Spencer, Sheila v. Federal Home Loan Mortgage Corporation

Filing 12

ORDER affirming Bankruptcy Court decision re: 1 Notice of Appeal and Partial Transmittal of Record from Bankruptcy Court, Adversary Proceeding case number 15-60, filed by Sheila M. Spencer. Signed by District Judge William M. Conley on 3/30/2017. (arw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
SHEILA MARIE SPENCER,

v.

Appellant,

FEDERAL HOME LOAN MORTGAGE
CORPORATION a/k/a Freddie Mac,

OPINION AND ORDER
15-cv-332-wmc

Appellee.
-------------------------------------------------------------------------------------------------------------------SHEILA M. SPENCER,
Appellant,
v.

15-cv-327-wmc

FEDERAL HOME LOAN MORTGAGE
CORPORATION a/k/a Freddie Mac,
Appellee.
-------------------------------------------------------------------------------------------------------------------SHEILA M. SPENCER,
Appellant,
v.

15-cv-455-wmc

FEDERAL HOME LOAN MORTGAGE
CORPORATION and PNC BANK, N.A.,
Appellees.
These three appeals from decisions of the Bankruptcy Court of the Western
District of Wisconsin comprise debtor Sheila M. Spencer’s latest attempt to delay

foreclosure on her home. Spencer appeals the court’s decision to lift the automatic stay
in the 15-cv-332 appeal; she appeals the court’s decision to dismiss the adversary
proceeding in the 15-cv-327 appeal; and she appeals the court’s decision to dismiss her
Chapter 13 petition in the 15-cv-455 appeal. After reviewing the parties’ submissions
and the bankruptcy records, the court now affirms all three decisions.

BACKGROUND 1
On April 3, 2015, Spencer filed a Chapter 13 voluntary bankruptcy petition. In re
Spencer, No. 15-11204 (Bankr. W.D. Wis. Apr. 3, 2015) (dkt. #1). On April 16, 2015,
creditor PNC Bank, N.A., filed a motion for relief from stay.

Id. (dkt. #10).

The

bankruptcy court conducted an evidentiary hearing on May 11, 2015, and issued an
opinion on May 15, 2015, in which the court found that “Spencer has engaged in a
scheme to delay creditors involving multiple bankruptcy filings affecting real property,”
and therefore PNC Bank was entitled to relief from the automatic stay under 11 U.S.C. §
362(b)(20). Id. (dkt. ##60, 61).
On April 26, 2015, Spencer also filed an adversary proceeding against PNC Bank,
N.A., and Freddie Mac, among other individuals and corporate entities, seeking a
judgment “declaring the relative rights, interests, obligations and responsibilities
concerning Ms. Spencer’s Homestead,” “declaring the mortgage recorded in the Wood

The bankruptcy court, this court and the Seventh Circuit are by now all well familiar with
debtor Sheila Spencer and her attorney Wendy Alison Nora’s efforts to delay foreclosure on
Spencer’s home. See Spencer v. PNC Bank, N.A., No. 14-cv-422-wmc, 2015 WL 1520912, at *2-4
(W.D. Wis. Apr. 2, 2015). With that background in mind, the court sets forth the following, key
events.

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County Register of Deeds purporting to encumber Ms. Spencer’s Homestead to be
adjudged null and void,” “determining the identity and capacity of any parties entitled to
receive adequate protection payments and/or the proceeds of sale of the Homestead” and
“determining the amount of each such claim or interest.” Spencer v. Fed. Home Loan Mrtg.
Corp., No. 15-00060-cjf (Bankr. W.D. Wis. Apr. 26, 2015) (dkt. #1). On April 30,
2015, the bankruptcy court ordered sua sponte that Spencer brief why her adversary
proceeding is not barred by the Rooker-Feldman doctrine. 2 Id. (dkt. #6). After review of
Spencer’s response, the bankruptcy court dismissed the adversary proceeding for lack of
subject matter jurisdiction in a decision also dated May 15, 2015, finding Spencer’s
claims were indeed barred by Rooker-Feldman. Id. (dkt. #14); see also id. (dkt. #15).
On June 30, 2015, the court held a preliminary hearing on the plan for
confirmation as well as PNC’s motion to dismiss the case. During the hearing, Attorney
Nora as counsel for Spencer acknowledged that the amount to be distributed to
unsecured creditors was overstated. In re Spencer, No. 15-11204 (Bankr. W.D. Wis.)
(dkt. #122) 9. Judge Furay then asked:
When can we anticipate at least a plan amendment to address
the distribution issue, if you will, if I can use that term as
shorthand, that’s been identified by the trustee?
MS. NORA: If I may have ten days, Your Honor . . . .
THE COURT: I was just asking for a date, Ms. Nora. So if I
said that a plan amendment will be filed no later than July
10, 2015, to address the plan distribution -- I’m making some
notes.
See Rooker v. Fidelity Trust Co., 263 U.S. 413, 415-16 (1923); District of Columbia Ct. of App. v.
Feldman, 460 U.S. 462, 486 (1983).

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MS. NORA: May I have until July 13th, Your Honor, just
because I am in proceedings in a remote location on the
10th? But I will hasten to get this done.
THE COURT: All right. So I will make a note that a plan
amendment will be filed no later than July 13, 2015, to
address the plan distribution issue to unsecured creditors. . . .
If the amendment is not filed by that date, the case will be
dismissed.
Id. 10. During that same exchange, Attorney Nora also agreed to provide a declaration
concerning Spencer’s failure to provide tax returns from 2011 to 2013, also by July 13.
Id. at 12.
In a one-page order dated that same day, June 30, 2015, the bankruptcy court
ordered:
A plan amendment will be filed no later than July 13, 2015,
to address the plan distribution issue to unsecured creditors.
Further, the Debtor will provide an affidavit or other evidence
to the trustee with respect to the 2011 through 2013 tax
returns and the fact that Debtor was not required to file such
returns by June 13, 2015. If the amendment and other
documents are not filed by that date[,] the case will be
dismissed.
Id. (dkt. #92).
Needless to say, Spencer filed neither a plan amendment nor the declaration
explaining why she was not required to file tax returns for certain years, by July 13, 2015.
The next day, the trustee filed a proposed order of dismissal. Id. (dkt. #105). That same
day, the bankruptcy court entered an order of dismissal, which provided:
The Court having reviewed the file finds that no Plan meeting
the requirements of Chapter 13 of Title 11, United States
Code has been presented; and further finding that no cause
has been shown why this case should not be dismissed; IT IS
FURTHER ORDERED that this case be and the same is
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hereby dismissed under USC 1307(c) without prejudice for
want to prosecution, or because no Plan has been confirmed.
Id. (dkt. #105). Also on July 14, before entry of Judge Furay’s dismissal order, Spencer
filed an objection to the trustee’s proposed order, acknowledging her oversight in failing
to file the required documents by July 13 and offered the same excuses for failing to do
so that she now offers on appeal. Id. (dkt. #106).

OPINION
I. Lifting of Automatic Stay
This court readily concludes that the bankruptcy court did not abuse its discretion
in lifting the automatic stay for the reasons provided by the bankruptcy court in
Spencer’s prior petition for bankruptcy under Chapter 13, In re Spencer, No. 1-1315076-cjf (Bankr. W.D. Wis. Feb. 15, 2014), as previously reviewed and affirmed by this
court, Spencer v. PNC Bank, N.A., No. 14-cv-422-wmc, 2015 WL 1520912 (W.D. Wis.
Apr. 2, 2015), and again articulated by the bankruptcy court in a nineteen-page
memorandum opinion in Spencer’s present appeal on her second Chapter 13 petition. In
particular, the court agrees with Judge Furay that relief from the stay is warranted under
11 U.S.C. § 362(d) because Spencer failed to demonstrate that (1) PNC Bank is
adequately protected; and (2) the property is necessary for effective reorganization as a
Chapter 13 debtor. In re Spencer, No. 1-15-11204-cjf, *8-14 (Bankr. W.D. Wis. May 15,
2015) (dkt. #60). That decision is, therefore, affirmed.

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II. Dismissal of Adversary Proceeding
Next, Spencer challenges the bankruptcy court’s dismissal of the adversary
proceeding, which yet again sought to challenge PNC’s standing to pursue foreclosure.
The court need not spend much time on this issue either. As previously explained to
counsel for Spencer, the Rooker-Feldman doctrine deprives federal courts of jurisdiction to
review a state court decision. See D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983);
Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923). This doctrine applies generally to “cases
brought by state-court losers complaining of injuries caused by state court judgments
rendered before the district court proceedings commenced and inviting district court
review and rejection of those judgments.” Exxon Mobile Corp. v. Saudi Basic Indus. Corp.,
544 U.S. 280, 284 (2005). The reason underlying the doctrine is that “no matter how
erroneous or unconstitutional the state court judgment may be, only the Supreme Court
of the United States has jurisdiction to review it.” Brown v. Bowman, 668 F.3d 437, 442
(7th Cir. 2012).
While a plaintiff may bring an independent claim before a federal district court,
Spencer fails to do so here, since her challenge seeks a review of the state court’s
foreclosure judgment. See Crawford v. Countrywide Home Loans, Inc., 647 F.3d 642, 645
(7th Cir. 2011) (emphasis added).

Indeed, Spencer expressly requested that the

bankruptcy court set aside that state court judgment, which is exactly what Rooker-Feldman
says lower federal courts cannot do. Cf. Taylor, 374 F.3d at 533-34 (claims were not
independent of state court foreclosure suit for Rooker-Feldman purposes where plaintiff
alleged “that the Defendants had committed a fraud upon the court by instituting a
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wrongful foreclosure action against her”); see also Mains v. Citibank N.A., No. 16-1985,
slip op. at *6-7 (7th Cir. Mar. 29, 2017) (affirming dismissal of similar challenges to
foreclosure judgment on Rooker-Feldman grounds); Schmid v. Bank of Am., N.A., 498 B.R.
221, 224-25 (W.D. Wis. 2013) (dismissing an action challenging defendant’s claim that
it owned a mortgage and claiming fraud against defendant based on Rooker-Feldman, since
the alleged injury was the state court foreclosure judgment being asserted against the
plaintiff).
Moreover, Spencer did raise her standing challenges in the state court. Even if she
did not, however, Spencer’s failure to avail herself of those rights in state court does not
create jurisdiction in federal court for her to do so now. See Levin Attorney Registration &
Disciplinary Comm’n of the Supreme Court of Ill., 74 F.3d 763, 766 (7th Cir. 1996) (“The
claims raised in district court need not have been argued in the state judicial proceeding
for them to be barred by the Rooker-Feldman doctrine.”). Spencer’s apparent argument is
that the state court did not accept her challenges to the foreclosure action, but even if the
state court erred in rejecting her arguments, this court still lacks jurisdiction for review:
“no matter how erroneous or unconstitutional the state court judgment may be, only the
Supreme Court of the United States has jurisdiction to review it.” Brown v. Bowman, 668
F.3d 437, 442 (7th Cir. 2012).
Finally, as appellant’s counsel surely knows from representing herself in the past,
the fact that Spencer may have a pending appeal of her foreclosure action does not bar
the application of the Rooker-Feldman doctrine. See Nora v. Residential Funding Co., LLC.,
No. 13-1660, slip op. at *10-11 (W.D. Wis. Sept. 30, 2012) (“As a result, this court
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finds that Nora’s pending appeal of decisions issued after the court entered judgment
against her in state court lacks a judicial basis to proceed in light of the Rooker-Feldman
doctrine.”), aff’d 543 F. App’x 601 (7th Cir. Nov. 26, 2013); see also Auston v. North
Carolina, No. 96-1158, 1997 WL 312285, at *1-2 (7th Cir. June 5, 1997) (noting that
plaintiff had filed a motion to vacate the state court judgments, which was pending at the
time that the plaintiff filed his federal action, and affirming the district court’s
application of the Rooker-Feldman doctrine to bar plaintiff’s federal claims).
Accordingly, the court also affirms the bankruptcy court’s order dismissing
Spencer’s adversary proceeding against PNC Bank.

III. Dismissal of Chapter 13 Petition
This then leaves Spencer’s last appeal from the bankruptcy court’s dismissal of her
second Chapter 13 petition. As detailed above, the bankruptcy court dismissed Spencer’s
petition after she was warned in open court on the record and again in a written order
that she had until June 13, 2015, to file a plan amendment and a declaration explaining
Spencer’s failure to file tax returns for certain years.

Making this failure even more

egregious is that the deadline was proposed by Spencer’s counsel with full knowledge that
a failure to meet that deadline would result in the dismissal of Spencer’s petition.
The bankruptcy court’s dismissal of Spencer’s petition falls within its inherent
powers to ensure the orderly administration of justice, In re Berryhill, 127 B.R. 427, 432
(Bankr. N.D. Ind. 1991), but the court’s order was also proper under 11 U.S.C. §

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1307(c), which governs dismissal or conversion to a Chapter 7 or Chapter 13 petition.
That provision provides in pertinent part:
Except as provided in subsection (f) of this section [dealing
with farmers], on request of a party in interest or the United
States trustee and after notice and a hearing, the court may
convert a case under this chapter to a case under chapter 7 of
this title, or may dismiss a case under this chapter, whichever
is in the best interests of creditors and the estate, for cause,
including-(1) unreasonable delay by the debtor that is prejudicial to
creditors;
...
(3) failure to file a plan timely under section 1321 of this
title; [and]
...
(9) only on request of the United States trustee, failure of the
debtor to file, within fifteen days, or such additional time as
the court may allow, after the filing of the petition
commencing such case, the information required by
paragraph (1) of section 521(a)[.]
All of the requirements of this provision were met here.

The Trustee filed a

proposed order dismissing the petition after Spencer had missed the June 13th deadline.
Spencer’s argument that the Trustee needed to file a motion is without merit, especially in
light of the fact that the bankruptcy court itself described the consequence of failing to
file timely the required documents orally on the record during the hearing and in a
follow-up written order. Moreover, Spencer was provided notice of the risk of dismissal
and that notice was provided in the context of a hearing -- a hearing in which Spencer’s
counsel herself set the deadline. Finally, while the list of reasons set forth in subsection
(c) is nonexclusive, Spencer’s failure here could fall within several of the categories
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delineated above -- unreasonable delay, failure to file a plan amendment, and failure to
file certain documents required under § 521(a).
In her untimely submission below and again in her appeal, Attorney Nora
attempts to explain her lapse by representing that she did not hear the June 13, 2015,
deadline during the telephonic conference, and she did not click on the link to the posthearing order because she thought the entire order was contained in the text entry on the
docket sheet. Neither excuse, however, constitutes excusable neglect, or at least Judge
Furay did not abuse her discretion in rejecting Attorney Nora’s implicit request for an
extension to file the required documents.
Even if the bankruptcy court could be viewed as acting sua sponte, the court finds
the dismissal order appropriate in light of the fact that Spencer and her counsel were on
notice of the consequences of the failure to file the required documents. Indeed, such a
course of action is contemplated by 11 U.S.C.A. § 105, which provides:
The court may issue any order, process, or judgment that is
necessary or appropriate to carry out the provisions of this
title. No provision of this title providing for the raising of an
issue by a party in interest shall be construed to preclude the
court from, sua sponte, taking any action or making any
determination necessary or appropriate to enforce or
implement court orders or rules, or to prevent an abuse of
process.
See also In re Black, 180 B.R. 534, 535 (S.D. Ind. 1995) (holding that bankruptcy court
was not required to provide debtor with a hearing before dismissing debtor’s Chapter 13
case where debtor received notice that his case was going to be dismissed if he missed
another payment); In re Meints, 222 B.R. 870, 872 (D. Neb. 1998) (affirming dismissal of
Chapter 13 petition on the bankruptcy court’s own motion and without providing notice
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or hearing to debtor based on debtor’s failure to follow procedures outlined in prior
dismissal); In re Greene, 127 B.R. 805, 808 (Bankr. N.D. Ohio 1991) (affirming dismissal
of Chapter 13 petition sua sponte based on debtor’s failure to file timely statement and
plan).

ORDER
IT IS ORDERED that the decisions of the bankruptcy court in the three abovecaptioned cases are AFFIRMED.
Entered this 30th day of March, 2017.
BY THE COURT:

/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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