In re Crompton, Bankruptcy No. 85-05312K.
| Decision Date | 07 May 1987 |
| Docket Number | Bankruptcy No. 85-05312K. |
| Citation | 73 BR 800 |
| Parties | In re Linda CROMPTON, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
David Sambolin, Philadelphia, Pa., for debtor/plaintiff.
David H. Rosenfeld, Philadelphia, Pa., for defendant.
Katherine McAlice, Philadelphia, Pa., for defendant.
James J. O'Connell, Philadelphia, Pa., Chapter 13 Standing Trustee.
David A. Searles, Philadelphia, Pa., for debtor/Mitchell Case.
James H. Gorbey, Jr., Media, Pa., for Frankford Trust Bank/Mitchell Case.
Irwin Trauss, Philadelphia, Pa., for debtor/Jablonski Case.
Lawrence T. Phelan, Philadelphia, Pa., for Meritor Mortg. Corp. East/Jablonski Case.
We address herein several disputes which have arisen in the aftermath of our previous decision in this case, reported as In re Crompton, 68 B.R. 831 (Bankr.E.D. Pa.1987). In that decision, we held, on the basis of 11 U.S.C. §§ 502, 506, that the secured portion of the claim of the Debtor's mortgage in the interest of the estate of the Debtor in a premises co-owned by the Debtor and a man to whom she was not legally married, was $2,500.00, half of the value of the premises, a figure far less than the mortgage balance. The matters presently before us include a revived Motion of the Mortgagee for relief from the automatic stay and a series of objections by the Mortgagee to the Debtor's Plan to pay off the $2,500.00 claim in full under her Plan, based, inter alia, on 11 U.S.C. §§ 1325(a)(5)(B) and 1325(b)(1)(B).
Considering first the mortgagee's Objections to confirmation of the Plan, we reject most of them, holding that (1) payment of the secured portion of the claim of $2,500.00, plus interest at the market rate, which we find to be ten (10%) percent, on that portion of the payment deferred beyond the date of confirmation of the Plan, satisfies the requirement, pursuant to 11 U.S.C. § 1325(a)(5)(B)(ii), that the property distributed "is not less than the amount of the secured claim;" and (2) given that we are imposing additional expenses upon the Debtor's rather modest budget in connection with the Mortgagee's Motion for relief from the stay, we believe that, as long as the Debtor continues to pay $96.57 to the Trustee under the Plan, for a total of thirty-six (36) months, as she did through its first thirteen (13) months, she is providing that all of her "projected disposable income . . . will be applied to make payments under the plan," pursuant to 11 U.S.C. § 1325(b)(1)(B). Since the alterations which we shall compel to the Debtor's Plan are relatively modest, we believe that the Debtor's prospects for performance according to her Plan are good.
The conclusion that the Debtor's Plan is basically sound is the linchpin of our analysis as to whether the Mortgagee is entitled to relief from the automatic stay on the basis of either of the alternative prongs of 11 U.S.C. §§ 362(d)(1) or (d)(2). Therefore, although we shall order the Debtor to insure the property and make certain that all real estate taxes are paid from 1987 through the date of the completion of the Plan in order to adequately protect the Mortgagee, we shall deny the Motion provided these conditions are met.
On January 9, 1987, we entered the Opinion reported as indicated above and an Order in Adversarial No. 86-0527S, in this case, a proceeding initiated by the Debtor, LINDA A. CROMPTON (hereinafter referred to as "the Debtor"), against BOULEVARD MORTGAGE COMPANY (hereinafter referred to as "The Mortgagee"), the holder of a first mortgage, insured by the Federal Housing Administration (hereinafter referred to as "FHA"), on a home located at 129 East Willard Street, Philadelphia, Pennsylvania 19134, on which the mortgage obligors were the Debtor and MICHAEL KENNY (hereinafter referred to as "Kenny"), a man with whom the Debtor lives as husband and wife and who is the father of her two young children, but to whom she is not legally married. In that Opinion, applying 11 U.S.C. §§ 502, 506, we valued the secured portion of the Mortgagee's claim in the interests of the Debtor's estate in the home at $2,500.00, half of the $5,000.00 value which we attributed to the home. In our Order, we also scheduled a hearing to consider both confirmation of the Plan and a Motion of the Standing Chapter 13 Trustee to dismiss the case on January 21, 1987; required the Debtor to file any amendments to the Plan on or before January 14, 1987; and required any interested party to file any Objections to confirmation on or before January 21, 1987, or assert same at the confirmation hearing on that date. We believed that our Opinion had resolved the largest area of dispute in the case and we hoped that this Order would bring the issue of confirmation to a rapid conclusion.
However, because the Mortgagee has raised several thoughtful issues in its filings subsequent to our Opinion and Order, final disposition of Confirmation has been delayed. We regret this delay, but we note that several of the issues raised here are likely to be recurrent,1 and therefore, we address them at some length herein.
One response of the Mortgagee to our Opinion and Order was a request that we reconsider them, pursuant to Bankruptcy Rule 9023 and Federal Rule of Civil Procedure 59(e), because we allegedly erroneously "declined to entertain the Mortgagee's testimony concerning the taxes that the Mortgagee had paid on the premises between the inception of the mortgage in 1984 and the present," which arguably would have enhanced the Mortgagee's secured claim. In our Order of March 5, 1987, setting forth a schedule of future proceedings in this matter, we denied that Motion. Our review of the tape recording of the hearing on the adversarial proceeding revealed that the Mortgagee's trial counsel, who was replaced by present counsel during the briefing, did not offer such testimony at the hearing. Further, although we acceded to the request of the Mortgagee's new counsel to allow her additional time to submit her Brief, the fact of, and the significance of, the payment of taxes by the Mortgagee was not raised, nor was there, as would have been necessary, a Motion to reopen the record filed to present testimony relevant to this subject. We have noted no appeal from our Order of March 5, 1987, therefore our rendering of our determination that the entire extent of the Mortgagee's secured interest in the premises is $2,500.00, considering all factors which were or could have been raised in that proceeding, must be deemed final as of the hearing date of November 5, 1986, and the law of this case.
Both parties responded somewhat belatedly to our Order of January 9, 1987. The Debtor did not file her Second Modified Plan until January 21, 1987, and the hearings on that date were continued by agreement, per an Order of January 23, 1987, until February 18, 1987. On January 20, 1987, the Mortgagee filed a Motion for Relief from the Automatic Stay and a request for an expedited hearing, and we scheduled that hearing also on February 18, 1987. On February 9, 1987, the Mortgagee filed Objections to confirmation of the Second Modified Plan.
On February 18, 1987, the parties advised us that the Mortgagee had not properly served its Motions and we continued the hearing on these matters, by agreement once again, until March 5, 1987, advising the Debtor to consider further Plan amendments to meet certain Objections raised by the Mortgagee. On February 20, 1987, the Debtor filed a Third Modified Chapter 13 Plan. On March 2, 1987, the Mortgagee responded with a series of Objections to this most recent version of the Debtor's Plan.
Brief testimony was adduced on March 5, 1987, from Joseph O'Connor, the Mortgagee's foreclosure manager; the Debtor; and Kenny, who revealed that, the day before, he had filed his own Chapter 13 case, at 87-01064S. Mr. O'Connor presented copies of the Mortgage and documents, establishing that the Mortgagee had paid both the taxes on the premises, amounting to about $340.00 annually, each year through 1986, and also insurance on the property through January, 1988, remitting $145.20 for fire and extended coverage to an insurer on or about January 27, 1987. His records also indicated that the Debtor and Kenny had made but four of the monthly mortgage payments of approximately $157.00 monthly over the entire course of the mortgage loan, from January, 1984, through April, 1984.
The Debtor testified regarding her current income and expenditures. It appears that her wages have been reduced slightly (to $131.00 weekly or $563.30 monthly, as opposed to $577.64),2 and that her support from Mr. Kenny is but $430.00 monthly, totalling $993.30, as opposed to the figure of $1,077.64 monthly set forth on her Chapter 13 Statement, filed on January 17, 1986.
The expenditures set forth in the Debtor's Statement of January 17, 1986, while for the most part modest for a woman with two children under three years of age, were attacked as overstated by the Mortgagee in two areas: (1) They included a "Rent or home mortgage" payment entry of $209.78, which the Debtor has neither made nor intends to make; and (2) They included $140.00 for "child care," and the Debtor testified that her babysitting expenses are presently $86.00 monthly. With respect to the latter, we note that the Debtor testified that the $140.00 "child care" was intended to contemplate only expenses for diapers and other incidentals for her one-year-old and two-year-old children, and we do not consider $140.00 in the least bit excessive for such expenditures. Hence, the $86.00 for babysitting represents an item which is additional to the expenses set forth on the Statement. In the first area, however, the Mortgagee has made a legitimate point, and we are required to discuss this issue in more detail below.
The Mortgagee's Objections to confirmation, which we shall consider first, are as follows:
1. The Debtor's Plan impermissibly modifies the...
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