In re Miller

• Decision Date: 04 February 2005
• Docket Number: No. 04-42087-JSS13.,04-42087-JSS13.
• Citation: 320 B.R. 203
• Parties: In re Lois Ann MILLER, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Alabama

320 B.R. 203

In re Lois Ann MILLER, Debtor.

No. 04-42087-JSS13.

United States Bankruptcy Court, N.D. Alabama, Eastern Division.

February 4, 2005.

COPYRIGHT MATERIAL OMITTED

Harvey B. Campbell, Jr., Talladega, AL, for Debtor.

Janine L. Smith, Birmingham, AL, for Green Tree Servicing, LLC.

ORDER GRANTING GREEN TREE'S MOTION FOR RELIEF FROM AUTOMATIC STAY

JAMES S. SLEDGE, Bankruptcy Judge.

This matter came on to be heard on the Second Motion for Relief from Automatic Stay (the "Motion") filed by Green Tree Servicing, LLC, formerly known as Conseco Finance Corp.-AL ("Green Tree"), in the above-referenced bankruptcy case. The Motion was filed pursuant to 11 U.S.C. § 362(d) and Federal Rules of Bankruptcy Procedure 4001(a) and 9014. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b) and 157(b). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Present at the hearing were (a) counsel for the debtor Lois Ann Miller (the "Debtor"); (b) counsel for Green Tree; and (c) the Chapter 13 Trustee. Due notice was given to all parties in interest.

FACTS

On March 27, 2002, the Debtor and her ex-husband, Ray Miller, also known as Buethyl Ray Miller, Jr. ("Miller"), executed and delivered to Conseco Finance Corp.-Alabama ("Conseco Finance") a note in the amount of Forty-Eight Thousand Two Hundred Dollars and No/lOOs ($48,200.00) (the "Note") and a mortgage securing the Note (the "Mortgage"). The Mortgage granted a security interest in the Debtor's home located at 1205 Central Avenue, Gadsden, Alabama 35094 (the "Collateral"). The Mortgage on the Collateral was properly recorded in the Office of the Judge of Probate for Etowah County, Alabama. The validity of the Mortgage has only recently been challenged in a complaint filed on January 26, 2005, after the hearing on this Motion. (Doc. No. 61).¹

Conseco Finance Home Equity Loan Trust 2002-B ("Conseco") is the current holder of the Note and Mortgage. Pursuant to the terms of that certain Pooling and Servicing Agreement, Green Tree is the servicer of the Note and Mortgage.

The Note and Mortgage are the valid and binding obligations of the Debtor and Miller to Conseco and are enforceable against the Debtor and Miller pursuant to their terms. The amount owed under the Note continues to accrue interest at the rate established by the Note. Neither the Debtor nor Miller have made one payment to Green Tree since the Note was executed in March 2002. Accordingly, the Debtor and Miller are in default of their obligations under the Note. Conseco Finance Home Equity Loan Trust 2002-B continues to have a recorded Mortgage on the Collateral.²

On June 21, 2004 (the "Petition Date"), the Debtor filed a voluntary petition for relief under Chapter 13 of Title 11, United States Code, 11 U.S.C. § 101 et seq. (the "Bankruptcy Code") with the Clerk of this Court. The Debtor's Chapter 13 bankruptcy case is currently pending before this Court as Case No. 04-42087-JSS13 (the "Bankruptcy Case"). Prior to the Debtor's filing of the Bankruptcy Case, on February 24, 2004, Green Tree commenced foreclosure proceedings on the Collateral. Before advertising the foreclosure sale, Green Tree gave proper notice to all parties having an interest in the Collateral. The foreclosure sale was set for June 23, 2004. Two days prior to the foreclosure sale, the Debtor filed the Bankruptcy Case.

On the Petition Date, the Debtor filed her Schedules and Statement of Financial Affairs, wherein she declared under the penalty of perjury that the information contained therein was true and correct. The Debtor's Schedules list Green Tree as a creditor holding a secured claim on the Collateral, although the Debtor refers to the claim as being disputed.

On June 22, 2004, the Debtor filed her Chapter 13 Plan Summary. Neither the Plan nor the Plan Summary disclose the debt owed by the Debtor and Miller to Conseco under the Note. The Plan and the Plan Summary also do not propose any payments by the Debtor or Miller to Conseco on the obligations under the Note. On September 18, 2004, Green Tree filed in the Bankruptcy Case its secured Proof of Claim against the Debtor for the indebtedness due under the Note and Mortgage. No objection was ever filed to Green Tree's Proof of Claim.

On September 27, 2004, Green Tree filed a Motion for Relief from Stay and an Objection to Confirmation in the Bankruptcy Case. On September 28, 2004, Green Tree filed an Evidentiary Submission in Support of its Motion for Relief and Objection to Confirmation. The Debtor did not file a response or an objection to Green Tree's Motion for Relief from Automatic Stay. A final hearing was scheduled on Green Tree's Motion for Relief for November 10, 2004. On the day of the hearing, counsel for the Debtor advised the Court that the parties had reached a settlement and Green Tree's Motion for Relief was placed on the administrative docket pending further notice from the parties as to the status. In furtherance of the parties' settlement agreement, Green Tree filed an Amended Proof of Claim in the Bankruptcy Case on November 22, 2004. No objection was ever filed to Green Tree's Amended Proof of Claim. Although the parties had previously reached an agreement, no agreement was filed to execute the settlement agreement. The Court subsequently dismissed the Motion for Relief on December 10, 2004.

The hearing on the current Motion was held on January 5, 2005 and January 6, 2005, and the Court made findings of fact as described herein. The Debtor has lived in the home made the basis of the mortgage for 33 years. The note and mortgage in issue were a refinancing, not a purchase money, mortgage. Most of the loan documents were presented to the Debtor and Miller on the night of the loan closing. The documents at the loan closing were dated March 27, 2002, but the closing occurred on March 28, 2002 after 2:00 a.m. The branch manager of Conseco, Mr. Chris Galloway, arrived at Ms. Miller's home around 2 a.m. without invitation or notice, and he pressured Ms. Miller, providing her with a number of documents that were either partially filled out or blank, and though she signed them, the signature would not amount to consent. The Court did not find Mr. Galloway to be a credible witness, and his testimony was only believed when it did not conflict with other evidence. At least one document was corrected and sent to the Debtor and Miller the next day. Although the Debtor acknowledges signing the Note, the Mortgage and other loan documents, she denies owing Green Tree the indebtedness evidenced by the Note and Mortgage. Ms. Miller has never made a payment on the loan. Her Chapter 13 plan does not provide for her to pay Green Tree as a secured creditor, but there is a recorded mortgage, in favor of Conseco, signed by the Millers. In addition to the abovenoted discrepancies with the Mortgage and Note, the settlement statements and the required Truth-in-Lending disclosures were not accurate, and the mortgage was also not properly notarized. There was no good faith estimate of settlement costs delivered to the Debtor prior to the loan closing, and the documents were either partially filled out or blank at the loan closing.

The principal reflected in the note was $48,200.00 with interest at 13.55% from March 27, 2002. To date, none of the indebtedness has been paid. The real estate has a Fair Market Value of $20,000.00, and the home is currently insured. The payment on the disclosure/settlement statement shown to CitiFinancial was different from the actual payment made. The payment on the settlement statement was $20,633.19, whereas, the actual payment was $20,302.25. A State Court cause of action was filed seeking to cancel the indebtedness.

The notary acknowledgment on Conseco's Mortgage was brought into question by the Debtor at the time of the hearing. The former branch manager of the Conseco Finance office that closed the loan, Chris Galloway, testified that the notary who acknowledged the signatures of the Debtor and Miller on the Mortgage did not actually witness the Debtor and Miller execute the Mortgage.³ The former branch manager is a notary and did witness the Debtor and Miller execute the Mortgage. However, the former branch manager did not notarize the Mortgage, and the Mortgage was not witnessed by two individuals in lieu of the notary acknowledgment. Mr. Galloway's testimony about the acknowledgment was uncontested.

The Debtor also acknowledges receiving the loan proceeds after the closing, both in the form of having various debts belonging to the Debtor and Miller being paid off and in cash proceeds. At some point in time within three days of the loan closing, the Debtor attempted to rescind the loan transaction by executing and delivering to Conseco the Notice of Right of Rescission. Ms. Miller's right of rescission was timely exercised by returning the Notice via UPS in the package sent to her by Conseco and required to be returned to the creditor before the checks were disbursed. Notwithstanding the timely rescission, Conseco disbursed the checks.

The Debtor's loan with Green Tree was never cancelled. Upon default of the Debtor's and Miller's obligations under the Note, Green Tree brought this action to enforce its rights in and to the Collateral.

To evidence the debt owed on the Note, the Debtor and Miller executed and delivered to Green Tree a Mortgage on the Collateral. Both Green Tree, the Debtor and Miller intended to execute a Mortgage on the Collateral. However, the Mortgage was not properly attested to as required under Alabama law.

At the conclusion of the hearing, the parties were ordered to file post-hearing briefs on the issues before the Court. Green Tree's brief was due to be filed with the Court on January 18, 2005. The Debtor's brief was due to be filed with the Court on January 24, 2005. On January 20, 2005, Green Tree filed a Motion to Extend Deadline to File Post-Hearing Brief. In the Motion...