State Bank v. Miller (In Re Miller), 459 B.R. 657

Debtor Miller borrowed from State Bank of Florence (Bank) and granted cross-collateralized mortgages on Wisconsin and Michigan real property, with a separate line-of-credit secured by a Michigan mortgage.
By 2008 Miller defaulted; Wisconsin judicial foreclosure against the Wisconsin property and Michigan foreclosure by advertisement against the Michigan parcels proceeded largely in parallel.
The Bank's Michigan foreclosure sale occurred August 8, 2008; the Bank credit bid $413,560.27, equal to the total debt, and took title to the Michigan parcels.
Miller filed chapter 13 in 2009; Bank filed a proof of claim for about $441,176.37 and sought relief from stay and objection to plan.
Bank’s Michigan bid created a surplus under Michigan law; mortgage terms prohibited crediting less than the full bid; the Bank later sought to set aside or undo the Michigan sale and continue Wisconsin foreclosures.
Bankruptcy court concluded Michigan law governs, Bank cannot credit less than full bid, Miller may offset Michigan bid against Wisconsin judgment, and Bank lacks standing to object to confirmation; order appealed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether court erred by sua sponte determining a claim exists without objection	Miller argues no claim due to lack of objection	Bank argues claim validity can be determined despite no objection	Court did not err; issue waived and resolution proper
Choice of law governing the dispute over foreclosure and cross-collateralization	Michigan law governs due to situs and conflict rules	Wisconsin law should apply per note cross-collateralization language	Michigan law governs the substantive dispute
Effect of overbid on debt and ability to proceed with Wisconsin foreclosure	Overbid can extinguish or reduce debt; credit should be full amount	Overbid should not reduce debt; Wisconsin action can proceed	Overbid cannot be credited for less than full bid; surplus to Miller
Relief from stay and standing to object to plan	Bank should be entitled to relief and an objectionatable interest remains	Bank lacks standing as no debt remains due	Relief from stay denied; Miller offsets Michigan bid to satisfy Wisconsin judgment; objection to plan overruled
Whether Bank's due process rights were violated	Bank alleges biased process and misapplication of law	Bank received full procedural avenues and hearings	No due process violation; process was adequate

Midland Asphalt Corp. v. United States, 489 U.S. 794 (1989) (finality and finality standards for appeals)
In re Taranto, 365 B.R. 85 (6th Cir. BAP 2007) (discretion in consolidating related proceedings)
In re Davis, 386 B.R. 182 (6th Cir. BAP 2008) (finality of decisions where not fully resolving underlying case)
In re Wicheff, 215 B.R. 839 (6th Cir. BAP 1998) (scope of consolidation and rule 42/7042 analysis)
In re Spillman Dev. Group, Ltd., 401 B.R. 240 (Bankr. W.D. Tex. 2009) (credit bid and surplus handling in foreclosures)