United States District Court, E.D. Michigan, Southern Division
In re SALISHA BAKER, Debtor.
WAYNE COUNTY TREASURER, Appellee. SALISHA BAKER, Appellant,
OPINION AFFIRMING BANKRUPTCY COURT'S ORDER
LIFTING THE AUTOMATIC STAY
J. MICHELSON U.S. DISTRICT JUDGE
Wayne County tax auction, Salisha Baker purchased five houses
located in Detroit. (R. 7, PID 359; R. 8, PID 391.) She
wanted the houses to generate supplemental income to create a
nest egg. (R. 7, PID 359.) So she started a property
management business and began leasing the houses to tenants.
(R. 8, PID 391.) But the tenants' rent did not cover
Baker's costs. (R. 5, PID 66-70; see also R. 5,
PID 137.) As a result, from 2010 to 2014, Baker did not pay
property taxes and fell behind on her utility bills. (R. 5,
PID 45, 51-52.)
reorganize her debts, Baker filed for Chapter 13 bankruptcy
protection. Her biggest debt was to the Wayne County
Treasurer for $49, 024.10 in unpaid property taxes. (R. 5,
PID 45.) She had other debts, too, including unpaid utility
bills along with student loan obligations. (R. 5, PID 51-52.)
consolidated her debts-including the delinquent property
taxes-and in late 2015, the Bankruptcy Court confirmed her
Chapter 13 plan. (R. 9, PID 415.) Over the objection of the
bankruptcy trustee, Baker included, as part of the bankruptcy
estate, the five rental properties. (R. 5, PID 207.) She
insisted the rental properties generated net income essential
to her ability to make plan payments. (R. 9, PID 416.)
made-and continues to make-timely and consistent plan
payments. (R. 5, PID 312, 323.) But sometime in 2016 Baker
fell ill and lost wages. (R. 8, PID 392.) Losing the wages,
Baker says, forced her to choose between paying her 2015 and
2016 property taxes or making her plan payments.
(Id.) Baker opted to make plan payments and did not
pay 2015 and 2016 property taxes on any of her rental
the Wayne County Treasurer tried to work with Baker. The
Treasurer mailed Baker two letters, informing her of the
delinquency and offering her a chance to structure a payment
plan. (R. 12, PID 473.) Baker never responded (R. 12, PID
473), so the Treasurer foreclosed on the five properties (R.
9, PID 474). But the rental properties were part of the
bankruptcy estate so the Treasurer could not immediately
begin foreclosure proceedings.
further explain, Baker's bankruptcy petition
automatically "operate[d] as a stay" of certain
legal proceedings against her and properties in her
bankruptcy estate. 11 U.S.C. § 362(a). Because
Baker's rental properties were part of the bankruptcy
estate, the stay blocks the Treasurer's attempt to
foreclose on them. 11 U.S.C. § 362(a)(3), (a)(4). But
the stay is not inviolable. See 11 U.S.C. §
362(d). Section 362(d) allows the Bankruptcy Court to lift
the stay "(1) for cause ... or (2) with respect to a
stay of an act against property ... if (A) the debtor does
not have an equity in such property; and (B) such property is
not necessary to an effective reorganization." 11 U.S.C.
permitted by § 362(d), the Treasurer moved to lift the
stay on the rental properties. (Id.) The Treasurer
argued that Baker's failure to pay post-petition property
taxes amounted to "cause" sufficient to lift the
stay. (R. 5, PID 261-62.) Baker replied that her health
concerns and timely plan payments to the trustee counseled
against granting the Treasurer relief from the stay. (R. 5,
PID 338.) Siding with the Treasurer, the Bankruptcy Court
lifted the stay. The Bankruptcy Court reasoned that
Baker's failure to pay post-petition property taxes on
five commercial properties amounts to cause.
after, the Treasurer began foreclosure proceedings. (R. 5,
PID 268-270.) Baker appealed. (R. 1.) Initially, she sought a
stay of the Bankruptcy Judge's ruling pending appeal, (R.
8), which this Court denied (R. 13). Now, Baker argues the
decision to lift the automatic stay was an abuse of
discretion. (R. 9, PID 414.)
bankruptcy court grants a creditor relief from the automatic
stay, the Court reviews that decision for an abuse of
discretion. See State Bank v. Miller (In re Miller),
513 Fed.Appx. 566, 570 (6th Cir. 2013); Laguna Assoc.
Ltd. P 'ship v. Aetna Cas. & Sur. Co. (In re Laguna
Assoc. Ltd. P 'ship), 30 F.3d 734, 737 (6th Cir.
1994). Abuse of discretion requires the Court to ask
"whether a reasonable person could agree with the
bankruptcy court's decision; if reasonable persons could
differ as to the issue, then there is no abuse of
discretion." In re M.J. Waterman & Assocs.,
227 F.3d 604, 608 (6th Cir. 2000) (citing Washington v.
Sherwin Real Estate, Inc., 694 F.2d 1081, 1087 (7th Cir.
1982)). Within the abuse of discretion framework, the Court
gives fresh review to legal conclusions, and reviews factual
findings for clear error. Jones v. City of Monroe,
341 F.3d 474, 476 (6th Cir. 2003).
appeal, Baker raises two arguments. First, Baker says the
Bankruptcy Court misread § 362(d). (R. 9, PID 422.) The
Bankruptcy Court's decision to lift the stay relied on
§ 362(d)(1), which allows relief from the stay "for
cause." 11 U.S.C. § 362(d)(1). Baker says relying
on the "cause" prong was error. Baker argues the
Bankruptcy Court was required to rely on § 362(d)(2).
Recall that § 362(d)(2) allows relief "with respect
to a stay of an act against property . . . if (A) the debtor
does not have an equity in such property; and (B) such
property is not necessary to an effective
reorganization." See 11 U.S.C. §
362(d)(2). Because the Treasurer wanted relief from the stay
to foreclose on property, Baker thinks the Bankruptcy Court
had to apply § 362(d)(2), the "property"
prong. And relying on the "property" prong would
have required the Bankruptcy Court to assess whether Baker
had equity in the rental properties and see if Baker needed
the properties for her reorganization. Thus, says Baker, the
Bankruptcy Court erred in deciding not to conduct those
inquiries. In the ...