United States District Court, E.D. Michigan, Northern Division
In re Michael B. White and Darla Kay White Whites IV, Debtors,
COLLENE K. CORCORAN, United States Trustee, Appellee. MICHAEL B. WHITE, and DARLA KAY WHITE, Appellants,
ORDER DENYING MOTION TO STRIKE AND GRANTING IN PART
AND DENYING IN PART MOTION TO DISMISS
L. LUDINGTON, UNITED STATES DISTRICT JUDGE
April 1, 2016, Appellant Michael White, acting on his own
behalf and purportedly on behalf of his deceased wife,
initiated this latest appeal of his bankruptcy proceedings.
See ECF No. 1. On April 19, 2016 the Trustee's
former attorney Thomas J. Budzynski, purportedly acting on
his own behalf as a creditor of the estate, filed a motion to
dismiss White's appeal. See ECF No. 3. Mr. White
responded by filing a motion to strike Mr. Budzynski's
motion for lack of standing. See ECF No. 4. For the
reasons stated below, White's motion to strike will be
denied. Mr. Budzynski's motion to dismiss will be
granted, however his request for costs will be denied without
and Darla White were a husband and wife who resided in Birch
Run, Michigan. Michael White has worked in the fields of
construction and sand mining. Darla White worked for a number
of years in the insurance and trucking industries. The
Whites' careers changed significantly in 2007 when Darla
White began suffering from a disability. She was no longer
able to work and Michael, facing his own issues with
employment, took time to care for her.
health never recovered after 2007 and she was unable to
return to work. She eventually passed away during the
pendency of the bankruptcy proceedings, on January 1, 2015.
See Tr. 299-300. While Michael White is likely to be
appointed as the personal representative of her estate, at
the time he filed his appeal this appointment had not yet
occurred. Michael White temporarily found employment in the
meat market at a local Meijer's, and now appears to be
employed in the construction field.
Whites purchased their primary residence at 11085 Block Road,
Birch Run, Michigan (“Block Road property”), in
1990. The homestead consisted of 40 acres of farmland and a
farmhouse where the Whites resided. They paid the mortgage
loan for the house in full in 2006. In 2007, the Whites
sought a line of credit from Frankenmuth Credit Union
(“FCU”). Their credit request was approved and
they obtained a $100, 000.00 loan from FCU that was secured
by a mortgage against the Block Road property. The loan money
was withdrawn using a credit card issued to the Whites.
Whites withdrew the full amount of the loan within eighteen
months of the account being opened. By 2010, the Whites began
to fall behind on their loan payments. They stopped making
payments altogether in 2011. In response, FCU initiated a
foreclosure action in Saginaw County Circuit Court. The
Whites defended the action, contending that FCU's
mortgage was invalid, but were unsuccessful. The Saginaw
County Circuit Court entered a judgment of foreclosure in
favor of FCU on July 15, 2011. FCU was authorized to hold a
foreclosure sale after August 5, 2011 and to recover $113,
789.23 in costs and fees. On July 30, 2015, before FCU
conducted a foreclosure sale, the Whites sought bankruptcy
protection and the automatic stay barred the foreclosure
sale. See In Re Whites, 13-21977 (E.D. Mich. Bankr.,
Sept. 30, 2013).
Whites proposed an initial plan of reorganization ten months
into the bankruptcy. All significant parties in interest
objected to confirmation of the plan, including FCU, Ally
Financial (holder of the Whites' car loan), and the
United States Trustee, and the plan was eventually rejected.
The United States Trustee then moved to have their case
dismissed or converted to a Chapter 7 proceeding. FCU and
Ally also moved to have the automatic stay lifted, allowing
FCU to continue the foreclosure.
response the Whites filed a second plan of reorganization on
August 21, 2014. A hearing was held the next day on the plan,
the United States Trustee's motion to dismiss or convert,
and the creditors' motion to lift the automatic stay. The
bankruptcy court rejected the Whites' second plan and
granted the motion to convert, converting the proceeding to a
Chapter 7 bankruptcy, and lifted the stay imposed upon
property securing the FCU and Ally loans.
Whites appealed to this Court on December 5, 2014. See In
re Whites (Whites I), Case No. 14-cv-14599 (E.D. Mich.
Dec. 5, 2014). The bankruptcy court's decision to convert
the case to a Chapter 7 proceeding was affirmed on July 31,
2015, and the Whites' motion for reconsideration of that
opinion was denied on March 7, 2016.
Schedule C of their initial Chapter 11 filing, the
White's claimed a variety of exemptions under federal
law. See Tr. Pg. ID 24. Prior to the conversion, the
Whites amended Schedule C on June 4, 2014. See TR.
Pg ID 176-79). After the bankruptcy filing was converted to a
Chapter 7 proceeding, on October 15, 2014 the Chapter 7
Trustee, Colleen Corcoran, objected to the Whites claimed
exemptions. Tr. Pg ID 196-98. The Trustee argued that because
the White's had claimed Michigan exemptions their
homestead exemption was limited to $30, 000, and generally
arguing that the White's had not provided sufficient
details in support of their claimed exemptions. Id.
In response, the Whites again amended Schedule C on December
1, 2014. Tr. Pg ID 238-45. The Trustee again objected to the
amended exemptions, and the Whites again amended Schedule C
on December 23, 2014. Tr. Pg ID 247-48; 265-74. The Trustee
again objected. Tr. Pg ID 294.
meantime, on December 11, 2014 Trustee moved for permission
to sell property of the bankruptcy estate. See Tr.
Pg. ID 253-56. On March 6, 2015, the bankruptcy court issued
an order permitting the sale of miscellaneous personal
property, including jewelry and tools of trade, and permitted
the sale of a potential medical malpractice suit held by
Darla White. Tr. Pg. ID 349-54. The order also set parameters
for the sale of the Whites automobile. Id. Finally,
the order contemplated the sale of three different parcels of
property: 11085 Block Road, the Whites' primary residence
and the most valuable piece of real estate; 11255 Block Road;
and one half of “Lot 35 Shay Lake Sub 2 lot on boat
canal Dayton Township, Tuscola County, Michigan” (the
“Shay Property”). Id.
11085 Block Road property was sold at an online auction for
$156, 115.23. Tr. Pg. ID 682-83. There is no record of any
other property of the bankruptcy estate being sold. On April
15, 2015, the Trustee filed a motion in the bankruptcy court
to abandon much of the miscellaneous personal property,
including the jewelry and tools of trade, and the Whites'
personal automobile, and the half lot on Shay Lake back to
the Whites. Tr. Pg ID 538-540. The 11255 Block Road property
was specifically not abandoned by the Trustee. Id.
On July 13, 2015 the bankruptcy court issued an order
restraining Michael White from interfering with the
administration of the estate; particularly restraining him
from entering onto 11085 Block Road or from contacting the
tenants of 11255 Block Road. Tr. Pg. ID 726-27.
White's filed two separate appeals arising out of the
bankruptcy court orders granting the Trustee leave to sell
property of the estate. First, in In re Whites
(Whites II), Case No. 15-cv-11310 (E.D. Mich.) the
Whites appealed an order granting the Trustee permission to
sell certain property of the bankruptcy estate free and clear
of liens, including the property located at 11255 Block Road.
It is unclear whether the sale of the 11255 property has yet
been finalized. In the second appeal, In re Whites
(Whites III), Case No. 15-cv-12354 (E.D. Mich.) the
Whites appealed an order confirming the auction sale of the
property located at 11085 Block Road for $156, 115.23, the
primary real estate within the ...