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Summarizing by Lars Fuller

In re Salma Merritt

Case Type:
Case Status:
Ninth Circuit Bankruptcy Appellate Panel Case No. NC-20-1026-TFB (9th Circuit, Dec 02,2020) Not Published
US Bank, as trustee ("Secured Creditor") evidenced its right to enforce deed of trust. 11 U.S.C. Sec. 362(d)(4) inclusion of "scheme" means "an intentional artful plot or plan." Thus it is not required that a "scheme" involve multiple bankruptcies. Considering the pre-bankruptcy litigation coupled with the second (or multiple) bankruptcy, the bankruptcy did not abuse its discretion granting in rem stay relief. The Debtor, over the course of 7 months, did not address trustee's plan objections. Rather, filed unconfirmable plans. Thus, no abuse of discretion in dismissal.
Procedural context:
Salma Merrtitt ("Debtor") and non-filing spouse both appealed the bankruptcy court's orders granting mortgage holder in rem stay relief and granting chapter 13 trustee's motion to dismiss. The Appellants also attempted to include an appeal of the bankruptcy court's prior denial of Debtor's motion for referral to the Mortgage Modification Program; however, this portion of the appeal was untimely and not considered by the Panel.
In 2006 Debtor and David Merritt (collectively "Merritts") obtained a loan in the amount of $591,200 to purchase a residence in California. The loan was secured by a Deed of Trust; and, Secured Creditor was the current beneficiary of the Deed of Trust. The Merritts obtained a loan modification in 2009. However, as of the second Chapter 13 bankruptcy no mortgage payments had been made since 2008. Therefore, the arrearages exceed $500,000. During the time period of 2009 to 2019, the Merritts staved off foreclosure through multiple lawsuits and appeals. The Merritts continually alleged they were defrauded at the loan origination, Secured Creditor improperly refused their rescission, and fraud. The Merritts occasionally obtained a discreet ruling in their favor; however, ultimately each time the Secured Creditor prevailed on the substantive issues. In 2013, the California superior court deemed the Merritts as vexatious litigations. Then in 2018, Debtor commenced the first Chapter 13 case. This case was dismissed based on Debtor's failure to prosecute the case and plan payment failures. The present appeal relates to Debtor's second Chapter 13 case, which faced similar issues. Approximately 6 months into the second Chapter 13, the Debtor had filed 4 proposed plans, each one not addressing the prior objections by the Chapter 13 trustee and prompting new objections. The Secured Creditor sought in rem stay relief and the Chapter 13 trustee sought dismissal. On appeal, the Merritts contend that the bankruptcy court improperly considered Secured Creditor to be classified as a secured creditor; improperly considered evidence of the Merritts’ decade-long litigation history with Secured Creditor and its predecessors in interest; considered allegedly false information related to the litigation history; and allegedly failed to consider that Debtor's attorney had passed away during her first bankruptcy case.
Honorable Taylor, Faris, and Brand

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