In re Anthony

• Citation: 481 B.R. 602
• Decision Date: 11 September 2012
• Docket Number: Nos. 4:12–CV–3124,Bankruptcy No. BK11–42232.,4:12–CV–3125,4:12–CV–3126.,s. 4:12–CV–3124
• Parties: In the Matter of Karen J. ANTHONY, Debtor.
• Court: United States District Courts. 8th Circuit. United States District Court of Nebraska

481 B.R. 602

In the Matter of Karen J. ANTHONY, Debtor.

Nos. 4:12–CV–3124, 4:12–CV–3125, 4:12–CV–3126.

Bankruptcy No. BK11–42232.

United States District Court, D. Nebraska.

Sept. 11, 2012.

John M. Guthery, Jr., Perry, Guthery Law Firm, Lincoln, NE, for Cattle National Bank & Trust Company.

Todd R. Mulliner, Jeffrey, Hahn Law Firm, Lincoln, NE, for Edenton North Home Owner's Association.

Karen J. Anthony, Lincoln, NE, pro se.

U.S. Bankruptcy Clerk, U.S. Bankruptcy Court, Lincoln, NE, for U.S. Bankruptcy Court.

Patricia M. Fahey, U.S. Trustee, Omaha, NE, for U.S. Trustee.

Kathleen A. Laughlin, U.S. Bankruptcy Chapter 13 Trustee, Omaha, NE, for Kathleen A. Laughlin.

MEMORANDUM AND ORDER

JOHN M. GERRARD, District Judge.

These three cases are appeals from orders of the United States Bankruptcy Court. In case no. 4:12–cv–3124, the appellant, Karen J. Anthony, appeals from the bankruptcy court's order granting Cattle National Bank & Trust Company's motion for relief from the automatic bankruptcy stay. In case no. 4:12–cv–3125, Anthony appeals from the bankruptcy court's overruling of her objection to Cattle National's proof of claim. And in case no. 4:12–cv–3126, Anthony appeals from an order that sustained in part and in part overruled her objection to the claim of the Edenton North Homeowner's Association.

Anthony claims the bankruptcy court erred in a number of ways. The Court has seen many of her arguments before. They are regularly peddled on the less reliable corners of the Internet by tax protesters, “sovereign citizens,” and other conspiracy theorists. Anthony has joined the ranks of the unwary, unwise, and often desperate victims to be persuaded that taxes are voluntary, money isn't “money,” and you don't really have to pay your bills. The truth: they aren't, it is, and you do. The Court, having reviewed the bankruptcy court record and the parties' briefing in these appeals, affirms the bankruptcy court's orders.

I. BACKGROUND

The plot of land that is at the heart of these disputes is a residential lot in Lincoln, Nebraska that Anthony purchased in 2001. Filing 59.¹ Anthony had been living in a house on an adjoining lot, and bought the residential property that is at issue when it was still an unimproved lot. At the time Anthony's deed was recorded, the lot was subject to a previously recorded declaration of restrictive covenants, which had been recorded by the Lincoln Land and Mortgage Company in late 2000. Filing 60. Among other things, the declaration provided that any person who became record owner of a lot in the subdivision would become a member of the yet-to-be-created Edenton North Homeowner's Association, and that each member of Edenton North

shall be deemed to covenant to maintain the Commons, which covenants by the members shall be satisfied by the payment of actual and special assessments for the administration, maintenance or improvement of the Commons. Such annual and special assessments shall be uniform as to each lot or living unit within [Edenton North]. Each such assessments [sic] shall be the personal obligation of the member who is, or was, the record owner of the lot or living unit assessed at the time of such assessments ... and, when shown of record, shall be a lien upon the lot or living unit assessed.

Filing 60 at 3.

In 2005, Anthony borrowed money from Cattle National to build a residence on the lot.² Filing 54–1. Anthony executed a promissory note for $285,000. Filing 54–1 at 1. That amount was later increased to $310,000 so that the basement of the constructed residence could be finished. Filing 54–1 at 3. Brian Lavelle, a vice-president at Cattle National, testified that the loan was a business purpose loan: Lavelle said that Anthony's intent was to build a residence, or “spec house,” on the then-vacant lot, then sell it for a profit. Case no. 4:12–cv–3124 filing 9 at 8, 24–25. Lavelle said that although Anthony was not in the business of home construction and had no experience building, Cattle National felt comfortable with the loan because Anthony planned to work with an established builder. Case no. 4:12–cv–3124 filing 9 at 27–28.

Cattle National supplied funds to Anthony to finance construction of the house. Filing 54–3 at 2. Lavelle testified that the funds were transferred from the bank to the title company via cashier's check, then the title company paid the contractors' bills. Case no. 4:12–cv–3124 filing 9 at 12. When the note matured in 2006, Anthony started making payments. Filing 54–3 at 2. But according to Lavelle, when the house was completed and placed on the market in 2006, it did not sell. Case no. 4:12–cv–3124 filing 9 at 26. At some point, Anthony moved into the house herself. Case no. 4:12–cv–3124 filing 9 at 26.

Some of Anthony's payments were deferred, but in 2008, Anthony was making payments on a monthly basis. Filing 54–3 at 1–2. The due date for the final balloon payment on the note kept getting pushed back, until the remaining balance of payments, in the amount of $248,632.56, was due on March 31, 2011. Filing 54–1 at 9. But Anthony's monthly payments became inconsistent after October 2010, and after a final $2,000 payment in February 2011, Anthony stopped paying. Filing 54–1 at 1. Nor did Anthony pay the property taxes for tax years 2010 or 2011. Filing 54–4. And Anthony does not dispute that she failed to pay the homeowners' association dues that Edenton North began assessing in 2008. Claim 3–1 at 8.

The note had been secured by a deed of trust executed on the same day as the note. Filing 54–2. After Anthony stopped making payments, Cattle National sought to sell the property pursuant to the deed of trust and the Nebraska Trust Deeds Act, Neb.Rev.Stat. § 76–1001 et seq. In response, Anthony filed a “Complaint to Quiet Title” in United States District Court. Case no. 4:11–cv–3064 filing 1. In that action, Anthony raised a legal theory that is worth setting forth at length, because the same theory underlies her arguments in these appeals. Anthony alleged that she delivered the promissory note to Cattle National, but that

[u]nder the guise of fraud, the Bank knowingly failed to disclose to Anthony that being its [sic] a National Bank it could not lawfully loan Anthony its own assets, or its own credit, or its depositors funds; that the Bank needed Anthony's signed Promissory Note; that the Bank deposited or recorded Anthony's Promissory Note as an asset then recorded an offsetting liability that matches the asset that the Bank accepted from Anthony of $285,000.00; that the Bank used Anthony's Promissory Note to raise an asset in its bookkeeping entries to itself and used the face value of the Promissory Note called principal which the Bank loaned Anthony and against which the Bank charged Anthony interest; that the Bank did not risk any of its assets; that consideration on the part of the Bank was nonexistent; and, that it was Anthony who created the money for the alleged Loan when the Bank accepted Anthony's Promissory Note.

Case no. 4:11–cv–3064 filing 10 at 3. But United States District Judge Laurie Smith Camp found that the federal courts lacked jurisdiction over Anthony's claim, and dismissed the case. Anthony v. Cattle Nat'l Bank & Trust Co., No. 4:11–cv–3064, 2011 WL 3665403 (D.Neb. Aug. 22, 2011), aff'd,684 F.3d 738 (8th Cir.2012). In particular, the Court concluded that the federal banking laws Anthony claimed had been violated did not create a private right of action, and therefore did not support federal question jurisdiction. Id. at *4–5.

The day after her “quiet title” claim was dismissed, Anthony filed a bankruptcy petition. Filing 1. A few weeks later, Anthony filed an adversary complaint against Cattle National in the bankruptcy court, essentially realleging the same theory from the previous “quiet title” claim. Filing 20. Cattle National moved the bankruptcy court to abstain or stay the adversary proceeding pending the Eighth Circuit's consideration of Anthony's appeal from the district court's dismissal of the “quiet title” claim. Adversary proceeding no. 11–4216 filing 4. The bankruptcy court agreed and stayed the adversary proceeding. Adversary proceeding no. 11–4216 filing 20 (text order).

Edenton North filed a claim in the bankruptcy case, as did Cattle National. Claims 3–1 and 6–1. Anthony objected to both claims. Filings 69, 77, and 173. Cattle National filed a motion for relief from the automatic bankruptcy stay. Filing 105. Hearings were held on Anthony's objections and Cattle National's motion. The bankruptcy court granted Cattle National's motion for relief from the stay, reasoning that Anthony's arguments about national banking law did not permit her to resist Cattle National's demand for payment, and finding that Anthony's bankruptcy petition had been filed in bad faith. Filing 201. The bankruptcy court overruled Anthony's objection to Cattle National's claim for similar reasons. Filing 205. And the bankruptcy court sustained in part, but overruled in part, Anthony's objection to Edenton North's claim: the court found that only $288.28 of the $1,295.38 claim was secured by the real estate, but that the balance of the claim would be permitted as an unsecured claim. Filing 203 at 2. Anthony appeals from each of those orders.

II. STATEMENT OF ISSUES

In both case nos. 4:12–cv–3124 and 4:12–cv–3125 (the appeals from the orders relating to Cattle National), Anthony raises the same issues, as slightly restated:

1. Whether the bankruptcy court erred in refusing to allow Anthony discovery with respect to Cattle National.

2. Whether the bankruptcy court erred in ignoring Anthony's motion for a formal hearing to consider her objection to Cattle National's proof of claim and failing to schedule any hearing to consider her objection prior to granting Cattle National's motion for relief from the automatic stay.

3. Whether the bankruptcy court erred in finding that Anthony was a “speculative builder” and consequently finding...