In re Everton Aloysius Sterling, 543 B.R. 385

Debtor Everton A. Sterling executed mortgage-backed notes (Brooklyn Note and Second Note) that were consolidated into a $465,000 Consolidated Note and Consolidated Mortgage in August 2012; title was transferred to Latou Realty Corp. to facilitate those instruments.
Latou defaulted; the lender (222 Funding Associates) commenced a foreclosure action in state court. On November 26, 2013, Latou deeded the Properties back to Sterling while foreclosure was pending; lender alleges this was to hinder foreclosure.
222 Funding assigned the Consolidated Note and Mortgage to 1279 St. John’s Place, LLC (Movant) on June 6, 2014; Movant produced the original Consolidated Note with an allonge endorsed in favor of 1279 and produced other original notes/allonges at hearing.
Sterling filed Chapter 7 on September 14, 2014. Movant moved to lift the automatic stay under 11 U.S.C. § 362(d)(1) and for in rem relief under § 362(d)(4); Sterling sought a preliminary injunction and raised multiple defenses including laches and purported transfers to the United States.
The court found Movant had physical possession/indorsement sufficient to establish standing, concluded Sterling made no meaningful showing of post-petition payments or tax payments (supporting lack of adequate protection), but declined to grant in rem relief for § 362(d)(4) because the record did not establish a scheme to delay, hinder and defraud.

Issue	Plaintiff's Argument (Sterling)	Defendant's Argument (1279 St. John’s Place)	Held
Standing to seek lift of stay	Movant lacks standing because assignment/chain is defective	Movant holds original Consolidated Note with an allonge endorsed to it; thus is a creditor/holder	Movant has standing based on possession of original endorsed note and mortgage incident to the note
Cause to lift automatic stay (§ 362(d)(1))	Stay should remain; various defenses (laches, timeliness) and alleged defects in assignment	Debtor made no post-petition payments, taxes unpaid, arrears large; lack of adequate protection; state foreclosure should proceed	Lift stay granted for foreclosure: failure to make post-petition payments and Sonnax factors favor relief
In rem relief under § 362(d)(4)	Bankruptcy filing part of scheme tied to pre-petition transfers back to Sterling; request in rem relief and binding order	Transfers occurred nearly a year before bankruptcy; record insufficient to show an insidious scheme to delay, hinder and defraud	In rem relief denied: movant failed to prove scheme involving transfers plus the bankruptcy filing
Preliminary injunction by Sterling	Urgent irreparable harm; laches bars Movant; claimed transfers to U.S. thwart creditor	Movant would be prejudiced; no imminent irreparable harm to Sterling; foreclosure still requires state-court process	Preliminary injunction denied: Sterling failed to show irreparable harm or likelihood of success on the merits

In re Escobar, 457 B.R. 229 (Bankr. E.D.N.Y.) (standing to seek stay relief established by possession/endorsement of original note)
In re Lippold, 457 B.R. 293 (Bankr. S.D.N.Y.) (New York law requires holder of note and mortgage to commence foreclosure)
In re Mims, 438 B.R. 52 (Bankr. S.D.N.Y.) (movant must be creditor or debtor to invoke stay-relief jurisdiction)
Sonnax Indus., Inc. v. Tri Component Prods. Corp., 907 F.2d 1280 (2d Cir.) (twelve-factor test for stay-relief where other litigation exists)
In re Schuessler, 386 B.R. 458 (Bankr. S.D.N.Y.) (failure to make post-petition mortgage payments is cause to lift stay)
In re Elmira Litho, Inc., 174 B.R. 892 (Bankr. S.D.N.Y.) (creditor can establish prima facie case by showing debtor failed to make post-petition payments)
Johnson v. Home State Bank, 501 U.S. 78 (U.S.) (state-law foreclosure is a "right to payment" under bankruptcy definitions)