Wells Fargo Bank, N.A. v. Jones
| Decision Date | 01 July 2008 |
| Docket Number | Adversary No. 06-01093.,Bankruptcy No. 07-3599.,Bankruptcy No. 03-16518. |
| Citation | 391 B.R. 577 |
| Parties | WELLS FARGO BANK, N.A., f/k/a Wells Fargo Home Mortgage, Inc. v. Michael L. JONES. |
| Court | U.S. District Court — Eastern District of Louisiana |
This consolidated matter comes before the Court on appeal from the Bankruptcy Court. Wells Fargo Bank, N.A. f/k/a Wells Fargo Home Mortgage, Inc. ("Wells Fargo") has filed eight (8) Notices of Appeal, or Motions Seeking Leave to Appeal in this matter.1 In the interests of judicial efficiency, the Court has consolidated these appeals, and asked the parties to submit omnibus briefs addressing all of the issues raised in the individual appeals.2 Having considered the parties briefs, exhibits and the applicable law, the Court AFFIRMS IN PART, AND REVERSES IN PART the Bankruptcy Court's rulings.
On August 26, 2003, this matter originated in Bankruptcy Court when Michael L. Jones, the debtor-appellee ("Jones"), filed for Chapter 13 relief. Jones's bankruptcy petition automatically stayed Wells Fargo's pending mortgage foreclosure action. However, Wells Fargo did not dismiss the foreclosure suit.3 As part of the bankruptcy action, Wells Fargo filed a proof of claim reflecting pre-petition arrearage of $22,259.69.4 Jones's Chapter 13 plan provided that Jones was to make all future monthly mortgage payments directly to Wells Fargo, while a Chapter 13 Trustee was to make payments on Wells Fargo's pre-petition arrearage claim. In addition, the plan provided for 100% payment to all unsecured creditors. The plan was confirmed by the Bankruptcy Court on October 28, 2003.
On November 1, 2003, Jones suffered a heart attack and missed payments both to the Trustee under the plan and mortgage payments to Wells Fargo. The Bankruptcy Court extended the term of Jones's plan by three months to compensate for the missed plan payments. In addition, and under a Consent Order with Wells Fargo, Jones agreed to pay $9,348.22 directly to Wells Fargo to cure the post-petition default on his mortgage.5 Following the Consent Order, Jones made payments to both the Trustee and Wells Fargo; the Trustee forwarded payments to Wells Fargo to cover the pre-petition arrearage.
In the summer of 2005, Jones requested authorization to refinance his mortgage. Jones attempted to use the equity in his house to satisfy his debt to Wells Fargo and all of his unsecured creditors.6 Due to Hurricane Katrina, a hearing on the motion to refinance the debt was not held until November 15, 2005. On December 7, 2005, the Bankruptcy Court approved Jones's request to refinance. On December 15, 2005, Jones requested a payoff statement of the amounts due to Wells Fargo. On January 3, 2006, Wells Fargo faxed an itemized payoff statement, indicating a payoff balance of $231,463.97.
Jones asserts that he disagreed with the amount listed on the payoff statement, specifically the $6,741.67 for Sheriffs Commissions. Yet, the new loan could not be closed without a release of the Wells Fargo mortgage, and the mortgage would not be released by Wells Fargo unless it received its payoff demand. Thus, Jones remitted the entire $231,463.97 to Wells Fargo, even though this left insufficient funds to satisfy Jones's remaining obligations under his plan.
After closing, Jones received a letter from Wells Fargo, dated January 12, 2006, indicating that Wells Fargo had collected sums in excess of the amount necessary to satisfy the debt, and that Wells Fargo would refund Jones's overpayment in about 15 days.7 Jones did not receive reimbursement within 15 days. On March 30, 2006, Jones filed an adversary action against Wells Fargo to recover the overpayment. On April 20, 2006, Wells Fargo deposited $7,598.64 in the registry of the Bankruptcy Court pending the outcome of the adversary proceeding. Following a trial, the Bankruptcy Court found that Wells Fargo misapplied funds between pre- and post-petition debts, which violated the terms of Jones's plan.
In a "Memorandum Opinion" dated April 13, 2007, the Bankruptcy Court held that Wells Fargo erred by: (1) miscalculating pre-petition debt; (2) assessing additional pre-petition charges, without amending the proof of claim; (3) miscalculating post-petition debt by misallocating payments to pre- and post-petition debt, thereby increasing interest charges over the life of the plan; (4) assessing unauthorized post-petition fees and charges.8
Based on these findings, the Bankruptcy Court concluded that Wells Fargo violated the Bankruptcy Code's automatic stay. In re Jones, 366 B.R. at 600. Furthermore, the Bankruptcy Court held that Jones was entitled to recover "actual damages" under § 362(h) of the Bankruptcy Code.9 Finally, the Bankruptcy Court scheduled a subsequent hearing to determine the appropriateness of sanctions against Wells Fargo. Id. at 604.10
On April 23, 2007, Wells Fargo filed a motion to reconsider the Judgment. The Bankruptcy Court denied the motion to reconsider on May 1, 2007. In re Jones, 2007 WL 1302549 (Bkrtcy.E.D.La.2007). Specifically, the Bankruptcy Court found no grounds for reconsideration because "the application of estate property to undisclosed fees and charges was an unrefuted fact." Id. at *2.
Wells Fargo filed a Notice of Appeal from the April 13, 2007 "Judgment" with this Court on May 10, 2007.11 Yet, proceedings continued in the Bankruptcy Court. On May 29, 2007, the Bankruptcy Court conducted an evidentiary hearing to determine whether sanctions were appropriate against Wells Fargo. At the hearing, counsel for Wells Fargo represented that Wells Fargo was willing to enter into a Consent Order regarding a change in their business and accounting practices to ensure that other debtors would be properly treated, in lieu of punitive damages.12 However, Wells Fargo's consent to enter a Consent Order is an issue on appeal.
Wells Fargo filed a Motion to Submit Additional Evidence or Reopen the Evidence on July 24, 2007.13 In the Motion to Reopen, Wells Fargo argued that the April 13, 2007 Judgment was a final judgment, but that they should be allowed to submit a payoff statement, dated July 21, 2005, to contradict part of Jones's testimony at the trial. Specifically, Wells Fargo claimed that the July 2005 payoff statement would undermine Jones's testimony regarding the date that Wells Fargo provided the payoff information. The Bankruptcy Court denied the Motion to Reopen, holding that evidence regarding the date on which the payoff letter was transmitted would provide, "at best," minimal probative value of the underlying sanctionable conduct: the misapplication and miscalculation of payments, fees, and charges.14
On August 13, 2007, Wells Fargo filed a Motion to Vacate the Judgment.15 Wells Fargo argued that Jones failed to disclose a pending lawsuit against the maker of Vioxx in violation of the debtor's duty to notify the court of any pending or potential lawsuit in which the debtor was a plaintiff.16 On that basis, Wells Fargo asserted that the April 13, 2007 Judgment must be vacated, and that all claims against Wells Fargo be dismissed. On August 20, 2007, the Bankruptcy Court denied the Motion to Vacate, stating that the failure to disclose the Vioxx lawsuit was not material to "Wells Fargo's actions that violated the automatic stay and confirmation order; its misapplication and miscalculation of payments, fees, charges, and the interest rate." Bankruptcy Case No. 06-01093, Rec. Doc. 143.
On August 22 and 23, 2007, Wells Fargo entered four (4) Notices of Appeal and two (2) Motions for Leave to Appeal in the Bankruptcy Court record.17 The Bankruptcy Court promulgated an Amended Judgment on August 29, 2007.18 The Amended Judgment awarded $67,202.45 to Jones as damages and sanctions against Wells Fargo.19 In addition, the Amended Judgment ordered Wells Fargo to implement new accounting procedures.20 A Second Amended Judgment was entered in the record on September 14, 2007 to correct clerical error.21 In this matter, Wells Fargo has filed a total of eight (8) appeals. The case numbers for the appeals are: 07-3599, 07-7993, 07-7994, 07-7995, 07-7996, 07-7997, 07-7998, and 07-9229. The Court notes that the issues presented in these appeals substantially overlap.22 Indeed, 07-7993 and 07-7997 are duplicates in terms of the issues presented, just as 07-7996 and 07-7998 are duplicates.23 The difference between these appeals is their designation as "appeals of right" vs. "motions for leave to appeal." Under the Bankruptcy Rules, a district court may entertain appeals from interlocutory orders of the bankruptcy courts, if leave is granted.24
The Fifth Circuit has consistently held that the standard of review applicable to bankruptcy appeals in a district court is the same as the standard applied by a Court of Appeals to a district court proceeding. In re Killebrew, 888 F.2d 1516, 1519 (5th Cir.1989). Furthermore, Bankruptcy Rule 8013 requires that a bankruptcy court's findings of fact are subject to clearly erroneous review. Fed. R. Bankr.P. 8013; see also, In re Multiponics, Inc., 622 F.2d 709, 713 (5th Cir.1980). Conclusions of law, on the other hand, are reviewed de novo. Id.; Killebrew, 888 F.2d at 1519.
As an initial matter, the Court must determine whether the orders appealed from in cases 07-7993, 07-7996, 07-7997, and 07-7998 are interlocutory. Again, the court notes that the issues presented in 07-7993 and 07-7997 are identical, just as the issues in 07-7996 mirror those in 07-7998. In 07-7993 & 07-7997, Wells Fargo seeks review of the Bankruptcy Court's dismissal of Wells Fargo's motion to strike a non-party pleading. And, in 07-7996 & 07-7998 Wells Fargo seeks review of the Bankruptcy Court's decision to deny its motion for leave to submit additional...
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