In re Spencer, 531 B.R. 208

Background

Debtor Sheila Spencer borrowed $209,160 in 2005; payments ceased in 2008; Freddie Mac holds a beneficial interest and PNC is servicer. Foreclosure commenced in 2009; Wood County Circuit Court entered a judgment of foreclosure in August 2014. Sheriff sale occurred April 1, 2015.
Spencer previously filed a Chapter 7 (discharged personal liability) and multiple Chapter 13 cases; prior Chapter 13 was dismissed for lack of good faith and relief from stay was granted to PNC. Spencer has mounted repeated challenges to PNC’s standing to enforce the note.
Spencer filed the present Chapter 13 on April 3, 2015 and offered “adequate protection” payments equal to the original mortgage payment paid to Freddie Mac (or to her counsel’s trust account) and proposed a contingent sale to her son.
PNC moved for relief from the automatic stay under 11 U.S.C. §§ 362(d)(1), (2), and (d)(4) (in rem relief), alleging lack of adequate protection, no debtor equity, and a scheme to delay via multiple filings.
At hearing Spencer stipulated there is no equity in the property and presented no proof of payment of taxes or naming PNC on insurance; PNC showed unpaid escrow advances and litigation expenses and produced the original note in prior proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether PNC has standing to seek relief from stay	Spencer: PNC is only servicer and not the real party in interest; appeal pending undermines foreclosure judgment	PNC: holds original note, obtained foreclosure judgment, has colorable claim to enforce mortgage	Court: PNC has standing; foreclosure judgment and production of original note establish a colorable claim
Whether PNC is adequately protected (§ 362(d)(1))	Spencer: will make periodic payments equal to original mortgage payment to Freddie Mac or counsel and seeks sale to son; contends property not depreciating faster than payments	PNC: payments not directed to PNC, do not cover accrued advances, taxes, insurance or increased judgment amount; offer speculative and insufficient	Court: Spencer failed burden to show adequate protection; payments/doctrines insufficient — grant relief for cause
Whether Debtor lacks equity and property is unnecessary to effective reorganization (§ 362(d)(2))	Spencer: home necessary for reorganization and to house her minor son; intends sale to son	PNC: Spencer has no equity; proposed sale is contingent/speculative and serves only to delay foreclosure	Court: Spencer stipulated to no equity and failed to show reasonable prospect of reorganization tied to the property; relief granted
Whether in rem relief under § 362(d)(4) is warranted for a scheme to delay	Spencer: disputes characterization; argues protections under other sections (e.g., single asset provisions not applicable)	PNC: multiple bankruptcies and repeated collateral attacks constitute an intentional scheme to delay enforcement	Court: finds a scheme to delay via multiple filings and collateral attacks; in rem relief under § 362(d)(4) granted

Key Cases Cited

In re Rexene Products Co., 141 B.R. 574 (Bankr. D. Del. 1992) (movant must establish prima facie case on stay relief issues)
In re Vitreous Steel Prods. Co., 911 F.2d 1223 (7th Cir. 1990) (creditor need only show a colorable claim to estate property for stay relief)
In re Fernstrom Storage & Van Co., 938 F.2d 731 (7th Cir. 1991) ("cause" under § 362(d) is case-specific)
In re Rinaldi, 487 B.R. 516 (Bankr. E.D. Wis. 2013) (summary nature of stay hearings; stay modification permits prosecution elsewhere)
In re Rogers, 239 B.R. 883 (Bankr. E.D. Tex. 1999) (factors for adequate protection assessment)
United Sav. Ass’n of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 (U.S. 1988) (property must be essential to a reorganization that is in prospect)
In re Wilke, 429 B.R. 916 (Bankr. N.D. Ill. 2010) (definition of a scheme under § 362(d)(4))
In re First Yorkshire Holdings, Inc., 470 B.R. 864 (9th Cir. BAP 2012) (interpretation of § 362(d)(4) elements)
In re Richmond, 516 B.R. 229 (Bankr. E.D.N.Y. 2014) (using repeated collateral attacks and filings as evidence of a scheme to delay)