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Bank of Oklahoma, N.A. v. Miller

Court of Appeals of Oklahoma, Division II

February 25, 2016

BANK OF OKLAHOMA, N.A., a national bank, Plaintiff/Appellee,
v.
DAVID WAYNE MILLER II and HEATHER LEIGH MILLER, Defendants/Appellants, and CHATEAU MMH, INC.; MERS AS NOMINEE FOR E LOAN; COCKRELL TRUST; DIJ, INC.; LEAF FUNDING; MARLIN LEASING CORP.; BANK OF AMERICA, NA; DAVID YOUNCE; BANK OF OKLAHOMA, N.A. (MORTGAGE DIVISION), Defendants.

          Mandate Issued: 10/12/2017

         APPEAL FROM THE DISTRICT COURT OF TULSA COUNTY, OKLAHOMA HONORABLE CARLOS CHAPPELLE, TRIAL JUDGE

          FREDERIC DORWART, SAMUEL S. ORY, SARA C. ROYSTER, FREDERIC DORWART, LAWYERS, TULSA, OKLAHOMA, FOR PLAINTIFF/APPELLEE

          BRIAN L. MITCHELL, CHAD M. NEUENS, SHEILA D. SAYNE, NEUENS MITCHELL PLLC, TULSA, OKLAHOMA, FOR DEFENDANTS/APPELLANTS

          P. THOMAS THORNBRUGH, PRESIDING JUDGE

         ¶1 David Wayne Miller II and Heather Leigh Miller (Millers) appeal the refusal of the district court to vacate a personal judgment made against them during the pendency of a bankruptcy stay, and the court's refusal to vacate a resulting deficiency order. On review, we find the in personum judgment was void because it was made during the bankruptcy stay, and the subsequent deficiency order is therefore also void.

         BACKGROUND

         ¶2 Beginning in 2001, Millers entered into a series of loans with Bank of Oklahoma, N.A. (Bank). In January 2009, Millers filed a Chapter 7 bankruptcy case. In May 2009, the bankruptcy court lifted its stay to allow Bank to proceed in rem against real property at 8927 South Maplewood Ave. in Tulsa, OK. In July 2009, Bank filed a petition against Millers seeking to foreclose on various security interests, including the Maplewood property. Millers did not appear or reply, and, in October 2009, Bank moved for a default judgment. The court ordered that Bank was entitled to a lien of approximately $331, 000 against the Maplewood property and to two other liens against similar properties. In December, Bank filed an amended petition, and, in March 2010, the court issued a second order finding liens against the three properties, and ordering the sale of same. The property thereafter was sold.

         ¶3 In April 2011, the bankruptcy court denied Millers a discharge, and, in June 2011, Bank filed a motion for leave to enter deficiency judgment. The deficiency motion stated that the court had previously rendered a judgment "against Defendants David Wayne Miller, II and Heather Leigh Miller" and sought a deficiency judgment of approximately $1, 056, 000. Millers did not appear, and the court granted this judgment. In April 2014, Millers filed a motion to vacate the deficiency judgment as void, arguing that Bank has never sought a personal judgment against them. In a later response, Millers also argued that the bankruptcy court had not lifted the stay to allow an in personam proceeding, and any personal judgment rendered against them during the bankruptcy stay was void. The district court denied this motion. Millers now appeal.

         STANDARD OF REVIEW

         ¶4 The test for measuring the legal correctness of the trial court's ruling on a motion to vacate or set aside judgment "is whether sound discretion was exercised upon sufficient cause shown to vacate, modify, open or correct the earlier decision, or to refuse the relief sought." Schepp v. Hess, 1989 OK 28, ¶ 11, 770 P.2d 34. The discretion of the court in this matter, however, revolves primarily around its interpretation of law, specifically whether the interaction of federal bankruptcy law and the state foreclosure statutes voids the judgment as a matter of law. These questions of statutory interpretation and implementation are reviewed de novo. Hubbard v. Kaiser- -Francis Oil Co., 2011 OK 50, ¶ 6, 256 P.3d 69.

         ANALYSIS

         ¶5 Although the parties discuss this matter primarily in terms of whether an in personam claim was properly pled, this question is irrelevant unless the bankruptcy court lifted its stay to allow Bank to proceed with an in personam claim in the first instance. This appeal therefore initially presents two issues of law:

1. Could Bank obtain a valid in personam judgment against Millers during the pendency ...

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