In re Cole

• Decision Date: 08 January 1991
• Docket Number: Bankruptcy No. 90-10672S,Adv. No. 90-0748S.
• Citation: 122 BR 943
• Parties: In re Brenda A. COLE, Debtor. Brenda A. COLE, Plaintiff, v. CENLAR FEDERAL SAVINGS BANK and Edward Sparkman, Trustee, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

122 B.R. 943 (1991)

In re Brenda A. COLE, Debtor Brenda A. COLE, Plaintiff, v. CENLAR FEDERAL SAVINGS BANK and Edward Sparkman, Trustee, Defendants.

Bankruptcy No. 90-10672S, Adv. No. 90-0748S.

United States Bankruptcy Court, E.D. Pennsylvania.

January 8, 1991.

Roger V. Ashodian, Delaware County Legal Assistance Ass'n., Chester, Pa., for debtor-plaintiff.

Gary McCafferty, Philadelphia, Pa., for defendant-Cenlar Federal Sav. Bank.

Edward Sparkman, Philadelphia, Pa., Standing Chapter 13 Trustee.

OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

A. INTRODUCTION

The success of the current Chapter 13 Plan of Debtor, who made but six of the 38 pre-petition mortgage payments due to her residential mortgagee, depends on her ability to convince us that she can utilize 11 U.S.C. § 506 to effectively "cram down" her sizable mortgage-payment arrears. Logic, as well as the express language of 11 U.S.C. § 1322(b)(5), dictates that she cannot do so. Therefore, although we will reduce the Mortgagee's "claim" for arrears by almost $2,000 to $12,801.05 in the instant adversary proceeding, we decline her invitation to cut this figure to $1,449.00.

In the alternative, the Debtor requests that we effectively rewrite her current mortgage by allocating a portion of her mortgage-payment delinquency to the unsecured portion of the Mortgagee's claim. We reject this effort as well. We will therefore compel the Debtor to prepare a Plan requiring payments of at least $300 monthly to avert dismissal of her underlying Chapter 13 case.

B. PROCEDURAL AND FACTUAL HISTORY

BRENDA A. COLE ("the Debtor"), who is separated from her husband and is effectively a single parent of three children, filed the individual Chapter 13 bankruptcy case underlying the adversary proceeding at issue on February 14, 1990. The instant proceeding was not filed until September 25, 1990, the date that the confirmation hearing in this case was initially scheduled. The confirmation hearing was continued until the date that the proceeding was scheduled for trial, November 13, 1990. Both of these matters were continued again until December 4, 1990, at which time this proceeding was tried.

Also pending before us is a motion to dismiss this case filed by Defendant EDWARD SPARKMAN, the Chapter 13 Trustee ("the Trustee"). The Trustee's motion is based on the fact that the latest version of the Debtor's Plan calls for payments directly to him of only $1,982.50, while the secured claim filed by Defendant CENLAR FEDERAL SAVINGS BANK ("the Mortgagee") demands as follows:

                REINSTATEMENT AMOUNT (Arrearages and Foreclosure Costs and Fees)
                  32 monthly payments @ $374.15 each       $11,972.80
                  (from 7/87 — 2/90)
                  32 late charges @ $14.97 each                479.04
                  (from 7/87 — 2/90)
                  11 property inspections @ $10.00 each        110.00
                  Late charges due prior to this default       250.00
                                                             ___________
                  Total Monthly Payments and Late Charges                 $12,812.64
                    Filing and Service                      $  184.00
                    Title Report                               171.00
                    Sheriff's Sale                             647.30
                    Notaries                                    40.00
                    Recorder of Deeds                            2.00
                    Legal Fee                                  747.30
                                                             ___________
                    Fees and Cost                                         $ 1,791.60
                                                                        _____________
                                                                          $14,604.24
                The current monthly payments are $374.15
                The current principal balance is $32,551.69
                

This claim thus enumerates the Debtor's mortgage arrears as $14,604.42 and the total claim of the Mortgagee as the sum of this figure and the principal balance of $32,551.69, or $47,156.11.¹ Both of these figures are far larger than the $1,982.50 funded by the Plan. This discrepancy prompted the Mortgagee to file an Objection to Confirmation similar in content to the Trustee's motion to dismiss. See In re Fricker, 116 B.R. 431, 436 (Bankr.E.D.Pa. 1990) (while the local vernacular for this sort of Objection is the lack of "feasibility" of the plan, such a deficiency is in substance a claim of a plan's failure to meet the criterion of 11 U.S.C. § 1325(a)(5)(B), not that of 11 U.S.C. § 1325(a)(6)). In an Order of December 5, 1990, establishing an abbreviated briefing schedule, we continued the hearing on confirmation and the Trustee's motion to dismiss one last time to January 29, 1990.

The Complaint includes three Counts. The first recites an attempt to invoke 11 U.S.C. § 506 to reduce the Mortgagee's claim to $30,000, the alleged value of the Debtor's home, see Wilson v. Commonwealth Mortgage Corp., 895 F.2d 123, 128-29 (3d Cir.1990), less a $1,000 recoupment arising from alleged violations of the federal Truth-in-Lending Act, 15 U.S.C. § 1601, et seq. ("the TILA"), which occurred in the writing of the mortgage loan, or $29,000.

In Count Two, the Debtor challenges certain of the specific components of charges enumerated in the proof of claim, i.e., the amount of the "Legal Fee," the amount of the late charges, and the imposition of any charge for property inspections or "Notaries." Like Count One, this sort of claim is commonplace in this district.

The Third Count articulates the TILA recoupment claim. This, again, is a very typical sort of contention which comes before this court.

The only ambitious claim asserted in this proceeding is contained in the closing phrases of the prayer for relief, wherein the Debtor requests that this court "allow Cenlar's claim for `reinstatement amount' as an unsecured claim only as a portion of Cenlar's allowed unsecured claim of $16,307.83." In this rather opaque language apparently lies the contention that the arrears should be reduced by the unsecured portion of the Mortgagee's claim after the requested § 506 bifurcation.

At the trial, the parties stipulated that the value of the Debtor's home, located at 630 Columbia Avenue, Darby, Pennsylvania, was $35,000, rather than the $30,000 posited by the Debtor in her Complaint. They also ultimately stipulated that, of the 38 payments due on the parties' mortgage of November 16, 1986, between January, 1987, the date of the first payment, and February, 1990, the date of the bankruptcy filing, the Debtor had failed to make 32. The arrearages of 32 monthly payments and corresponding late charges for this 32-month period were therefore undisputed. While the issue of how the Debtor could allocate the secured and unsecured portions of the Mortgagee's claim was a legal issue argued at length, brief testimony from the Debtor, the only witness, was necessary only in reference to the issues of the proper late charges and the validity of the Debtor's TILA claims.

C. THE DEBTOR IS ENTITLED TO REDUCTION OF THE LATE CHARGES AND LEGAL FEE CLAIMED, AND ELIMINATION OF CHARGES FOR "NOTARIES" AND HOME INSPECTIONS.

The Debtor testified that the January, February, and March, 1987, payments were timely made but that she was uncertain when payments were made thereafter. By way of some explanation, she stated that, at the time, she assumed that her estranged husband was making all of the payments. Later, when she discovered, to her surprise, that his failure to make payments had resulted in a large delinquency, she made several payments, admittedly late, but without including the late charge. Regarding her current payment history, the Debtor testified that, since the filing of her bankruptcy, she had been making her regular monthly mortgage payments directly to the Mortgagee by means of a wage attachment. Her original Chapter 13 Plan, we note, called for payments of $25 monthly to the Trustee for 60 months. On the date of the trial, the Debtor's counsel filed an Amended Plan calling for $15 monthly for 10 months and $36.65 for the remaining 50 months, which totals the $1,982.50 figure referenced at page 944 supra. She is apparently current in making the modest total payments of $150 called for by her plan to date.

It is apparent that the sum designated on the Mortgagee's proof of claim for "Late charges due prior to this default," i.e., prior to the Debtor's admitted 32-month delinquency, was overstated. There were only six months in which payments fell due other than in the 32-month delinquency period for which late charges were already assessed. The parties agreed that the late charges were $14.97 per month. Accepting, in view of lack of contrary evidence, the Debtor's claim that the first three mortgage payments were timely made leaves only three more months in which payments could have been made, yet were late. Therefore, the total due for late charges outside of the 32-month period of delinquency could not possibly exceed $14.97 for three months, or $44.91. The $250 figure on the Mortgagee's proof of claim will be revised accordingly.

Several other specific entries on the proof of claim are also subject to reduction. The Mortgagee agreed that the charge for "Notaries" could not be sustained. See In re Smith, 92 B.R. 127, 133 (Bankr.E.D.Pa.1988), rev'd in part on other grounds sub nom. Smith v. Kissell Co., 98 B.R. 708 (E.D.Pa.1989). Also, the Mortgagee was forced to concede that our holding in In re Nickleberry, 76 B.R. 413, 422 (Bankr.E.D.Pa.1987), required a reduction of the "Legal Fee" of $747.30 to $300.00. Finally, we observe that the mortgage in issue reads exactly like the mortgage in issue in In re Burwell, 107 B.R. 62, 65-68 (Bankr.E.D.Pa.1989). In Burwell, we held, for several reasons, including the failure of the mortgage document to so provide, that a claim for recovery of property inspection fees was unwarranted. Therefore, the $110 charge for this item must also be excised.

D. THE DEBTOR IS ENTITLED TO SUCCEED ON HER TILA CLAIM, DESPITE HER FAILURE TO PRODUCE THE ALLEGEDLY ERRANT DISCLOSURE STATEMENT.

The other...