Countrywide Home Loans Inc. v. Beaulieu
| Decision Date | 16 May 2011 |
| Docket Number | CIVIL ACTION NO. 10-3589 |
| Parties | COUNTRYWIDE HOME LOANS, INC. v. MARK A. STEWART & S. J. BEAULIEU, JR., CHAPTER 13 TRUSTEE |
| Court | U.S. District Court — Eastern District of Louisiana |
Before the court is the Appeal of Countrywide Home Loans, Inc. ("Countrywide"), from the August 23, 2010 Order1 issued by the United States Bankruptcy Court in Bankruptcy No. 03-18462-EWM. Appellee, S. J. Beaulieu, Jr., Chapter 13 Trustee ("Trustee") filed a response brief, to which Countrywide replied. This matter is before the court on briefs, without oral argument. Now, having considered the briefs of counsel, the record below and the applicable law, this court finds that the Bankruptcy Court's Judgment should be reversed and vacated and the case remanded for further proceedings consistent herewith.
The facts of this case are not disputed by the parties. On October 30, 2003, J. Edward Thompson, attorney at law, filed a Chapter 13 Petition including a 1% Chapter 13 plan on behalf of Mark A. Stewart (Debtor) in the United States Bankruptcy Court for the Eastern District of Louisiana in case number 03-18462. (Bkrtcy. Rec. Doc. 1 and 2).
Debtor's sole secured creditor held a mortgage debt of $76,617.62 on debtor's personalresidence. By various acts of assignment, the mortgage debt was transferred to Washington Mutual Bank and then Countrywide Home Loans, Inc. 2
Debtor's Chapter 13 Plan identified a pre-petition arrearage amount of $5,622.41 owed to mortgage servicer Washington Mutual Bank ("Washington Mutual"), which entity was listed as a secured creditor on the schedules of the captioned bankruptcy proceeding. Said scheduled mortgage arrearage ($5,622.41) to be paid via the Chapter 13 Plan represented less than nine (9) mortgage installments of $653.00 each. (Bkrtcy. Rec. Doc. 2).
Notice of this Chapter 13 Plan was forwarded to Washington Mutual Bank c/o Dean Morris, attorneys-at-law, to P.O. Box 2867, Monroe, Louisiana 71207-2867. As noted by the bankruptcy court, Countrywide does not dispute that it or its predecessor in interest was given notice of the filing of the case, the date of the creditor's meeting and the bar date - i.e., the last date to file proofs of claim (03/09/2004).3
On February 12, 2004, the bankruptcy court's order confirming the Chapter 13 Plan ("Plan") issued. (Bkrtcy Rec. Doc. 26). Although Debtor's Chapter 13 Plan listed a mortgage arrearage amount that Debtor proposed to cure, no distributions were made to Washington Mutual by the Trustee. It is undisputed that Washington Mutual (Countrywide's predecessor) never filed a proof of claim in this case.
The Plan purports to cure $5,622.41 in pre-petition defaults owed to Countrywide.Debtor also committed to pay all post-petition accruing installments through direct payments to Countrywide. As a secured claimant, Countrywide retained its lien to secure repayment of the pre-petition default set forth in the Plan. On completion, the Plan provided that all pre-petition defaults were discharged.
On April 8, 2004, Washington Mutual Bank filed a Motion to Lift Stay As to the Debtor's Property located at 154 Trafalgar Square, Slidell, Louisiana 70460, alleging that the debtor's failed to make four (4) post petition arrearage payments of $773.00, reflecting a total of post-petition mortgage arrearage of $2,559.50. The Motion to Lift Stay was filed by Dean Morris, attorneys-at-law, on behalf of Washington Mutual Bank. (Bkrtcy. Rec. Doc. 28).
On April 13, 2004, the Chapter 13 Trustee filed a Trustee's Notice of Intention to Pay Claims, reflecting that Washington Mutual had not filed a claim for an arrearage and that merely $6,019.19 in proofs of claim had been filed. It reads in pertinent part:
(Bkrtcy. Rec. Doc. 31)
On May 13, 2004, the bankruptcy court entered a Consent Order, memorializing the agreement between Countrywide and the Debtor and reflecting that his post-petition arrearage figure was $2,559.50. The amount of $219.00 was paid at court leaving a remaining balance of on the arrearage of $2,231.76, which was to be paid outside of the Chapter 13 Plan at the rate of $371.96 a month for six (6) months. A drop dead order also issued via the Consent Order, providing that Debtor's failure to catch up on missed payments and to make future paymentswould result in lifting the automatic stay, inter alia. (Bkrtcy Rec. Doc. 34).
On July 2, 2004, the Trustee filed "Trustee's Ex Parte Motion to Amend Plan" seeking to increase the percentage paid to unsecured creditors from 1% to 99%. (Bkrtcy. Rec. Doc. 38). No objection was filed by debtor, his attorney, any creditor or any party in interest. The bankruptcy court (then, the Honorable Judge T. M. Brahney) executed the an order amending the plan increasing the percentage paid to unsecured creditors to 99%. (Bkrtcy. Rec. Doc. 40).
On December 21, 2006, Countrywide notified the Chapter 13 Trustee that it was now the servicer on the Debtor's mortgage debt. On July 5, 2007, after having assumed servicing of the Debtor's home loan, Countrywide filed a "Motion to Allow Late Filed Proof of Claim." (Bkrtcy. Rec. Doc. 70). More particularly, Countrywide advised the bankruptcy court that, at the time of the filing of this case, "Debtor owed Creditor $16,404.23 in monthly payment arrearages" itemizing the same. Id. Countrywide further explained that the allowance would not prejudice the Debtor because, should the late claim not be filed, the Debtor would not receive the fresh start sought by filing the Chapter 13 bankruptcy. Id. at ¶ 4.
On August 16, 2007, following a hearing, the bankruptcy court entered an order allowing the late filing of Countrywide's pre-petition arrearage claim in the full amount of $16,404.23. (Bkrtcy. Rec. Doc. 73).4
On August 21, 2007, Countrywide filed its proof of claim no. 7-1 for a pre-petition arrearage of $16,404.23, representing twenty (20) back due installments of $653.00, late chargesand costs and asserting its secured claim in the amount of $73,164.25.5
Thereafter, on August 22, 2007, the Trustee filed Chapter 13 Notices of Intent to Pay Additional Claims of Countrywide Home Loans for mortgage arrears in the amounts of $16,404.23 and $56,760.62. (Bkrtcy. Rec. Doc. 75 and 76). No objection was filed by attorney for Debtor, J. Edward Thompson, although he was in fact practicing in the United States Bankruptcy Court for the Eastern District of Louisiana at that time.6
On November 12, 2009, the Chapter 13 Trustee filed a Motion to Dismiss for Unfeasibility and served a copy on both Debtor and his counsel. (Bkrtcy. Rec. Doc. 79).7 As of the date of the filing of the Chapter 13 Trustee's Motion to Dismiss, the Debtor had been in Chapter 13 for a total of seventy-two (72) months. The debtor had a balance of $15,118.67 remaining unpaid on the plan in light of Countrywide's late-filed proof of claim.
Though service was made upon the debtor, notifying him personally that the hearing on the Chapter 13 Trustee's Motion to Dismiss was scheduled for December 8, 2009, the motion was not opposed. At the December 8, 2009 hearing on the Motion to Dismiss, the bankruptcy court had an unopposed Motion to Dismiss for Unfeasibility before it but sua sponte ordered theChapter 13 Trustee to object to Countrywide's late-filed proof of claim.8
On December 10, 2009, the Chapter 13 Trustee filed an Objection to Countrywide's Claim No. 7 pursuant to the bankruptcy court's order and Notice of Hearing. (Rec. Doc. 82). The Trustee's singular objection to Countrywide's claim for arrearage was that it was filed in the 40th month of plan, which was beyond a reasonable time; the Trustee also noted that his Motion to Dismiss for Unfeasibility was pending, the bankruptcy court having continued it to January 12, 2010.9 On January 5, 2010, Countrywide filed its Response to the Trustee's Objection, appending a copy of the Mortgage and Note.10 (Bkrtcy. Rec. Doc. 84).
On January 12, 2010, the bankruptcy court conducted a hearing on Countrywide's Motion to Dismiss Plan for Unfeasibility and the Trustee's Objection to Countrywide's claim.11 Pursuant to the hearing, the bankruptcy court took the matter under advisement, directed that nopayment be made to Countrywide or anybody.12 Thereafter, pursuant to the bankruptcy court's January 14, 2010 order,13 both Countrywide and the Trustee submitted post-hearing briefs.14 In his objection to Countrywide's proof of claim, the Trustee reminded the bankruptcy court of its pending Motion to Dismiss for Unfeasibility pointing out that the Debtor was uncooperative throughout the process. The Trustee highlighted:
[T]he difference between a nine (9) month pre-petition mortgage arrearage and a twenty (20) month mortgage arrearage is not a minimal miscalculation made by the debtor. This debtor has been allowed to reside in his family home for a period in excess of six (6) years because he failed to include 2/3's of his mortgage arrearage in the Chapter 13 plan.
(Bkrtcy. Rec. Doc. 93 at p. 4).
The Trustee further pointed out that:
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