Dukes v. Suncoast Credit Union (In re Dukes)
| Decision Date | 06 December 2018 |
| Docket Number | No. 16-16513,16-16513 |
| Parties | IN RE: Mildred M. DUKES, Debtor. Mildred M. Dukes, Plaintiff-Appellant, v. Suncoast Credit Union, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Richard J. Hollander, Melissa H. Jeda, Edward R. Miller, Miller Hollander & Jeda, Naples, FL, for Plaintiff–Appellant.
Marie Tomassi, Trenam Kemker, Saint Petersburg, FL, Larry M. Foyle, Kass Shuler, PA, Rhys Phillips Leonard, Trenam Law, Tampa, FL, for Defendant–Appellee.
Before JILL PRYOR and JULIE CARNES, Circuit Judges, and CONWAY,* District Judge.
Mildred M. Dukes ("Debtor") filed for Chapter 13 bankruptcy in 2009, and the bankruptcy court confirmed her bankruptcy plan in 2010. At the time her plan was confirmed, Debtor had two outstanding mortgages with Suncoast Credit Union ("the Credit Union"). Debtor’s plan did not address the Credit Union’s mortgages aside from stating that Debtor would make payments directly to the Credit Union, not through the bankruptcy trustee. The plan did not specify repayment terms for the mortgages, did not set a schedule for repayments, and did not make any changes to the mortgages' terms. When her plan was confirmed, Debtor was current on her payments to the Credit Union.
Debtor made the required payments under her bankruptcy plan, and, in 2012, Debtor made her last payment for her bankruptcy. Accordingly, the bankruptcy court discharged "all debts provided for by the plan." 11 U.S.C. § 1328(a).
Debtor, however, had defaulted on her mortgage payments to the Credit Union in 2011. In 2013, the Credit Union foreclosed on Debtor’s home under the second mortgage and sought a judgment against Debtor for the remainder on the first mortgage. In 2014, the Credit Union moved to reopen the bankruptcy proceeding and begin an adversary proceeding to declare that Debtor’s personal liability on the first mortgage had not been discharged.
The bankruptcy court and the district court, hearing the initial appeal, both concluded that the first mortgage was not discharged because it was not "provided for" by Debtor’s bankruptcy plan. Both also found that, even if the mortgage was "provided for," the discharge did not include the debt for other reasons, including because discharge would violate 11 U.S.C. § 1322(b)(2), which prohibits a plan from "modify[ing] the rights of holders of ... a claim secured only by a security interest in real property that is the debtor’s principal residence."
On appeal, Debtor contends that both the bankruptcy court and the district court erred in holding that the plan did not "provide for" the Credit Union’s mortgage and that discharge was prohibited by § 1322(b)(2). Debtor also asserts that the mortgage was discharged because the Credit Union failed to file a proof of claim for it.
We affirm the bankruptcy court and district court and hold that Debtor’s plan did not discharge the Credit Union’s mortgage. In doing so, we hold that, for a debt to be "provided for" by a plan under § 1328(a), the plan must make a provision for or stipulate to the debt in the plan. Because Debtor’s plan did nothing more than state that the Credit Union’s mortgage would be paid outside the plan, it was not "provided for" and was not discharged. Even if it was provided for, we hold that discharge of the Credit Union’s debt would violate § 1322(b)(2) by modifying the Credit Union’s right under the original loan documents to obtain a deficiency judgment against Debtor. We also hold that the issue of whether the Credit Union’s failure to file a proof of claim for its first mortgage resulted in the mortgage’s discharge was not preserved for appeal because Debtor did not raise it before the bankruptcy court, and, alternatively, that failure to file a proof of claim did not discharge the Credit Union’s mortgage because, again, discharge would violate § 1322(b)(2).
Debtor’s first mortgage with the Credit Union was taken out in 1989 and her second mortgage was taken out in 2007. Together, the mortgages total roughly $150,000 and mature in 2022. On February 18, 2009, Debtor filed for Chapter 13 bankruptcy. In her bankruptcy schedules, Debtor listed the Credit Union—then Suncoast Schools Federal Credit Union—as the holder of both the first and second mortgages on her primary residence. At the time Debtor filed for bankruptcy, she was current on her payments for both mortgages. During the bankruptcy proceeding, the Credit Union filed a proof of claim only for the second mortgage (with a balance of approximately $77,000), not the first.
Debtor’s plan includes a number of sections potentially relevant to the Credit Union’s mortgages. Specifically, the plan lists the amount for the adequate protection payments required under the Bankruptcy Code. See 11 U.S.C. § 1326(a)(1)(C). The plan and its implementing orders further state that no money would be paid through the plan to the Credit Union, meaning that any payments made on the Credit Union’s mortgages will be made directly to the Credit Union, not through the bankruptcy trustee. The plan does not set repayment terms for the Credit Union’s mortgages, identify a repayment schedule, or otherwise mention the mortgages.
First, the plan states that "All secured creditors, except as provided otherwise herein, including mortgage creditors, must be paid through the plan as part of the plan payment to the Chapter 13 Trustee." Next, the part of the plan titled "Secured Claims," addresses adequate protection payments:
(A) Pre-Confirmation Adequate Protection Payments: No later than 30 days after the date of the filing of this Plan or the Order for Relief, whichever is earlier, the Debtor(s) shall make the following adequate protection payments to creditors pursuant to § 1326(a)(1)(C).... If Debtor(s) elects to make such adequate protection payments directly to the creditor, and such creditor is not otherwise paid through the Plan, such payments shall constitute adequate protection.
Following this and under the heading "Paid directly to the Creditor," the plan includes the following entries:
Creditor Total Est. Claim Direct Ad. Prot. Pay
Suncoast Schools FCU $79000.00 $611.00
Suncoast Schools FCU $77671.00 $1,040.00
Part (B) of the same section addresses "Claims Secured by Real Property Which Debtor(s) Intends to Retain / Mortgage Payments Paid Through the Plan." The Credit Union’s mortgages presumptively fit into this category. But, in the section where Debtor could have elected to have the Trustee "pay the post-petition mortgage payments" on Debtor’s behalf, Debtor wrote "N/A."
The plan concludes with a calculation of the total debt burden under the plan’s payment schedule. This calculation includes a dividend of $3,600 to unsecured creditors, attorneys' fees totaling $1,500, and a trustee’s fee of $566.60, for a total of $5,666.66 to be paid off in thirty-six installments over an estimated three years.1 None of this money goes to pay off the roughly $150,000 Debtor owed on the Credit Union’s mortgages.
When Debtor filed her Chapter 13 petition, an automatic stay went into effect that prevented any creditor, including the Credit Union, from foreclosing on Debtor’s property. See 11 U.S.C. § 362(a). Shortly after she filed the plan, Debtor moved for authorization to make her mortgage payments directly to the Credit Union. The bankruptcy court granted her request and issued two orders authorizing direct payments to the Credit Union for both the first and second mortgages. The orders accordingly terminated the automatic stay against the Credit Union for its mortgages, permitting it "to seek in rem relief against the property securing [the Credit Union’s] claim[s]."
The Credit Union did not object to the plan, and the bankruptcy court confirmed it in May 2010. Shortly thereafter, the court issued a follow-up order identifying the claims that would be allowed and ordering disbursement pursuant to the plan. The Credit Union’s first mortgage was omitted from this order, as no proof of claim had been filed. The order listed the second mortgage (for which a proof of claim was properly filed) in "Exhibit D" as "hereby allowed," but noted that "the Trustee shall not make distribution upon such claims" under the confirmed plan.
Thus, at each point in the bankruptcy proceeding, Debtor intended—and was granted the right—to make payments on the first and second mortgages directly to the Credit Union "rather than through the Chapter 13 Trustee." In fact, the implementing order specifically stated that the Credit Union "SHALL NOT RECEIVE ANY PAYMENT FROM THE CHAPTER 13 TRUSTEE UNDER THE CONFIRMED PLAN." Thus, Debtor’s performance of her monthly installment obligations under the plan would do nothing to pay down her mortgage debt owed to the Credit Union.
Once the plan was confirmed, Debtor began making payments to the trustee. She timely made her thirty-six payment obligations and, upon completion, the bankruptcy court discharged "all debts provided for by the plan" in March 2012, under 11 U.S.C. § 1328(a).
During this same time period, Debtor made a few of the scheduled payments to the Credit Union on her mortgages but stopped paying altogether in 2011. Both mortgages entered default. In 2013, the Credit Union foreclosed on Debtor’s home under the second mortgage and sought a personal judgment against Debtor on the first.
In 2014, the Credit Union moved to reopen the bankruptcy case and commenced an adversary proceeding seeking a determination that Debtor’s personal liability on the first mortgage had not been discharged. Both parties moved for summary judgment. The bankruptcy court granted summary judgment to the Credit Union and concluded that the Credit Union’s mortgage had not been discharged because it was not "provided for" by the plan, as it was paid outside the plan and unaffected by the plan itself. The bankruptcy court also held that, even if the mortgage was provided for,...
To continue reading
Request your trial
-
Mortg. Corp. of the S. v. Bozeman (In re Bozeman)
...113 S.Ct. 2106 (quoting Dewsnup v. Timm , 502 U.S. 410, 417, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992) ).We have also recognized as much. In In re Dukes , we said that "[a] creditor's rights ‘protected from modification by § 1322(b)(2) ’ are the rights under the original loan instruments as def......
-
In re Simmons
...is subject to approval ... and must ultimately be confirmed by the bankruptcy court under a specific set of criteria." In re Dukes, 909 F.3d 1306, 1316 (11th Cir. 2018). Chapter 13 plans must contain certain provisions set forth in § 1322(a)2 and may contain other provisions set forth in § ......
-
In re Rivera
...terms for the creditor's mortgage, identify a repayment schedule, or otherwise mention the mortgage. Dukes v. Suncoast Credit Union (In re Dukes ), 909 F.3d 1306 (11th Cir. 2018). That analysis has been criticized by some of consumer bankruptcy's leading commentators. For example, Hon. Keit......
-
In re Materne
...thus subject to the requirements of § 1325(a)(5), if the creditor is not paid pursuant to the terms of the contract."). See also In re Dukes, 909 F.3d at 1315 (in case "provided for language" in the context of discharge injunction application and concluding that "Rake does not stand for the......
-
CHAPTER 4, B. Denying Chapter 13 Discharges for Direct-Payment Defaults
...In re Rivera, 2019 Bankr. Lexis 989 (Bankr. D. Ariz. 2019).[31] In re Gibson, 582 B.R. 15, 18 (Bankr. C.D. Ill. 2018).[32] In re Dukes, 909 F.3d 1306 (11th Cir. 2018).[33] See In re Gibson, 582 B.R. 15 (Bankr. C.D. Ill. 2018); In re Rivera, 2019 Bankr. Lexis. 989 (Bankr. D. Ariz. 2019).[34]......
-
Chapter 18-7 Discharge and Dischargeability
...136 So. 3d 1267 (Fla. 2d DCA 2014).[70] 11 U.S.C. 1322(b)(5) and 11 U.S.C. 1328(a)(1).[71] Dukes v. Suncoast Credit Union (In re Dukes), 909 F.3d 1306 (11th Cir....
-
Chapter 17-7 Discharge and Dischargeability
...So. 3d 1267 (Fla. 2d DCA 2014).[68] 11 U.S.C. 1322(b)(5) and 11 U.S.C. 1328(a)(1).[69] . Dukes v. Suncoast Credit Union (In re Dukes), 909 F.3d 1306 (11th Cir....