In re Abreu, Case No. 1-15-44844-nhl
| Decision Date | 25 September 2017 |
| Docket Number | Case No. 1-15-44844-nhl |
| Parties | In re: Victor M. Abreu aka Victor Manuel Abreu Pina, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
DECISION ON MOTION FOR VALUATION OF COLLATERAL, BIFURCATION OF CLAIMS, AND VOIDING OF LIENS PURSUANT TO 11 U.S.C. § 506
Attorneys and Law Firms:
Dennis Jose, Esq.
Gross Polowy, LLC
1775 Wehrle Drive, Suite 100
Williamsville, NY 14221
Attorney for Wells Fargo Bank, NA
Brian McCaffrey, Esq.
Brian McCaffrey, P.C.
88-18 Sutphin Boulevard, 1st Floor
Jamaica, NY 11435
Before the Court is the motion (the "Motion") of Victor M. Abreu, a chapter 13 debtor (the "Debtor"), seeking to modify a first mortgage lien on real property pursuant to 11 U.S.C. § 506. Mot. for Valuation, ECF No. 7. Wells Fargo Bank, N.A. ("Wells Fargo"), the mortgagee, opposes the Motion, arguing, in part, (1) that the Debtor does not meet the requirements for modification imposed by 11 U.S.C. § 1322(b)(2) because the property in question, located at 8 The Boulevard, New Rochelle, New York 10801 (the "Property"), is the Debtor's principal residence; and (2) that because the Debtor is not the mortgagor, his lack of privity with Wells Fargo prohibits him from modifying the mortgage under a chapter 13 plan. Aff. in Opp. to Mot., ECF No. 30; Suppl. Aff. in Opp. to Mot., ECF No. 33; Sec. Suppl. Aff. in Opp. to Mot., ECF No. 34.
This Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(b)(1), and the Eastern District of New York standing order of reference dated August 28, 1986, as amended by order dated December 5, 2012. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B) and (K). This decision constitutes the Court's findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure.
The Property was previously titled to Dario Obregon ("Obregon"), who, on August 30, 2006, executed a note and mortgage in favor of Wells Fargo. June 15 Tr. 10-11, ECF No. 38; Suppl. Aff. in Rep. ¶ 3, ECF No. 31. On December 5, 2006, Obregon, without obtaining any signature or other manner of consent from Wells Fargo, transferred fee title to the Debtor. Suppl. Aff. ¶¶ 4-5, ECF No. 31. The Debtor did not assume the note and mortgage, though he alleges that he made the mortgage payments to Wells Fargo from December 2006 through January 2008. Id. at ¶ 7; June 15 Tr. 24, ECF No. 38.
On May 14, 2008, Wells Fargo commenced a foreclosure action with respect to the Property in the Supreme Court of New York for Westchester County, in which the Debtor, Obregon, and American Brokers Conduit were named defendants. Suppl. Aff. Exhibit C, ECF No. 31-3. In order to stay the foreclosure, the Debtor initiated two separate bankruptcy cases in the Southern District of New York, one in 2013 and another in 2015, in which he listed the Property as his primary residence. June 15 Tr. 13, 18, ECF No. 38. On October 28, 2015 (the "Filing Date"), the Debtor filed the instant voluntary petition under chapter 13 (the "Petition").
At an evidentiary hearing on the Motion, the Debtor, through an interpreter, offered testimony about his residential history. See Id. at 7. Starting in December of 2006, after acquiring title from Obregon, the Debtor lived in the Property for approximately three months. Id. at 10-12. From that point forward, for a period of about seven or eight years, the Debtor lived with his daughter at 190 South 8th Street in Brooklyn, New York. Id. at 10, 15. The Debtor then moved with his daughter to 375 Bath Avenue, in Brooklyn, New York, where he resided until approximately August 2015. Id. at 16-17. Around that time, he again moved with his daughter to 54 Bay 29thStreet in Brooklyn, New York. Id. at 14-15. The Debtor testified that he lived at the 375 Bath Avenue address despite listing the Property as his principal residence in the two previous bankruptcy cases in the Southern District. Id. at 17. In the instant case, the Debtor listed the Property as his "Primary Residence" on his Schedule A. Ch. 13 Pet. 9, ECF No. 1. However, the Petition lists "54 Bay 29th Street, Apt 15B Brooklyn, NY" as the Debtor's street address. See id. at 1.
The Debtor argues that modification of the lien is permissible here because the Property is not his principal residence, but rather an investment property. Mot. ¶¶ 5, 8, ECF No. 7. Wells Fargo disputes this point by citing the classification of the Property in the Debtor's prior filingsand the Debtor's instant Schedule A. Alternatively, Wells Fargo argues that, even if the Property is not the Debtor's principal residence, he is still not entitled to modify the mortgage because he is not the mortgagor and therefore not in privity with Wells Fargo. Aff. in Opp. ¶¶ 7-8, ECF No. 30. The Debtor contends that privity is not determinative; rather, it is Wells Fargo's in rem rights against the Property that make the bank the holder of a "claim" under 11 U.S.C. § 1322, which in turn permits modification of the mortgage. Suppl. Aff. ¶¶ 24, 28, ECF No. 31. Finally, Wells Fargo claims that, regardless of how the above factual and legal issues are resolved, the Debtor has commenced this case in bad faith, and, for that reason, should not be entitled to the benefit of modification under § 1322. The parties agree that, should all of these points be decided in the Debtor's favor, the Court must determine the Property's value.
11 U.S.C. § 506(a). A debtor may void the unsecured portion of a lien "[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim." 11 U.S.C. § 506(d).
In turn, 11 U.S.C. § 1325(a)(5)(B) requires payment based on the value determined under § 506. Bankruptcy courts are required to ensure that, over the life of a chapter 13 plan, the holder of a secured claim receives the "value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim [] not less than the allowed amount of such claim." 11 U.S.C. § 1325(a)(5)(B)(ii). However, § 1322 does not allow for a debtor to modify therights of a secured creditor whose "claim [is] secured only by a security interest in real property that is the debtor's principal residence." 11 U.S.C. § 1322(b)(2).
The term "debtor's principal residence" that appears in § 1322(b)(2) is a defined term within the Code.1 According to 11 U.S.C. § 101(13A), a "debtor's principal residence" is "a residential structure if used as the principal residence by the debtor, including incidental property, without regard to whether that structure is attached to real property." 11 U.S.C. § 101(13A)(A). The text provides that whether a structure is a debtor's principal residence is, rather simply, a question of whether it is "used as" such. See In re Schayes, 483 B.R. 209, 213 (Bankr. D. Ariz. 2012) (); In re Laycock, 497 B.R. 396, 399 (Bankr. S.D.N.Y. 2013) (quoting Schayes, 483 B.R. at 213); see also In re Addams, Case No.: 8-15-75191-AST, 2017 WL 944190, at *4 (Bankr. E.D.N.Y. Mar. 9, 2017) ("This Court's analysis necessarily begins by looking to the language of the statute itself to determine if the statute is plain or ambiguous." (citing RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 649 (2012)). Though "residence" alone is not defined by the Code, it has been defined elsewhere as "the place where one actually lives." See Schayes, 483 B.R. at 213 (citing Residence, Black's Law Dictionary 1423 (9th ed. 2009)). Furthermore, as the Code includes references to both "residence" and "principal residence," the inclusion of "principal" must signal a substantive difference between the terms, or its use would be superfluous. See In re Lawrence, 469 B.R. 140, 142 (Bankr. D. Mass. 2012) (); In re Demeter, 478 B.R. 281, 289 (Bankr. E.D. Mich. 2012) (discussing Lawrence). When the definition of "residence" articulated in Schayes is modified by "principal," as that word is commonly understood, the resulting term would mean the primary place where one actually lives. See Lawrence, 469 B.R. at 142; Schayes, 483 B.R. at 213. In other words, an individual's residence becomes her principal residence when that structure, more than any other, is used as a living space.
While the Debtor's account of where he lived over the past ten years is less than precise, constructing an exact timeline of the Debtor's past principal residences is not the focus of the instant inquiry. This is because the Court is required to determine the Debtor's principal residence as of the time of the bankruptcy filing. Schayes, 483 B.R. at 214; see also In re Jordan, 330 B.R. 857, 859-60 (Bankr. M.D. Ga. 2005) (). Thus, the question that must be answered is whether, as of the Filing Date, the Debtor had been living in the Property more than he had been living elsewhere.
The record before the Court reflects that, as of the Filing Date, the Debtor did not live at the Property at all, and had not done so for at least a number of years. The Debtor's Petition states that, on the Filing Date,...
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