United States District Court, W.D. Arkansas, Fayetteville Division
MARVIN A. HARLAN and CAROL G. HARLAN, PLAINTIFFS/COUNTER-DEFENDANTS
THE BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK, AS TRUSTEE FOR THE CERTIFICATE HOLDERS CWALT, INC., ALTERNATIVE LOAN TRUST 2006-30T1, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-30T1, DEFENDANT/COUNTER-PLAINTIFF
TIMOTHY L. BROOKS UNITED STATES DISTRICT JUDGE
the close of business yesterday, June 27, 2016, the Court
received notice that Plaintiff/Counter-Defendant Marvin A.
Harlan had filed an individual petition for bankruptcy. The
Court that same evening entered a text-only Order, setting a
show cause hearing for today at 9:00 a.m. in order to
determine whether Defendant/Counter-Plaintiff The Bank of New
York Mellon f/k/a The Bank of New York, as Trustee for the
Certificate Holders CWALT, Inc., Alternative Loan Trust
2006-30T1, Mortgage Pass-Through Certificates, Series
2006-30T1 ("BONY") was entitled to relief from the
automatic stay triggered by 11 U.S.C. § 362(a). Earlier
today, the Court withdrew the reference of Mr. Harlan's
bankruptcy case (Case No. 5:16-BK-71531) from the bankruptcy
court, pursuant to 28 U.S.C. § 157(d). See Doc.
the show cause hearing, the Court heard oral argument and
testimony from the parties,  and BONY's counsel made an
oral motion pursuant to 11 U.S.C. § 362(d)(1), arguing
that BONY should be granted relief from the automatic stay
provided under § 362(a), due to the Harlans' bad
faith and abuse of process in filing successive bankruptcy
petitions for the sole purpose of delaying the foreclosure
sale of their property.
to 11 U.S.C. § 105(a), the Court "may issue any
order . . . that is necessary or appropriate to carry out the
provisions of this title. No provision of this title ...
shall be construed to preclude the court from, sua sponte,
taking any action or making any determination necessary or
appropriate ... to prevent an abuse of process." Here,
the Court finds that to prevent an abuse of process, an order
should issue under 11 U.S.C. § 362(d)(1), granting BONY
relief from the automatic stay that would ordinarily result
from the filing of Mr. Harlan's newest bankruptcy
the Court entered its Judgment and Decree of Foreclosure as
to the subject property on September 2, 2015, the Harlans
have succeeded in delaying the sale on multiple occasions.
First, on October 6, 2015, the Harlans moved to cancel or
postpone the sale pending appeal. The Court denied the
Harlans' Motion (Doc. 78) on October 16, 2016, with the
caveat that if the Harlans agreed to post a supersedeas bond
in the amount of $160, 000.00, the Court would reconsider its
Order. No bond was posted, however, and the foreclosure sale
was scheduled to take place on October 30, 2015. The day
before the sale, Mr. Harlan filed an individual bankruptcy
petition (Case No. 5:15-BK-72755), and the sale was
automatically stayed pursuant to 11 U.S.C. § 362(a). The
bankruptcy court dismissed Mr. Harlan's petition on
December 30, 2015, due to his failure to submit the
appropriate documentation to support his case, and the
foreclosure sale was reset to March 3, 2016. Once again, on
the day before the sale, another bankruptcy petition was
filed, this time by Mrs. Harlan individually (Case No.
5:16-BK-70518). The sale was stayed a second time. Just as in
Mr. Harlan's case, the bankruptcy court summarily
dismissed Mrs. Harlan's petition on March 11, 2016,
finding that she, too, failed to support her bare-bones
filing with appropriate documentation. Finally, a third
foreclosure sale was set for today, and, not surprisingly,
Mr. Harlan filed his second individual petition for
bankruptcy (Case No. 16-BK-71531) yesterday evening,
intending to provoke yet another stay of the proceedings in
11 U.S.C. § 362(c)(4)(A), "if a single or joint
case is filed by or against a debtor who is an individual
under this title, and if two or more single or joint cases of
the debtor were pending within the previous year but were
dismissed, the stay under subsection (a) shall not go into
effect upon the filing of the later case." Although Mr.
and Mrs. Harlan each filed a bankruptcy case that was
dismissed in the past year, and Mr. Harlan filed a second
bankruptcy case in that same period of time, it does not
appear that § 362(c)(4)(A) provides the Court with
authority to lift the automatic stay. This is true because
Mr. and Mrs. Harlan filed their successive bankruptcy
petitions individually, rather than jointly, even though they
jointly owned the real property at issue. Upon questioning by
the Court as to this point during the show cause hearing, Mr.
Harlan was unable to explain why he and his wife decided to
file their bankruptcy petitions individually, rather than
jointly, and the Court can only surmise that they did so in
order to maximize delay in these foreclosure proceedings.
to a different provision of the bankruptcy code, the Court
observes that under 11 U.S.C. § 362(d)(1), a party in
interest may obtain relief from the automatic stay
"after notice and a hearing" and "for cause,
including the lack of adequate protection of an interest in
property of such party in interest...." The testimony of
Mr. Harlan at the show cause hearing provides ample cause for
BONY's oral request for relief from the automatic stay.
In particular, Mr. Harlan's testimony confirms that he
and his wife filed multiple individual bankruptcy petitions,
each on the eve of the scheduled foreclosure sale of their
property, for the purpose of delaying the judicial sale, and
not for the purpose of restructuring their assets through the
bankruptcy process. This fact is evident from the timing of
each of their three bankruptcy petitions, as well as the fact
that they failed to support each petition with documentation.
Indeed, the bankruptcy court dismissed each of Mr. and Mrs.
Harlan's first bankruptcy petitions because the couple
ignored the court's orders to supplement their skeletal
filings with required schedules and plans for reorganization.
Mr. Harlan's bankruptcy petition filed yesterday is also
skeletal, which tends to support the Court's conclusion
that none of the Harlans' attempts to file for bankruptcy
have been legitimate.
Harlan argued during the show cause hearing that he filed
yesterday's bankruptcy petition in good faith because he
believed he had been offered a valid loan modification
proposal by a loan servicer named Ditech, and he thought that
perhaps the loan modification, if approved, would allow him
to save his property from foreclosure. However, upon
questioning by the Court, Mr. Harlan was unable to explain
how it was legally possible for him to obtain a valid loan
modification, given the fact that the note and mortgage on
his real property had already been incorporated into a
Judgment and Decree of Foreclosure. Further, Mr. Harlan was
unable to explain how Ditech's offer of a loan
modification related to his decision to file for bankruptcy
the day before the scheduled foreclosure sale. In fact, Mr.
Harlan admitted in open court that he received a letter from
Ditech on June 17, 2016-ten days before he filed for
bankruptcy-advising him that the offer of a loan modification
had been withdrawn because it had come to Ditech's
attention that the property securing the loan was set for a
for the reasons stated above, as well as the reasons stated
from the bench during the show cause hearing, IT IS ORDERED
that the automatic stay of proceedings in this matter, as
triggered by Mr. Harlan's bankruptcy filing, is hereby
LIFTED, and BONY's oral Motion for Relief from the
automatic stay is GRANTED for good cause shown, pursuant to
11 U.S.C. § 362(d)(1).
FURTHER ORDERED that the 14-day stay contemplated by Federal
Rule of Bankruptcy Procedure 4001 (a)(3)-which would
otherwise take effect after the filing of this Order-is
WAIVED and will not take effect.
FURTHER ORDERED that the foreclosure sale of the property at
1621 N. Starr Drive in Fayetteville, Arkansas, will take
place today following the show cause hearing.