In re Danley

Citation540 B.R. 468
Decision Date02 November 2015
Docket NumberCase No. 15–80960–WRS
PartiesIn re Stacy L. Danley II, Stephanie Danley, Debtor
CourtUnited States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Alabama

540 B.R. 468

In re Stacy L. Danley II, Stephanie Danley, Debtor

Case No. 15–80960–WRS

United States Bankruptcy Court, M.D. Alabama.

Signed November 2, 2015


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Lee R. Benton, Samuel C. Stephens, Benton and Centeno, LLP, Birmingham, AL, for Debtor.

MEMORANDUM DECISION

William R. Sawyer, United States Bankruptcy Judge

This Chapter 11 case came before the Court for hearing on October 14, 2015, on the Debtors' Motion to Alter, Amend, or Vacate. (Doc. 71).1The Debtors were present by counsel Lee R. Benton, Liberty Bank and Trust was present by counsel Kristen Abbott, and the Bankruptcy Administrator was present by counsel Britt Griggs.

The Debtors request that the Court vacate its Order of September 17, 2015, granting Liberty Bank and Trust in rem

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relief from the automatic stay pursuant to 11 U.S.C. § 362(d)(4)(B). (Docs. 58, 71). The Debtors also ask this Court to stay its order pending consideration of its motion to alter, amend, or vacate. (Doc. 74). For the reasons set forth below, the motion to alter, amend, or vacate is DENIED, and the motion to stay is DENIED AS MOOT. In addition, the Debtors addressed this Court's Order to Show Cause entered September 22, 2015, requiring the Debtors to appear and show cause why this case should not be dismissed for their failure to file statements and schedules. (Doc. 60). For the reasons set forth below, the Court discharges its order to show cause.

I. FACTS

A. Procedural Setting

Stacy and Stephanie Danley (“the Danleys”) initiated this Chapter 11 case on July 22, 2015. (Doc. 1). On August 10, 2015, Liberty Bank and Trust (“Liberty Bank”) filed a motion for relief from the automatic stay, seeking in remrelief pursuant to 11 U.S.C. § 362(d)(4)(B)on the grounds that the Danleys' July 2015 petition was part of a scheme to delay, hinder, or defraud Liberty Bank. (Doc. 36). The Danleys filed a response on August 31, 2015, opposing Liberty Bank's motion. (Doc. 48). The Court held an evidentiary hearing on September 16, 2015. At the conclusion of the hearing, the Court made findings of fact and conclusions of law on the record, granted Liberty Bank's motion for in remrelief from the automatic stay, and further instructed counsel for Liberty Bank to prepare an appropriate form for an order. (Doc. 67). The Court entered an order on the form provided by Liberty Bank's counsel on September 17, 2015. (Doc. 58). The Danleys filed a timely motion to alter, amend, or vacate on October 1, 2015. (Doc. 71). The Court heard oral argument on the Danleys' motion on October 14, 2015 and took it under advisement.

B. Two Loans: Rental Properties and Personal Residence

This dispute centers on two loans made by Liberty Bank to the Danleys.2The first loan was made on September 1, 2005, in the principal amount of $264,000, and is secured by a mortgage on real property that the Danleys purchased as investment rental property in Auburn, Alabama. This loan will be referred to as the “Rental Properties Loan.” The second loan was made on September 21, 2006, in the principal amount of $425,000, and is secured by the Danleys' personal residence in Auburn, Alabama. The second loan will be referred to as the “Personal Residence Loan.”3

C. The First Bankruptcy Case: No. 07–31868

On November 1, 2007, Liberty Bank sent the Danleys a notice of default with respect to the Personal Residence Loan; at that point, the balance on it had grown to $427,546.08 and the delinquent balance was $9,961.50. Liberty Bank also accelerated the Rental Properties Loan and scheduled a foreclosure sale for November 29, 2007. In response to Liberty Bank's notice of default, the Danleys filed their

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first bankruptcy case on November 28, 2007.4(Case No. 07–31868, Doc. 1).

The Bankruptcy Administrator moved to dismiss the Danleys' first case because they did not file monthly operating reports as required by the Court's Local Rules.5(Case No. 07–31868, Doc. 94). The Danleys did not respond to the Bankruptcy Administrator's motion and the Court dismissed the case on July 11, 2008. (Case No. 07–31868, Doc. 96).

D. The Second Bankruptcy Case: No. 08–32095

On August 8, 2008, Liberty Bank sent the Danleys a second notice of default on the Personal Residence Loan and gave them until September 10, 2008 to cure the default. The loan balance had grown to $430,744.12 and the delinquency had grown to $40,641.38. In response to the notice of default, the Danleys filed a second bankruptcy case on September 9, 2008. (Case No. 08–32095, Doc. 1). The Danleys proposed a Chapter 11 plan that called for the payment of the two loans in issue here, as well as several other debts. (Case No. 08–32095, Doc. 60). The Danleys proposed to pay the Personal Residence Loan over a 30–year period at 6% interest, with monthly payments of $2,740.00. In addition, the Danleys acknowledged that the indebtedness on the Rental Properties Loan had grown to $275,460.59 and also proposed to pay it over a 30–year period at 6% interest, resulting in monthly payments of $1,652.00. This Court confirmed the Danleys' Chapter 11 Plan on December 3, 2008. (Case No. 08–32095, Doc. 67).

Although the Danleys confirmed a plan in their second case, they did not fund it. On January 7, 2009, and again on February 5, 2009, Liberty Bank filed notices of default for both loans. (Case No. 08–32095, Docs. 75 and 81). A second secured creditor, Chase Bank, moved for relief from the automatic stay on March 10, 2009 because the Danleys had not made any post-confirmation payments towards its loan. (Case No. 08–32095, Doc. 86). A third secured creditor, Colonial Bank, moved for relief from the automatic stay on July 14, 2009 for the same reason.6(Case No. 08–32095, Doc. 105). Finally, the Danleys' counsel withdrew from representation because they would not perform under the terms of their confirmed plan, would not maintain contact with him, and would not pay him the attorney's fees he had earned. (Case No. 08–32095, Doc. 110). This Court eventually closed the Danleys' second bankruptcy case without granting them a discharge because they had failed to pay their quarterly fees. (Case No. 08–32095, Doc. 129).

E. Civil Case No. 14–111–Lee County Circuit Court

On June 26, 2014, Liberty Bank sent two letters to the Danleys, advising them that the Personal Residence Loan and Rental Properties Loan had been accelerated, and scheduled foreclosure sales for July 21 and 22, 2014. On July 18, 2014, the Danleys filed a civil action against Liberty Bank in the Circuit Court for Lee County, Alabama, under Case No. CV 14–111 (“the civil action”). The Danleys, acting pro se,

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filed a motion for a temporary restraining order in an effort to stall Liberty Bank's efforts to foreclose its mortgages on both the residence and the rental properties.

On June 5, 2015, the Circuit Court granted Liberty Bank summary judgment in the civil action and assessed the Danleys with Liberty Bank's costs of defending the action. Copies of documents from the civil action were filed in this Court. (Doc. 57).

F. The Third Bankruptcy Case: No. 14–80885

Apparently realizing that the state court would not grant a temporary restraining order in time to stop Liberty Bank's foreclosure sales, Stephanie Danley filed Chapter 13 bankruptcy on July 20, 2014. (Case No. 14–80885, Doc. 1). Stacy Danley did not join in filing the petition in this case.

Stephanie's Chapter 13 petition was met with a barrage of filings from outraged creditors. The first in line was the law firm of Espy, Metcalf & Espy, which sought relief from the co-debtor stay so that it could collect its unpaid attorney's fee from Stacy Danley.7(Case No. 14–80885, Doc. 20); see also11 U.S.C. § 1301. Chase Bank objected to Stephanie's plan, noting that the Danleys were delinquent for 66 monthly payments, in the amount of $53,199.13, on its mortgage since the confirmation of the Danleys' last plan in December 2008. (Case No. 14–80885, Doc. 33). In other words, the Danleys had paid virtually nothing to Chase Bank since filing bankruptcy in 2008. Liberty Bank also moved for relief from the automatic stay as to the Rental Properties Loan. (Case No. 14–80885, Doc. 36).

Stephanie moved to dismiss her Chapter 13 case on October 16, 2014. (Case No. 14–80885, Doc. 38). The Court granted the motion to dismiss the following day. (Case No. 14–80885, Doc. 39). Because Stephanie did not confirm a plan, nothing was paid to creditors—all of the plan payments made by Stephanie were returned to her. (Case No. 14–80885, Doc. 46).

G. The Fourth Bankruptcy Case: No. 15–80960

On June 4, 2015, Liberty Bank again sent the Danleys two letters giving notice of acceleration of the two loans, and scheduled a foreclosure sale for July 22, 2015. The indebtedness on the Rental Properties Loan had grown to $353,648.55 and the indebtedness on the Personal Residence Loan had grown to $457,544.34. Again, to stave off foreclosure, the Danleys filed the instant Chapter 11 petition on July...

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