Liberty Bank & Trust Co. v. Danley (In re Danley)
| Citation | 552 B.R. 871 |
| Decision Date | 08 July 2016 |
| Docket Number | Case No. 15–80960–WRS,Adv. Pro. No. 15–8061–WRS |
| Parties | In re Stacy L. Danley II, Stephanie Danley, Debtors Liberty Bank and Trust Company Successor by Merger to First Tuskegee Bank, Plaintiff v. Stacy L. Danley II and Stephanie Danley, Defendants |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Alabama |
Leonard N. Math, Chambless & Math, Montgomery, AL, for Plaintiff.
Stacy L. Danley, II, Auburn, AL, pro se.
Stephanie Danley, Auburn, AL, pro se.
William R. Sawyer
This adversary proceeding is before the Court on the motion for summary judgment filed by Liberty Bank and Trust Company (“Liberty Bank”),1 (Doc. 16), and the motions to remand or abstain filed by Stacy and Stephanie Danley (together, “the Danleys”). (Docs. 20 and 23). Liberty Bank asks this Court to order the Danleys to vacate certain real property, while the Danleys seek to set aside a foreclosure deed and ask for money damages. The Court held a hearing on June 15, 2016, at which Liberty Bank appeared through counsel Kristen Abbott and Stacy Danley appeared in person; Stephanie Danley did not appear. The Danleys filed a response in opposition to the motion for summary judgment. (Doc. 23). For the reasons set forth below, the Danleys' motion to remand or abstain is GRANTED IN PART and DENIED IN PART. Liberty Bank's motion for summary judgment is GRANTED IN PART. This case will be REMANDED to the Circuit Court of Lee County, Alabama.
This case is the latest episode of Liberty Bank's long-running effort to recover its collateral from the Danleys. The Court has previously related much of the tortured history of that effort, see In re Danley, 540 B.R. 468 (Bankr.M.D.Ala.2015)
, and will only repeat so much of that history as is necessary to dispose of this case.
On September 21, 2006, the Danleys obtained a loan from Liberty Bank in the amount of $425,000. In return the Danleys executed a note promising to repay Liberty Bank that amount plus interest, and executed a mortgage in favor of Liberty Bank that was secured by their personal residence, located at 2267 Potomac Court in Auburn, Alabama (“the Residence”). In addition to their obligation under the note, the Danleys were required under the terms of their mortgage to maintain insurance and pay ad valorem taxes on the Residence as they came due. (Exhibit A)2 ; Danley, 540 B.R. at 473
.
On November 1, 2007, Liberty Bank sent the Danleys a notice of default on the
Residence note and scheduled a foreclosure sale for November 29, 2007. (Exhibit A). The Danleys filed Chapter 13 bankruptcy (later converted to Chapter 11) on November 28, 2007, but the case was subsequently dismissed due to their failure to file monthly operating reports. (Exhibit A). On August 8, 2008, Liberty Bank sent the Danleys a second notice of default on the Residence note and gave them until September 10, 2008 to cure the default, and the Danleys filed Chapter 11 bankruptcy on September 9, 2008. (Exhibit A). The Court confirmed a plan in that case but the Danleys failed to perform under its terms, so the Court dismissed the case without granting them a discharge. (Exhibit A). On June 26, 2014, Liberty Bank advised the Danleys that it was accelerating the Residence note and scheduled a foreclosure sale for July 21, 2014. (Exhibit A). Stephanie Danley filed Chapter 13 bankruptcy on July 20, 2014, but voluntarily dismissed the case three months later without a confirmed plan. (Exhibit A).
Liberty Bank sent the Danleys a notice of acceleration on the Residence note on June 4, 2015, and scheduled a foreclosure sale for July 22, 2015. Danley, 540 B.R. at 472
; (Exhibit B). The Danleys filed Chapter 11 bankruptcy on July 22, 2015, and Liberty Bank soon after moved for in rem relief from the automatic stay under 11 U.S.C. § 362(d)(4)(B).3
Danley, 540 B.R. at 472. The Court held an evidentiary hearing on September 16, 2015, at which it heard testimony from both of the Danleys and from Roger Dale Selph (“Selph”), Liberty Bank's senior vice president. Id. at 472–73 ; (Exhibit C). Selph testified that the debt on the Residence note had grown to $474,354.78, that the Danleys had not made a payment since November 2012, and that Liberty Bank had been forced to pay ad valorem taxes and carry insurance on the Residence since 2010. (Exhibit C); Danley, 540 B.R. at 473. The Danleys offered no credible evidence to contradict Selph's testimony, and at the conclusion of the hearing the Court granted Liberty Bank in rem relief from the automatic stay.4
Danley, 540 B.R. at 473–74. On the motion of the Bankruptcy Administrator, the Court subsequently converted the Danleys' bankruptcy case to Chapter 7. (Case No. 15–80960, Doc. 128). It is still pending.
Liberty Bank scheduled a foreclosure sale for November 5, 2015, and published notice of the impending sale in the Opelika–Auburn Daily News on October 15, October 22, and October 29, 2015. (Exhibits B and D). The Danleys moved to alter, amend, or vacate the Court's order granting Liberty Bank in rem relief, and the Court denied their motion on November 2, 2015. Danley, 540 B.R. at 480–81
. The Danleys appealed to the district court, which denied their request for a stay of the foreclosure sale on November 4, 2015.
Danley v. Liberty Bank & Trust Co., 2015 U.S. Dist. LEXIS 149330, *2–3 (M.D.Ala. Nov. 4, 2015). Liberty Bank purchased the Residence at the November 5 foreclosure sale for $414,600.00 and properly recorded its deed the same day. (Exhibit D).
The same day as the foreclosure sale, Liberty Bank mailed a letter to the Danleys demanding that they vacate the Residence within ten days. (Exhibit E). The Danleys did not comply with the demand letter.
On November 17, 2015, Liberty Bank sued the Danleys for ejectment in the Circuit Court of Lee County, Alabama (“the State Court”). (Doc. 1). Stacy Danley, then represented by counsel, answered the ejectment complaint with a general denial, and asserted a counterclaim of $100,000 on the grounds that the foreclosure was wrongful because Liberty Bank had refused to accept payments he had tendered.5 (Doc. 1). Stacy Danley also demanded a jury trial on all counts. Liberty Bank removed the action to this Court, filed an answer denying the counterclaim, and moved for default judgment against Stephanie Danley. (Docs. 1, 3, and 4). Stephanie Danley, acting pro se, answered with a denial and filed her own counterclaim on February 29, 2016, seeking to have the foreclosure deed set aside on the basis that Liberty Bank had refused to accept payments tendered; she also demanded a jury trial.6 (Doc. 13).
Liberty Bank filed the instant motion for summary judgment on all counts on May 10, 2016. (Doc. 16). In support of its motion, Liberty Bank offers the following evidence: the stipulation of facts between it and the Danleys in advance of the September 16, 2015 hearing (Exhibit A); an affidavit signed by its counsel, Leonard Math, along with a notice of default and the right to cure dated January 31, 2014 (Exhibit B); part of the transcript of the September 16, 2015 hearing (Exhibit C); the foreclosure deed (Exhibit D); the letter demanding that the Danleys vacate the Residence (Exhibit E); interrogatories, requests for production, and requests for admission served upon Stacy Danley (Exhibit F); interrogatories, requests for production, and requests for admission served upon Stephanie Danley (Exhibit G); and an affidavit of substantial hardship filed by the Danleys in a 2014 case in the State Court7 (Exhibit H).
Two days after Liberty Bank filed its motion the Court scheduled a hearing on it for June 15, 2016. (Doc. 17). On the afternoon of June 14, 2016, the Danleys—now acting pro se —moved to continue the
hearing and moved for remand or abstention.8 (Docs. 19 and 20). At the June 15 hearing, Stacy Danley represented that he had not received notice of Liberty Bank's motion for summary judgment, but this was refuted by Liberty Bank's counsel and by the Court's own bankruptcy notices. The Court denied the motion to continue but gave the Danleys one extra week to respond to the motion for summary judgment.9 (Doc. 21). The Danleys filed their response, along with a supplement to their motion for remand or abstention, on June 22, 2016. (Doc. 23). Attached to the Danleys' response was the following evidence: a copy of the mortgage on the Residence (Exhibit 1); an email from Leonard Math to attorney Michael Fritz (the Danleys' initial counsel in their current bankruptcy case) (Exhibit 2); and an email from attorney Sam Stephens (part of the Danleys' second counsel in their current bankruptcy case) to Stacy Danley that forwarded an email from Math to Stephens (Exhibit 3).
“A party may remove any claim or cause of action in a civil action” in a state court “to the district court for the district where such civil action is pending” if 28 U.S.C. § 1334
provides the district court with jurisdiction over the claim or cause of action. 28 U.S.C. § 1452(a). In the supplement to their motion to remand or abstain, the Danleys cite Scott v. Communications Servs., Inc., 762 F.Supp. 147 (S.D.Tex.1991), for the proposition that Liberty Bank's removal was improper because counterclaim-defendants cannot remove cases to federal court. However, Scott has no application to this case because it involved an attempted removal under 28 U.S.C. § 1441(a) on the basis of diversity of citizenship. Scott, 762 F.Supp. at 149–50. While the plain language of § 1441(a) specifically reserves removal power under that section solely for the original defendant,10 the language of § 1452(a) just as plainly allows any “party” to remove a case on the...
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