## Facts

- Prudential Savings Bank loaned Leonard J. Siciliano $17,000 secured by a mortgage on his Philadelphia residence; Siciliano defaulted.
- A state court foreclosure judgment was entered, and a sheriff’s sale was scheduled for December 4, 1989.
- Siciliano filed a first Chapter 13 petition shortly before the sale, triggering the automatic stay under 11 U.S.C. § 362(a).
- After repeated post-petition payment defaults, the bankruptcy court granted Prudential relief from the stay in June 1991; the first Chapter 13 case was later dismissed on November 7, 1991 for plan-payment failures.
- Prudential scheduled another sheriff’s sale for December 2, 1991.
- Siciliano filed a second Chapter 13 petition on November 29, 1991, again imposing the automatic stay, but did not notify Prudential or the sheriff.
- The sheriff’s sale proceeded on December 2, 1991; Prudential then sought stay relief to validate the sale.

## Issues

1. Whether 11 U.S.C. § 362(d) authorizes retroactive relief from the automatic stay by “annulling” the stay to validate a foreclosure sale held after a bankruptcy filing.
2. Whether actions taken in violation of the automatic stay are void or voidable, and how that characterization affects the availability of annulment.

## Decision

- The court of appeals reversed the district court and remanded to the bankruptcy court.
- Section 362(d) empowers bankruptcy courts to “annul” the automatic stay, which permits retroactive relief capable of validating acts that otherwise violated the stay.
- Although stay violations are generally void, voidness does not eliminate the statutory authority to cure the defect through annulment.
- The bankruptcy court erred by concluding it lacked power to grant retroactive relief; on remand it must decide, in its discretion, whether annulment is warranted on the facts.

## Legal Principles

- The automatic stay arises upon the filing of a bankruptcy petition and halts foreclosure activity. (11 U.S.C. § 362(a))
- A bankruptcy court may grant relief from the stay by “terminating, annulling, modifying, or conditioning” it; “annul” authorizes retroactive relief. (11 U.S.C. § 362(d))
- Acts taken in violation of the automatic stay are generally void unless and until the stay is annulled retroactively.
- Whether to annul the stay is an equitable, discretionary determination requiring consideration of the circumstances, including notice to creditors, debtor conduct, and reliance interests created by the challenged act.

## Conclusion

The court held that bankruptcy courts have statutory authority under § 362(d) to annul the automatic stay retroactively, so a foreclosure sale conducted after a bankruptcy filing may be validated in appropriate circumstances; the matter was remanded for the bankruptcy court to exercise its equitable discretion.


In re Siciliano, 13 F.3d 748 (3d Cir. 1994)