In re Hollis, Civ. A. No. 89-AR-0949-W
| Decision Date | 22 September 1989 |
| Docket Number | Civ. A. No. 89-AR-0949-W,Bankruptcy No. 88-05270. |
| Citation | 105 BR 1003 |
| Parties | In re James Webster HOLLIS, Debtor. SOUTHEAST BANK, N.A. Appellant, v. James Webster HOLLIS, Appellee. |
| Court | U.S. District Court — Northern District of Alabama |
Charles E. Vercelli, Jr., Copeland Franco Screws & Gill, P.A., Montgomery, Ala., for appellant.
Albert G. Lewis, III, Turner & Turner, P.C., Tuscaloosa, Ala., for appellee.
This is an appeal by Southeast Bank, N.A., from a decision of the Bankruptcy Court for the Northern District of Alabama, Honorable George S. Wright, sitting. The debtor is James Webster Hollis, who, on June 1, 1988, filed a Chapter 13 petition in Case No. 88-05270, which automatically stayed his creditors from proceeding against him. Hollis' creditors included Southeast Bank which held a first mortgage on his residence securing a promissory note in the original sum of $33,631.20. But for the automatic stay Southeast Bank would have been entitled to foreclose under the terms of its mortgage. In fact, at the time the petition was filed, Hollis was several months past due in his required monthly mortgage payments, and this was undoubtedly the reason why he filed his petition.
In response, Southeast Bank filed a proof-of-claim of a prepetition arrearage of $1,212.80. On July 6, 1988, the bankruptcy court confirmed a plan for Hollis, requiring, inter alia, the Standing Trustee to pay $45.00 per month to Southeast Bank from Hollis' earnings. This amount was to be applied to the prepetition arrearage. Hollis continued to be responsible for making the remaining regular monthly mortgage payments directly to Southeast Bank.
On February 24, 1989, Southeast Bank filed a motion for relief from the automatic stay, alleging that Hollis had failed to make five out of nine regular monthly mortgage payments after the confirmation order of July 6, 1988. Hollis did not file an answer denying any of the averments of Southeast Bank's said motion, and Hollis failed to appear when the motion was set for hearing on March 23, 1989.
On March 30, 1989, the bankruptcy court issued an order denying Southeast Bank's motion for relief from the stay, directing Southeast Bank to file a new proof-of-claim for a new, post-confirmation arrearage of $1,474.40, and directing that future monthly mortgage payments be paid by the Standing Trustee rather than directly by Hollis to Southeast Bank. Southeast Bank appeals this order, claiming that the bankruptcy court erred as a matter of law in several respects.
Southeast Bank first says that the bankruptcy court erred because 11 U.S.C. § 362(d)(1) provides that the court "shall grant relief from the stay . . . for cause, including the lack of adequate protection of an interest in property. . . ." (emphasis supplied). Southeast Bank argues that 11 U.S.C. § 362(g)(2) places the burden on the debtor to prove that there is no "cause" to continue the stay in place, and that inasmuch as the debtor here did not show up for the hearing and made no attempt whatsoever to explain or to justify his post-confirmation default, he failed to meet his burden.
Hollis responds with the argument that the burden of proof on these issues was on Southeast Bank. He does not respond with the obvious argument that the phrases "for cause" and "adequate protection" may call for mixed findings of fact and law by the bankruptcy court, making a de novo review difficult, if not impossible, no matter who had the burden of proof, and arguably necessitating the indulgence of a presumption in favor of the bankruptcy court's exercise of its fact-finding responsibility. Instead, Hollis' brief devotes most of its time to the proposition that Southeast Bank offered no evidence in support of its motion.
In this court's view, the ultimate "right-and-wrong" in this situation should not, and does not, turn on which party had the burden of proof, but rather on where the undisputed facts inexorably lead as a matter of law. The proposition that the denial of relief from the stay was proper because Southeast Bank failed to meet its supposed burden of proof is unavailing for several reasons. First, Hollis never denied a single allegation contained in Southeast Bank's motion. Second, the bankruptcy court did not mention, much less rely upon, any alleged failure by Southeast Bank to meet any burden of proving the facts which it had alleged. Third, the bankruptcy court necessarily agreed with the central factual allegations of Southeast Bank, namely, that Hollis had badly defaulted, post-petition and post-confirmation. The bankruptcy court accepted totally the figures submitted by Southeast Bank.
This court proceeds on the assumption that the bankruptcy court has broad discretion to decide whether or not there is "cause" for relief from the automatic stay, and whether or not the secured creditor has "adequate protection," that is, where the pertinent facts are disputed or can lead to different conclusions.
Unless it was the intention of the Eleventh Circuit in In re Saylors, 869 F.2d 1434 (11th Cir.1989), reversing this court in In re Saylors, 98 B.R. 1005 (N.D.Ala.1988), to give bankruptcy judges virtually free rein to take whatever action they deem appropriate to prevent the foreclosure of a mortgage on the home of a debtor, and further that a debtor filing almost any paper to accomplish this end can, with impunity, be found to be acting in "good faith," there is no Eleventh Circuit authority on the issue. Not believing that this was the intention of the Eleventh Circuit in In re Saylors, this court looks elsewhere for guidance.
If the bankruptcy court here found that Southeast Bank had "adequate protection," the finding must have been based on the new preferential payments to be applied toward the additionally accumulated arrearage, accomplished by wage deduction from Hollis (this was nothing new), and based further on the direct payment of the future regular mortgage payments by the Standing Trustee, who, of course, cannot be asked to make the payments out of her own pocket. Bankruptcy judges undoubtedly have more experience than this court has in predicting the incidence of compliance with payment orders in particular Chapter 13 cases, and although this particular bankruptcy judge proved to be "bad wrong" in finding Southeast Bank "adequately protected" in the first confirmation order he entered in this case, this court is not in a position to substitute its judgment for what may well turn out to be another misjudgment by the bankruptcy judge. The fact is that some bankruptcy judges are more easily persuaded than others by a debtor of the debtor's good intentions and of his ability to perform. This is an unavoidable fact of human nature which no amount of jurisprudential overlay can change. "Discretion" covers many a misjudgment. While saying this, this court confesses that it, too, has a heart. The humanity of the courts, and particularly of the bankruptcy courts, should not be completely straightjacketed by the black robe and the oath of office, but neither should the constraints of the nation's public policy, as represented by express Congressional enactments, be overlooked or sidestepped.
A more important question, if not the crucial question, raised by Southeast Bank comes from a reading of 11 U.S.C. § 1322(b)(2) and (5), which provides that "a Chapter 13 plan may not modify the rights of a creditor holding a claim secured only by a mortgage on the debtor's principal residence except to cure pre-petition defaults within a reasonable time." In re Nicholson, 70 B.R. 398, 401 (Bankr.D.Colo. 1987). The bankruptcy court in In re Nicholson decided simply that where Congress in § 1322(b)(3) allows "the curing or waiving of any default" it was referring to defaults which occur pre-petition and not defaults which occur post-plan. The bankruptcy court in Nicholson logically concluded that the debtor was not entitled to cure his post-confirmation defaults. This court agrees with the Nicholson court. The...
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