Opinion
21-10094
12-02-2021
In Re SAMUEL A. MALONE, JR. Debtor(s)
Default List Plus, Adam J. Turer, Esq.
This opinion is not intended for publication or citation.
Chapter 13
Default List Plus, Adam J. Turer, Esq.
MEMORANDUM OPINION DENYING CREDITOR BRIDGEWELL CAPITAL'S MOTION TO DISMISS [DOCKET NUMBER 55]
Beth A. Buchanan United States Bankruptcy Judge
This matter is before this Court on the Motion and Notice of Creditor Bridgewell Capital LLC to Dismiss [Docket Number 55]; Debtor Samuel A. Malone Jr.'s Response [Docket Number 65] and Bridgewell Capital LLC's Reply [Docket Number 66]. At issue is whether the creditor has sustained its burden of proving that the debtor's chapter 13 case should be dismissed for cause based on a lack of good faith.
An evidentiary hearing was held on September 15, 2021. Following the hearing, the parties filed briefs in accordance with a court ordered schedule and the matter is now ripe for determination. The following constitutes this Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.
I. JURISDICTION
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a) and 1334, and the standing General Order of Reference in this District. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A).
II. FACTS
A. Urban Strategies' Purchase of the Property with Financing from Bridgewell
In 2009, Debtor Samuel A. Malone, Jr. ("Mr. Malone") formed Urban Strategies & Solutions Group, LLC ("Urban Strategies"), a consulting firm that contracted with public sector entities including Cincinnati public schools and the Cincinnati Metropolitan Sewer District ("MSD"). Mr. Malone was the sole member of Urban Strategies.
In March of 2018, Urban Strategies purchased a residential investment property at 850 Lincoln Avenue in Cincinnati, Ohio (the "Property") for $210,000 from Global Wealth Investments, Inc. [Docket Number 77-1, Ex. A. (Addendum sand Second Addendum to Purchase Contract)]. To help finance the purchase by Urban Strategies, Mr. Malone sought out a lender that could close the deal quickly. He landed on Bridgewell Capital, LLC ("Bridgewell") because the lender advertised that it could close in 10 days.
Bridgewell is a lender that lends to business entities, such as LLCs and corporations, for the purchase of residential properties used as rentals or investment properties. Mr. Malone emailed Bridgewell Senior Account Executive John O'Leary ("Mr. O'Leary") to inquire about Bridgewell's loan programs in August of 2017. Mr. O'Leary emailed Mr. Malone an application as well as a summary of the loan programs that Bridgewell offers, such as a two-year fixed 12.99% interest rate loan called the "Fix and Flip Loan," a two-year fixed 9.99% interest rate loan called the "Rental Bridge Loan," and a more conventional 20 or 30 year "Landlord Perm Loan" with an interest rate between 6.55% and 8.6% depending on LTV and credit [Docket No. 78, Ex. 4]. The summary provided to Mr. Malone includes this statement: "If you are buying a rental property that needs rehab, we can close you in our 2-year Rental Bridge Loan and then convert your loan into our 20- or 30-year Landlord Perm Loan once your rehab is completed." [Id.]
The parties presented no other evidence of contact between Mr. Malone and Bridgewell until March of 2018. According to Mr. Malone's testimony, he contacted Mr. O'Leary in early March of 2018 regarding Urban Strategies' ability to obtain financing through Bridgewell. Mr. O'Leary was adamant that Urban Strategies would be able to close quickly on what Mr. Malone characterized as a rehab flip loan and then convert it to the permanent landlord loan with better terms which is what Bridgewell advertises. Mr. Malone testified that, at the time he spoke with Mr. O'Leary, his credit score was good, close to 700, which he thought would help facilitate the conversion. On March 7, 2018, Mr. Malone signed a loan questionnaire [Docket Number 77, Ex. A] which, according to his testimony, he submitted to Bridgewell on March 17, 2018 along with other documents which the lender required for review.
The loan documents reveal that Urban Strategies received two loans from Bridgewell, totaling $152,650 and $19,350 respectively, through two promissory notes dated April 3, 2018 [Id., Ex. B (two notes labeled "Promissory Note for Investment Real Estate")]. The two loans bore fixed interest rates of 9.95% and 12.95%, respectively. Significantly, both loans were short-term. The $152,650 loan had a maturity date of April 3, 2020 and the $19,350 loan had a maturity date of October 3, 2019. Upon reaching the maturity dates, the entire principal balance of the notes and all accrued unpaid interest was to become due and payable. The promissory notes were signed on behalf of Urban Strategies by Mr. Malone as its member. Mr. Malone also signed a personal guaranty of Urban Strategies obligations to Bridgewell [Id. ("Guaranty Agreement")].
Bridgewell includes two Guaranty Agreements in its Exhibit B [Docket Number 77]. However, the two agreements have the same date and principal amount of the loan. No explanation was provided by Bridgewell as to any differences in these agreements and, thus, this Court considers them to be duplicates.
As part of the financing transaction, Urban Strategies granted Bridgewell a first and second mortgage on the Property [Id.] The "First Mortgage and Security Agreement" and the "Second Mortgage and Security Agreement" executed by Urban Strategies each had 48 "Sections" including a Section 13 titled "Disposition of Mortgaged Property: Liens and Encumbrances" which states, in part:
[Id.] Like the other loan documents, the mortgage agreements were signed by Mr. Malone on behalf of Urban Strategies [Id.].Mortgagor shall not sell, convey, assign, transfer, lease, or dispose of all or any part of the Mortgaged Property, or any interest therein, or enter into any agreement for any of the foregoing, in each case without the prior written consent of Mortgagee which consent may be granted or withheld in the sole and absolute discretion of the Mortgagee.
B. Attempt to Convert Short-Term Loans to Permanent Landlord Loans
Following the closing of these short-term loans, Mr. Malone went back to Bridgewell to convert the loans into permanent financing. Mr. Malone first made a written request on May 17, 2018 and John O'Leary responded with a list of documents required for loan approval [Docket No. 76, Ex. 3 (email exchange), pp. 1-2]. In June 1 and June 4, 2018 emails, Mr. Malone provided a completed 1003 and copies of the leases for the Property and inquired about the length of the approval process. In response, Mr. O'Leary noted that the loan process takes approximately 45 days [Id., pp. 2-5].
Bridgewell moved office locations on July 1, 2018. After the move, Mr. Malone followed up with Mr. O'Leary on July 11, 2018 to check on the status of his loan application noting that the application had been completed in May. Mr. O'Leary responded that same day that he did not handle "refi's/mods" but would follow up with the processor handling it [Id., p. 11]. Mr. Malone contacted Mr. O'Leary again by email on July 17, 2018 noting that it had been more than two months since he completed the application, that he has not heard a word regarding his refi, and it was now costing him money [Id., p. 10]. Mr. O'Leary again responded that he does not handle refi's but only new loans so there is "not a whole lot I control" but that he can check in with the processor "if you would like to see if they have an update." [Id.]. He also offered to waive the prepay "if you have someone else to refi it for you." [Id.]
It appears from the email record, that the required documents may not have been fully submitted until early June of 2018.
Mr. Malone also attempted to reach other employees of Bridgewell for help with updates on the progress of his application. On July 27, 2018, Mr. Malone contacted Mr. William Campbell in Bridgewell's accounting department [Id., p. 14-15]. Mr. Campbell responded that he would let the underwriting department know to see who Mr. Malone should contact [Id.]. Mr. Malone followed up with Mr. Campbell again on July 31, 2018, noting that he has still not heard from anyone. [Id., p. 18]. Mr. Campbell responded that, going forward, Mr. Malone should email Amber at Bridgewell regarding the refi and "That's all I can really say." [Id.] On that same date, August 1, 2018, Mr. Malone emailed Amber requesting to know when his refi would close [Id., p. 17]. No party presented any evidence of a response from either Amber or Mr. Campbell after this email.
After about six months, Mr. Malone testified that Bridgewell stopped returning emails and calls he made, and he never received an acknowledgment from Mr. O'Leary or any other employee at Bridgewell of either the approval or denial of his loan application for permanent financing.
Mr. Malone made one last inquiry to Mr. O'Leary about converting to a 30-year fixed loan on February 7, 2019 [Docket Number 76, Ex. 3, p. 20-21]. Mr. O'Leary responded by asking about Mr. Malone's current credit score [Id.]. The parties had no further evidence of any other follow-up emails or phone conversations following that exchange.
Ms. Spencer Putnam ("Ms. Putnam"), Senior Vice-President of Operations at Bridgewell, acknowledged that Mr. Malone submitted an application requesting refinancing on May 17, 2018, but testified that Urban Strategies did not meet Bridgewell qualifications to convert the loan. She noted that Mr. Malone's personal credit score would have had to be a minimum of 620, but that his was 509. She testified that Urban Strategies was also late on payments and that the Property was not rented which was another requirement for conversion. Furthermore, she stated that Bridgewell required between six and twelve months of timely payments before a conversion is granted. While confirming that Urban Strategies was not qualified for the permanent financing requested, Ms. Putnam acknowledged that she had no documentation that Bridgewell ever communicated to Mr. Malone that his application for permanent financing had been denied.
Although the credit report was not admitted into evidence, the parties agreed that as of Mr. Malone's September 26, 2018 credit report, his credit score was 509 according to Experian and 598 according to Trans Union.
C. Business, Personal and Financial Difficulties
Around the time that Urban Strategies purchased the Property, the company began experiencing financial difficulties. For years, Urban Strategies had developed a good reputation and was able to procure minority contracts in the public sector. However, problems with the MSD project along with what Mr. Malone characterized as a political shift caused a loss of that contract and litigation that damaged Urban Strategies' reputation with negative press. Between these events as well as the COVID pandemic, Urban Strategies' contracts dried up.
Mr. Malone further discovered problems with the Property that he was not aware of when it was purchased including roof, box gutter and water intrusion issues. He believed these issues arose from an inadequate rehab by the City of Cincinnati prior to the Property being acquired by Global Wealth, the entity from which Urban Strategies purchased the Property. These issues, some of which are ongoing, were costly to repair and made retaining tenants difficult early on.
In addition to Urban Strategies' decline in business and the problems with the Property, Mr. Malone's mother's health deteriorated due to an injury in 2017 and what was eventually diagnosed as ALS / Lou Gehrig's disease. She was in the hospital as well as a nursing home and lived with Mr. Malone for a time while requiring significant care all of which took an emotional toll on him. She passed away in May of 2020.
D. Foreclosure and Transfer of the Property
With the loss of its contracts, Urban Strategies was insolvent and no longer in a position to make payments to Bridgewell. According to Ms. Putnam's testimony and Bridgewell's loan history [Docket number 77, Ex. E], several of Urban Strategies' payments "bounced" in July, August, and September of 2018 as well as April, May, and June of 2019. Bridgewell filed a foreclosure action against Urban Strategies and Mr. Malone in Hamilton County in late 2019 followed by the filing of a motion for summary judgment in the foreclosure action in July of 2020. While the defendants filed an answer in the foreclosure action [Docket Number 79, Ex. F], they did not respond to the motion for summary judgment. On November 10, 2020, the state court granted Bridgewell a judgment entry, decree of foreclosure and ordered the sale of the Property [Docket Number 77, Ex. C].
Shortly after Bridgewell filed a motion for summary judgment in the foreclosure action, Urban Strategies, through its sole member, Mr. Malone, executed a Quit Claim Deed on July 24, 2020 conveying the Property from Urban Strategies to Mr. Malone individually [Id., Ex. D, p. 3]. The conveyance was recorded in August of 2020. Urban Strategies did not request consent from Bridgewell prior to the transfer and Ms. Putnam testified that, had the request been made, Bridgewell would not have consented.
Mr. Malone testified that the reason for the transfer was because Urban Strategies' financial difficulties made it impossible for the business to continue making payments on the loans. In addition, Mr. Malone had become convinced that Bridgewell was never going to convert the loans to permanent landlord financing which, because of the better terms, would have saved him approximately $800 per month. Consequently, once the foreclosure was filed, Mr. Malone caused the conveyance of the property to find a way to service the debt himself. Mr. Malone further testified that he did not realize at the time of the transfer that the loan documents contained a provision that prohibited such a transfer without the written consent of Bridgewell.
E. Bankruptcy Filings and the Proposed Treatment of Bridgewell's Claim
Mr. Malone filed his chapter 13 bankruptcy petition on January 15, 2021, five days prior to the scheduled sheriff sale of the Property. The filing was not Mr. Malone's first bankruptcy case. He filed a prior chapter 13 case in 2012 which he completed and received a discharge. He also filed a chapter 7 case in 2008 in which he received a discharge and filed two chapter 13 cases in 2009 that were dismissed.
In his current case, Mr. Malone filed a proposed chapter 13 plan that was most recently amended on July 27, 2021 (the "Plan") [Docket Number 63]. Mr. Malone's Plan proposes to pay Bridgewell's first loan in full up to the value of the Property securing the loan with interest at a rate of 4.75% [Id., ¶ 5.1.2(A)]. The Plan lists the value of the Property, and thus the amount to be paid in full, as $153,000. The remaining balance, approximately $102,691.92 according to Bridgewell's Payoff Statement dated July 15, 2021 [Docket Number 77, Ex. E], is to be treated as a general unsecured claim [Docket Number 63, ¶5.1.2(A)]. The Plan further proposes to avoid Bridgewell's second mortgage lien and treat the claim related to the second loan as wholly unsecured [Id., ¶ 5.4.1]. The Plan provides that general unsecured claims, including those of Bridgewell, will be paid approximately 1% of the value of the claims over the life of the Plan.
At the hearing, Mr. Malone testified that he is taking actions to ensure that his current chapter 13 filing is successful and that Bridgewell is paid the full value of its collateral. He noted that the Property is fully rented and the rents to date have given him the cash flow to make the payments required by the Plan. He is currently paying $6,850 per month into the plan and has paid over $50,000 to date. In addition, Mr. Malone completed his Bachelor of Arts degree in political science at Xavier University in August of this year. He believes his degree will gain him better employment, aided by his status as a disabled veteran, and will lead to increased income. He remains confident in his ability to complete payments under the Plan.
III. LEGAL ANALYSIS
A. Standard for Dismissal of a Chapter 13 Bankruptcy Case for Bad Faith
Bankruptcy Code Section 1307(c) provides for dismissal of a chapter 13 case "for cause." 11 U.S.C. § 1307(c). Although not specifically enumerated as such in Section 1307(c), a debtor's lack of good faith has been determined to be cause to dismiss a case. See Marrama v. Citizens Bank of Mass., 549 U.S. 365, 373-75 (2007) Alt v. United States (In re Alt), 305 F.3d 413, 418- 19 (6th Cir. 2002) (noting there is abundant authority to support dismissing a chapter 13 case that is not filed in good faith under § 1307(c)); Cusano v. Klein (In re Cusano), 431 B.R. 726, 735 (B.A.P. 6th Cir. 2010).
The Supreme Court has not articulated what constitutes a lack of good faith warranting dismissal, although it has noted that such dismissals should be limited to "extraordinary cases." Marrama, 549 U.S. at 375 n.11. Also significant to the analysis, the Supreme Court has noted that dismissal for bad faith is a "harsh" remedy that bankruptcy courts should be reluctant to impose, noting the statutory and less punishing alternative provided to creditors to object to confirmation of a chapter 13 plan for bad faith under Section 1325(a)(3). Id. (citing In re Love, 957 F.2d 1350, 1356 (7th Cir. 1992)); Alt, 305 F.3d at 420.
While the guidance from the Supreme Court is limited, the Sixth Circuit has provided extensive guidance noting that, in determining whether a petition has been filed in bad faith, "[t]he key inquiry . . . is whether the debtor is seeking to abuse the bankruptcy process." Alt, 305 F.3d at 419. The Sixth Circuit approves of a "totality of the circumstances" test that include some of the same factors relevant in determining whether a chapter 13 plan has been proposed in good faith. Id. at 419. Those factors include:
(1) the debtor's income;
(2) the debtor's living expenses;
(3) the debtor's attorney's fees;
(4)the expected duration of the Chapter 13 plan;
(5) the sincerity with which the debtor has petitioned for relief under Chapter 13;
(6) the debtor's potential for future earning;
(7) any special circumstances, such as unusually high medical expenses;
(8) the frequency with which the debtor has sought relief before in bankruptcy;
(9) the circumstances under which the debt was incurred;
(10) the amount of payment offered by debtor as indicative of the debtor's sincerity to repay the debt;
(11) the burden which administration would place on the trustee;
(12) the statutorily-mandated policy that bankruptcy provisions be construed liberally in favor of the debtor.Id.
In addition to these, the Sixth Circuit cites factors recognized in other circuits to determine whether a debtor's chapter 13 petition has been filed in good faith including:
Id. (citing Love, 957 F.2d at 1357); Condon v. Smith (In re Condon), 358 B.R. 317, 325 (B.A.P. 6th Cir. 2007). Ultimately, good faith "is a fact-specific and flexible determination." Id. (citing Metro Employees Credit Union v. Okoreeh-Baah (In re Okoreeh-Baah), 836 F.2d 1030, 1032- 33 (6th Cir.1988)); see also Condon, 358 B.R. at 325 (noting that the factors to determine good faith in filing the petition and good faith in proposing a plan overlap to some extent and that "both tests are designed to detect abuses of the provisions and spirit of chapter 13"). The movant seeking dismissal carries the burden of proving that the case was not filed in good faith. Alt, 305 F.3d. at 420.the nature of the debt, including the question of whether the debt would be nondischargeable in a Chapter 7 proceeding; the timing of the petition; how the debt arose; the debtor's motive in filing the petition; how the debtor's actions affected creditors; the debtor's treatment of creditors both before and after the petition was filed; and whether the debtor has been forthcoming with the bankruptcy court and the creditors.
B. Factors Applied to Mr. Malone's Bankruptcy Filing
In this case, many of the factors cited by the Sixth Circuit point to Mr. Malone's good faith in his dealings with creditors even in the face of financial challenges. Mr. Malone testified to having a good credit score, near 700, until Urban Strategies lost its business contracts due to a combination of the economy, COVID, negative press, and other issues associated with one of its projects. It is these outside events, rather than bad faith conduct, that caused Mr. Malone's finances to crumble and Urban Strategies to be unable to continue to service the debt to Bridgewell.
In an effort to save what Mr. Malone thought would be $800 a month, and in line with the process that Bridgewell advertises, Mr. Malone applied to convert the short-term loans with Bridgewell to permanent landlord financing with better terms in May of 2018. Upon submitting the loan application, Mr. Malone was informed by Mr. O'Leary at Bridgewell that the application process takes 45 days. Mr. Malone made repeated requests to Mr. O'Leary and other employees at Bridgewell for the status of his loan application over the next three to six months. While Bridgewell ultimately did not grant the loan application, Mr. Malone's diligent attempt to convert the loans to more manageable financing with Bridgewell also demonstrates good faith.
Since his January bankruptcy filing, Mr. Malone has continued to proceed in good faith towards his creditors. No party disputes the veracity of Mr. Malone's disclosures in his petition and schedules and his testimony at the hearing was transparent and credible. He proposes a chapter 13 Plan that includes paying Bridgewell the full value of its collateral, in line with provisions of the Bankruptcy Code. See 11 U.S.C. § 1322(b)(2) and § 1325(a)(5). Mr. Malone demonstrates sincerity by diligently making his monthly plan payments, totaling over $50,000 to date, much of which would be turned over to Bridgewell in accordance with the Plan's provisions. Furthermore, with an eye to the future, Mr. Malone recently completed his bachelor's degree intending to utilize the degree to increase his income and support the successful completion of his chapter 13 plan.
Balanced against these factors, Bridgewell points to three facts to support a lack of good faith. The first is Mr. Malone's multiple bankruptcy filings. The second is the timing of Mr. Malone's bankruptcy filing five days before the scheduled sheriff sale of the Property, which Bridgewell characterizes as an attempt to thwart and delay the foreclosure process. The third is the July 24, 2020 transfer of the Property subject to Bridgewell's security interest from Urban Strategies to Mr. Malone without the consent of Bridgewell and in contravention of the terms of the mortgages after Bridgewell started foreclosure proceedings.
B.R. 665 (Table), 2012 WL 2329051, at *11 (B.A.P. 6th Cir. Apr. 9, 2012) (noting that lis pendens does not prevent the transfer of property while a foreclosure proceeding is pending although the debtor takes the property subject to the judgment lien and, if the foreclosure action has not proceeded to the sale of property at the time of a debtor's bankruptcy filing, the property becomes part of the debtor's bankruptcy estate). The Walker decision does not provide guidance on whether such a transfer in violation of a mortgage agreement could support a determination of bad faith and is, thus, not relevant to this Court's current inquiry. Mr. Malone raises the Sixth Circuit decision of Walker v. Detwiler to support the validity of the transfer of the Property. 110 F.2d 154 (6th Cir. 1940). Walker, decided under the Bankruptcy Act, holds that a pending foreclosure proceeding and lis pendens do not prevent the transfer of real property to a debtor nor do they prevent the property from becoming property of the estate upon the debtor's bankruptcy filing. Id. at 155-56; see also In re Webb, 472
Bridgewell is correct that such facts are "probative" and may support a finding of bad faith when combined with other factors. See Cusano, 431 B.R. at 735 (noting that a history of multiple filings and filing on the eve of foreclosure are not necessarily an indication of bad faith but are probative); In re Glenn, 288 B.R. 516, 520 (Bankr.E.D.Tenn. 2002) (concluding that the debtor's filing of three bankruptcy cases in less than two years all on the eve of foreclosure along with facts indicating a lack of intent to follow through with the current case including a failure to attend the 341 meeting, a failure to initiate payments to the trustee, and his twenty-three-month arrearage to the mortgage creditor, supported an abuse of the bankruptcy process and dismissal). However, they are insufficient to establish bad faith in the case at hand.
While Mr. Malone filed four prior bankruptcy cases, none was filed recently. His most recent case was a chapter 13 bankruptcy case filed in July of 2012 that Mr. Malone successfully completed and received a discharge. Given the length of time between his previous case filings and Mr. Malone's current case, as well as the successful completion of the last chapter 13 bankruptcy case filed, this Court concludes that these prior bankruptcy filings do not support a finding of bad faith.
Turning to the timing of the bankruptcy petition filing only five days before the scheduled sheriff sale, such timing indicates that the bankruptcy case was filed to stop the sale. Certainly this fact would be an indicator of bad faith if the bankruptcy case was filed solely to delay the inevitable sale of the property. However, many bankruptcy cases are filed following the initiation of foreclosure proceedings in a valid attempt to reorganize, keep the property, and pay the secured debt in accordance with the Bankruptcy Code's provisions. In re Anderson, 631 B.R. 417, 424 (Bankr. S.D. Ohio 2021) (noting that a foreclosure sale "is most frequently the final impetus for a debtor to file a bankruptcy reorganization case, and this Court cannot impute bad faith based upon this timing"). In this case, Mr. Malone indicates his good faith intent to reorganize by proposing a chapter 13 plan that will pay Bridgewell the value of its collateral and by diligently making the monthly plan payments required to succeed in this endeavor.
The final "bad faith" fact raised by Bridgewell, the transfer of the Property, on its face is troubling as it implies an intent to circumvent payment of a valid obligation. The evidence in this case, however, refutes that implication. Mr. Malone credibly testified that, prior to the transfer, he had become increasingly frustrated with Bridgewell's failure to process and provide him updates on his loan application for permanent landlord financing. As time passed, Urban Strategies became unable to service the debt after the loss of its business contracts and eventually became a defunct entity. Consequently, Mr. Malone caused the Property to be transferred to himself. Mr. Malone testified that he was unaware of the mortgage provisions prohibiting such a transfer. He further testified that he did not effectuate the transfer in an effort to defraud or knowingly harm Bridgewell, but in an effort to service the debt to Bridgewell himself, an effort he continues in this bankruptcy case.
Mr. Malone's frustration in this regard is understandable. Upon submitting the loan application to Mr. O'Leary, the same Bridgewell employee Mr. Malone worked with in procuring Urban Strategies' short-term loans, Mr. Malone was informed that the loan application process would take 45 days. Records of emails admitted as evidence and Mr. Malone's testimony establish that he diligently followed up with Mr. O'Leary and at least two other Bridgewell employees over the next three to six months to determine whether his application would be granted. Although Bridgewell's Senior Vice-President of Operations testified that Urban Strategies did not qualify for the permanent landlord financing requested, Bridgewell provided no evidence that this information was ever communicated to Mr. Malone amid his repeated requests for updates on the status of the loan application.
Based on Mr. Malone's credible testimony, this Court concludes that Mr. Malone did not cause the transfer to occur with the intent to harm Bridgewell's security interest. Instead, Mr. Malone transferred the Property from Urban Strategies to himself in an attempt to service the debt to Bridgewell, a debt for which he was personally liable based on his personal guaranty. Mr. Malone's intent stands in contrast to cases such as Gundrum where the transfer of collateral without the secured creditor's consent was done with the intent to harm the secured creditor. See In re Gundrum, 509 B.R. 155, 165 (Bankr. S.D. Ohio 2014) (alleging that debtor's company transferred the property to the debtor to avoid having the property immediately revert to the creditor under the terms of a state court consent judgment).
Upon consideration of the totality of the circumstances, including Mr. Malone's dealings with Bridgewell, this Court concludes that Bridgewell failed to prove Mr. Malone's bankruptcy petition was filed in bad faith such as to warrant the harsh remedy of dismissal of this chapter 13 case.
At the hearing and in its post-hearing briefing [Docket Number 84], Bridgewell argues that Rooker-Feldman prevents Mr. Malone from collaterally attacking the validity of the foreclosure judgment or requesting that this Court reverse it. Bridgewell is correct that the Rooker-Feldman is a jurisdictional doctrine that prevents federal review, including bankruptcy court review, of state court judgments. Isaacs v. DBI-ASG Coinvestor Fund, III, LLC (In re Isaacs), 895 F.3d 904, 912 (6th Cir. 2018); Miller v. Johnson (In re Miller), 626 B.R. 503, 509 (Bankr. S.D. Ohio 2021) (noting that the Rooker-Feldman doctrine "generally provides that lower federal courts may not engage in appellate review of state-court decisions"). However, the Rooker-Feldman doctrine does not prevent a bankruptcy court from granting relief under the provisions of federal bankruptcy law that does not challenge the validity of the state court judgment. Isaacs, 895 F.3d at 914-15. This Court concludes that neither Bridgewell's motion to dismiss nor Mr. Malone's defense challenges the validity of the foreclosure judgment, so Rooker-Feldman is not relevant to the inquiry.
IV. CONCLUSION
For the reasons set forth in this opinion, the Motion and Notice of Creditor Bridgewell Capital LLC to Dismiss [Docket Number 55] is DENIED.
In its closing argument, Bridgewell requests that, as an alternative to dismissing the case, this Court grant Bridgewell relief from the automatic stay. Such relief must be requested by filing a motion that meets the requirements of Local Bankruptcy Rule 4001-1. Bridgewell's request does not meet these procedural requirements and is denied, without prejudice.
SO ORDERED.