Rodolpho O'Farrill

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
RODOLPHO O’FARRILL,
Debtor.
FOR PUBLICATION
Case No. 17-11026
Chapter 7
MEMORANDUM OPINION AND ORDER REGARDING
OCWEN LOAN SERVICING LLC’S MOTION TO LIFT THE AUTOMATIC STAY
A P P E A R A N C E S:
ROBERTSON, ANSCHUTZ & SCHNEID, P.L.
Attorneys for Movant Ocwen Loan Servicing LLC
409 Congress Ave., Suite 100
Boca Raton, FL 33487
By: 	Miriam J. Rosenblatt, Esq.
YANN GERON
Chapter 7 trustee of the estate of Rodolpho O’Farrill
c/o Reitler Kailas & Rosenblatt LLC
885 Third Avenue, 20th Floor
New York, New York 10022
By: 	Yann Geron, Esq.
RODOLPHO O'FARRILL
Debtor, pro se
1554 Leland Avenue
Bronx, New York 10460
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Pending before the Court is a motion for relief from the automatic stay (the “Motion,”
ECF Doc. # 8) regarding real property owned by Rodolpho O’Farrill (the “Debtor”), located at
1554 Leland Avenue, Bronx, New York 10460 (the “Property”). The Motion was filed on June
19, 2017, by Ocwen Loan Servicing LLC (“Ocwen” or the “Movant”), as servicer for HSBC
Bank USA, N.A., as Indenture Trustee for the Registered Holders of the Renaissance Home
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Equity Loan Asset-Backed Certificates, Series 2005-1. The Motion is supported by a
memorandum of law (the “Movant’s Brief,” ECF Doc. # 9) and several exhibits, including
copies of documents establishing a perfected security interest and the Movant’s ability to enforce
the terms of the underlying note (“Exhibit A,” ECF Doc. #8-1 at 1‒46); the Movant’s statement
regarding the indebtedness and default of the Debtor regarding the Consolidated Note and
Mortgage (defined below) on the Property (“Exhibit B,” ECF Doc. #8-1 at 47‒51); an order filed
September 16, 2016, granting a motion to dismiss a chapter 7 petition filed by the Debtor on
June 23, 2016, in Case No. 16-11820 (“Exhibit C,” ECF Doc. #8-1 at 52‒53); and an order filed
April 13, 2017, granting a motion to dismiss a chapter 13 petition filed by the Debtor on
December 19, 2016, in Case No. 16-13536 (“Exhibit D,” ECF Doc. #8-1 at 54‒56). No
objections to the Motion have been filed. The Debtor did not provide a statement of intention to
either retain or surrender the Property as required by section 521(a)(2)(A) of the Bankruptcy
Code. Additionally, the chapter 7 trustee (the “Trustee”) filed a response to the Motion on July
12, 2017 (the “Trustee’s Response,” ECF Doc. # 12), stating that he does not object to the
Movant’s Motion. (Trustee’s Response ¶ 5.)
For the reasons stated below, the Court finds that there is no automatic stay in place in the
instant case. In the alternative, even if the automatic stay was in place in this case, there would
be grounds to lift the stay. Further, the Court grants the Movant in rem relief under section
362(d)(4)(B), permitting the Movant to proceed to foreclose against the Property uninhibited by
frivolous filings in this case or any subsequent cases, assuming that the Movant complies with
applicable State law recording requirements for notices of interests or liens in real property.
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I. 	BACKGROUND
A. 	The Prior Bankruptcy Filings
In his two prior bankruptcy filings, both pending within the preceding year, the Debtor
claimed the Property as property of the estate. (Mot. ¶ 6.) Both of the Debtor’s prior bankruptcy
petitions were dismissed. (Mot. ¶ 7.)
The Debtor filed a chapter 7 petition on June 23, 2016 (“Petition 1”). (Mot. ¶ 8
(discussing Case No. 16-11820 before Judge Bernstein in the Southern District of New York
Bankruptcy Court).) A deficiency notice was filed on June 24, 2016, on account of the Debtor’s
failure to submit required documents, including the Debtor’s schedules. 	(See Case No. 16-
11820, ECF Doc. # 3 at 1.) On September 16, 2016, Judge Bernstein granted the United States
Trustee’s motion to dismiss the case, based on the Debtor’s failure to adequately explain why he
did not attend a creditors’ meeting. (Ex. C at 53.)
The Debtor next filed a chapter 13 petition on December 19, 2016 (“Petition 2”). (Mot. ¶
9 (discussing Case No. 16-13536 before Judge Garrity in the Southern District of New York
Bankruptcy Court).) On April 13, 2017, Judge Garrity dismissed the case for cause due to the
Debtor’s failure to appear at the scheduled section 341(a) meeting of creditors, and due to the
Debtor’s failure to provide all documentation as required by the chapter 13 trustee. (Ex. D at
55.)
B. 	The Current Bankruptcy Filing
The current chapter 7 proceeding, filed on April 17, 2017 (“Petition 3,” ECF Doc. # 1), is
the Debtor’s third bankruptcy case pending in the past year. (Mot. ¶ 6.) However, in his
schedules for this filing, the Debtor checked the “No” box for the question “[h]ave you filed for
bankruptcy within the last 8 years?” (Petition 3 at 3.)
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In his petition, the Debtor requested a 30-day extension due to his inability to obtain
credit-counseling services during the seven days after he made his request for such. (Petition 3
at 5.) However, one month and three weeks after May 17, 2017—the expiration of the 30-day
extension—the Debtor had still not filed a statement of completion of a course concerning
personal financial management, and a notice of this requirement was filed on July 7, 2017, and a
certificate of mailing regarding this notice was filed on July 9, 2017. (See ECF Docs. ## 10‒11.)
C. 	The Mortgage
On September 20, 2002, the Debtor executed and delivered a promissory note (“Note
2002”) and a mortgage (“Mortgage 2002”), securing payment of Note 2002 in the amount of
$128,000.00 to Delta Funding Corporation (“Delta”). (Mot. ¶ 2.) Mortgage Electrical
Registration Systems Inc. (“MERS”) held Mortgage 2002 as nominee for Delta, and Mortgage
2002 was recorded on November 18, 2002. (Id.)
On February 9, 2005, the Debtor executed and delivered a promissory note (“Note 2005”)
and a mortgage (“Mortgage 2005”), securing payment of Note 2005 in the amount of $73,761.27
to Delta. (Id.) MERS held Mortgage 2005 as nominee for Delta, and Mortgage 2005 was
recorded on May 19, 2005 in Instrument Number 2005022400761001 of the Public Records of
Bronx County, New York. (Id.)
On February 9, 2005, the Debtor also executed and delivered a promissory note
(“Consolidated Note”) and a mortgage (the “Consolidated Mortgage”) to consolidate Mortgage
2002 and Mortgage 2005 into a single lien, securing payment of the Consolidated Note in the
amount of $200,000.00 to Delta. (Id.) MERS held the Consolidated Mortgage as nominee for
Delta, and the Consolidated Mortgage was recorded on May 19, 2005 in Instrument Number
2005022400761002 of the Public Records of Bronx County, New York. (Id.) The Consolidated
Mortgage provides the Movant with a lien on the Property. (Id.)
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On February 9, 2009, the Debtor executed and delivered a loan modification agreement
(the “Loan Modification Agreement”) that decreased the principal balance of the Consolidated
Mortgage to $185,293.40. (Id.)
The Debtor did not provide any estimate of the Property’s value; the only evidence of
Property’s value in the record is the Movant’s $431,000.00 estimated market value of the
Property. (Ex. A at 48.)
The Consolidated Note and the Consolidated Mortgage have been and remain in default
since November 1, 2010. (Mot. ¶ 4.) The Debtor, who does not list any employment
information in his schedules, has not sent a payment to the Movant since October 19, 2010. (Ex.
A at 49.) The Movant owes a total pre-petition amount of $311,757.96, which includes a
principal amount of $183,296 and $76,172.62 of interest, accruing at the contractual interest rate
of 6.35000%. (Ex. A at 49.) As of May 3, 2017, the Movant owes a combined total pre-petition
and post-petition amount of $312,275.26. (Mot. ¶ 5.)
D. 	The Motion
The Movant argues that relief from the automatic stay is warranted under sections
362(d)(1) and (4). (Mot. ¶ 14.) The Movant fails to discuss section 362(c).
Regarding section 362(d)(1), the Movant argues that, combining continually accruing
interest, real property taxes, and insurance on the Consolidated Mortgage, “whatever equity
[that] might exist will decrease rapidly. Therefore, Movant’s security interest is not adequately
protected, constituting ‘cause’ to terminate the automatic stay as it pertains to Movant’s lien
interest [on the Property].” (Movant’s Brief at 2‒3.)
Regarding section 362(d)(4), the Movant argues that the Debtor’s pattern of petition
filings and subsequent dismissals “for failure to adhere to the Court’s requirements . . . suggests
that the Debtor has filed each of these bankruptcies for the sole purpose of delaying, hindering,
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and/or defrauding [the Movant],” and that the Debtor’s “serial filings evidence a lack of good
faith.” (Mot. ¶¶ 10‒11.) In addition, the Movant seeks a restriction on “any future imposition of
the automatic stay on its currently pending foreclosure action [on the Property],” as well as
attorneys’ fees and costs in incurred in preparing and filing the Motion. (Mot. ¶¶ 14, 16.)
In the Trustee’s Response, the Trustee states that he “does not believe the Debtor’s
[Property] . . . holds any value for the creditors of this estate,” and therefore does not object to
the Motion. (Trustee’s Response ¶¶ 1, 5.) In addition, the Trustee, like the Movant, fails to
discuss section 362(c).
The Movant has standing to bring the Motion, as evidenced by the mortgage assignment
(“Assignment,” Ex. A at 42) entered into on March 28, 2005, assigning the mortgage for the
Property from MERS, as nominee for Delta, to HSBC Bank USA, N.A., as Indenture Trustee for
the registered holders of Renaissance Home Equity Loan Asset-Backed Certificates, Series 2005-
1, whose address is c/o Ocwen Loan Servicing, LLC, 1661 Worthington Road, Suite 100, West
Palm Beach, Florida, 33409. (See Ex. A at 42.)
As already stated, the Debtor failed to provide the required statement of intention to
retain or surrender the Property. The section 341 meeting of creditors was originally scheduled
for May 23, 2017, so even if the Debtor had stated an intention to retain the Property, the Debtor
would have been required to perform the intention within 30 days thereafter, which the Debtor
did not do. 11 U.S.C. § 521(a)(2)(B). The Debtor did not oppose the Motion in any event.
II. 	LEGAL STANDARD
A. 	Section 362(c)
Under section 362(c)(3) of the Bankruptcy Code,
[I]f a single or joint case is filed by or against a debtor who is an
individual in a case under chapter 7, 11, or 13, and if a single or joint case
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of the debtor was pending within the preceding 1-year period but was
dismissed, . . .
(A) the stay under subsection (a) with respect to any action taken
with respect to a debt or property securing such debt or with
respect to any lease shall terminate with respect to the debtor on
the 30th day after the filing of the later case;
11 U.S.C. § 362(c)(3). Therefore, if a debtor files a petition, but had one case pending within the
preceding year that was dismissed, the automatic stay for the new case terminates after 30 days,
as long as the debtor undertakes no successful action to maintain the stay pursuant to section
362(c)(3)(B).
Similarly, under to section 362(c)(4)(A),
(i) [I]f a single or joint case is filed by or against a debtor who is an
individual under this title, and if 2 or more single or joint cases of the
debtor were pending within the previous year but were dismissed, . . . the
stay under subsection (a) shall not go into effect upon the filing of the later
case; and
(ii) on request of a party in interest, the court shall promptly enter an order
confirming that no stay is in effect[.]
11 U.S.C. § 362(c)(4)(A). In such a case, if a debtor files a petition, but had two cases pending
within the preceding year, both of which were dismissed, the debtor does not receive an
automatic stay upon filing the new, third petition.
However, within 30 days of filing the third petition, a party in interest may request that
the court order an automatic stay to take effect, if the party in interest can “[demonstrate] that the
filing of the later case is in good faith as to the creditors to be stayed[.]” 11 U.S.C. §
362(c)(4)(B). Yet, according section 362(c)(4)(D),
[The] case is presumptively filed not in good faith (but such presumption
may be rebutted by clear and convincing evidence to the contrary)— (i) as
to all creditors if—(I) 2 or more previous cases under this title in which
the individual was a debtor were pending within the 1-year period[.]
11 U.S.C. § 362(c)(4)(D).
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B. 	Section 362(d)
The Bankruptcy Code imposes an automatic stay of nearly all litigation against the
debtor. 11 U.S.C. § 362(a). But a party in interest can seek relief from this automatic stay “for
cause, including the lack of adequate protection of an interest in property of such party in
interest.” 11 U.S.C. § 362(d)(1). A party secured by an interest in real property can also seek
relief from the stay “if the court finds that the filing of the petition was part of a scheme to delay,
hinder, or defraud creditors . . . .” 11 U.S.C. § 362(d)(4).
1. 	Section 362(d)(1)
Any party moving to lift the automatic stay under section 362(d) must first establish its
prima facie case. See In re Elmira Litho, Inc., 174 B.R. 892, 902 (Bankr. S.D.N.Y. 1994). A
prima facie case that a party lacks adequate protection under section 362(d)(1) can be satisfied
by showing (i) a quantitative decline in value of a property, or (ii) that the debtor has failed to
make numerous post-petition payments. See id., 902–04. If a movant fails to demonstrate its
prima facie case, the court must deny the request to lift the stay. 3 COLLIER ON BANKRUPTCY ¶
362.10 (16th ed. 2016). Once the creditor makes a prima facie case, the burden shifts to the
debtor on all other issues. Elmira Litho, 174 B.R. at 902; 3 COLLIER ON BANKRUPTCY ¶ 362.10.
Courts may find that there is adequate protection for a secured creditor where there is
equity in the property, but the equity cushion must be significant. See In re Rorie, 98 B.R. 215,
221 (Bankr. E.D. Pa. 1989) (stating that in determining whether the equity cushion provides
adequate protection, the court considers factors such as “the size of the cushion; the rate at which
the cushion will be eroded; and whether periodic payments are to be made to prevent or mitigate
the erosion of the cushion,” and holding that an equity cushion valued at almost 42% of the claim
is sufficient to provide adequate protection); In re McKillips, 81 B.R. 454, 458 (Bankr. N.D. Ill.
1987) (stating that “an equity cushion of 20% or more constitutes adequate protection,” while
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“an equity cushion under 11% is insufficient to provide adequate protection” ); In re James River
Assocs., 148 B.R. 790, 796 (E.D. Va. 1992) (holding that a 2% equity cushion is insufficient to
provide adequate protection because of the deterioration of the equity cushion from accumulating
interest).
2. 	Section 362(d)(4)
In order for the court to lift the automatic stay under section 362(d)(4), the Debtor’s
scheme must involve either “(A) [the] transfer of all or part ownership of, or other interest in,
such real property without the consent of the secured creditor or court approval; or (B) multiple
bankruptcy filings affecting such real property.” 11 U.S.C. § 362(d)(4). A successful motion to
lift the automatic stay under section 362(d)(4) halts the automatic stay from applying to the real
property in future bankruptcy filings for a period of 2 years. See 11 U.S.C. § 362(b)(20).
However, it is not easy to successfully move for relief from the automatic stay under 11
U.S.C. § 362(d)(4). “[T]he language [in section 362(d)(4)] was deliberately chosen by Congress
to impose a substantial burden of proof on secured creditors . . . .” 3 COLLIER ON BANKRUPTCY ¶
362.05[19][a]. Collier notes that requiring a high standard on motions under section 362(d)(4) is
consistent with the statute’s extreme remedy, which halts the automatic stay from applying to the
real property in bankruptcy filings for two years. Id. Courts have agreed with this approach,
only granting relief under section 362(d)(4) in extreme circumstances when a creditor has
demonstrated that the bankruptcy petition was filed as part of a scheme to delay, hinder, and
defraud creditors. In re Young, No. 06-80534, 2007 WL 128280, at *8–10 (Bankr. S.D. Tex.
Jan. 10, 2008) (holding that to prevail on a 362(d)(4) motion, a creditor “must demonstrate that
the filing of this petition was part of a scheme to ‘delay, hinder, and defraud.’”); In re Muhaimin,
343 B.R. 159, 167 (Bankr. D. Md. 2006) (“To obtain section 362(d)(4) relief, the court must find
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three elements to be present,” which are (i) a scheme by the debtor, (ii) to delay, hinder and
defraud creditors, (iii) involving the actions listed in either section 362(d)(4)(A) or (B)).
III. 	ANALYSIS
A. 	Pursuant to Section 362(c)(4), There is No Automatic Stay in Effect
The Debtor filed Petition 1, a chapter 7 petition, on June 23, 2016, which was dismissed
by Judge Bernstein on September 16, 2016, and then filed Petition 2, a chapter 13 petition, three
months later on December 19, 2016, which was dismissed by Judge Garrity on April 13, 2017.
The Debtor then filed Petition 3, the instant chapter 7 petition, four days later on April 17, 2017.
Both Petitions 1 and 2 were pending within the year preceding the filing of Petition 3, contrary to
what the Debtor wrote on his Petition 3 schedules, and Petitions 1 and 2 were dismissed.
Therefore, pursuant to section 362(c)(4)(i), the automatic stay “shall not go into effect upon the
filing of the later case,” because Petition 3 is a “single or joint case . . . filed by or against a
debtor . . . , and . . . 2 or more single or joint cases of the debtor were pending within the
previous year but were dismissed . . . .” See 11 U.S.C. § 362(c)(4)(A)(i).
B. 	Pursuant to Section 362(d)(4), Even if There Was an Automatic Stay in
Effect, the Court Would Grant the Motion
The Movant establishes a prima facie case that the automatic stay, if in effect, should be
lifted under section 362(d)(1) by showing that, among other things, the Debtor has failed to make
numerous payments on the Consolidated Note and Mortgage, the last payment occurring during
October of 2010, over six and a half years ago. Regarding the question of adequate protection of
the Property, if the Debtor owns the Property to the extent that its value exceeds the Movant’s
claim of $312,275.26, and the Movant’s estimated market value of the Property of $431,000.00
is accurate, the Debtor has an equity cushion of $118,724.74 in the Property, which is 38% of the
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Movant’s claim. The Movant argues that interest, taxes, and insurance costs will rapidly erode
the equity cushion.
The Movant also supports its assertion that it is entitled to prospective relief from the
automatic stay under section 362(d)(4) by citing the Debtor’s prior two bankruptcy filings
pending within the preceding year, both of which involved the subject Property, and both of
which were dismissed due to the Debtor’s failure to attend creditor meetings and/or file the
requisite schedules. In his schedules for this bankruptcy filing, the Debtor checked the “No” box
for the question “[h]ave you filed for bankruptcy within the last 8 years?” Further, in this
bankruptcy filing, the Debtor has thus far failed to file a statement of completion of a course
concerning personal financial management, despite nearly three months having passed since he
filed his petition. The Debtor also failed to file schedules or to appear for the section 341
meeting.
The Debtor has demonstrated a clear pattern of repeat filings concerning the Property,
and in each bankruptcy case the Debtor has consistently failed to honor the obligations of a
debtor in good faith, and has instead used the bankruptcy filings as a scheme to delay foreclosure
proceedings against the Property. See Muhaimin, 343 B.R. at 167. Additionally, the Debtor has
consistently failed to make payments on the Consolidated Note, and has demonstrated no
intention of making payments in the future.
IV. 	CONCLUSION
Pursuant to section 362(c)(4)(A)(i), there is no automatic stay in effect because the
Debtor had two cases pending within the year preceding the filing of Petition 3, both of which
were dismissed. As a result, the Court finds that there is no automatic stay in place in the instant
case.
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However, even if the automatic stay was in effect, despite the fact that the Debtor appears
to have an equity cushion in the Property, the Debtor has not made a payment on the
Consolidated Note or Mortgage in over six and a half years, and appears to have attempted to use
the Bankruptcy Code improperly and repeatedly in an effort to undermine the Movant’s rights.
The Court also finds that the assertions and evidence set forth by the Movant demonstrate that
the Debtor’s bankruptcy petition was filed as part of a scheme to delay, hinder, and defraud
creditors. Accordingly, pursuant to section 362(d)(4)(B), the Court grants the Movant in rem
relief permitting the Movant to foreclose against the Property despite any further bankruptcy
filings (in this case or other cases), assuming that the Movant complies with the recording
requirements of State law governing recording of notices of interests or liens in real property.
IT IS SO ORDERED.
Dated: 	July 25, 2017
New York, New York
_____Martin Glenn______
MARTIN GLENN
United States Bankruptcy Judge
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