Melissa B. Sarner

UNITED STATES BANKRUPTCY COURT
FOR THE
DISTRICT OF MASSACHUSETTS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In re
MELISSA B. SARNER, 	Chapter 13
Debtor 	Case No. 10-17487-JNF
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
MEMORANDUM
I. INTRODUCTION
Melissa B. Sarner (the “Debtor”) filed, on August 23, 2010, a Motion for Relief from
Order Granting Relief from the Automatic Stay (the “Motion”), in which she states that this
Court’s order dated August 19, 2010 is based on manifest errors of fact and law. The Court
shall treat the Motion as a Motion for Reconsideration under Fed. R. Bankr. P. 9024, which
makes Fed. R. Civ. P. 60 applicable to bankruptcy proceedings.
In her motion, the Debtor specifically seeks reconsideration of this Court’s order
granting Dean Co-Operative Bank relief from the automatic stay under 11 U.S.C. §
362(d)(2). In its Memorandum accompanying the order granting Dean Co-Operative Bank
relief from the automatic stay, the Court determined that the Debtor lacked equity in 625
Old Farm Road, Franklin, Massachusetts (the “property”) and that the Debtor failed to
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sustain her burden that the property is necessary to an effective reorganization that is in
prospect. In her present Motion, the Debtor does not seek reconsideration of the denial of
her Motion for Consolidation or Joint Administration of her Chapter 13 case with that of
her spouse, Lawrence E. Sarner (“Sarner”), who commenced a Chapter 13 case on
November 24, 2009, which is pending before the Court (Case No. 09-21351-JNF) .
Upon consideration of the Motion, and the record of proceedings in this case, the
Court shall enter an order denying the Motion.
II. BACKGROUND
The Court incorporates by reference its Memorandum and Order dated August 19,
2010.
III. STANDARD FOR RECONSIDERATION
According to the court in Hovis v. Grant/Jacoby, Inc. (In re Air South Airlines, Inc.),
249 B.R. 112 (Bankr. D.S.C. 2000),
The decision of whether to grant a motion for relief from judgment under the
standard set forth in Rule 60(b) lies within the discretion of the Court. See, e.g.
Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp., 843 F.2d 808,
810 (4th Cir.1988); Park Corp. v. Lexington Ins. Co., 812 F.2d 894, 896 (4th
Cir.1987). In determining whether a judgment should be set aside under the
standard of Rule 60(b), the Court must engage in a two-pronged process.
First, the moving party must satisfy three requirements: (1) the motion must
be timely filed; (2) the moving party must have a meritorious defense to the
action; and (3) the setting aside of the judgment must not unfairly prejudice
the nonmoving party. See Nat’l Credit Union v. Gray, 1 F.3d 262, 264 (4th
Cir.1993); Park Corp., 812 F.2d at 896. Once the requirements of the first
prong have been met, the moving party must next satisfy one of the six
grounds for relief set forth in Rule 60(b). See Park Corp., 812 F.2d at 896.
249 B.R. at 115-16. In In re Bererhout, 431 B.R. 42 (Bankr. D. Mass. 2010), this Court
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observed that in the First Circuit, “[r]elief under Rule 60(b) is available . . . when
exceptional circumstances exist to justify extraordinary relief.” Rodriguez Camacho v.
Doral Fin. Corp. (In re Rodriguez Camacho), 361 B.R. 294, 301 (B.A.P. 1st Cir. 2007) (citing
Simon v. Navon, 116 F.3d 1, 5 (1st Cir.1997)). Additionally, “‘a party who seeks recourse
under Rule 60(b) must persuade the trial court, at a bare minimum, that his motion is
timely; that exceptional circumstances exist, favoring extraordinary relief; that if the
judgment is set aside, he has the right stuff to mount a potentially meritorious claim or
defense; and that no unfair prejudice will accrue to the opposing parties should the motion
be granted.’ ” 361 B.R. at 301 (citing Karak v. Bursaw Oil Corp., 288 F.3d 15, 19 (1st
Cir.2002)).
IV. DISCUSSION
The Debtor has satisfied the element of timeliness under the standard set forth
above. She has failed, however, to persuade this Court that exceptional circumstances exist
to justify the relief requested.
The Debtor maintains that this Court erred in finding that she had no equity in the
property. The Debtor admitted that she had no equity in the property in Schedules A and
D, where she valued the property at $487,000 and listed liens and encumbrances totaling
$509,814.25. 	It is well-settled in Massachusetts that all liens affecting the property are
considered in determining whether the Debtor has equity for purposes of 11 U.S.C. §
362(d)(2). The Debtor’s reliance on In re Gould, 348 B.R. 78 (Bankr. D. Mass. 2006), is
misplaced. 	To the extent that the court in Gould did not consider all encumbrances
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affecting real property for purposes of determining a motion for relief from the automatic
stay under section 362(d)(2) it is at odds with the weight of authority in this district.
In In re Jug End of the Berkshires, Inc., 46 B.R. 892, 901 (Bankr. D. Mass. 1985), the
court stated: “The majority view . . . defines equity as the difference between the property
value and the total amount of liens against it.” (citations omitted). 	Moreover, “[t]he
existence of junior lienholders is relevant . . . to § 362(d)(2) and not to § 362(d)(1).” Id. See
also In re Sunshine Three Real Estate Corp., 2009 WL 3617798 (Bankr. D. Mass. Oct. 26,
2009).
Although the Debtor argues that her plan was not predicated on the proof of claim
bar date of April 6, 2010 applicable to the plan proposed by Sarner, she proposed a plan
virtually identical to his in which she provided for the identical treatment of secured
claims, but without a monthly plan payment. In other words, her plan was the same as his
Second Amended Pre-Confirmation Plan which provided for a monthly plan payment of
$6,317, a sum which included the monthly mortgage obligation to Dean Co-Operative Bank
in the sum of $2,585, and contained the following provision:
Although this creditor has received relief from the automatic stay, the debtor
[Sarner] is making provision for payment to the trustee of BOTH the pre-
petition arrears claim AND the post-petition payment coming due. No late
fee shall be charge [sic] by Dean. No distribution to Dean Cooperative Bank shall
be made, notwithstanding the plan or any Proof of Claim, unless the order granting
relief from stay is reversed on appeal. . . .
The Court was justified in inferring that the Debtor proposed to use Sarner’s bar date,
which has expired, because she proposed to use his plan and pay creditors according to
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proofs of claim filed (or not filed as the case may be) in his case. 	While the Debtor
maintains that she did not represent that she intended to utilize the bar date applicable to
Sarner’s case, her plan speaks for itself and the Court’s inference was warranted under the
circumstances.
The Debtor also argues that “[t]he court should not hold Melissa or Lawrence
responsible for MSB’s [Middlesex Savings Bank] failure timely to file a proof of claim [in
Sarner’s case] . . . ,” adding that “[i]n Melissa’s case, the argument in favor of treating
MSB’s claim in this manner [i.e., in the manner set forth in Sarner’s Second Amend Pre-
Confirmation Chapter 13 Plan] is even stronger.” The Court disagrees. The Court also
disagrees that MSB, in the Debtor’s words, received “all the due process to which it is
entitled” in the Debtor’s case. Because the proof of claim bar date has not passed in the
Debtor’s case, MSB may still file a proof of claim in her case and, the Debtor then may seek
a determination of its secured status. 	The Debtor is correct, however, in her contention
that, were MSB to file a claim that was determined to be wholly unsecured, she would not
need to provide a distribution to MSB in view of her Chapter 7 discharge. Nevertheless,
based upon the Debtor’s Schedule D, the value the Debtor ascribes to the property, and the
amount of debt owed to MSB, MSB would appear to be fully secured. Indeed, in view of
the Debtor’s argument that there is “an equity cushion,”with respect to her property, her
simultaneous contention that MSB’s claim need not be addressed in her plan is perplexing.
The Debtor also argues that this Court erred in finding that the Debtor’s proposed
plan is not feasible, referring to pay stubs submitted to the Court, and changes in
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circumstances since the filing of the Debtor’s and Sarner’s prior cases. The plan proposed
by the Debtor, i.e., Sarner’s Second Amended Pre-Confirmation Chapter 13 Plan, is not
feasible because the Court sustained an objection to it filed by Dean Co-Operative Bank.
Moreover, Sarner’s plan provided for a monthly plan payment of $6,317, a sum which
includes the payment of $2,585 for Dean Co-Operative Bank’s monthly mortgage payment.
The following table sets forth the Debtor’s reported income and expenditures reflected on
Schedules I and J, which she filed on August 9, 2010 and Sarner’s reported income and
expenditures from amended Schedules I and J filed on March 3, 2010 and January 15, 2010,
respectively. 1
Schedule 	Date 	Amt. - Debtor 	Amt.- Sarner 	Mo. Net Income
I 	8/9/10 	$9,767
J 	8/9/10 	$7,642 	$2,125
Amended J 	1/15/10 	$6,924 	$2,843
($9,767-$6,924)
Amended I 	3/3/10 	$10,677 	$3,753
($10,677-$6,924)
Sarner, through his Second Amended Pre-Confirmation Plan filed on June 7, 2010,
proposed a monthly plan payment of $6,317, which included the payment of $2,585 to Dean
1 In the following table, the Court calculated Sarner’s monthly net income on
January 15, 2010 using his reported Combined Average Monthly Income from original
Schedule I and amended Schedule J. To calculate his monthly net income for March 3,
2010, the Court used the Combined Monthly Income from amended Schedule I and the
expenditures reported on amended Schedule J filed on January 15, 2010.
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Co-Operative Bank with respect to its first mortgage. 	For purposes of comparing the
Sarner’ plan payment with Sarner’s reported monthly net income, the plan payment is
comprised of $3,732 plus $2,585. Thus, Sarner’s monthly net income is slightly more than
what he proposed to contribute to his Second Amended Pre-Confirmation Plan based upon
what can be computed from Sarner’s Amended Schedules I and J. In contrast to Sarner,
however, the Debtor, more recently, reported monthly net income of only $2,125. If the
monthly mortgage payment to Dean Co-Operative Bank were to be added to that figure
it produces $4,718, a sum significantly less than the $6,317 plan payment.
The Debtor complains that she was entitled to an evidentiary hearing with respect
to plan feasibility. The Court disagrees. The Debtor filed her Schedules and Statement of
Financial Affairs under penalty of perjury. She filed her Schedules I and J just ten (10) days
before the Court issued its ruling. The Court need not look beyond those submissions or
conduct an evidentiary hearing to examine pay stubs from Sarner’s case to determine
whether Dean Co-Operative Bank established a colorable claim to relief, particularly where
the Court sustained an objection to the very plan upon which the Debtor relies. See Grella
v. Salem Five Cent Sav. Bank, 42 F.3d 26, 34 (1st Cir. 1994).
In furtherance of her position that the Court erred in determining that she had not
satisfied her burden of showing that she had a reasonable possibility of a successful
reorganization within a reasonable time, the Debtor argues that the priority claim she owes
the IRS is unsecured and, therefore, it was discharged in her Chapter 7 case, unless it is
nondischargeable pursuant to 11 U.S.C. § 523(a)(1). She adds that any proof of claim filed
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by the IRS would control, referencing the proof of claim filed by the IRS in Sarner’s case.
The Debtor listed the IRS as the holder of a priority claim in the sum of $65,758 on Schedule
E. Because the proof of claim deadline has not passed, the Court justifiably inferred that
the Debtor owed that sum because she listed it on Schedule E. The Debtor now asserts that
only a portion of the claim is entitled to priority. The Court recognizes that the IRS now
has filed a proof of claim in the Debtor’s case, setting forth a priority claim in the sum of
$50,640.75 and an unsecured nonpriority claim in the sum of $12,756.97. The proof of claim
reflects that the IRS is seeking payment of income taxes for the 2006 and 2007 tax years that
were assessed in February of 2009. The Debtor’s reliance on the proof of claim filed by the
IRS in Sarner’s case is misplaced because the IRS now has filed a proof of claim in her case
and Sarner filed his petition over seven months ago.
The Debtor makes the same argument about the controlling effect of proofs of claim
with respect to the Town of Franklin’s proof of claim. The Town of Franklin, however,
filed a proof of claim in the Debtor’s case on August 6, 2009 in the amount of $17,389.25,
yet the Debtor’s plan (i.e., Sarner’s Second Amended Pre-Confirmation Plan) provided for
payment of its secured claim in the sum of $11,745.25. The Debtor’s position supports the
Court’s conclusion that the Debtor, in fact, intended to rely on Sarner’s proof of claim bar
date, despite her protestations to the contrary. 	To conclude otherwise would permit
another inference, namely that the Debtor filed her Chapter 13 plan for purposes of delay,
knowing that creditors would be compelled to file objections to confirmation which
ultimately would have to be resolved by the Court. The Court concludes that it is improper
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for her to reject the figures she set forth in her own Schedules, which she executed under
penalty of perjury and to rely instead upon proofs of claim filed in Sarner’s case,
particularly where the Town of Franklin filed a proof of claim in the amount of $17,389.25
in her case. 	Because the Debtor has stated that “the Proof of Claim controls for plan
purposes, not the schedules,” the Court concludes that the Debtor’s plan must provide for
the amounts set forth in proofs of claim filed in her case absent a Court order sustaining
objections to claims.
V. CONCLUSION
For the foregoing reasons, the Court finds that the Debtor failed to sustain her
burden with respect to her Motion. The Court shall enter an order denying the Debtor’s
Motion for Relief from Order Granting Relief from Automatic Stay.
By the Court,
Joan N. Feeney
United States Bankruptcy Judge
Dated: September 8, 2010
cc: David G. Baker, Esq., Guy B. Moss, Esq., Carolyn Bankowski, Esq.
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