565 B.R. 258
S.D.N.Y.2017Background
- Everton A. Sterling (Appellant) executed and consolidated mortgage debt on three properties (Brooklyn Property, Bronx Property, Bronx Lot) into a Consolidated Note and Consolidated Mortgage; assignments and allonges transferred interests to 222 Funding Associates and later to 1279 St. Johns Place LLC (Appellee).
- Latou Realty (of which Sterling was president) defaulted; foreclosure proceedings in state court followed; Sterling re-transferred deeds back to himself on the eve of foreclosure, which appellee viewed as delay tactics.
- Sterling filed Chapter 7 on Sept. 14, 2014; U.S. Trustee commenced an adversary proceeding objecting to discharge, alleging nondisclosure and obstructive conduct by Sterling.
- Appellee moved to lift the automatic stay (Lift-Stay Motion); Sterling sought a TRO/preliminary injunction, asserted laches, lack of standing, and various novel sovereign-citizen and statutory defenses; Bankruptcy Court (Judge Lane) examined originals/allonges, found standing, granted stay relief but denied in rem relief and denied Sterling injunctive relief (Dec. 22, 2015).
- Sterling appealed; his first appeal from the December 22 Order was dismissed by the district court as untimely. Sterling then filed a Motion for Additional Findings (treated as a request for an evidentiary hearing), which the Bankruptcy Court denied (Apr. 12, 2016). Sterling appealed that denial; the district court here affirms the April 12 Order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Appealability / Jurisdiction of second appeal | Sterling contends denial of additional findings/evidentiary hearing is reviewable | Appellee and district court argue prior dismissal of first appeal and procedural posture preclude this collateral attack | Court finds second appeal largely precluded by prior untimely appeal but proceeds to consider denial on the merits; concludes appeal is not clearly appealable and is precluded in substance |
| Whether appellee had standing to move to lift stay | Sterling argued appellee lacked standing and documents were unvalidated/fraudulent | Appellee produced originals/allonges and mortgage documents showing assignment and possession | Bankruptcy Court correctly found appellee had standing; district court affirms |
| Whether Bankruptcy Court abused discretion by denying broader evidentiary hearing / additional findings | Sterling sought further discovery and an evidentiary hearing to contest allonges, assignments, and merits | Bankr. Ct. limited hearing after reviewing documentary record and testimony; found no legitimate factual dispute warranting discovery | No abuse of discretion: court had adequate record (documents + admissions of nonpayment) to decide Lift-Stay Motion without broader hearing; April 12 Order affirmed |
| Lifting stay and in rem relief | Sterling argued laches, discharge defenses (including sovereign-citizen statutory theories) barred relief | Appellee argued lack of post-petition payments and inadequate protection justified lifting the stay; in rem relief required stronger showing of bankruptcy fraud scheme | Court (Bankr.) granted relief from stay under 11 U.S.C. § 362(d)(1) but denied § 362(d)(4) in rem relief for insufficient evidence of scheme; district court finds no error in those determinations |
Key Cases Cited
- Sonnax Indus., Inc. v. Tri Component Prods. Corp., 907 F.2d 1280 (2d Cir. 1990) (factors for evaluating lift-stay and interlocutory relief in bankruptcy)
- Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (U.S. 2015) (finality rules in bankruptcy appeals)
- TecknoMarine SA v. Giftports, Inc., 758 F.3d 493 (2d Cir. 2014) (res judicata / claim preclusion principles)
- ASM Capital, LP v. Ames Dep’t Stores, Inc. (In re Ames Dep’t Stores), 582 F.3d 422 (2d Cir. 2009) (clear-error standard for factual findings)
- In re C-TC 9th Ave. P’ship, 113 F.3d 1304 (2d Cir. 1997) (when an evidentiary hearing is not required; sufficiency of the record)
- Key Mech. Inc. v. BDC 56 LLC (In re BDC 56 LLC), 330 F.3d 111 (2d Cir. 2003) (discretion of bankruptcy court to decide without evidentiary hearing)