In re Bozeman, Case No. 16-32469-WRS
| Citation | 616 B.R. 407 |
| Decision Date | 09 June 2020 |
| Docket Number | Case No. 16-32469-WRS |
| Parties | IN RE Judith Lacy BOZEMAN, Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Alabama |
Charles E. Grainger, Grainger Legal Services, LLC, Montgomery, AL, for Debtor.
This Chapter 13 case involves a dispute between Debtor, Judith Lacy Bozeman and Mortgage Corporation of the South ("Mortgagee"), the holder of a mortgage on her home. This dispute arose when Mortgagee filed an objection to the Notice of Final Cure Payment and Notice of Completion of Plan Payments. (Docs. 48, 49, & 51). Mortgagee next filed a Motion for Relief from the Automatic Stay on the grounds that its mortgage had not been paid – contrary to the position of Trustee and Debtor that it had. (Docs. 57 & 60). Debtor subsequently filed a Motion to Deem the mortgage satisfied, and Mortgagee objected. (Docs. 74 & 76). At the Court's request, Debtor and Mortgagee filed briefs. (Docs. 76, 80, & 81). In addition, following the filing of the Notice of Final Cure Payment and the Notice of Completion of Plan Payments, Mortgagee filed amended proofs of claim. (Claims 2-2 & 2-3). Debtor objected to the amended claims contending that they were not filed timely. (Doc. 82). Mortgagee filed a response to Debtor's objection to claims. (Doc. 86). The Court conducted an evidentiary hearing on February 24, 2020.
The Court is called upon to decide three questions: (1) whether the Court should sustain Debtor's objection to the tardily filed amended claims of Mortgagee; (2) whether Debtor is entitled to a discharge; and (3) whether Mortgagee is entitled to relief from the automatic stay or whether Debtor's mortgage has been satisfied. For the reasons set forth below, the Court: (1) sustains Debtor's objections to Mortgagee's amended claims; (2) finds that Debtor is entitled to a Chapter 13 discharge; and (3) denies Mortgagee's motion for relief from the automatic stay and determines Debtor's mortgage is satisfied.
On September 7, 2016, Debtor filed a petition in bankruptcy pursuant to Chapter 13 of the Bankruptcy Code. (Doc. 1). The Court set a claims bar date for January 16, 2017. (Doc. 5). Mortgagee filed a timely proof of claim on September 16, 2016. (Claim No. 2-1). Four days later, on September 20, 2016, Debtor filed her Chapter 13 plan. (Doc. 18). Debtor's plan proposed to pay the claim of Mortgagee in full over the life of the plan, with interest at the contract rate of 7.568%, with monthly payments of $456.1 (Doc. 26). On January 14, 2017, Debtor's Chapter 13 plan was confirmed by the Court, without objection from Mortgagee. (Doc. 34).
In the schedules filed with the Court, Debtor indicated that Mortgagee was owed $17,393.04. (Doc. 17, Sch. D). However, in Claim 2-1, Mortgagee stated it was owed $6,817.42 – which is over $10,000 less than the amount scheduled by Debtor. It appears that the parties did not discuss this discrepancy. On September 9, 2016, Mortgagee filed a Motion for Relief from the Automatic Stay. (Doc. 9). But, Mortgagee later withdrew its motion. (Doc. 20). This Court confirmed the Debtor's Chapter 13 plan, without objection from Mortgagee, on January 14, 2017. (Doc. 34).
On August 24, 2017, the Trustee moved to dismiss Debtor's Chapter 13 case, alleging that Debtor was delinquent in plan payments in the amount of $2,788.00. (Doc. 36). Debtor filed a response to the motion stating that unexpected medical expenses had caused the delinquency and that she would make payments in the future. (Doc. 37). On December 27, 2017, apparently satisfied with the Debtor's progress, the Trustee withdrew her motion to dismiss. (Doc. 41). On March 9, 2018, Mortgagee filed a Motion to Dismiss, alleging that Debtor was behind in her plan payments. (Doc. 42). Mortgagee and Debtor settled their differences through an Agreed Order that was entered on May 14, 2018. (Doc. 46). The Agreed Order called for Debtor to make her Chapter 13 plan payments in the future and provided that if she did not do so, the case would be dismissed upon service of a notice of default by Mortgagee.
This case proceeded without incident until May 13, 2019, when the Trustee filed a Notice of Final Cure Payment and a Notice of Completion of Plan Payments. (Docs. 48 & 49). On May 14, 2019, Mortgagee filed a Response disputing the Trustee's statement that its mortgage had been paid in full – notwithstanding the fact the amount of Mortgagee's claim as filed had been paid in full. (Doc. 51). Mortgagee argued that only the mortgage arrearage had been paid and that a balance of $15,032.73 remained owing.
After the Trustee filed the Notice of Final Cure Payment and the Notice of Completion of Plan Payments, Mortgagee filed two amended claims. (Claim Nos. 2-2 and 2-3). Debtor objected to the amended claims, contending they should be disallowed because they were filed years after the claims bar date. (Doc. 82). As Mortgagee's objection to issuance of a discharge turns on the amount determined to be owed on the mortgage, the Court will review the three proofs of claim filed by Mortgagee in detail. The Court conducted an evidentiary hearing on February 24, 2020, on the question of whether the amended claims should be allowed.
The following is a timeline of relevant dates:
| 09/07/16 | Petition Date |
| 09/09/16 | Motion for Relief from Stay filed by Mortgagee |
| 09/16/16 | Claim 2-1 filed ($6,817..42 secured) |
| 09/20/16 | Schedules and initial Chapter 13 Plan filed |
| 01/14/17 | Plan Confirmed |
| 01/16/17 | Claims Bar Date |
| 03/09/18 | Motion to Dismiss filed by Mortgagee |
| 05/13/19 | Notice of Final Cure Payment and Notice of Completion of Plan Payments |
| 05/14/19 | Claim 2-2 filed ($15,032.73 secured) |
| 09/13/19 | Claim 2-3 filed ($22,382.39 secured) |
At the evidentiary hearing, Mortgagee called John Williams, its President and Owner to testify concerning the claims of Mortgagee. Mr. Williams signed Claim 2-1. In response to a question from Mortgagee's counsel as to why he filed an "arrearage claim" he testified as follows:
Mr. Williams testified on cross examination concerning the "arrearage only claim" as follows:
This testimony encapsulates the problem in this case. Mortgagee filed Claim 2-1 before Debtor filed her Chapter 13 plan. Mr. Williams testified that he was expecting a plan which would pay the arrearage. Indeed, in this Court, most, but not all, Chapter 13 plans which provide for a mortgage are "cure and maintain plans." In a cure and maintain plan, the debtor is to continue making the regular monthly mortgage payments directly to the mortgagee and the Chapter 13 Trustee pays the mortgage delinquency to the mortgagee from the plan payments. In such a plan, if all of the payments are made as called for, the debtor has a mortgage which is current at the time she exits bankruptcy. The problem in this case is that the Debtor's Chapter 13 plan provided for the entire debt to by paid by the Trustee through the Chapter 13 plan. As most Chapter 13 plans which provide for a mortgage are "cure and maintain" plans, Mortgagee's mistake was understandable. However, Debtor's plan was filed on September 16, 2016, yet the claims bar date was not until January 16, 2017, some four months later. Mortgagee had plenty of time to read the plan, see that it was a full payment plan, and amend its claim accordingly.
There is a certain obtuse quality to Mortgagee's actions here. Regardless of its understanding of Debtor's plan, it had only to properly complete the Proof of Claim form and it would have been paid. If one examines the form, the following numbers are called for: "Amount of the claim that is secured," "Amount of the claim that is unsecured," and "Amount necessary to cure any default as of the date of the petition." The amount of the claim that is secured, in this case, was the entire mortgage balance. The "Amount necessary to cure any default as of the date of the petition" which is the arrearage, is a separate amount. Yet, on Claim 2-1, Mortgagee lists the amount of its secured claim as $6,817.42 and the amount of the arrearage as also $6,817.42. A disinterested reader of Claim 2-1 would conclude that $6,817.42 was all that was owed to Mortgagee, and all of which was in arrears at the time the Debtor filed her petition. Why Mortgagee did not properly complete the Proof of Claim form is a mystery. Why it failed to amend its claim after Debtor filed a full payment plan, rather than a cure and maintain plan, is another.
Yet another mystery is why Mortgagee did not promptly discover its error based upon the payments it was receiving. If Mortgagee indeed thought that Debtor had filed a "cure and maintain" plan, it would have expected to receive payments of two kinds. First, it should have been receiving the monthly payments from Debtor under the terms of the original note and mortgage. This...
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In re Tesch
...as a complaint or analogous thereto, a proof of claim is nevertheless not a "pleading." See Fed. R. Civ. P. 7 ; In re Bozeman , 616 B.R. 407, 414 (Bankr. M.D. Ala. 2020) aff'd sub nom. Mortgage Corp. of the South v. Bozeman , 623 B.R. 811 (M.D. Ala. 2020). Moreover, when the Trustee filed h......