United States District Court, N.D. Illinois, Eastern Division
IN RE SHERMAN REED AND YVETTE REED, Debtors. SANDRA SUTTON, Appellant-Creditor,
SHERMAN REED AND YVETTE REED, Appellees-Debtors
For Sandra Sutton, Appellant: Harold L. Moskowitz, LEAD ATTORNEY, Law Firm of Harold Moskowitz, Chicago, IL.
For Yvette Reed, Sherman Reed, Appellees: Brian E. Alexander, LEAD ATTORNEY, Alexander, Alexander & Associates, Chicago, IL; Helena Milman, LEAD ATTORNEY, Elan Law Group, Chicago, IL.
MEMORANDUM OPINION AND ORDER
Honorable Edmond E. Chang, United States District Judge.
Creditor Sandra Sutton appeals from the bankruptcy court's orders denying Sutton's motion to lift the automatic stay and confirming Sherman and Yvette Reed's Chapter 13 bankruptcy plan. For the reasons discussed below, the bankruptcy court's orders are affirmed.
The Reeds filed a Chapter 13 bankruptcy petition in June 2012. R. 1-3, Chapter 13 Voluntary Petition [Dkt. 1]. One of the reasons for their Chapter 13 filing was a pending foreclosure dispute they had with Sutton over the mortgage on the Reeds' six-unit apartment building; Sutton is the Reeds' mortgage lender for the property. See R. 9, Appellees' Br. at 1-2; see also R. 1-3, Adversary Compl. [Dkt. 23] at 2; R. 1-3, Mot. Relief from Stay [Dkt. 38] at 1. The Reeds acknowledged that they owed Sutton $250,000 on the mortgage, but they wanted to modify the mortgage through Chapter 13 bankruptcy (this is known as a " cram down" in the bankruptcy world). See Adversary Compl. [Dkt. 23] at 3. The Reeds argued that by 2012, the property had lost more than half of its value, leaving no equity in the property. See id.
During the bankruptcy proceedings, the Reeds filed multiple proposed bankruptcy plans, along with amended schedules listing their income and expenses. Sutton likewise filed multiple objections to the Reeds' proposed plans and also a motion to lift the automatic stay so that she could proceed with her foreclosure action against the Reeds. See Mot. Relief from Stay [Dkt. 38]. Before the bankruptcy court addressed these proposed plans and objections, it first ordered the Chapter 13 Trustee to make an adequate-protection payment to Sutton from " all amounts held by the Trustee on behalf of the Debtors." R. 1-3, Order Enforcing Required Adequate Protection Payment [Dkt. 102]; see also R. 1-4, Sixth Am. Plan [Dkt. 130] at 6 (stating that Sutton received an adequate-protection payment of $32,836). Then, in a valuation hearing, the bankruptcy court also determined that the current value of the Reeds' apartment-building property was $140,000. See Sixth Am. Plan [Dkt. 130] at 6. In other words, instead of owing Sutton the $250,000 balance on the mortgage, the Reeds would now owe Sutton $140,000 (plus interest)--the current value of the property.
Finally, the bankruptcy court confirmed the Reeds' seventh and final plan--their " Sixth Amended Plan" --on July 11, 2013, and denied Sutton's motion to lift the stay. See R. 1-4, Order Confirming Plan [Dkt. 139]; see also Order Denying Mot. Relief from Stay, In re Reed, No. 12-22803 (Bankr. N.D.Ill. July 11, 2013), ECF No. 138. During the confirmation hearing, the bankruptcy court found that " based on a lot of history in this courtroom that the Reeds are making a good faith effort to confirm a Chapter 13 plan that does treat their creditors appropriately." R. 4, 7/11/13 Tr. [Dkt. 150] at 16. Under the confirmed plan, the Reeds will repay Sutton $140,000 on the mortgage, $12,121.88 for post-filing real-estate tax payments that Sutton made on the property, and 5% interest, for a total of $172,224.20. Sixth Am. Plan [Dkt. 130] at 6. Unsecured creditors will then receive, at a minimum, 2.59% of their claims. See R. 1-4, Order Modifying Plan [Dkt. 140].
Sutton filed her notice of appeal on July 22, 2013. R. 1, Notice of Appeal [Dkt. 143].
II. Standard of Review
A federal district court has jurisdiction, under 28 U.S.C. § 158(a), to hear appeals from the rulings of a bankruptcy court. On appeal, the district court reviews the bankruptcy court's legal findings de novo and its factual findings for clear error. In re Miss. Valley Livestock, Inc., 745 F.3d 299, 302 (7th Cir. 2014). A bankruptcy court's finding that a debtor's plan was proposed in good faith is a finding of fact that this Court evaluates for clear error only. In re Smith, 848 F.2d 813, 816 n.2 (7th Cir. 1988). Under that standard, an appellate court will not reverse simply because it would have decided the case differently; instead, a reviewing court must ask whether, considering all of the evidence, " it is left with the definite ...