale, he argues that the stay was still in effect on June 6 when the foreclosure occurred. Thus, he contends the foreclosure was void because it violated the stay. See Kalb v. Feuerstein, 308 U.S. 433, 60 S. Ct. 343, 346, 84 L. Ed. 370 (1940).

Determining the effect of the May 12 order is pivotal. We will apply the rules that govern the interpretation of other written instruments to determine from the language of the order what the court intended and then give the order its intended effect. See Lone Star Cement Corporation v. Fair, 467 S.W.2d 402, 404-05 (Tex. 1971); R & P Enterprises v. LaGuarta, Gavrel & Kirk, 596 S.W.2d 517, 518 (Tex. 1980).

The prohibition against proceeding with the foreclosure sale without a court order is not limited to any particular period of time. The question is whether the court intended the prohibition to apply only as long as the stay remained effective under section 362(e) in this instance until the thirtieth day after the motion was filed to lift the stay or intended it to continue the stay beyond the thirtieth day and until a subsequent court order was issued authorizing the foreclosure sale.

Sobel asserts that the court intended the prohibition to continue the stay beyond the thirtieth day. The order was issued ex parte and without notice or a hearing. An order issued without notice or a hearing is ineffective to extend the stay beyond the thirtieth day after a motion is filed to lift it. In re Looney, 823 F.2d 788, 791-92 (4th Cir. 1987). Thus, if we interpret the order as Sobel suggests, the portion of the order containing the prohibition will be ineffective. We must interpret the order in a way that makes all of its provisions effective. See Harris v. Roe, 593 S.W.2d 303, 306 (Tex. 1980). Consequently, we reject Sobel's interpretation. See id.

Instead, we adopt the more reasonable interpretation of the court's intent: The court intended the prohibition to apply only as long as the stay remained effective under section 362(e). This interpretation is not only in harmony with the language of the order but gives effect to all its provisions. Although in interpreting the order we did not consider comments which the bankruptcy judge made at a show-cause hearing held subsequent to the foreclosure, we note that our interpretation is consistent with his view of the order's effect.

Sobel's suit for wrongful foreclosure is based on the erroneous premise that the June 6 foreclosure sale violated the stay. The stay automatically expired on June 3 because no hearing, either preliminary or final, was ever held on the motion to lift it. See 11 U.S.C.A. 362(e) (West Supp. 1991). The prohibition against proceeding with the foreclosure sale without a court order expired with the termination of the stay. Therefore, Sobel has no legal basis for a wrongful-foreclosure action based on a violation of the stay. Points one, two, and five are overruled.

His third point attacks the legal conclusion that MBank complied with all notice requirements in the deed of trust and under state law. The trustee's deeds contain a recital that MBank complied with "all prerequisites required by law and/or by said Deed of Trust." This recital created a rebuttable presumption that the foreclosure sale was validly conducted. See Hart v. Eason, 159 Tex. 375, 321 S.W.2d 574, 575 (1959). Because the presumption was not conclusively rebutted, we overrule point three.

The fourth point is that the court erred when it found that the amounts bid at the foreclosure sale by MBank were reasonable. Sobel testified that the improved tract was worth $80,000, but notes that MBank bought the tract at the foreclosure sale for only $24,500. His opinion testimony on value was not binding on the court and, thus, did not conclusively establish that the sale price was commercially unreasonable. See McGalliard v. Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986) (holding that the fact-finder is not bound by opinion testimony from interested witnesses). Point four is overruled.

The judgment is affirmed.

BOB L. THOMAS

Chief Justice

Before Chief Justice Thomas,

Justice Cummings and

Justice Vance

Affirmed

Opinion filed and issued February 19, 1992

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