In re Hardison, CASE NO. 2:06-bk-20225

IN RE: RICHARD EICHERT HARDISON and MARY ANN HARDISON, Debtors.

CASE NO. 2:06-bk-20225

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF WEST VIRGINIA AT CHARLESTON

March 31, 2020

CHAPTER 7

JUDGE FRANK W. VOLK

MEMORANDUM OPINION AND ORDER GRANTING RELIEF FROM STAY

Pending is Creditor Land Home Financial Services' Motion for Relief from the Automatic Stay [dckt. 623] (the "MFR"), filed December 17, 2018.

The Hardisons filed a Response to the MFR on January 9, 2019 [dckt. 628]. A preliminary hearing was held January 16, 2019, which was continued to a final hearing. On April 25, 2019, Land Home Financial Services ("Land Home") filed a Supplement to its MFR [dckt. 647]. The Debtors responded thereto on April 29, 2019 [dckt. 650]. The final hearing was held July 24, 2019. At that time, the parties presented argument, witness testimony, and exhibits. The Court ordered post-hearing briefs and responses, which were due August 14, 2019, and September 4, 2019, respectively. All filings have been received. The matter is ready for adjudication.

I.

A. Procedural Posture

The Hardisons filed their Chapter 13 bankruptcy on April 27, 2006. Seven (7) years passed without confirmation of a Chapter 13 Plan. The Court eventually converted the Hardisons' case to one under Chapter 7 on December 12, 2013.

In the meantime, multiple motions for relief from stay were filed concerning the subject property. On January 24, 2008, BB&T, the noteholder at that time, moved for stay relief. The arrearage then existing was $96,987.34; the note balance was $348,288.23. That motion was eventually withdrawn in September 2008. On July 17, 2013, Selene Finance LP ("Selene"), as servicer at that time, filed a Motion for Relief from Stay on the subject property [dckt. 400]. The undersigned's predecessor held a trial on Selene's Motion for Relief on September 11, 2013, at which time the matter was taken under advisement. The motion was never adjudicated. When the case converted in December 2013, the Court continued Selene's motion pending review and evaluation by the Chapter 7 Trustee. Again, the motion was never adjudicated. For clarity's sake, it is ORDERED that Selene's Motion for Relief from Stay [dckt. 400] be, and is hereby, DENIED.

The Hardisons moved to reconsider the conversion to Chapter 7 on January 15, 2014. The undersigned's predecessor denied reconsideration on February 14, 2014. The Hardisons appealed. On September 5, 2017, the case was remanded "for further proceedings on whether reconversion to chapter 13 is appropriate in this case." Hardison v. Morris, 2:14-23820, slip op. at 9 (S.D. W. Va. Sept. 5, 2017). The Court entertained briefing prior to entering its decision, and the Hardisons filed amended schedules on September 24, 2018.

On September 30, 2018, the Court entered its Memorandum Opinion and Order denying the Hardisons' request to convert their case from Chapter 7 to Chapter 13. Following that decision, Land Home filed the instant MFR.

B. Factual Background

Richard and Mary Ann Hardison financed a $350,000 real property purchase with One Valley Bank, N.A., on May 24, 1991. The obligation is memorialized in a note recorded and re-recorded in Kanawha County on May 24 and June 5, 1991. Repayment of the note was securedby a first-priority mortgage on the Hardisons' home, 6 Wildacre Road in Charleston. The mortgage was assigned several times and is currently serviced by Land Home.

On April 27, 2006, the same day they faced a foreclosure sale, the Hardisons filed their Chapter 13 petition pro se. They listed their estimated assets between $500,001 and $1 million. They estimated their debts between $100,001 and $500,000. The petition listed only a two-story house and a single secured creditor (BB&T Mortgage). The Hardisons valued the home at $600,000 and claimed full interest in the property. A proposed Chapter 13 plan was due May 12, 2006.

A show cause hearing was held May 24, 2006, inasmuch as the Hardisons failed to file a proposed plan, completed schedules, and other documents. The Hardisons were given one week to retain counsel, with the show cause hearing being advanced to June 7, 2006. When the advanced date arrived, the Hardisons did not appear. They also did not heed the Court's earlier instructions. They filed schedules but failed to retain counsel. They also neglected to file their credit counseling certificate and made no Chapter 13 plan payments. The Court dismissed the case on June 12, 2006.

The Hardisons moved to reopen their case on June 26, 2006. The Court held a hearing on August 2, 2006. The motion to reopen was held in abeyance pending the Hardisons (1) filing an amended motion to reopen, (2) retaining experienced bankruptcy counsel, and (3) filing their missing documents, which included a proposed Chapter 13 plan and credit counseling certificate. The requirements were met but the Hardisons' certificate indicated that they received credit counseling on July 28, 2006, ninety-two (92) days after filing their petition.¹ Owing tohospitalizations, the Hardisons moved several times to extend time to file their schedules and participate in credit counseling. No extensions were ever granted. Their case was eventually reinstated in February 2007.

Also noteworthy is that the Hardisons' original petition indicated they had not filed a bankruptcy case within the prior eight (8) years. In fact, the Hardisons filed an earlier Chapter 13 petition on May 23, 2005, which was dismissed on December 7, 2005, as a result of their failure to file a proposed Chapter 13 plan. Their amended schedules, filed by counsel on August 10, 2006, acknowledge this prior case.

The Hardisons' history in Chapter 13 is littered with failed attempts to plot a workable way forward. They filed three separate proposed plans -- on August 2, 2006, October 16, 2006, and May 30, 2013 -- with each offering monthly payments of $210.00 [dckts. 35, 65 & 383]. In the ninety-two (92) months that they were in Chapter 13, however, none of the plans achieved confirmation. They additionally missed promised payments during the life of their case. On December 10, 2013, after seven (7) long years in Chapter 13 with little success, the Court converted the case to Chapter 7.

Over the life of this case, the Hardisons have filed a multitude of amended schedules. The ones discussed herein are the only schedules which relate to the note and the subject property. As noted above, the Hardisons' original schedules valued their residence at $600,000 and indicated that they alone owned the home. Subsequently, their next amendment on May 30, 2006, raised the value of their home to $800,000. The three amendments followingthereafter maintained the $800,000 value and indicated that Mrs. Hardison alone possesses a one-half interest in the home, with the other half held by their two sons, Richard E. and John B. Hardison.

On the opposing side, the lender and similarly interested parties have filed several amended proofs of claim for the mortgage and mortgage arrearage. BB&T filed the original proof of claim ("POC") on May 19, 2006. It claimed $302,639.73, with a pre-petition arrearage of $35,165.10. BB&T filed the first amended POC on November 16, 2010, listing $301,207.02 as the claim amount, and an adjusted pre-petition arrearage of $26,546.47. After assignment, Selene submitted the second amended POC on May 1, 2013. This POC was identical to BB&T's second POC in both the amount due and the pre-petition arrearage. The most recently filed POC was submitted by Trifera, LLC (for which Land Home is servicer), and echoed the amounts on the previous POCs, namely, $301,207.01 due at the time of filing and $26,546.47 in pre-petition arrearages.

According to the MFR, the Hardisons' mortgage note is in practically irretrievable default. Their last remittance was the September 2005 payment, over fourteen years ago. As of December 17, 2018, the unpaid principal balance was $279,499.02. Additionally, there is accrued interest of $268,470.63, escrow advances of $97,826.32, delinquent property taxes of $4,848.61, and late fees of $1,242.20. As of December 17, 2018, the payoff is $651,659.55.²

In response to the MFR, the Hardisons first allege that they do not know how much they owe on their mortgage. They claim that there was a pending lawsuit in the Circuit Court of Kanawha County challenging BB&T's original claim to payment and alleging violations of theWest Virginia Consumer Credit Protection Act. The state law claim asserted that BB&T failed to credit payments made. The Hardisons additionally note that the Chapter 7 Trustee has not abandoned any interest in the subject property and assert that the Trustee's intentions should be disclosed prior to any stay relief. The Hardisons note also that they are ailing and elderly and require the residence.³

Land Home filed a supplement to the MFR on April 25, 2019, wherein it simply noted that the deed of trust was transferred to Land Home as authorized servicer for Isanthes, LLC. In response thereto, the Hardisons claimed the MFR hearing in combination with the supplement violated Federal Rule of Bankruptcy Procedure 3001(e)(2). The Hardisons question the assignment forms attached to the supplement, noting that all are signed and notarized by the same individual and asserting that they are all unclear respecting the identities of the assignor and assignee. The Hardisons additionally (1) seem to challenge the assignment and transfer of their mortgage, (2) allege inconsistencies between the proofs of claim and the MFR, assertedly giving rise to a Rule 3001 violation, (3) contend the subject property is valued at more than $301,000, contrary to that stated in claim 6-4, and, (4) again, state that the home is "necessary for their existence" given their ages and infirmities.

C. Evidence Presented at Hearing

The arguments and evidence tendered at the final hearing on the MFR generally mirror the filings. Land Home called its employee Bruce Skinner. He reviews loan...