Leo Raymond Stegman III

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 09-71251 TG
Chapter 13
LEO RAYMOND STEGMAN III,
Debtor.
_______________________________/
MEMORANDUM OF DECISION RE MOTION FOR STAY PENDING APPEAL
The debtor has filed a motion for a stay pending the appeal from
the 	Court’s 	orders, 	granting 	relief 	from 	the 	automatic 	stay 	to
secured creditor The Bank of New York Mellon (the “Bank”), dismissing
his 	chapter 	13 	case, 	and 	denying 	reconsideration 	of 	these 	orders.
For the reasons stated below, the motion will be denied.
BACKGROUND
The 	debtor 	filed 	his 	first 	chapter 	13 	bankruptcy 	petition 	on
September 28, 2009. 	In his bankruptcy schedules, the debtor listed
three 	parcels 	of 	real 	property, 	including 	real 	property 	located 	on
Shattuck 	Avenue 	in 	Oakland, 	California 	(the 	“Shattuck 	Property”).
The chapter 13 trustee moved to dismiss the case due to the debtor’s
failure to file a certificate evidencing the receipt of pre-petition
counseling, among other things. 	The case was dismissed on November
Signed: June 22, 2010
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
June 22, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-71251 Doc# 56 Filed: 06/22/10 Entered: 06/22/10 15:54:04 Page 1 of 6

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16, 2009. 	On November 20, 2009, the debtor filed a motion to vacate
the 	dismissal 	order, 	noting 	that 	there 	was 	a 	foreclosure 	sale
scheduled on November 25, 2009 with respect to the Shattuck Property.
The 	Court 	denied 	the 	motion, 	primarily 	because, 	by 	that 	time, 	the
debtor 	had 	filed 	a 	certificate 	evidencing 	the 	receipt 	of 	credit
counseling post-petition, more than 30 days after the petition date.
The debtor filed his second chapter 13 petition on November 24,
2009. 	He 	filed 	his 	first 	chapter 	13 	plan 	in 	this 	case 	(the 	“First
Plan”) 	on 	December 	1, 	2009. 	The 	First 	Plan 	proposed 	to 	pay 	the
chapter 13 trustee $100 per month for 60 months and listed no secured
creditors. 	On February 5, 2010, the debtor filed his second chapter
13 plan (the “Second Plan”). 	The Second Plan proposed to pay to the
chapter 13 trustee $669.50 for 60 months. 	Again, it failed to list
any 	secured 	creditors. 	In 	addition, 	the 	proposed 	payments 	to 	the
trustee exceeded the debtor’s scheduled disposable income of $117 per
month. 	On February 11, 2010, the debtor filed his third chapter 13
plan 	(the 	“Third 	Plan”). 	The 	Third 	Plan 	proposed 	to 	pay 	to 	the
chapter 	13 	trustee 	$1,800 	per 	month 	for 	60 	months. 	The 	Third 	Plan
listed 	three 	secured 	creditors 	and 	estimated 	the 	arrearages 	due 	to
each. 	The 	increased 	proposed 	payment 	exacerbated 	the 	feasibility
problem, there having been no amendment to Schedules I and J.
After the meeting of creditors was conducted and concluded, the
chapter 	13 	trustee 	noticed 	the 	Third 	Plan 	for 	a 	contested
confirmation hearing on April 16, 2010. 	On April 15, 2010, the Bank
filed 	a 	motion 	for 	relief 	from 	the 	automatic 	stay, 	scheduling 	a
preliminary 	hearing 	on 	the 	motion 	for 	April 	30, 	2010. 	The 	motion
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sought 	relief 	from 	the 	automatic 	stay 	to 	foreclose 	its 	security
interest on the Shattuck Property. 	The motion based its request for
relief on the debtor’s failure to make post-petition payments to the
Bank. 	It also based its request on the fact that the debtor was not
its original borrower and that its original borrower, Joseph Williams
(“Williams”), 	had 	transferred 	the 	Shattuck 	Property 	to 	the 	debtor
without the secured creditor’s consent, while the Shattuck Property
was 	in 	foreclosure. 	The 	Shattuck 	Property 	was 	transferred 	to 	the
debtor on October 9, 2009, shortly after the debtor filed his first
chapter 13 petition.
At 	the 	confirmation 	hearing 	on 	April 	16, 	2009, 	the 	chapter 	13
trustee 	informed 	the 	Court 	that 	the 	debtor 	had 	failed 	to 	serve 	the
Third Plan on creditors, had only made one partial plan payment, and
was delinquent in plan payments in the total amount of $6,500. 	She
also 	informed 	the 	Court 	that 	Alameda 	County 	had 	filed 	a 	claim 	for
over $37,000 in domestic support arrearages. 	Finally, she informed
the 	debtor 	and 	the 	Court 	that 	the 	plan 	payments 	would 	have 	to 	be
increased 	substantially 	in 	order 	for 	the 	Plan 	to 	fund. 	The 	debtor
was 	given 	a 	deadline 	for 	filing 	and 	serving 	an 	amended 	plan 	that
accounted 	for 	these 	deficiencies. 	The 	confirmation 	hearing 	was
continued 	to 	May 	14, 	2010. 	The 	Bank’s 	preliminary 	hearing 	on 	its
motion 	for 	relief 	was 	later 	continued 	to 	the 	same 	date. 	The 	Court
warned 	the 	debtor 	that 	the 	case 	would 	be 	dismissed 	unless 	he
corrected the deficiencies noted by the trustee.
On April 21, 2010, the debtor filed his fourth plan (the “Fourth
Plan”), 	providing 	for 	increased 	payments, 	although 	less 	than 	the
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amount 	recited 	by 	the 	trustee. 	The 	Fourth 	Plan 	listed 	secured
creditors 	but 	failed 	to 	identify 	the 	arrearages 	due 	to 	them. 	The
Bank 	filed 	an 	objection 	to 	confirmation 	of 	the 	Fourth 	Plan. 	It
contended that the debtor had filed the case in bad faith. 	It noted
that, 	not 	only 	had 	the 	debtor 	received 	an 	unauthorized 	transfer 	of
the 	Shattuck 	Property 	on 	October 	9, 	2009, 	he 	had 	received 	an
unauthorized transfer of another property on September 28, 2009, the
day his first bankruptcy petition was filed. 	In addition, the Bank
noted that the Fourth Plan continued to provide insufficient payments
to fund and, in any event, based on the debtor’s reported disposable
income, was not feasible. 	In addition, the debtor had failed to make
the 	required 	post-petition 	payments 	to 	the 	Bank 	on 	the 	Shattuck
Property.
At 	the 	hearing, 	counsel 	for 	the 	Bank 	informed 	the 	Court 	that
Williams, its original borrower, had also filed a bankruptcy petition
and had scheduled the Shattuck Property as his property. 	The Court
asked the debtor to explain his relationship to the Shattuck Property
and to Williams. 	The debtor explained that the Shattuck Property was
a 	four-plex 	and 	that he lived in one of the units. 	He stated that
he had been managing all three of Williams’ properties, that Williams
had 	been 	unable 	to 	make 	the 	payments 	on 	the 	mortgages, 	and 	that
Williams 	had 	consequently 	transferred 	the 	properties 	to 	him. 	The
debtor 	stated 	that 	he 	intended 	to 	make 	the 	monthly 	payments 	and
ultimately 	to 	sell 	the 	properties. 	The 	debtor 	did 	not 	explain
whether he had paid Williams any of his own money for the transfers
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nor 	did 	he 	explain 	who 	he 	thought 	would 	be 	entitled 	to 	receive 	the
proceeds from any sales of the properties.
Based 	on 	the 	foregoing 	undisputed 	facts, 	the 	Court 	concluded,
while the debtor may have believed he was behaving in good faith as
a 	subjective 	matter, 	objectively 	speaking, 	his 	conduct 	was 	in 	bad
faith. 	In 	addition, 	it 	appeared 	clear 	that 	the 	debtor 	would 	be
unable to propose a feasible chapter 13 plan since he had no income
other 	than 	the 	rents 	on 	the 	various 	properties. 	Consequently, 	the
Court concluded that the Bank’s motion for relief from the automatic
stay 	should 	be 	granted, 	with 	in 	rem 	relief 	provided 	as 	to 	the
Shattuck 	Property, 	and 	that 	the 	case 	should 	be 	dismissed. 	For 	the
same reason, the Court concludes that the debtor’s motion for a stay
of these orders should be denied.
Based on the foregoing, it is
SO ORDERED.
END OF DOCUMENT
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COURT SERVICE LIST
Leo Raymond Stegman III
5614 Shattuck Ave. #A
Oakland, CA 94609
Les Zieve
Law Offices of Les Zieve
18377 Beach Boulevard, Ste. 210
Huntington Beach, CA 92648
Case: 09-71251 Doc# 56 Filed: 06/22/10 Entered: 06/22/10 15:54:04 Page 6 of 6