In re Standfield, Bankruptcy No. 93 B 00683.
| Decision Date | 18 March 1993 |
| Docket Number | Bankruptcy No. 93 B 00683. |
| Parties | In re Roy L. STANDFIELD and Delois Standfield, Debtors. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
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Gary S. Mueller, McKown, Fitzgerald, Zollner Buch, Hutchison & Ruttle, Joliet, IL, for Members Equity Credit Union.
Jerome J. Kornfeld, Chicago, IL, for Roy L. Standfield and Delois Standfield, debtors.
Craig Phelps, Chapter 13 Trustee, Chicago, IL.
This matter comes on to be heard on the motions seeking relief from the automatic stay of 11 U.S.C. § 362(a) filed by Members Equity Credit Union ("Members") and Amerifed Federal Savings Bank ("Amerifed"), and the responses filed by the Debtors through their attorney, Jerome J. Kornfeld ("Kornfeld"). Members also seeks certain declaratory relief and sanctions under Federal Rule of Bankruptcy Procedure 9011. The Debtors seek confirmation of their Chapter 13 plan and an award of damages, costs and fees against Members and its attorneys pursuant to 11 U.S.C. § 362(h).
For the reasons set forth herein, the Court having considered all the evidence, pleadings and exhibits, does hereby grant the motions for relief from the automatic stay. Members' additional relief under Bankruptcy Rule 9011 is allowed, and sanctions are entered against Kornfeld in the amount of $1,537.50 for reasonable attorney's fees and costs incurred by Members. In addition, the instant Chapter 13 case is dismissed with prejudice to any future filings for 180 days pursuant to 11 U.S.C. § 349(a), but without prejudice to the Debtors' pending Chapter 7 case. Confirmation of the Debtors' plan is denied pursuant to 11 U.S.C. § 1325. The relief requested against Members and its attorneys under section 362(h) is also denied.
The Court has jurisdiction to entertain these matters pursuant to 28 U.S.C. § 1334 and General Rule 2.33(A) of the United States District Court for the Northern District of Illinois. All matters constitute core proceedings under 28 U.S.C. § 157(b)(2)(A), (G), (L) and (O).
In an effort to expedite the trial, the Court advised the attorneys for all parties of its intent to take judicial notice of the filing and contents of the relevant parts of the records in both of the Debtors' cases. No objections were made by any party. The Court can take proper judicial notice of the existence and filing of the papers constituting the records in both of the Debtors' cases. See Federal Rule of Evidence 201 and Federal Rule of Bankruptcy Procedure 9017. The bankruptcy court is duty bound to take judicial notice of its records and files. In re Snider Farms, Inc., 83 B.R. 977, 986 (Bankr. N.D.Ind.1988). Verified schedules and statements filed by Debtors are not just pleadings, motions or exhibits, they contain evidentiary admissions. In re Earl, 140 B.R. 728, 730 n. 2 (Bankr.N.D.Ind.1992); In re Cobb, 56 B.R. 440, 442 n. 3 (Bankr. N.D.Ill.1985). In particular, the docket entries show a summary of what has occurred in the two cases.
The Debtors filed their first Chapter 13 petition on April 29, 1991. They were represented by their former attorney, John A. Reed ("Reed"). On May 20, 1991, they filed a plan which proposed to pay one hundred percent of all allowed claims (priority, secured and unsecured) by paying $1,400.00 a month to the Chapter 13 Standing Trustee (the "Trustee") for thirty-one months, and by directly paying their currently accruing post-petition mortgage payments shown on their statement of income and expenses. The case was originally assigned to the Honorable David H. Coar. Judge Coar confirmed an amended plan on September 16, 1991, which provided for payments to the Trustee of $873.00 a month for sixty months.
The Debtors fell behind in their required payments and Members, which held liens on various items of collateral, including a junior mortgage encumbering the Debtors' homestead property, filed a motion to modify the automatic stay on December 16, 1991. That motion was continued before the undersigned bankruptcy judge after reassignment on January 1, 1992. On March 6, 1992, an agreed order was entered in which the parties stipulated that the Debtors had made all the required payments through November 1991. The December 1991 mortgage payment was to be paid by March 13, 1992. The Debtors tendered the January and February 1992 monthly mortgage payments in court. The order further provided that all subsequent payments were to be due and paid on or before the 20th day of each calendar month.
On March 27, 1992, Members filed a second motion to modify the automatic stay alleging nonpayment. The parties disputed the amount of Members' remaining unpaid claim, and the Debtors asserted that Members' attorney's fees were excessive. This motion was continued by agreement for ruling on July 31, 1992, when an order was entered (the "July 31 Order"). The July 31 Order included certain terms and conditions sometimes referred to as "drop dead" or "doomsday" provisions. Commencing with the payments that otherwise would have accrued under Members' mortgage beginning in July 1992, the drop dead provision provided for an automatic lifting of the automatic stay without further court hearing, upon future defaults in monthly payments to be made by the Debtors, after notice by Members to the Debtors of the defaults. The July 31 Order also allowed for the cure of such defaults within a certain period.
On July 31, 1992, Reed also moved to withdraw as the Debtors' attorney. The Debtors so stipulated and retained substitute counsel to represent them, Marshall Levin ("Levin"). Thereafter, on August 20, 1992, pursuant to Federal Rule of Bankruptcy Procedure 1017(d), Levin converted the case to Chapter 7 by filing a notice of conversion. Prior thereto, on July 10, 1992, Amerifed filed its first motion to modify the automatic stay alleging the Debtors' nonpayment on the senior mortgage it held. On August 21, 1992, Amerifed's motion was allowed.
On September 11, 1992, the Trustee filed a final report and account. It showed the Debtors had paid the Trustee under the plan in excess of $9,625.00, of which Members had received $3,960.03. The balance of the plan payments had been applied to pay Reed's fees, the Trustee's statutory costs and fees, and ITT Thorpe, another secured creditor holding liens on other collateral. No payments were disbursed to any unsecured claimants. On October 2, 1992, the Trustee's final report and account was approved. Thereafter, on October 26, 1992, an order was entered establishing a new meeting of creditors on November 20, 1992, in the superseding Chapter 7 case, pursuant to 11 U.S.C. § 341. January 19, 1993 was fixed as the new date under Federal Rules of Bankruptcy Procedure 4004 and 4007 for filing objections to discharge or dischargeability determination complaints.
On January 8, 1993, the Debtors, represented by Levin, filed an emergency motion to enforce the automatic stay, contending that Members had provided defective or ineffectual notice under the drop dead provision of the July 31 Order. Members' attorney had sent a notice advising of a hearing to foreclose its mortgage in state court. The Court denied the Debtors' motion without prejudice to the Debtors to pursue any appropriate relief from the state court, finding that there was adequate notice sent under the terms of the July 31 Order. On January 14, 1993, the Chapter 7 trustee filed a no-asset report. A discharge order was administratively issued by the Bankruptcy Clerk's Office on March 4, 1993, but not docketed until March 15, 1993.
Rather than appeal or ask for rehearing on the Court's denial of their January 8, 1993 motion, the Debtors, now represented by Kornfeld, filed a new Chapter 13 petition and plan on January 12, 1993. This plan proposes to pay $606.00 a month to the Trustee for sixty months. Their attached budget or statement of income and expenses further provides that the Debtors are to directly pay various current accruing expenses, $647.00 per month on their first mortgage held by Amerifed, and $514.00 on their second mortgage to Members. The plan proposes to pay one hundred percent dividend to all priority, secured and unsecured creditors. The Debtors value the homestead property at $77,000.00, subject to a scheduled claim of Amerifed of $43,000.00 on its current remaining balance, plus $11,646.00 in pre-petition arrearages. The Debtors also reference a $27,000.00 claim held by Members for the current balance on its mortgage and arrearages of $3,201.00. Notwithstanding these figures, however, their summary schedule of all debts lists only a total of $30,532.00 in secured claims.
On February 5, 1993, Members filed the instant (and third) motion. On February 19, 1993, Amerifed filed its instant (and second) motion. A hearing on confirmation of the plan as well as a hearing on the motions was held on March 5, 1993.
Debtor Delois Standfield was the only witness who testified. She explained the present and past employment of both her and her husband, the prior injury and illness of her husband, and that he recently received a raise in his compensation as a truck driver. She stated that she was not aware that the July 31 Order was entered in the first case, although she had dropped off mortgage payments to Members at Reed's office. She claims she did not receive any notice from Members that it was proceeding with the foreclosure. Although she disputes the exact amount owed Members, she estimated the balance owed it on its remaining claim at approximately $23,000.00. She admitted she and her husband tendered no mortgage payments to Amerifed since June 1991, until the filing of the second case in January 1993. She estimates the balance owed Amerifed at between $40,000-50,000. Her estimate...
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