In re Hearn, s. 04-62224, 05-5330.
| Decision Date | 03 February 2006 |
| Docket Number | Nos. 04-62224, 05-5330.,s. 04-62224, 05-5330. |
| Parties | In re Terry S. HEARN, Debtor. Terry S. Hearn, Plaintiff v. Bank of New York, Countrywide Home Loans, Defendants. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan |
Charles J. Schneider, Livonia, MI, for Debtor/Plaintiff.
J. Kyle Guthrie, Jessica B. Allmand, Myers & Allmand, PLLC, Brighton, MI, for Defendants.
OPINION (1) GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; AND (2) DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
This matter is before the Court upon a complaint filed by Terry S. Hearn, the Debtor in this Chapter 13 case, to avoid a lien. The complaint seeks to avoid a mortgage lien held by Countrywide Home Loans as nominee for Bank of New York under 11 U.S.C. § 544.1 Plaintiff filed a motion for summary judgment. Defendant filed a motion for summary judgment. The Court conducted a hearing on the cross motions for summary judgment on January 13, 2006. The Court took the motions for summary judgment under advisement at that hearing. For the reasons set forth in this opinion, the Court grants Plaintiff's motion for summary judgment and denies Defendant's motion for summary judgment.
On September 19, 2003, the Debtor borrowed $ 103,500 from Encore Credit Corporation and granted it a mortgage upon the Debtor's residence located at 16860 Collingham Dr., Detroit, Michigan. The mortgage was assigned to the Defendant on September 29, 2003. However, for reasons that are not explained in the record, neither the mortgage nor the assignment were ever recorded with the Wayne County Register of Deeds.
On August 6, 2004, the Debtor filed a Chapter 13 petition. The Debtor's schedule A showed that the Debtor owned the real property at 16860 Collingham in fee simple, that it had a market value of $ 120,000, and that it was encumbered by a secured claim in the amount of $ 102,899.68. The Debtor's schedule D showed that the secured claim was held by the Defendant. The schedule did not designate the secured claim as contingent, unliquidated or disputed. On the same day that he filed his petition, the Debtor also filed a Chapter 13 plan (docket entry No. 6). The plan showed the Defendant as holding a secured claim to be paid in monthly payments by the Debtor. Section II of the plan entitled "General Provisions" indicated that the Debtor's plan followed the model plan used in this district in all respects with certain specified exceptions. One of the specific exceptions referred to was Section II.B entitled "Vesting, Possession of Estate Property and Lien Retention." That section reads as follows:
VESTING. POSSESSION OF ESTATE PROPERTY AND LIEN RETENTION: Upon confirmation of the Plan, all property of the estate shall vest in the debtor [11 U.S.C. § 1327(b)]. The debtor shall remain in possession of all property of the estate during the pendency of this case unless specifically provided herein [11 U.S.C. § 1306(b)]. All secured creditors shall retain the liens securing their claims unless otherwise stated.
Attached to the plan as required by L.B.R. 3015-1(b)(1) (E.D.M.) was an analysis of what creditors would receive if the Debtor's case were a Chapter 7 case. That analysis showed that unsecured creditors would receive no distribution in a Chapter 7 case.
On October 26, 2004, the Debtor filed a modification of his plan (docket entry No. 32). The modified plan continued to list the Defendant as a secured creditor holding a lien upon the Debtor's residence and provided for monthly payments to be made on this secured claim. However, the modified plan significantly changed Section II.B. from the original plan. That provision in the modified plan reads as follows:
VESTING, POSSESSION OF ESTATE PROPERTY AND LIEN RETENTION: Upon confirmation of the Plan, all property of the estate shall not vest in the debtor [11 U.S.C. § 1327(b)] but shall remain property of the estate. The debtor shall remain in possession of all property of the estate during the pendency of this case unless specifically provided herein [11 U.S.C. § 1306(b)]. All secured creditors shall retain the liens securing their claims subject to the avoidance powers of the Debtor granted herein and provided the Debtor retains possession of the collateral and unless otherwise stated. Debtor shall have standing to commence turnover actions under 11 U.S.C. § 542, to assert strong-arm powers under 11 U.S.C. § 544, to avoid statutory liens under 11 U.S.C. § 545, to recover preferences under 11 U.S.C. § 547 and/or to avoid fraudulent conveyances under 11 U.S.C. § 548 and in furtherance thereof commence adversary proceedings.
The modified plan was accompanied by a liquidation analysis which again showed the Defendant's lien upon the Debtor's residence and showed that there would be no distribution for unsecured creditors if this were a case under Chapter 7 of the Bankruptcy Code.
The Defendant did not file any objections to the Debtor's modified plan. On November 23, 2004, the Court held a hearing on confirmation of the Debtor's modified plan. The Defendant did not appear at the confirmation hearing. The modified plan was confirmed by entry of an order on November 24, 2004. The Debtor has made the payments under the plan since confirmation.
Apparently, sometime after the order confirming the plan was entered, the Defendant learned that its mortgage had not been recorded. The Defendant requested that the Debtor agree to lift the automatic stay so that the Defendant could record its mortgage. The Debtor declined that request. On June 6, 2005, the Defendant filed a motion in the Debtor's Chapter 13 case to lift the automatic stay for the limited purpose of permitting it to record its mortgage and assignment of mortgage. The Debtor objected. The Court held a hearing on July 1, 2005 and was informed at the hearing that the Debtor had filed this adversary proceeding seeking to avoid the unrecorded mortgage under § 544 of the Bankruptcy Code. Because the Debtor had made all of his payments under the Chapter 13 plan, and because the Debtor had filed this adversary proceeding seeking to avoid the Defendant's mortgage, the Court concluded that the Defendant had not shown cause to lift the automatic stay and, therefore, denied the Defendant's motion. The parties then pursued resolution of their dispute through this adversary proceeding.
Fed.R.Civ.P. 56(c) for summary judgment is incorporated into Fed. R. Bankr.P. 7056(c). Summary judgment is only appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A "genuine" issue is present "'if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Berryman v. Reiger, 150 F.3d 561, 566 (6th Cir. 1998) (quoting Anderson, 447 U.S. at 248, 100 S.Ct. 2124).
"The initial burden is on the moving party to demonstrate that an essential element of the non-moving party's case is lacking." Kalamazoo River Study Group v. Rockwell International Corp., 171 F.3d 1065, 1068 (6th Cir. 1999) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). "The burden then shifts to the non-moving party to come forward with specific facts, supported by evidence in the record, upon which a reasonable jury could return a verdict for the non-moving party." Id. (citing Anderson, 477 U.S. at 248). "The non-moving party, however, must provide more than mere allegations or denials . . . without giving any significant probative evidence to support" its position. Berryman v. Reiger, 150 F.2d 561, 566 (6th Cir. 1998) (citing Anderson, 447 U.S. at 256, 106 S.Ct. 2505).
A threshold issue raised by the Defendant is whether the Debtor has standing to bring an avoidance action under § 544. The Defendant asserts that only a trustee may bring an avoidance action under § 544. The Debtor asserts that he may also bring an avoidance action under § 544. At the hearing on July 1, 2005 on the Defendant's motion to lift the automatic stay, the Chapter 13 Trustee agreed with the Debtor that the Debtor has standing to bring the avoidance action.
Section 544(a) provides that "the trustee" may avoid any transfer of property under that section of the Bankruptcy Code. 11 U.S.C. § 544(a). There is no specific section of the Bankruptcy Code that authorizes a debtor to prosecute an action under § 544. Section 1303 of the Bankruptcy Code authorizes the Debtor to have certain of the rights and powers granted to a trustee under § 363 of the Bankruptcy Code, but makes no mention of powers granted to a trustee under other sections of the Bankruptcy Code such as § 544. By way of comparison, a Chapter 11 debtor has a more extensive list of rights and powers set forth in § 1107 of the Bankruptcy Code. Similarly, in Chapter 12, § 1203 of the Bankruptcy Code provides a Chapter 12 debtor with various rights and powers beyond those that are extended to a Chapter 13 debtor in § 1303.
While it appears then that there is no specific statutory authority for a Chapter 13 debtor to exercise the avoidance or recovery powers of § 544, there are reported cases going both ways on this issue. See 1 Keith M. Lundin, Chapter 13 Bankruptcy § 53.1 n. 7 (3d ed. 2004) (collecting cases). There are no controlling cases in the Sixth Circuit regarding this issue. The Court finds somewhat appealing the ...
To continue reading
Request your trial
-
Lim v. Combs (In re Combs)
...is "void as against any subsequent purchaser in good faith and for a valuable consideration"); Hearn v. Bank of New York (In re Hearn), 337 B.R. 603, 610 (Bankr. E.D. Mich. 2006) ("In Michigan, a mortgage that is not recorded as provided by law is void as against any subsequent purchaser in......
-
In re Herrera
...§ 1322(b)(11) include, for example: (1) authorizing the debtor to exercise a trustee's avoiding powers, Hearn v. Bank of New York (In re Hearn), 337 B.R. 603 (Bankr.E.D.Mich. 2006); (2) establishing reserve funds to pay utilities in event of default, In re Epling, 255 B.R. 549 2000); (3) pa......
-
In re Meadows
...avoidance action under § 549(a), and there is no controlling Sixth Circuit decision on the issue. See Hearn v. Bank of New York (In re Hearn), 337 B.R. 603, 608-09 (Bankr.E.D.Mich.2006) (acknowledging cases on both sides of issue, but not having to reach the issue); see also Realty Portfoli......
-
Russo-Chestnut v. Wells Fargo Home Mortg. (In re Russo-Chestnut)
...a mortgage lien, despite general principles of claim preclusion or the res judicata effect of the confirmed plan. In re Hearn, 337 B.R. 603, 609 (Bankr.E.D.Mich 2006). In Hearn, the court held that the creditor itself was bound to the reservation of rights provision pursuant to § 1327, as p......