Utzman v. Suntrust Mortgage, Inc. (In re Utzman)

NC-15-1331-TAJuKi (BAP 9th Cir. Aug. 9, 2016) (unpublished)
The BAP for the 9th Circuit affirmed the ruling of the bankruptcy court (N.D. Cal.) denying motion from chapter 11 debtors for reconsideration of an order granting stay relief for cause, including lack of equity and lack of adequate protection, under 362(d)(1). The BAP ruled that the bankruptcy court did not abuse its discretion in failing to hold an evidentiary hearing before granting qualified relief from stay, and ruled that debtors' failed to appeal bankruptcy court's ruling on relief from stay. With respect to appeal of motion to reconsider, debtors waived appellate review under Rule 60(b) by failing to raise the issue, or to address how it applied to appeal. Bankruptcy court effectively granted debtors' motion for reconsideration by conditioning relief from stay on debtors' failure to make adequate protection payments in a decreased amount. Bankruptcy court did not abuse its discretion in determining that debtors' motion for reconsideration failed to raise new fact or legal issues, but merely rehashed debtors' original arguments in opposition to relief from stay.
Procedural context:
Creditor filed motion for relief from stay, and bankruptcy court conditionally granted motion subject to debtors making adequate protection payments. Debtors did not appeal order, but fifty days later, filed a motion to reconsider the order. Following a hearing, the bankruptcy court denied the bulk of the reconsideration motion, but reduced debtors' adequate protection payment. Debtors appealed to BAP for 9th Circuit.
In 2007, Debtors borrowed $1,365,000 from SunTrust Mortgage, Inc. for construction of residence on real property located in Mill Valley, California (the “Property”). The obligation owed to SunTrust was secured by a deed of trust against the Property. Despite the Suntrust loan, the Debtors failed to pay all obligations owed for construction services, so various state statutory liens were recorded against the Property. They also failed to pay all real property taxes in relation to the Property and to pay for all required real property related insurance. Eventually, they also defaulted on their payments under the Suntrust note. On the eve of Suntrust’s foreclosure, they filed a chapter 11 petition. Their schedule A listed the Property with a then current value of $1,300,000 and stated that it was encumbered by secured claims in the amount of $1,978,493.29. Their schedule D listed SunTrust’s secured claim in the amount of $1,897,262.29. The record shows that construction of the residence remained incomplete, but the Debtors, nonetheless, occupied the home. Five months after the bankruptcy filing, SunTrust filed its second motion for relief from stay seeking relief pursuant to § 362(d)(1) and (d)(2). SunTrust argued that cause existed for § 362(d)(1) relief based primarily on a lack of adequate protection of its interest in the Property, and lack of equity. Bankruptcy court ruled that debtors scheduling had conceded the lack of equity issue, and further found that debtors were failing to make adequate protection payments postpetition. The bankruptcy court granted conditional stay relief subject to debtors making timely adequate protection payments.
Taylor, Jury, Kirscher

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