EL ECTRONI C CI TATI ON: 2011 FE D App. 0012P (6th Cir.) File Na me: 11b0012p.06

BA NK RU P TC Y A P P ELLA TE P AN EL OF THE SI XT H C IR CU IT

I n re: RI CHARD K. MI L L ER, ) ) D e b t o r
. )

_____________________________________ ) ) ) STATE BA

NK OF FL ORENCE, ) ) Appellant, ) No. 11-8011 ) v
. ) ) RI CH ARD K . M I L L ER, ) ) Appellee

. ) )

Appea l from the United States B ankruptc y Court for the Western District of Michig an Case No. 09- 90569 Argued: Aug ust 16, 2011
Dec ided and F iled: October 5, 2011
B e fo re : HA RRI S, RH OD ES, and SHE A- STO NU M, B ank ru ptc y Ap pe lla te Pane l Judg e s.

____________________ CO UN SEL
ARG UED: Gr e g or

y P. Se ibo ld, SEI B OL D LAW F I RM, I ro n M ounta in, Mic hig an, fo r A pp e lla nt. Robert D. He ikkinen, Marque tte, Michig an, fo r Ap p el l ee. O N B RI E F: Gre g ory P. Seibold, S E I BO L D LAW FI R M , I ro nM o u n t ai n , M i ch i gan , Fr ed er i ckC

. W i et i n g, HINK FU S S , S I C K E L, PETI TJ EAN & WI ETI

NG, Gr een Ba

y , Wis consin, for Appe llant. Robert D. Heikkinen, Ma rquette, Michig an, for

Appellee

.- 2- ____________________ OP IN ION

____________________ ARTHUR I . HARRI S, Bankr uptcy Appellate Panel J udg e. I n this appea l, the State B ank of Flore nce ( “B ank”) appea ls an order of the bankruptc y court denying its motion for re lief fr om stay to c on tin ue a fo re c los ur e a c tio n a g a ins t Ric ha rd K. Mil le r ( “ De bto r” ), and de nyingits ob

je c tio n to confirmation of the Debtor’ s chapte r 13 plan. F or the re asons that follow, the order of the bankruptc y

court is AF FI RMED.

I. ISSU ES ON AP P EAL
Th e is su es prese nte d b y

thi s a pp e a l are (1 ) w he the r t

he ba nk ru ptc y c ourt e rr e d w he n it undertook a

deter mination of whether

the B ank holds a c laim ag ainst the Debtor despite the De btor’s la c k o f wri tte n o bje c tio n to the B ank ’s pro of of c la im; (2 ) w he the r t

he ba nk ru ptc y c ourt e rr e d in deter mining that Michig an, not W isconsin, law applies to the dispute betwee n the Debtor and B ank; (3) whe ther the ba

nkruptcy court e rre d when it deter mined that the Ba n k ’s bid in a Michig an fore closure e x tinguished the debt owed by the Debtor

to the Ba n k an d preve nts the Ba nk from

c on tin uin g a jud ic ia l f or e c los ur e a c tio n in

Wisc on sin ; ( 4) wh e the r t he ba nk ru ptc y c ourt a bu se d it s dis c re tio n w he n it

de nie d th e B ank re lie f fr om sta y ; (5) wh e the r the ba

nk ru ptc y c ourt e rr e d w he n it deter mined that the B ank lac ks standing to obje ct t o co nfirmation of the D ebtor’s pla n; and (6 ) w he the r t

he ba nk ru ptc y c ourt de pr ive d th e B ank

of its du e pr oc e ss r ig hts un der the F if th Amendment to the United States Constituti on.

II. JU RI SDI CT ION AND STANDARD OF RE VI EW
Th e B ank ru ptc y Ap pe llate Pane l of

the Sixth C ir c uit ha s jur isd ic tio n to de c ide thi s a pp e a l. The United States District Court for the Western District of Michig an has a uthorized appea ls to the Pane l, a nd ne ith e r p art

y ha s tim e ly e le c te d to have thi s a pp e a l he ard

by the dis tr ic t c ourt . 2 8 U .S. C. §§ 15 8( b) (6 ), (c )( 1)

. A f

ina l or de r o f t

he ba nk ru ptc y c ourt may be a pp e a le d a s o f r ig ht p ur su a nt t o 28 U. S.C. § 1 58 (a )( 1) . F or purp os e s o f a

pp e a l, a n o rd e r i s f

ina l if it “e nd s the lit ig a tio n on the me ri ts and leave s nothing for the court to do but e x ecute the judg ment.” Midland Asphalt Cor p. v. United States , 489 U.S. 794, 798, 109 S. C t. 1494, 1497 ( 1989) (citations omitted). The ba nkruptcy court’sWe d o n ot s pe c if ic a lly a dd re ss h e re the sta

nd ard s f or dis c re tio na

ry a pp e llate re vie w

s e t f or th 1 in 28 U.S.C. § 1292(b) beca use, while instructive, we a re not c onstrained by

them. In re Taran to , 3 6 5 B. R

. at 8 7 (c i t i n g W

ic he ff , 2 15 B .R. a t 84 4; Mo ix -M c Nut t v
. Coo

p ( In re Mo ix -M

c Nut t) , 2 12 B .R. 953 (B .A.P. 8th Ci r. 1997))

.

- 3- order denying relief from stay is a final, appe alable or der. Tidewater Fin. Co. v. Curry (In reCurry) , 347 B.R. 596, 598 (B .A.P. 6th Ci r. 2006).
Be cause it ne ither confirme d the plan nor dismiss ed the c ase, the bankruptc y court’s or der denying the Ba

nk’s obj ection to confirmation of t he Debtor’s pl an is not final. Davis v. G reen Tree Ser vic ing , LLC ( In re Da v is) , 3 8 6 B

. R. 1 8 2 , 1 8 4 ( B

. A

. P. 6 th Ci r
. 2 0 0 8 ) ( o r d e r

w h ic h n e it

her

c o n f i r m s a p l ann o r d i s m i s s e s t h e u n d e r l yi n g c a s e i s n o tf i n a l )

. H o w e v e r , w h e r e a

p p r o p r i a t e w e m a y, in o ur dis c re tio n, c on sid e r the no tic e of a pp e a l as a moti on fo r le a ve to ap pe a l and de c ide the a

pp e a l. 28 U. S.C. §§ 15 8( a )( 3) , ( b) ; F e d. R. B ank r. P. 8 00 3( c ); DaimlerChrysler Serv s. N. Am. LL C v. Taranto (I

n re Taranto) , 3 6 5 B. R

. 8 5 , 8 7 (B

. A. P

. 6 t h C i r. 2 0 0 7 ) ( ci t i n g W ic he ff v . B au mg

ar t ( In re W ic he ff) , 2 15 B .R. 83 9, 84 3 ( B .A .P. 6th Cir

. 19 98 ))

. Th e B ank ’s mot ion fo r r e lie f f ro m st ay a nd its objection to confirmation were decide d toge ther followinga leng thy evidentiar

y h ea ri n g wi th the evidenc e foc used on the same underlying issue – the amount of t he debt, if any , owed by the Debtor to the Ba nk as of the date of the ba nkruptcy filing. T o d ec ide the appe al of one portion of the bankruptc y

court’s order which is clea rly final, denial of t he mot ion for r elief f rom stay , and not the other, de nial of the objec tion to confirmation, would be a w aste of the parties’ and judicial sy stem’s

resour ces, nor would it materially advanc e this liti g ation. There fore , we will treat the Ba nk’s notice of appe al as a

motion for interlocutory

appea l and g rant the motion. 1
The ba nkruptcy court’s f indings of fac t are revie wed under the c lear ly err oneous standar d. Riverv iew Trenton R.R. Co. v. DSC, Ltd. ( In re DSC, Ltd.) , 486 F.3d 940, 944 ( 6th Cir. 2007). “A finding of fa ct is c lear ly err oneous ‘whe n althoug h there is evidence to support it, the reviewingcourt on the entire evidenc e is left with the def i n i t e an d firm conviction that a mistake has bee n committed.’” Id

. (q u o t i n g An de rso n v . Ci ty of B esse me r Ci ty

, N. C. , 47 0 U. S. 56 4, 57 3, 10 5 S. Ct. 1504, 1511 (1985))

. The bankruptc y

court’s le g al conc lusions are re viewed de novo

. Solis v. Laurelbrook S a n it a r iu m & Sch., Inc

. , 642 F.3d 518 ( 6th Cir. 2011). “De novo means that the a ppellate c ourt- 4-

deter mines the law indepe ndently of the trial c ourt’s dete rm i n at i o n .” Treinish v. Norw est Bank Mi nn ., N.A . (

In re Pe ria nd

ri) , 266 B.R. 651, 653 (B .A.P. 6th Ci r. 2001) ( citations omitt ed).
Ho we ve r, the ba

nk ru ptc y c ourt ’s ult imate de c isi on

de nyingre lie f f

ro m sta y un de r 1 1 U .S. C. § 362 is revie wed for an abuse of discr etion. Spierer v. F ederate d Dept. Stores, Inc . ( In re Fe derated Dept. Stores, Inc .) , 328 F.3d 829, 835 ( 6th Cir. 2003). “‘A n abuse of discretion occurs only when the [ trial] court relies upon clea rly err oneous findings of fact or when it improperly applies the law

or uses a n err oneous leg al standar d.’” Kaye v. Agripool, SRL ( In re Murray, I

nc.) , 392 B.R. 288, 296 (B

. A. P

. 6 t h C i r. 2 0 0 8 ) ( qu o t i n g Vo lv o Co mm e rc ial Fi n. LLC th e Am e ric as v . G as e l Tra ns p. Lin es, Inc. ( In re Gase l Transp. L ines, Inc.) , 326 B.R. 683, 685 (B .A.P. 6th Ci r. 2005))

. III . F AC TS
A. The Loans and Mortgages
The De btor is a lifelong resident of the ar ea on the Michig an/Wisconsin bord er n ear I ron Mountain, Michig an. By 2006, he owned sever al parcels of rea l proper ty in the are a including one in Wisc on sin

(“ Wisc on sin

Pr op e rt y ” ) a nd thr e e in M ic hig an –

the “ Mo on

L a ke Pr op e rt

y ,” the “ Ca

bin Property ,” and thr ee c ontiguous pa rce ls known as the “3- 40 Acr e Parc els.”

I n 2006, the Debtor

beg an suff

eringfrom a se rious medical c ondition, became une mploy ed

an d e v e n tu a l l y

p e r m an e n t l y d i s a b l e d

. A s a

r e s u l t , h e s o u g h t an d o b t a i n e d l o an s f r o m t h e B an k

. In order to secure the loans, the Debtor g ave the Ba nk mortg ag es cover ing all of his r eal proper ty except t h e C a b i nP r o p e rt y.
The D eb t or sig ned his first promissory note with the B ank on Oc tober 16, 2006, in the

o ri gi n al p ri n ci p al am o u n to f $ 2 2 1 , 4 4 4

. 2 9 (“ 2 0 0 6 No t e” ). T h e 2 0 0 6 No t e w as s ec u re d b y a m o rt gage date d O c tob e r 1 6, 20 06 , o n th e Wisc on sin Pr op e rt y . T he mor

tg a g e c on ta ins a

pr ov isi on , r e fe rr e d to by the B ank a s a c ro ss- c oll a te ra lizatio n p ro vis ion , w hic h p ro vid e s th a t it se rv e s a s c oll a te ra l f

or “ a ll obligations, debts and liabiliti es, plus interest ther eon, of [t he Debtor to the Bank]

. . . whether now
e xistin g or

he re a ft e r a

ri sin g , w he the r r e la te d o r u nr e la te d to the purp os e of the No te [.]” (B ank r. Ct. Doc. #120, Ex. S.) Also in October, 2006, the De btor applied for a $100,000 line of credit with theWhil e the B ank introduce d a copy of the a pplication for a

l i ne of c redit at the he aringon 2 its mot ion fo r r e lie f f

ro m st ay , it

did no t in tr od

uc e a c op y of the re su lti ngc re dit

a g re e me nt. B e c a

us e the Debtor

in fac t gr anted a mortg ag e on the 3-40 Acr e P arc els as collateral for the ag ree ment, the bankruptc y

court found that the l ine of cre dit, ref err ed to as “Note 2” by

the bankr uptcy court, wa s fu nd e d, in wh ole or in part . The ba nk ru ptc y c ourt fu rt he r d e te rm ine d th a t N ote 2 w a s e ith e r p a id i n full by the Debtor

or incorpor ated into a late r loan by the Bank because the Ba nk offe red no e vidence that any a mou nt r e ma ine d o wi ngon

No te 2, and

the B ank ’s pr oo f o f cl aim make s n o r e fe re nc e to any a mou nt o we d und e r a

lin e of c re dit . T he B ank

do e s n ot d isp ute thi s f

ind ingon a pp e a l. Th e Janu ary 20 , 20 06 , mor tg a g e lis te d in

the 20 07 No te a s c oll a te ra l w a s n ot i ntr od uc e d in to 3 evidenc e at the hear ing on the Bank’s mot ion for relief from stay or any other he aringin this case. As of De cembe r 21, 2007, the Wisconsin Property had an a ppraised va lue of $284,000. 4 The B ank did not offe r any proof a s to the pay

ment made f

ollowing the sa le of the Moon 5 L ake Prope rty ; howeve r, i n pre- hear ing pleading s, the Bank st ated that the sa le re duced the Debtor’ s debt by approximately

$315,000.

- 5- Ba n k

. T h is li n e o f c r e d it w a s s e c u r e d b y a mo rtg a g e d a te d O c to b e r 2 0 , 2 0 0 6 , o n th e 3 -40 Ac re Parce ls. This mortga g e did not contain cr oss-collater alization langua g e.

2
On J anuar

y 20, 2007, the Debtor

signe d another

promissory

note with the B ank in t he principal amount of $400,000 (“2007 Note”). The 2007 Note states that it is secur ed by a January 20, 2007, mortg ag e, the Oc tober 20, 2006, mortg ag e, and a J anuar y 20, 2006, mortg ag e. The 2007 3 Note does not c ontain a cross-collater alization provision. The properties li sted on the J anuar y 20, 2 0 0 7 , m o rt g a g e ar e t h e 3

- 4 0 A c r e P ar c e l s an d t h e M o o nL a k e p r o p e rt y.
Th e De bto r r e ma ine d une mpl oy e d, and by 20 08 he ha d de fa

ult e d on th e loa

ns . T hr ou g h it s Vice Pre sident and senior c redit off icer in char g e of f

orec losure of mortg ag es, Cly de Ne lson (“N elson”), the Ba

nk beg an for eclosure proce eding s in both W isconsin and Michig an.
B. The W

isconsin Foreclosure Proc eedings

I n April 2008, the B ank, throug h Wis consin counsel, c ommenced a judi ci al foreclosure action on the Wisconsin Property

. On May 14, 2008, the Debtor

filed a pe tition for rel ief unde r 4 chapte r 13 in t h e Ba n k ru p tcy Court for the Ea stern District of Wisconsin. On J une 18, 2008, the De bto r v olu

nta ri ly dis mis se d h is ch a

pte r 13 ca se in or de r to se ll his Moo n L a ke Pr op e rt y . Sh or tly there afte r, the Moon L ake Prop er t y wa s s old, and the De btor paid all net proc eeds to the B ank. 5I n it s e arl ie r o pin ion de nyingthe B ank ’s mot ion to dis mis s fo r i mpr op e r v e nu e , 4 33 B .R. 6 205, the bank ru p t cy

court took judicial notice of the prior Wisconsin chapter 13 case and the Wis consin state cour

t judgment pur sua

nt t o F eder al Rule of Evidenc e 201 and B ankruptc y Rule 9017 statin g that th e “ B ank ra ise d the e xiste nc e of the Wisc on sin c ha pte r 1 3 c a se and

the Wisc on sin

state court for eclosure jud gm en t in its opening statement and throug hout the hear ing. ( Trans. at 13 & 22) .” In re M

iller , 433 B.R. at 209 n.1. The B ank published this notice appr ox imately two wee ks afte r the Wisconsin court issued 7 i t s f o r e c l o s u r e j u d g m e n to nt h e W i s c o n s i nP r o p e rt y.

- 6- Following that sale, the B ank believe d the Debtor owed unpa id balanc es on the 2006 and 2007 Notes in the total amount of $413,560.27.

F oll ow ingthe dis mis sa l of the De bto r’s fi rst cha

pte r 1 3 c a se , th e B ank

c on tin ue d it s Wis consin judicial fore closure a ction. On J uly 15, 2008, the Ba

nk obtained a f

orec losure judg ment from the Wisconsin state court f or $407,914.04 , plus attorney ’s fe es and c osts. The judg ment appar ently

provided that the Wiscons in property would be sold unless the De btor satisfied the jud g me nt w ith in 1 2 mo nth s. Th e De bto r d id n ot a pp e ar at or de fe nd the jud ic ia l f or e c los ur e . H e did not satisfy

the Wisconsin judgment. The D ebtor filed his curre nt chapte r 13 case staying a ny further action in the Wisconsin forec losure litigation two day s befor e the f orec losure sale s ch ed u l ed for Aug ust 5, 2009. Curiously , the B ank did not introduce a copy o f t he Wisconsin forec losure 6 jud g me nt a t the he ari ng on thi s ma tte r. I n f a c t, t he Wisc on sin

fo re c los ur e jud g me nt i s n ow he re in the re cord of

this case.
C. The Michigan Forec losure Procee dings The Bank retained Michiga n counsel to commence a Mi chig an non-judicial fore closure by adver tisement on the 3-40 Ac re Par cels pursua nt to the J anuar

y 20, 2006, and January

20, 2007, mortg ag es. On Apr il 10, 2008, t wo n o tices of f orec losure sale s were published schedulingthe fore closure by

adver tisement sales re g ardingthe two Michig an prope rties. Eac h of the notice s stated

“ no oth e r l egal or equ ita

ble pr oc e e din g s h a ve be e n in sti tut e d to re c ov e r t he de bt s e c ur e d b y

thi s Mortg ag e and the power

of sale in the Mor

tga g e has be come ope rative by rea son of def

ault.” (B ankr. Ct. Doc. #151-6, at 13- 14.) No sale went for war d at that time.
On J uly 31, 2008, the Ba

nk published a new notice of fore closure on the J anuar y 20, 2007, mortg ag e on the 3- 40 Acr e Parc els. That notice schedule d the fore closure sale for Aug ust 8, 2008. 7As of De cembe r 21, 2007, the 3-40 A cre Parce ls had an a ppraised va lue of $300,000. 8

- 7- Ag ain, the notice c ontained the sta t em en t t h at “no other leg al or e quitable proc eeding s have be en instit uted to reco v er t h e d ebt sec ured by this Mortga g e and the power of sale in the Mor

tga g e has become operative by

rea son of def

ault.” (B ankr. Ct. Doc. #151- 6, at 11.)

T h e fo reclosure sale proce eded a s adver tised on Aug ust 8, 2008, and the sole bidder –the Ba nk–cre dit bid $413,560.27. The B ank’s c redit bid repr esente d th e fu l l amount owed by the 8 Debtor to it. Following the sale, a Sheriff’ s Dee d was recor ded, drafted by an attorney for the Ba nk. Th e de e d sta te d tha t the pr op e rt y wa s sold to the B ank fo r $41 3, 56 0. 27 , a nd c on ta ine d a

n a ff ida vit of the a uctioneer , the Dickinson County Sheriff’ s Depa rtment, attesting that the bid ha d been ma de by “the [Ba nk] and that said sale wa s in all re spects open a nd fair; a nd that [t he sher iff] did strike of f a nd se ll s a id l and s and

te ne me nts to s a id b idd e r, wh ic h p ur c ha se d th e sa id land s and te ne me nts fa ir ly , a nd in g oo d f a ith , a s d e po ne nt v e ri ly

be lie ve s. ” (B ank

r. Ct. Do c ke t #1 24 , Mille r’ s E xhibi t L ist, Ex . 1.) No pa

rty soug ht to avoid the fore closure sa le following its completion, and the one y ear rede mption period, as extended by 11 U.S.C. § 108, ran appr ox imately 60 day s postpetition.
Th e 2 0 0 7 mo rtg a g e th a t w a s f o r e c lo s e d u

p o n a t th is s a le in c lu d e s a p r o v is ion tha t “any surplus funds, afte r pay

ment in full of t he sum s then due unde r this Mortga g e and e x penses of the sale, including attorney ’s fe es as provided by law” w ill be paid to the Debtor. ( Ba nkr. Ct. Doc. #151, Ex . U, at 6.)
D. Debtor’s Bank

ruptcy Filing On Aug ust 3, 2009, in the W estern D istrict of Michig an, the De btor filed a voluntar y petition for r elief unde r cha

pter 13 of the Ba

nkruptcy Code as well as a chapte r 13 pl an in which he treated the B ank as a

secur ed cre ditor holding a claim secur ed by a mortg ag e on rea l pr operty owned by

the Debtor in Wisconsin. The Debtor subsequently amende d his pla n sever al times, e ach time proposing to p ay the B ank no thi ngbe c a

us e he c on te nd s th a t th e B ank ha s b e e n p a id i n f

ull a s a re su lt o f i ts prepe tition non-judi cial for eclosure of a r eal pr operty mortg ag e in Michig an. At that fore closure, the B ank cr edit bid an amount equa l to the entire amount owed by the Debtor

to the Ba nk.The proof of cla im has not been amended; howe ver, the re appea rs to be no dispute that the 9 total bid at the Michig an for eclosure of $413,560.27 is the total amount owed by the Debtor

to the B an k

. T h i s w a s a l s o c o n f i r m e d b y N e l s o n ’ s t e s t i m o n y. The B ank first filed a motion for relief from stay on October 15, 2009. On Novembe r 19, 10 2009, the bankr

uptcy court denied the Ba

nk’s motion without prejudice to its re filing “ afte r the B ank sells t h e Mi chig an re al prope rty that it purchase d at the for eclosure sale, a nd the cour

t determines the fa ctual and le g al issues reg ardingthe amount of the de bt.” M.C .L .A. 600. 32 04 (1 )( b) pr ov ide s th a t a fo re c los ur e by

a dv e rt ise me nt m ay

be ha d o nly 11 if “[a]n action or proc eedinghas not bee n instit uted, at law, t o rec over the debt sec ured by the mortg ag e or a

ny part of the mortg ag e . . . .”

- 8- On J uly 21, 2010, the Bank filed a proof of claim in the Debtor’s case asser ting a claim for $4 41 ,1 76 .3 7. Th e De bto r h a s n ot f ile d a n o bje c tio n to the B ank ’s pr oo f o f c la im. 9
On J uly 26, 2010, the B ank filed a rene wed motion for relief from the a

utomatic stay

“for 10 the purp os e of

fi lin g a n a c tio n to un do and re ve rs e a for ecl os ure by a dv e rt ise me nt o n c e rt a in Michig an re al estate secur ing the Ba nk’s claim and also to proc eed w ith a fore closure sa le of Debtor’ s Wi sconsin residenc e.” (B ankr. Ct. Doc. #105, at 1.) I n its mot ion, the Ba nk asser ted that the Michig an for eclosure by adver tisement s al e was prohibited by Michig an law be cause the Wisc on sin

fo re c los ur e wa s pen din g , an d tha t the B ank sh ou ld be g ra nte d re lie f fr om the sta

y to f ile suit to undo t he Michig an for eclosure

. Add i t i o nally , the B ank ar g ued that Wisconsin law, not 11 Michig an law, deter

mines whether the debt ref lected in the promissory notes was e x tinguished by the Michig an for eclosure sale, and there fore , the Bank shoul d be gra nted relief from stay to allow the Wisconsin court to decide the issues involving the Wisconsin forec losure judg ment. The B ank

ma int a ine d th a t “ [w]he n th e B ank fo re c los e d b y a dv e rt ise me nt on the Mic hig an r e a l e state , it c ou ld do so only

for the inde btedness sec ured by the Michig an re al es t at e. The loan se cure d by the Wis consin reside nce . . . simply was not par

t of the Michig an for eclosure and coul d n o t be exti ng uished by

the M ichig an foreclosure . . . .” (B ankr. Ct. Doc. #121, B ank’s Supplemental B rief in Advanc e of Confirmation/St ay Hea ring , at 6-7.) I n response to the re newe d motion, the Debtor

asser ted that the B ank had n o t shown “c ause” for r elief f rom the stay

beca use it has no re maining

c la im a g a ins t hi m.
The ba nkruptcy court sche duled a final hear ing on the rene wed motion for Aug ust 18, 2010. The ban kr

u p tc y c o u rt c o mm e n c e d

th e h e ar in g o nth e r e n e w e d mo ti o na s s c h e d

u le d

. H o w ever ,The De btor fil ed a fourth amende d plan on Marc h 30, 2011. That ame ndment does not 12 a dd re ss a ny iss ue s r e g ard ingthe B ank ’s c la im.

- 9- during the hea

ring the cour

t determined to “ continue the he aringand consolidate it, for the purpose s of j u d i ci al economy

and to avoid the possibility of inconsistent results, with the cha pter 13 plan

c on fi rm a tio n h e ari ng . ( Sc he du lin g Or de r, Au g . 2 3, 20 10, B ank r. Ct. Do c . # 11 4, a t 1. ) I n it s scheduling order , the bankr uptcy court identified the leg al and fac tual issues it would decide at the

co n cl u s i o no f t h e h ea ri n g:

First, it should be noted that the major issue to be deter mined is the amount of the debt, if any , owed by the Debtor to the Ba nk as of the filing date. Second, a

n ancillar y issue is wh et h er any

debt owed by t h e D eb t o r t o t h e B an k

h as b ee n i n cu rr ed o r i n cr ea s ed af t er t h e f i l i n g. Th ir d, is the B ank

e nti tle d to re lie f f

ro m st ay or no t? Fou rt h, sh ou ld the Debtor ’s plan, as nowfiled or a s may be timely

amended, be c o n f i r m e d ? (Scheduling Orde r, Aug . 23, 2010, Ba nkr. Ct. Doc. # 114, at 1.) The bankruptc y court fur ther noted that the evidentiary hear ing would continue on September 7, 2010, and directed that a ny amende d plan be f iled by not later than Septe mber 1, 2010. On Aug ust 25, 2010, the Debtor f iled a third ame nded plan ( the “Ame nded Plan ”)

. The 12 Am e nd e d Pl an p ro vid e s in pa rt :
1. The e ntire debt owingto the [Bank] is paid in full. I n particula r, the [Bank] shall have no c laim in this case for any money owing on e it h e r o f th e a b o v e r e f e r e n c e d tw o n o te s [th e 2 0 0 6 an d 2 0 0 7 N o te s ]. I n addition, any

claim for inter est, taxes or insurance re: the fore closure of the 3-40 acr e parce ls of land is also pre cluded in ac cord with Ba nk of Three Oa

ks v. L akef

ront Properties, Mich A

pp 551, 444 NW2d 217 (1989). 2. The [Ba

nk] shall di schar g e and r elea se an y an d all mortg ag es g iven to s ec ure r epay

ment of the notes with re g ard to the D ebtor’s pr op e rt y in M ic hig an a

nd Wisc on sin , in

pa rt ic ular th e [Wisc on sin Property ]. . . . 3. I n the eve nt the [Bank] does not releas e [ its] mortg ag e(s) on the Michig an and Wisconsin proper ty , the Debtor may petition the Court to enforc e a r elea se of the m ortg ag e(s) and ask to be aw arde d actua l c os ts a nd a tto rn e y fe e s in c ur

re d f or su c h p ur po se s.Sho rt ly a ft e r t he De bto r f

ile d h is c ha

pte r 1 3 p e tit ion , th e B ank mov e d to dis mis s th e c a se 13 for imprope r venue . The he aringon the B ank’s motion to dismi ss for improper venue involved many of the same exhibi ts and witnesses involved in the later he aring on the B ank’s motion for r elief fro m s ta y a n d o b je c ti o n to c o n f

ir mati o n
. I n c o n n e c ti o n w it h th e B an k ’ s mo ti o n to d is miss for improper ve nue, the pa

rties also brief

ed the issue of

the debt, if a

ny , owed by

the Debtor

to the Ba nk. I n its opini on finding venue to be proper and deny ing the Ba nk’s motion to dis miss, the bankruptcy court declined t o deter

mine the validi ty or amount of t he Bank’s claim beca use a f inal deter mination reg ardingthe B ank’s c laim was not nec essar y to the venue issue. The bankruptcy court’s opinion reg ardingvenue is published at 433 B .R. 205 (B ankr. W .D. M ich. 2010). The ba nkruptcy court’s opinion which is the subject of the a ppeal pr esently

befor e us is published at 442 B.R. 621 (B ankr. W.D. Mich. 2011).

- 10- (B ankr. Ct. Doc. #113, at 2-3.) The Ba nk timely filed an objection to confirmation of the Amended Plan. To date, no plan ha s been c onfirmed.

B e g inn ingon

Au g us t 18 , a

nd c on tin uin g on Se pte mbe r 7, 201 0, the ba nk ru ptc y c ourt

he ld an evide ntiary

hear ing on the Ba

nk ’s re n ew ed motion and objection to confirmation at whic h the fo llo wi ngfa c ts w e re e lic ite d thro ug h N e lso n’ s te sti mony and nume ro us e xhibi ts a dmi tte d in to evidenc e. 13

E. Bankruptcy

Court’s Findings of

Fact
At the conc lusion of the evidentiar y hear ing on September 7, 2010, the bankruptcy court took the B ank’s r enew ed motion for relief fr om stay and objec tion to confirmation of the De btor’s amende d chapte r 13 plan unde r adviseme nt. On J anuar y 13, 2011, the bankr

uptcy court iss ued a separ ate wr itten opinion, deta iling its findings of fac t and conc lusions of law, and a n order in which it g ra nte d th e B a

nk lim ite d r e lie f f

ro m st ay fo r t he so le purp os e of di sm is si ngthe Wisc on sin fore closure a ction with prejudice , but otherwise denied the Ba nk’s motion for re lief fr om stay . The bankruptc y

court’s or der a lso denied the B ank’s objec tion to confirmation of the De btor’s plan.

Ba sed upon the testimony and ex hibits admit ted into evidence at the hea ring , the bankr

uptcy court’s opinion deta iled the bac kg round fa cts, various loans and mortg ag es, and the circ umstances of the Wisconsin and Michig an for eclosure s. Wi th respec t to th e ci rc umstances of the Michig an fore closure, N elson testified re g ardingthe B ank’s c redit bid at the Michig an for eclosure sale. He testified first that the B ank re tained Attorne y Kruppstadt to handle the fore closure of the Debtor ’s proper ty in Michiga

n. The for eclosure notice adve rtising the sa le for Au g ust 8, 2008, was then- 11-

pr e p ar e d b y K

r u p p s ta d t. N e ls o n an d K

r u p p s ta d t d is c u s s e d th e a mo u n t o w e d b y th e D e b to r to the Ba nk. Nelson advised K

ruppstadt that the Debtor owed the Ba nk a total of $413,560.27 on the 2006 Note and 2007 N ote. Nelson, Kruppstadt, and the Bank’s W isconsin counsel then discussed bidding th at am o u n t on behalf of the B ank at the f

orec losure sale . Duringtheir discussions, Kruppstadt advised Ne lson that the 2006 Note wa s not, in his opi nion, secure d by “any Michig an mortg ag e.” Kruppstadt then, a s the sole bidder at the sale on be half of the Ba nk, cre dit bid $413,560.27. Nelson testified that h e understood a cr edit bid in a Michig an for eclosure sale to be one wher e a
cre ditor purcha ses the prope rty at the sher iff’s sale without any money actua lly being transfe rre d. Rather, the c reditor bids a certain amount and credits that money ag ainst the debtor’s acc ount. Such a bid w o u l d achieve the same re sult as if a third par ty bid at the sale a

nd paid the money . Nelson acknow ledg ed that if a third party had bid $413,560.27 at the sale, the Ba nk would have c ance lled both the 2006 and 2007 No t es an d d i schar g ed all of the Debtor’ s mortga g es following the rede mption period. Nelson furthe r testified that because the Debtor did not rede em the prope rty and the re de mpt ion

pe ri od ha d p a sse d, the B ank

ha d b e c ome the ow ne r o f t he 3- 40 Ac re Parc e ls.
Nelson also testi fied that it was his position that the 2006 Note was not sec ured by the 3-40 Ac re P ar ce l s s o l d

at t h e M i ch i gan fo re cl o s u re s al e, an d t h er ef o re , t h e p ro ce ed s o f t h e s al e d i d n o tgo toward pa y ing the 2006 Note in a

ny manner
. Rather, the B ank cr edited only the amounts owing on the 2 0 0 7 N o t e , w h i c h w a s s e c u r e d b y t h e m o rt g a g e o n t h e 3

- 4 0 A c r e P ar c e l

. R e s p o nd ing to questions conce rning what the B ank then did with the s urplus from the Michig an for eclosure sale, Nelson stated that the B ank “did nothing with it . . . it ’s my belief that Attorney Kr u p pstadt made a mistake with the bid price , and that’s why - - that’ s why

we’ re here

. . . . [I ]t was de termined that the mistake wa s made by Attorney Kruppstadt. I t was not our intention to have a ny surplus at the

sa le . T hat w a s ma de c le ar t o M r. Kr up ps ta dt. ” (T ra

ns c ri pt o f h e ari ng , Sept. 17, 20 10 , B ank r. Ct. Doc. #130, at 63-5.)

I n a dd iti on , N e lso n te sti fi e d th a t w hil e the B ank us e d th e pr oc e e ds of

the De bto r’ s sa le of

his Moon L ake Prope rty

to pay down a por

tion of the outstanding balanc e on the 2007 Note, it ha d not

w a i v e d t h e r e m a i n i n g i n d e b t e dn e s s o nt h a tn o t e s i n c e t h e s a l e o f t h e M o o nL a k e P r o p e rt y. Moreove r, the B ank never intended for its bid at the Michig an fore closure sale to extinguish the debt owed by the Debtor on the 2006 Note, which was secure d by the W isconsin Property

. Nor did t he- 12-

Ba nk authorize a bid at the f

orec losure sale that would exti ng uish all of the debt owe d by the Debtor to the Ba nk.

B a se d on thi s te sti mony , the ba nk ru ptc y c ourt fo un d that the de c isi on re g ard ingthe c re dit bid was made by

Nelson and the Ba

nk’s Michig an and Wi sconsin fore closure attorney s, that the Debtor did no t tak e any pa

rt in the fo re c los ur e , an d tha t the B ank wa s the so le pa rt ic ipa nt wh ic h e xclu siv e ly controlled the f

orec losure proc ess. As such, the ba nkruptcy court found that any

mistakes in the proce ss were unilatera l on t h e p art of the Ba nk. Fur thermore , despite havingbeen a dvised by counsel that the 2006 Note was not secur ed by the J anuar y 20, 2007, mortg ag e, which w as for eclose d up on a t th a t sa le , th e B ank

bid an amou nt a t th e sa le e qu a l to the fu ll re ma ini ng a mou nt ow e d to it by the Debtor . Finally , the bankruptc y court found that the B ank fa iled to cre dit the full amount of its bid t o satisfy

the Debtor ’s loans, but rathe r cr edited the De btor a lessor a mount equal to the

rema ining ba lance on the 2007 Note only , and that the Ba nk did not pay any surplus amount to the Debtor. Nicely

summarizing the fa cts, the bankr uptcy court stated:
Boiled dow n, the co n t rol ling f acts a re f airly straig htforwa

rd. The Debtor borrowe d a larg e amount of mone y from the B ank. The Ba

nk w a s g iv e n mo rtg a g e s o n r e a l p r o p e rty lo c a te d in Wi s c o n sin and Michig an. After

the Debtor

defa ulted, the B ank instituted a judicial fore clo s ure on the Wis consin proper ty and a f

orec losure by a d v e rt i s e m e n to nt h e M i c h i g anp r o p e rt y. T h e B an k , f

r o m i t s p e r s p e c t i v e , m a d e a t e r r i b l e u n i l a t e r a l m i s t a k e
. It bid the entire a

mount of its d ebt i n the Michig an for eclosure . The Debtor did not rede em t he Mi chig an foreclosure deed and the B ank now owns the Michig an prope rty

. Be cause the value of the Michig an proper ty is very likely less than what the Debtor owe d the B ank, the Ba nk now wants to continue the Wisconsin forec losure to re duce or e lim inate its mon e tary

los s. Th e De bto r’ s pe rs pe c tiv e is fa r d if fe re nt. He a sse rt s a ll d e bt o we d to the B ank wa s fully

satisfied as a r esult of the Michig an for eclosure

. Th e De bto r t a ke s th e po sitio n th a t he ow ns the Wisc on sin pr op e rt y fr e e a nd c le ar o f t

he B ank ’s pr io r mor

tg a g e ; th e Wisc on sin fore closure a ction should be dismissed. In re M iller , 442 B.R. 621, 628-29 ( Ba nkr. W.D. Mich. 2011).Th e B ank so ug ht a sta y pe nd inga

pp e a l w hic h w a s d e nie d b y the bankru ptcy

c ourt

. 14 Additionally , following the bankr uptcy court’s order , the Debtor soug ht approva l of appointment of specia l counsel to pur sue a cause of action ag ainst the Ba nk for fra ud, brea ch of c ontrac t, abuse of proce ss, violation of state and/or fede ral banking laws and/or r eg ulations, and intentional infliction of emotional distress. Afte r initially denying the Debtor’ s reque st, upon reco n s i deration, the bankruptc y court g rante d the motion, with conditions, to appoint specia l counsel. ( See B ank r. Ct. Doc. #177.)

- 13- F. Bankruptcy

Court’s Conclusions of Law

I n its detail ed , thoroug h, and ably articulated opinion, the bankruptc y court c oncluded the fo l l o wi n g:
1. Michig an law, not Wisconsin law as a rg ued by the Bank, gover

ns the deter

mination of the dispute betwe en the De btor and the B ank. 2. The B ank is leg ally prohibited fr o m cr edit ing the Debtor w ith an amount less than its full bid at the Michig an for eclosure sale. And, e ven if Wisconsin law applied, the result would be the sa

me. 3. By

virtue of its ea

rlier inconsistent position, the Ba nk can n o t argue that the fore clo s u r e o nth e Ja n u ar y 2 0 , 2 0 0 7 , mo rtg a g e h a s n o b e ar in g o nth e 2 0 0 6 N ote. Even if the i nconsistent position were pe rmitted, by bidding the total of

the two notes at the Michig an for eclosure sale, a surplus equal to the amount of the 2006 Note was cre ated, whic h must be cre dited to the benef it of, or otherw ise paid to, the De btor. 4. Th e Ba

nk cannot invalidate the Michig an for eclosure sale be cause Michig an prohibits judicial attacks on for eclosure s absent a show ing of fra ud. Having s o co ncluded, the ba nkruptcy court he ld that the Debtor ow ed the B ank nothing , and there fore , the B ank did not hold a “debt” or a “claim” aga inst the Debtor . As a re sult, the bankruptcy court opined that there was no rea son to c ontinue the Wisconsin foreclosure and g rante d the B ank “extremely limit ed relief

from stay solely to permit the Ba

nk to dismiss wi th prejudice the Wisc on sin fore closure la

wsuit.” In re M

iller , 442 B.R. at 637. Additionally , beca use the Ba

nk had no “c laim,” and ther efor e, no pec uniary interest at stake in the Debtor’ s case , the bankruptc y court held that the Ba nk lacke d standing to object to confirmation of t he AmendedPlan and denied the B ank’s objec tion to confirmation. The bankruptc y court ha s since d el ay ed holding a confirmation hearingpending the ou tc ome of

thi s a pp e a l.
The B ank’s timely

appea l of the bankr

uptcy court’s or der f

ollowed. 14- 14- IV . D ISC USS ION
A. No O bje c tio n to Ba nk ’s Pr oo f of Cla im
The first is s u e th e B an k

a s s e rts o na

p p e a l i s a p r o c e d u r a l o n e : “ Wh e th e r

th e B an kr

u p tc y Court err ed by

sua sponte under

taking to analy

ze and dec ide whethe r the [Ba nk] had a claim whe n the Debtor

filed no objec tion to the [ Ba nk’s] p ro o f o f cl ai m
. ” (A ppellant’s B r. at 9.) T he B ank

a sse rt s th a t pur su ant to 11 U.S .C. § 502 (a ) an d Fe de ra l Ru le of B ank ru ptc y Pr oc e dure 30 01 (f

), its claim, to which the De btor did not file a wr itten objection pursu an t t o Rule 3007(a) , is deemed allowed a nd constitutes prima fac ie evidenc e of both the validity and amount of its c laim. Pursua nt to § 5 0 2 (b ), t he B ank conte nds that the bankruptc y court may

deter mine the enf

orce ability

and amount of the claim only if an objec tion is m ade. B eca use the De btor did not file a wr itten objection to the Ba nk’s proof of

claim pursuant to R u l e 3 0 0 7 (a ), the B ank asse rts that the bankr uptcy court should not have dete rmined whe ther the B ank has a claim ag ainst the Debtor. Rather, the bankr uptcy

c ourt sh ou ld h a ve a dd

re ss ed on ly wh e the r c a

us e e xists to l if

t th e sta y , a nd pe rm it the B a nk

to continue its Wi sconsin fore closure a ction.
The B ank fur

ther a rgue s t h at because the Debtor’ s amende d plan, and pr esumably any objection he mig ht have made to the Ba nk’s claim, soug ht the discharg e of a ll mortga g es g rante d on both the Michig an and Wisconsin proper ties, he would have been r equir ed t o fi le an a dversa ry proce eding rathe r than a

n objection to the allowanc e of c laim alone. The Ba nk bases this argument upon Rule 3007(b) which provides that a “par ty in inter est shall not inc lude a de mand for r elief of the kind specifie d in Rule 7 0 0 1 i n an o b j ection to t he allowa

nce of a cla im, but may

include the objection in an adve rsar

y proce eding .” F ed. R. Ba

nkr. P

. 3007(b). The Bank states that the Debtor ’s reque st for dischar g e of the mort gage s wo u l d fall under Rule 7001 beca

use Rule 7001 includes deter mination of the “va lidity , priority or extent of a lien or othe r intere st in property .”
The B ank has f

orfe ited i t s rig ht to assert this proce dural a rg ument beca

use it raised the argument for the f

irst time on appeal. See Kontrick v . Ryan , 540 U.S. 443, 1 2 4 S

. C t

. 906 (2004) (re liance on c laim-proce ssing r ules forf eited if pa rty asser ting r ule waits too long to r aise issue). The De bto r’ s ame nd e d c ha

pte r 1 3 p lan sou g ht a re le a se of a ll mor tg a g e s, inc lud ingthat on

the Wisc on sin Pr op e rt y , o n th e g ro un ds that th e de bt o we d to the ba nk ha d b e en pai d in ful l. I n o bje c tin g to

c on fi rm a tio n o f t

he De bto r’ s p lan, the B ank did no t r a ise the pr oc e dura l argume nt i t no w a sse rt s.- 15-

Following the B ank’s a ssertion of its objection to the Debtor’ s plan, without the pr ocedur al argument the B ank now r aises for the first t ime, the bankruptcy court clearly stated i n its scheduling

or de r w hat w ou ld b e a dd

re sse d at th e c on so lid a te d e vid e nti ary he ari ng on the B ank ’s ob

je c tio n to confirmation and motion for relief from stay : “F i rst, it should be noted that the major issue to be deter mined is the amount of the debt, if any , owed by the Debtor

to the Ba nk as of the f

iling date .” (Scheduling Orde r, Aug . 23, 2010, Ba nkr. Ct. Doc

. # 114, at 1.) The consolidation of matters, suc h

a s th e mot ion

fo r r e lie f f

ro m stay and ob je c tio n to c on fi rm a tio n a sse rt e d h e re , w a s e xpre ssl y authorized. Fe d. R. Bankr . P. 7042 and 9014. Fe dera l Rule of Civil Procedur e 42, which a pplies in contested matter s, Fe d

. R

. Ba n k r. P. 7042 and 9014, g rants broa d discretion to the bankr uptcy

c ourt to d e c ide ho w c a se s are to b e tr ie d “ ‘s o th a t th e bu sin e ss of the c ourt may be dis patc he d w ith expedition and e conomy

while providing justice to the parties.’ ” Iron-Oak Supply Corp. v. NIBCO, Inc. ( In re I ron-Oak Supply

Corp.) , 162 B.R. 301, 304 (B ankr. E.D . Cal. 1993) (quoting 9 Charles A. Wright & Arthur R. Miller, F e d e r a l P r a c t i c e & P r oc e du re § 2 3 8 1 (1971)) . Whether matters involving the same fa ctual and le g al questions should be consolidated f or trial is a matter within the discretion of the trial court, a nd the exercise of t h e court’s discr etion is reviewe d for a buse of discretion. See Cantrell v. GAF Corp. , 9 99 F .2 d 1 00 7, 10 11 (6 th C ir . 1 99 3) ; se e als o F e de ra l Ru le of B ankruptc y

Procedur e 7016, which inc orporates Fe dera l Rule of Civil Procedur e 16, including Rule 16(c) (2)( A) (“ [a] t any pretria l confe renc e, the c ourt may consider a

nd take a ppropriate action

on the fo llo wi ngmatte rs : ( A) fo rm ulatin g and

sim pli fy ingthe iss ue s
. . . .” ). Th e re fo re , p ur su a nt t o Rules 7016, 7042, and 9014, the bankr uptcy court did not abuse its discre tion when it consolidated for a single h e ar in g th e B an k ’ s mo ti o nf o r r e li e f f r o m s ta y an d o b je c ti o nto c o n f

ir mati o na nd identified the issues to be a ddresse d, including a key issue to deciding both matters – the amount of the debt, if a

ny , owed by

the Debtor

to the Ba nk.

I n fac t, the Ba

nk briefe d that very

issue in specific r esponse to the ba nkruptcy court’s scheduling order in the Ba nk’s “Supplemental B rief in Adva nce of Confirmation/St ay

Hea ring .” At no time did the Ba

nk raise the Debtor’ s lack of written objection to its proof of claim, or the need fo r t he De bto r t o in iti a te an a dv e rs ary pr oc e e din g , a s an iss ue
. Ra the r, fu lly awa re of the iss ue s to be dec ided, the B ank par

ticipated in the evide ntiary hear ing a nd introduced e x hibits and testimony desig ned to show that a de bt was st i l l o we d to it by the Debtor . Only

afte r the ba

nkruptcy court de c ide d th a t the re wa s no long e r any de bt ow e d to the B ank , ha s the B ank no w, be la te dly on a pp e a l,- 16-

c h a l l e n g e d

t h e p r o c e d

u r a l m an n e r

b y w h i c h t h i s i s s u e w a s b r o u g h tb e f o r e t h e b an kr

u p t c y c o u rt

. It is simpl y too late for the Ba

nk t o raise this non-jurisdictional proc edura l argument. See e .g., Kontrick , 5 40 U. S. a

t 46 0 ( “ No re a so na

ble c on str uc tio n o f c omp la i nt

- p r o c e s s i n g r u l e s , in s um, wo uld allow a litigant situated as [debtor] is to defe at a claim, as filed too late, a fter the party has litigated and lost the ca se on the mer its.”).
Ad dit ion a lly , b e c aus e th e Bank did no t r a ise thi s is su e be fo re the ba nk ru ptc y c ourt , it is waived. Se e De ale r Com

pu te r Se rv

s. , In c . v . D ub He rri ng

Fo rd , 623 F.3d 348, 357 (6th Cir. 2010) (“It is well-settled t h at t h is court will not consider ar g uments raised f or the fir st tim e on appe al

u n l es s o u r fa i l u re t o co n s i d er t h e i s s u e wi l l re s u l t i n a p l ai n m i s ca rr i age o f j u s t i ce
. ”) (q u o t i n g Hood

v. Tenn. Student Assistance Corp. ( In re Hood) , 3 19 F .3 d 7 55 , 7 60 (6 th C ir . 2 00 3) ); W hite v. Anc hor Motor Freight, Inc. , 8 99 F .2 d 5 55 , 5 59 (6 th C ir . 1 99 0) ). Our r e fu sa l to c on sid e r t he B ank ’s un tim e ly proce dural a

rg ument will not result in a “plain miscarriag e of justice.” The B ank knew the ba nk ru ptc y c ourt int e nd e d to ana ly

ze w he the r t

he B ank had a cl a im, and it p art ic ipate d in

a fu ll

e vid e nti ary

he ari ngwi th e xhibi ts a

nd te sti mony de sig ne d to atte mpt to s ho w i t in de e d h e ld a

c la im. Permitting the Ba

nk to now attack the proce dure by which the issue of the debt wa s broug ht before the bankr uptcy court, a fter the bankruptc y court a lrea dy

adjud i ca t ed it, would be contra ry to the “policy conce rns of e x peditious administration of bankruptcy matters and the finality of the bankruptc y

court’s de cision . . . .” Kontrick , 540 U.S. at 452.
B. Choice of Law
The B ank asse rted be fore the bankr uptcy court that W i s co n s i n law must be applied to the disp u t e b et we en the B ank and the Debtor be cause the promissory notes executed by

the Debtor contain a pr ovision that the note s wo u l d b e go verne d by Wis consin law whe re not pre empted by fede ral law . On appe al, the B ank ag ain asser ts the lang uag e of the promissory notes as g rounds for applying Wisconsin law.

F e de ra l c ourt s ar e sp lit a s to whe the r state or fe de ra l law su pp lie s the c ho ic e of

law r ule s in bankruptc y

case s. Compare Lindsay v. Bene ficial Reinsurance Co. (

In re Lindsay) , 59 F.3d 942, 948 (9th Cir. 1995) (“ I n fede ral que stion cases wi th exclusi ve jurisdiction in fede ral c ourt, such as b an k rupt cy , the cour

t should apply

fede ral, not for

um state, choice of law r

ules.”), wi th B ianco v. Er k ins ( In re Ga sto n &Sn ow) , 243 F.3d 599, 605- 06 (2d Cir. 2001) (conc luding that a bankr uptcy- 17-

court should apply

the choice of law r

ules of the f

orum state). Se e als o J

afa ri v . W y nn Las Ve

ga s, LLC ( In re J afa ri) , 569 F.3d 644, 648- 51 (7th Cir. 2009) (discussing split but conc luding that it nee d

no t de c ide be tw e e n s ta te or fe de ra l c ho ic e of

law ru le s bec a

us e Ne va da su

bs tanti ve law w ou ld a

pp ly either w ay

).
A s w it h th e Se v e n th Ci r c u it in Jaf ar i , we ne ed not dec ide whethe r state or fede ral law supplies the choice of law r ules in this dis pute over

the validity

o f t h e Ba n k ’s foreclosure of re al proper ty located in Michig an and e ffor ts to s et as ide the Michig an for eclosure due to the B ank’s unilatera l error . Michig an substantive law a pplies either wa

y . Under choice of law r

ules of the forum state – Michig an, it is clear that Michig an law g overns the validity of a dispute involving r eal proper ty located in Michig an. See Timber- Lee Ev angelical Free Church Christ ian Ctr. v. Baraga Cnty. Rd. Comm’n , 145 F.3d 1333 ( 6th Cir. 1998), No. 96-2288, 1998 WL 228044 at *1 (6th Cir. Apr. 29, 1998) ( unpublished table dec ision) (“Michig an cour ts follow the principle of lex loci rei sitae and apply

the law of

the state in which the proper ty in dispute is si tuated . . . .”) (citations omi tte d) ; U.S. Truck Co. v. Pe nnsylvania Surety Corp. , 2 43 N. W. 31 1, 31 2 ( Mic h. 19 32 ); Fuller v. Mc Kim , 154 N.W. 55, 58 (Mich. 1915).
Under fede ral choice of law rules, in the absenc e of a ny established body

of fe dera l choice of law rules, we beg in with the Restatement (Sec ond) of Conflict of L aws. Me dic al Mu t. of O hio

v . d e So to , 245 F.3d 561, 570 & n.9 (6th Cir. 2001) (a pply ing f eder al cho i ce of law rule s to action under ERI SA, w hile noting that state choice of law rules would y ield same re sult). Under Sec tion 2 2 9 o f t h e R es t at em en t(S ec o n d ) o f C o n fl i ct o f Law s , “T h e m et h o d fo r t h e f o re cl o s u re o f a m o rt gage on land and the inter ests in the l and resulting from the foreclosure are deter mined by the local law of the situs.” Se e als o comments a throug h e of Sec tion 229 of the Restatement (Sec ond) of Conflict of L aws (loc al law of

the situs also gove rns method and time of f orec losure, ef

fec t of fore closure upon interests i n the l and, and questions involving the f orec losure which a ffe ct intere sts in the land). Thus, reg ardle ss whether

state or fede ral law supplies the choice of law rules, the bankr uptcy court

corr ectly deter mined that Michig an substantive law g overns the va lidity of the B ank’s f

orec losure of re a l pr op e rt

y loc a te d in Mic hig an, inc lud ing e ff or ts to set a sid e the Mic hig an for e c los ur e du e to the B ank’s unilater al er

ror.Mic h. Com p. L aws Ann. § 6 00 .3 20 4( 1) (b ) p ro vid e s: 15 (1) [A] party

may fore close a mortg ag e by

adver tisement if all of the fo llo wi ngc ir c ums tanc e s e xist: (b) An action or proce eding has not be en instit uted, at law, to rec over the debt secur ed by the mortg ag e . . . or, if a ny action or pr ocee ding has bee n instit uted, the ac tion or proce eding has bee n disc o n t i n ued . . . .”

- 18- C. “Un do ing ” th e Mi c hig an Fo re c los ur e Sa le
The Bank’ s asser

tion that it should be permitted to see k to “undo” the Mic higa n fore closure sale due to its overbid was thoroug hly addre ssed by the bankruptc y court, a nd the B ank has not c ited to this Panel any authority contra ry to the bankruptcy

court’s c onclusion that the Ba nk cannot undo the sale. Contra

ry to the Ba nk’s as s er t ions, the bankruptcy court c oncluded that the B ank did not violate the M i ch i gan fore closure statute by instit uting the Wisconsin fore closure pr ior to the Michig an for eclosure sale. The Michig an statute prohi b i t s foreclosure by adver tisement when another action at law h a s b e e n in s ti tute d

. Ci ti n g to Wi s c o n s in c a s e la w e xp la in ing that the 15 fore closure of

a mortg ag e in Wisconsin is a proc eedingin equity , the bankruptc y court c oncluded that the Wisconsin foreclosure proce eding was not a proce eding “at law ,” but an e quitable ac tion. Additionally , beca

use t he B ank obtained its def ault judgme nt on J uly

15, 2008, prior to the Michig an sale on August 8, 2008, and did not move t o enfor ce the judgme nt until a y ear later, the bankruptcy court c oncluded the B ank may have “ discontinued” its W isconsin action prior to the Michig an sale

. The B ank has not provide d this P anel with any support for its asser

tion that it is entitled to “undo” the Michig an sale due to a violation of the Michig an for eclosure statute.
Th e ba nk ru ptc y c ourt a lso c on c lud e d th a t th e B ank is e sto pp e d fr om c ha lle ng ingits ow n s a le by virtue of taking control or possession of the proper ty , and having its attorney prepa re the dee d and aff idavit of the sher iff conf

irming the sale. More over, the Ba nk did not act to attack the sale for a y ear fol lo wi ngthe sa le . T he B ank ’s fa ilure to a c t ti me ly to c ha lle ng e the fo re c los ur e sa le a lso prohibits any

challeng e. See W

orthy v. W

orld W ide Fin. Servs., I

nc. , 347 F. Supp. 2d 5 02 (E.D. Mich. 2004) (six mon ths betwee n sale a nd complaint; court re

jected attack on sale ) aff’d , 1 92 F. App’x 369, 2006 W L 2 1 8 8931 (6th Cir. 2006); Jack son Inv. Corp. v. Pittsfield Prods., Inc. , 413 N.W. 2d 99 ( M ic h

. 1 9 8 7 ) ( f iv e mo n th s b e tw e e ns a le an d c o mp la in t att a c k in g s a le w a s f o und- 19-

untimely). F inally , the bankr uptcy court e x plained, Michig an law pr ohibits j udicial attac ks upon Michig an statutory

fore closures in the a

bsence of a showingof fr aud. See United States v. Garno , 97 4 F . Su pp. 62 8, 63 3 ( E. D. Mic h. 19 97 ) ( “ Th e Mic hig an Su pr e me Cou

rt ha s h e ld t

hat it wo uld

re qu i re a s t ro n g ca s e o f

fr au d o r i rr egu l ar i t y , o r s o m e p ec u l i ar ex i gen cy , t o wa rr an ts et t i n g a fore closure sa le aside.” ). The B ank has not provided thi s Panel wit h any support for its position that its mi staken ove rbid entitles it to set aside the fore closure sa le. B eca use there was no fr aud asse rted or “pe culiar exigenc y ” beyond the B ank’s own unilate ral mistake a nd beca use the B ank fa iled to act timely , the bankr

uptcy court c orre ctly co n cl u d ed t hat the B ank is not entitled to invalidate the Michig an for eclosure sale.
D. Ef fe c t of Ov e rb id Havingconclude d that Michig an law g overns the dispute, the bankr uptcy court a naly zed the eff ect of the B ank’s overb i d , and concluded that the B ank is leg ally forbidden f

rom cre diting the Debtor w ith an amount less than its full bid at the Michiga n fore clos u re s al e. Citi ng to Michiga n jurisprudenc e, as well as the “mainstrea m of Americ an jurisprudenc e,” the bankruptcy co u rt explained that i f a mortg ag ee bids more than the value of prope rty purcha sed, it, like any

other purcha ser at a mortg ag e for eclosure sale, is re quired t o p ay , or cr edit the mortg ag or, the e ntire amount of the bid. See e .g., Pulleyblank v . Cape , 4 46 N. W. 2 d 3 45 (M ic h. Ct. Ap p. 19 89 ); Bank of Thr e e Oa k

s v . La k e fro nt Pro ps
. , 4 44 N. W. 2d 217 (M ic h. Ct. Ap p. 19 89 ); Chrysler Capital Realty, In c . v. Gr e lla , 94 2 F .2 d 1 60 (2 nd Cir . 1 99 1) (a

pp lyingMic hig an la

w) ; Sh oa ff v . E sta te of B ald

win , No . 2 76 46 9, 20 08 WL25 97 55 3 (Mi ch. Ct. Ap p. July 1, 20 08 ). A m or

tg a g e e wh o b ids the fu ll amount of hi s debt at a foreclosure sale is preve nted from pursuing additional collater al. See e .g., Spillman Inv. Grp., Ltd. v. Am. Bank of Tx. ( In re Spillman Dev . Grp., Ltd.) , 401 B.R. 240 (B ankr. W.D. Tex . 2009). The ba nkruptcy court then explained f urther that even assuming f or the sake of

argume nt t

hat Wis c on sin l aw app lie s, the re su lt w ou ld b e the same be c a us e Wisc on sin

law a lso pr ov ide s th a t a

pa rt y wh o o ve rb ids at a for ecl os ur e sa le wi ll b e he ld t o it s b id r e g ard le ss o f i ts unilatera l mist ake. See Metropolitan Lif e Ins. Co. v. W

ilson , N o. 96 -2 83 8, 19 98 WL25 50 46 (Wi s. Ct. Ap p. 19 98 ); Horicon St ate Bank v. K ant Lumber Co. , Inc. , 478 N.W. 2d 26 (Wi s. Ct. App. 1991). The B ank has not provide d this Pane l w ith a ny support for its position that it should be relieve d of the conse quence s of its overbid.- 20-

E. Cross-Coll ateralization
Th e ba nk ru ptc y c ourt a lso a dd re sse d an d dism iss e d the B ank ’s argume nt that the 20 06 No te was not sec ured by

the J anuar

y 20, 2007, mort gage an d t h at, t here fore , the fore closure on that mortg ag e has no be aringon the 2006 Note. The bankruptc y court re jected the argument on the g ro un d th a t th e B ank

ha d p re vio us ly

pr e se nte d s wo rn

te sti mony

tha t t he loans we re c ro sscollater alized by

both the Wis consin and Michig an proper ty

. Additionally , even if the Ba nk wer e permitted to raise the issue belate dly despit e i t s prior inconsistent position, the bankruptcy court conclude d that the B ank’s bid at the f orec losure sale cre ated a

surplus equ al t o t h e amount of the 2006 Note, which must be c redited to the be nefit of, or otherwise pa id to, the Debtor.
On a pp e a l, t he B ank a sse rt s that re g ard le ss of any e arl ie r t e sti mony of Ne lso n, the 20 06 No te is secure d only

by the mortg ag e on the Wisconsin Property , while the 2007 Note is se cure d by the mortg ag es on both the W isconsin Property and the 3-40 Acre Parcels, because only the mortg ag e on the Wisc on sin

Pr op e rt y conta ins c ro ss- c oll a te ra lizatio n la ngua g e . A dd iti on a lly , th e 20 06 No te identifies only

the mortg ag e on the Wisconsin Property as collate ral. The ref

ore, the Ba

nk asser ts that the mortg ag e which w as for eclose d upon in the Michig an sale (the January 20, 2007, mortg ag e) ha s “nothing to do with the [2006] Note” and there fore , the “B ank’s ove rbid at the Michig an for eclosure by adver tisement could have no impact whatsoever on the Bank’s right to proce ed with a forec losure sale on Wisconsin real e state.” ( Appellant’s B r. at 19.)
Our re view of the rec ord re veals that the notes and mortg ag es introduced into e vidence at the h ea ri n g d o i nfa ct s u

p p o rt t h e B an k ’s p o s i t i o nt h at t h e 20 0 6 No t e wa s n o t s ec u re d b y t h e m o rt gage on the 3-40 Ac re Par cels whic h was for eclose d upon in the Michig an for eclosure sale. The J anuar y 20, 2007, mortg ag e conta ins no cross-c ollatera liz ation lang uag e, and the 2006 Note indee d identifies

on ly the Oc tob e r 1 6, 20 06 , mo rt g a g e on the Wisc on sin

Pr op e rt y a s c oll a te ra l.
Ho we ve r, Mic hig an la

w s ta te s th a t any

surp lus pr oc e e ds fr om a

fo re c los ur e sa le be lon g to th e mo rtg a g o r
. T h e M ic h ig an F o r e c lo s u r e o f M o rtg a g e s b y A d v e rti s e me n t s tatute s tate s th a t “ [i ]f af t er an y s al e o f r ea l es t at e . . . th er e sh al l re m ai n
. . . an y s u rp l u s m o n ey af t er s at i s fy i n g t h e m o rt gage . . . the surplus shall be paid ove r . . . to the mortg ag or . . . .” M. C

. L

. A. § 600.3252. And, as the bankruptc y court noted, the Ba nk’s mortg ag e upon which it f orec losed provides a s i milar require ment. “Unde r the [Michiga n] statutes, surplus proce eds are to be paid over to the mortg ag or,- 21-

even thoug h the mortg ag ee is the suc cessf ul bidder. A mortg ag ee w ho bid on the proper ty cannot

esca pe liability

to the mortg ag or on the g round that he or she bid mor e than wa s nece ssary .” 10A Michigan Pleading and Practice§ 74:46 (Thomson Reuters, 2d ed. rev. 2010). There fore , as there is n o q ue sti on that th e B ank

ov e rb id a

t th e Mic hig an f

or e c los ur e sa le , a

nd the B ank

is l e g a lly forbidden f

rom cre diting the De btor with a n amount less than its full bid at the sale, the D ebtor ha s
a ri g ht t o th e surp lus pr oc e e ds

. F. Setoff Pursuant to 11 U.S.C. § 558 Havingconclude d that the B ank is leg ally forbidden f

rom cre diting the De bto r wi th an amount less than i ts full bid at t he sale , and that it has not done so, the ba nkruptcy court found that the B ank is owed no debt, holds no “ debt” or “cla im” ag ainst the Debtor, a nd lacks standingto object to the Debtor’ s plan. There fore , the bankruptcy court de nied the B ank’s objec tion to confirmation of the De btor’s plan. The bankruptc y court e rre d, howeve r, in conc luding that the B ank lac ked sta nd ingto o bje c t to c on fi rm a tio n o f t he De bto r’ s p lan. As of

the pe tit ion

date , th e B ank

ha d a va lid Wis consin fore closure judg ment, and the Wisconsin mortga g e upon which it was based ha d not been

r e le a s e d

. A d d it io n a ll y , a s o f th e p e ti ti o nd a te , th e r e d e mp ti o np e r io d in th e M ic h ig anfore closure had not expir e d

. T h e r e f

o r e , th e B an k

te c h n ic a ll y

h a s s ta n d in g to o b

je c t t o th e D e b to r ’ s a me n d ed plan.
Neve rtheless, throug h his proposed amended chapter 13 plan, the Debtor se eks to have the Ba nk’s claim expunged (“the [ Ba nk] shall have no claim i n this case” ) bec ause the Ba nk has bee n paid in full by virtue of its bid in the Michig an fore closure sale. Additionally , he seeks to ha ve the Wis consin judg ment decla red satisfied and discharg ed. We inter pret the Debtor ’s amende d plan as seekinga setoff

of the Michig an sale cre dit bid of $413,560.27 ag ainst the Wis consin judg ment of $4 07 ,9 14 .0 4, the re by

satis fy ingthe Wisc on sin

jud g me nt.
A s et o ff i s d efine d as “[a] debtor’s rig ht to reduce the amount of a debt by any sum the

cre ditor owes the de btor; the counter balanc ing sum o we d b y the cr editor.” B LACK ’ S L AW D I C TI ONAR Y 14 96 (9 th e d. 20 09). I t “ a llo ws e nti tie s th a t ow e e a c h o the r m on e y to a pp ly the ir mutual debts ag ainst eac h other, ther eby avoiding ‘the a

bsurdity of making A pay

B w hen B owes A.’” Citi zens Bank of Md. v . Strumpf , 5 1 6 U. S

. 1 6 , 1 8 , 1 1 6 S

. C t

. 2 8 6 , 2 8 9 (1 9 9 5 ) ( qu o t i n g Studley

v. B o yl s t o n Nat. Bank , 2 29 U. S. 5 23 , 5 28 , 3 3 S. Ct. 80 6, 80 8 ( 19 13 )) . T he ri g ht o f s e tof f i sUn lik e se tof f u nd e r § 55 3, se tof

f und e r § 558 doe s not re qu ir e that the mut ua l deb ts b oth 16 be pre petition obligations. See I n re PSA, Inc

. , 2 7 7 B. R

. at 5 3 (c i t i n g In re Pape rcraft Corp. , 127 B.R. at 350)

.

- 22- rec og nized by 11 U.S.C. § 553; howe ver, that section applies only when a creditor seeks to “of fset

a mutual de bt ow ing by such cre ditor to the debtor . . . .” When the debtor is se e kin g to of fs e t a de bt, 11 U.S.C. § 558 determines setoff rig hts. NRG Options, Inc. v. R uthrauff, Inc. ( In re Ruthrauff

, Inc.) , No . 0 3- 35 73 8, 20 05 WL 14 20 76 5, *7 (B ank r. W.D . Pe nn . Jun e 16 , 2 00 5) (“ Se c tio n 5 58 fr e qu e ntl y comes into play

when a debtor in bankr

uptcy objects to a c laim filed in the ca se by a cr editor.”)

. Se c tio n 5 58 pr ov ide s:
The e state shall have the benef it of any defe nse ava ilable to the debtor as ag ainst any

enti t y o t h er tha

n the estate , including statutes of limit ations, statutes of frauds, us ury , and other persona l defe nses. A wa ive r of su c h de fe ns e by the de bto r a ft e r c omm e nc e me nt o f t he c a se does not bind the estate. This section preserve s to the Debtor defe nses, including setoff a nd rec oupment, he would have had prepe tition. e.Spire Commc ’ns, Inc

. v. Morris Plumbing & Elec. Co. ( In re e.Spire Commc’ns, Inc .) , 293 B.R. 639 (B ankr. D. Del. 2003) (holding debtor e ntitled to ex erc ise state law r ight of rec oupment

un de r § 55 8) ; In re PSA, Inc

. , 2 77 B .R. 51 (B ank r. D. De l. 2 00 2) (h old ingde bto r e nti tle d to e xer c ise st ate law r ig ht o f s e tof

f u nd e r § 55 8) ; S

e c o n d P a
. R e a l E

s t a t e C o r p
. v
. P a p e r c r a f t C o r p
. ( In re Papercraft Corp.) , 127 B.R. 346 (B ankr. W .D. P a. 1991) ( finding that either se toff or r ecoupme nt is a va ila ble a s a de fe ns e un de r § 55 8 a

nd , if es tab lis he d, re su lts in n e tti ngou t of wh a t e a c h p a rt

y owes the othe r). 16 “[A] right to setoff must be established under state law so that the debtor ma y then asser

t the setoff a s a def

ense r eser

ved b y § 5 58.” In re PSA, I nc. , 277 B.R. at 54. B oth Wi sconsin and Michig an re cog nize the rig ht to setoff. B oth states rec og nize that a party may counter claim base d upon setoff. See Wis . Stat. § 802.07(1) (“ A def endant may

counter claim any

claim which the defe ndant has a g ainst a plaintiff, upo n which a judg ment may be had in the a ction.”); M.C.L .A. § 6 0 0

. 1 1 1 ( “ T h e t e r

m ‘ c o u n t e r c l a i m , ’ a s u s e d i nt h i s a c t , i n c l u d e s s e t o f f an d r e c o u p m e n t

. ” )

. In

a dd iti on , b oth

Wisc on sin

and Mic hig an c ourt s have lon g re c og nize d a ri g ht to se tof f bo th in e qu ity and at law

. Zweck v . D.P. W ay Corp. , 234 N.W.2d 921, 925 ( Wis . 1975) (se toff is purely statutory in n a tur e ); W

isconsin M

ut. I ns. Co. v. Ma n son , 130 N.W. 2d 182, 184-85 (Wis. 1964)A s th e D e b to r ’ s r ig h t to s e to f f is a v a il a b le u n d e r e it

h e r Wi s c o n s in o r M ic h ig an la w , we 17 need not de termine which state’s substantive law applies. See Restatement (Sec ond) of Conflict of L aws § 229 , co mme nt e (“ I ssu e s whi c h do not af fe c t any int e re st in the land , altho ug h the y do re la te to the fore closure, a

re de termined .

. . by the law which g overns the de bt for which the mortg ag e wa s g iven.”)

.

- 23- (“[A]ppli cation of the principle of ‘ equitable se t-off’ is larg ely within the discre t i o n o f the trial

c ourt .” ); Piotrowski v. Czerwins ki , 120 N.W. 268 (Wi s. 1909) (equitable setoff pe rmitted whene ver jus tic e re qu ir e s it , e ve n if no t w ith in s ta tut e of

se tof fs ); W alker v. Farmers Ins. Exc h. , 572 N.W.2d 17, 19 (Mich. Ct. App. 1998) (“ Setoff is a leg al or e quitable re medy that may o ccur

when two

e nti tie s th a t ow e mon e y to ea c h o the r a pp ly the ir mut ua l de bts a g a ins t e a c h o the r .
. . . In g e ne ra l,

a bs ent a st atu tory

mand a te a

uth or izin g a

se tof f i n a pa rt ic ula r c ir c ums tanc e , s e tof

f i s a ma tte r i n equit y
. ”). A ccor dingly , under e ither state’ s law, a cour t can a llow or deny

setoff of claims as 17

c ir c ums tanc e s w arr ant.
B y vir tue of his pr op os e d ame nd e d p lan p ro vis ion , th e De bto r ra ise d set of f as a de fe ns e to the B ank’s c laim. As both Michiga n and Wis consin rec og nize the Debtor’ s rig ht to such a setoff , both at law and in e quity , we a ffirm the bankruptc y court’s conclusion that the Debtor owes the B ank nothing pur suant to the application of setoff unde r § 558. Se e W e dg e woo d Ltd. P’

sh ip I v . To wns hip ofLib e rty , O hio , 610 F.3d 340, 355 ( 6th Cir. 2010) (“We may aff irm on any

g rounds supported by the re cord e ven if differ ent from the g rounds re lied on by the [bankruptcy ] court.”). Invoking se toff is discretionary

with the bankruptc y

court. Brooks Farms v. United States Dept

. o f A g ric. ( In re Br oo k s F ar ms ) , 7 0 B. R

. 3 6 8 , 3 7 3 (B an kr. E

. D. W i s
. 1 9 8 7 ) ( ci t i n g 4 Colli er on Bankruptc y , § 553.02 at 553-11 (15th ed.)). Whil e not expressly articulating the principles of setoff as we have her e, the bankruptc y

court a ppli ed these principles to re ach its conc lusion that the Debtor owe s the Ba nk nothing, a nd in so doing, it did not abuse its discretion.
G. Relief from Stay and Objec tion to Confirmation
Under 11 U.S.C. § 362(d)(1) a party in interest may

obtain relief

from stay

by showing “ca use,” inc luding the lack of adequa te protec tion in proper

ty of such a party

in interest. “Cause ” for re l i ef fr o m stay

is not defined by

§ 362(d)( 1). Ther efor e, “c ourts must determine whe ther discretionar

y relief is appropriate on a ca se-by -ca se basis.” Lagun a A sso c s. Ltd . P ’s hip v . A e tna Cas

.- 24-

& Sur. Co. (

In re Laguna Assocs. Ltd. P’ship) , 3 0 F. 3 d 7 3 4 , 7 3 7 (6 t h C i r. 1 9 9 4 ) ( ci t i n g In re Zick, 931 F.2d 1124, 1129 ( 6th Cir. 1991)). Havingdeter

mined t h at any

challeng e to the Michig an for eclosure would be unsucc essful

un de r M i c h i g an l aw , an d t h a t , f o r a l l i n t e n t s an d p u r

p o s e s , t h e W i s c o n s i n j u d g m e n t i s s u b je c t to being satisfied by

the Debtor ’s asser

tion of setoff throug h his proposed plan, the ba nkruptcy court did not abuse i t s discretion in deny ing the Ba

nk relief from stay

to seek re versa l of the Michig an fo re c los ur e or

to c on tin ue its Wisc on sin

fo re c los ur e pr oc e e din g s. Additionally , the bankruptc y court proper ly overr uled the Ba

nk’s objection to confirmation of the De btor’s plan a s the Debtor ha s a rig ht to offse t the Michig an sale c redit bid of $413,560.27 ag ainst the Wisconsin j udg ment of $407,914.04, there by satisfying the Wis consin judg ment. The ba nk ru ptcy c ourt a c te d p ro pe rl y

to d e ny the B ank the re lie f i t so ug ht t o e sc a pe the re su lts of

its unilatera l mist ake.
H. Du e Pr oc ess
Th e B ank ra ise s a va

ri e ty of ina

pp os ite argume nts in an a tte mpt to e sc a pe the re su lts of

its unilatera l m i s take at the Michig an for eclosure sale. The Ba nk asser ts that the bankruptcy

court’s actions violated its proce dural due proce ss rig hts beca use “( 1) the Court er

red by misappl y ing the law in denying the Ba

nk’s m otion to lift the automatic stay ; (2) the Court has deprived t he B ank of its due p ro ce s s ri ghts by setting the amount of the B ank’s Wisconsin judgment to zero without providing the B ank proc ess; and (3) the Ba nk was denied its due proce ss rig ht to have ‘a meaning ful hear ing’ in front of a

neutra l arbiter.” (Appe llant’s Br . at 38.)
Procedur al due pr ocess r equire s that the B ank be a ffor ded “‘ notice and oppor tunity for hear ing a ppropriate to the nature of t he case’” befor e it s proper ty rig hts are terminated. Pittman v. Cuy ah og a Cn ty . D e

pt. of C hil dr e n a nd Fa mi ly Se rv s. , 640 F.3d 716 ( 6th Cir. 2011) (quot i n g Bell v. Burson , 402 U.S. 535, 542, 91 S. C t. 1586, 1591 (1971)). The g oal is to mini miz e the r isk of substantive err or, to assure fairne ss i n the decision-makingproce ss, and to assure that the individ u a l a f fec ted has a

participatory role in the proc ess. The touc hstone of proc edural due proc ess is the fundame ntal require ment that an indi vidual be given the opportunity to be hea rd ‘in a me aning ful manner .’Th e ba nk ru ptc y c ourt re fe rr e d to the B ank ’s c on te nti on that “ if t h i s h ad b ee n a m o rt gage 18 on Wis consin rea l estate a nd if it had for eclose d that mortg ag e judicially in Wi sconsin, then , p e rh a ps , a Wisconsin court would have saved the B ank fr om its uni latera l mist ake of overbidding by

finding that th e ‘fair valu e ’ o f t

he pr op e rt

y e xce e de d th e a mou

nt o f t he de bt u nd e r a pa rt ic ula r Wi sc on sin statute,” a s the “turnip def ense.” In re M

iller , 442 B.R. at 634. The ba nkruptcy court stated that any asser ted fra ud in the Michig an for eclosure proce dure 19 was on the part of the Ba nk which was playing “fa st a nd loose” with the proce d u re b y p u b l ishing notices of f

orec losure in Michig an which stated, despite the Wisconsin fore closure pr ocee dings, that no leg al or e quitable proc eeding s had bee n instit uted to rec over the debt sec ured by the mortg ag e.

- 25- Howard v. Grinage , 82 F.3d 1343, 1349 ( 6th Cir. 1996) (citations omitted).

I n a n atte mpt to s ho w that it

ha s b e e n d e nie d d

ue pr oc e ss, the B ank sim

ply re ha sh e s w hy

it believes the bankruptc y

court’s conclusions wer e in e rror
. Even assuming that the B ank has be en de nie d a pr op e rt y ri g ht by the ba

nk ru ptc y c ourt ’s or de r, the B ank ha s n ot b e e n d e nie d d

ue pr oc e ss. The B ank wa s awa

re tha t t h e De b t o r sought rele ase of the Wisconsin mortgag e in his amende d chapte r 13 plan. The Ba nk objected t o t h e p roposed plan and soug ht relief f rom stay . I t was

a ff or de d nume ro us op po rt

un iti e s to pr e se nt wr itt e n le g a l argume nts to t he ba nk ru ptc y c ourt , a s w e ll

as a f u ll e v id e n ti ar

y h e ar in g a t w h ic h it p r e s e n te d th e te s ti mo n y o f it s e mp lo y e e and numerous exhibi ts. The B ank also fully briefe d the i ssues in connec tion with it s motion t o dismiss the Debtor ’s

case for imprope r venue , and submitted the same exhibi ts in an evide ntiary hear ing on that motion. Simpl y asser ting that the bankruptc y court’s conclusions wer e in e rror does not de monstrate a denia l of du e pr oc e ss.
The B ank’s ove rar ching due proc ess arg ument appea rs t o be that the ba

nkruptcy court wa s not a “ne utral ar

biter.” In support of this argument, the B ank asse rts that the bankr u p t cy court mischara cter ized the fac ts, miss tated the law, and ridiculed the Ba nk when it r efe rre d to the Ba nk’s argument as a “ turnip defe nse” and stated that the Ba nk play ed “f

ast and loose” with the Michig an 18 19 fore closure pr ocedure. I t is true that a “ fair tr ial in a fa ir tribunal is a basic r equire ment of due proce ss.” Caperton v. A.T. Massey Coal Co., Inc. , 129 S. Ct. 2252, 2259 (2009) ( citations omitt ed). Ho we ve r, c ir c ums tanc e s w hic h r a ise c on sti tut ion a l du e pr oc e ss c on c e rns are or din ari ly so me financ ial interest in the outcome of the case, or a ty

pe of interest which prese nts a si tuation which would tempt the aver ag e judg e “‘not to hold the balanc e nice , clea r and true .’” Caperton, 12 9 S. Ct. at 2 2 6 1 (q u o t i n g Ae tna Life In s. Co. v . La v oie , 4 7 5 U

. S

. 8 1 3 , 1 0 6 S

. C t

. 1 5 8 0 ( 1 9 8 6 ) )

. O r d i n a r i l y,- 26-

persona l bia s or prejudice is a lone not a cause for constitutional due proce ss c oncer ns. Se e Lav oie , 475 U.S. at 820-21 (g ener al frustra tions of jud ge t o wa rd insurance companies a nd alleg ations of resulting bias and pre

judice insuffic ient to establish constituti onal viola ti o n )

. T h e B a

nk ’ s alleg ations of l ack of neutra lity

do not rise to the level of a constitutional conce rn. Se e Lite k yv . U nit e d S tat es, 5 1 0 U

. S

. 5 4 0 , 5 5 0

- 5 6 , 1 1 4 S

. C t

. 1 1 4 7 , 1 1 5 4

- 5 8 ( 1 9 9 4 ) ( e xp l a i n i n g j u d i c i a l r u l i n g s a re no t va lid ba sis to sho w bia s o r p art ia lity ; r uli ng s are g ro un ds fo r a

pp e a l no t r e c us a l; “

Not establishing bia s or partiality , howeve r, are expressions of impatience , dissatisfaction, annoy ance , and eve n ang er, that

are within the bounds of what imper fec t men and women, e ven af ter having be en conf

irmed as fede ral judg es, sometimes display .”). The Ba nk has not asser

ted that the bankruptc y

court ha d any fi na nc ia l in te re st i n th e ou tc ome of the c a se , o r a ny thi ngbe y on d, pe rh a

ps , a g e ne ra l f ru str a tio n w ith the B ank.
Wit hout question, the bankruptcy court provide d the B ank with m o re t h an sufficie nt due proce ss. E vidence of this due proce ss is found in the transcr ipt of the evidentiar y hear ing he ld by the bankr uptcy court, a s well as in the bankr uptcy court’s thoroug h published opinion.

V. CO NC LU SION
The Bank made a unilatera l mistake by bidding the e ntire amount owe d to it by the Debtor

a t th e Mic hig an fo re c los ur e sa le

. I t is re qu ir e d b y Mic hig an la

w t o p ay , o r c re dit , th e De bto r t he fu ll

a mou nt o f i ts b id. Th e B ank

ha s c on c e de d that the a mou nt bid wa s the e nti re a mou nt o we d, a nd

it has, t he r e f

o r e , b e e np a id

in f u ll

. Pur s u an t t o 1 1 U

. S. C. § 5 5 8 , th e D e b to r is e n ti tl e d

to o f f s e t t he Michig an sale cre dit bid of $413,56 0

. 2 7 ag ainst the Wisconsin j udg ment of $407,914.04, there by satisfying the Wis consin judg ment. As such, the De btor no long er ow es the Ba nk any money , and the bankr uptcy court did not abuse its discr etion in de ny ing the Ba nk relief from stay

to seek to set asi d e the Michig an for eclosure sale a nd to proce ed with executing on its W isconsin forec losure judgme nt. I n addition, while the bankr uptcy court tec hnically

err ed in over

ruling the B ank’s ob je c tio n to c on fi rm a tio n of the De bto r’ s Am e nd e d Plan fo r la c k of sta nd ing , su c h e rr or is h arm le ss beca use consider ation of t he merits of t he objection would also result i n overr uling the objection as the De bto r i s e nti tle d to e ff e c t a se tof f un de r his pr op os e d pla

n. Th e re fo re , th e ba

nk ru ptc y c ourt did not err in ove rruling the B ank’s objec tion to confirmation of the De btor’s Amende d Plan.
For the fore g oing r easons, the or der of the bankr uptcy court is AF FI RMED.