In re Herrera
| Decision Date | 05 January 2010 |
| Docket Number | BAP No. CC-09-1175 PaHD.,BAP No. CC-09-1155-PaHD.,Bankruptcy No. SV 08-14725-GM.,Bankruptcy No. SV 08-13212-KT.,BAP No. CC-09-1184-PaHD.,Bankruptcy No. SV 09-11330-MT.,Bankruptcy No. LA 09-11321-VK.,BAP No. CC-09-1162-PaHD. |
| Citation | 422 B.R. 698 |
| Parties | In re Anthony John HERRERA and Mary Ellen Herrera, Debtors. In re Norman Leff and Rosita Blones Leff, Debtors. In re Christine Paulette Hannon, Debtor. In re Arthur Daniel Monroy and Laura Monroy, Debtors. Greenpoint Mortgage Funding, Inc., Appellant, v. Anthony John Herrera and Mary Ellen Herrera, Appellees. Deutsche Bank, National Trust Co., as Trustee for First Franklin Mortgage Loan Trust 2006-FF5, Mortgage Pass-Through Certificates, Series 2006-FF5, Appellant, v. Norman Leff and Rosita Blones Leff, Appellees. U.S. Bank, N.A., Appellant, v. Christine Paulette Hannon, Appellee. Home Funds Direct, Appellant, v. Arthur Daniel Monroy and Laura Monroy, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Before: PAPPAS, HOLLOWELL and DUNN, Bankruptcy Judges.
In each of these four appeals, the creditor holding the mortgage on the debtors' primary residence challenges the order of the bankruptcy court confirming the chapter 131 debt-repayment plan. In each case, the debtors incorporated in the plan several provisions taken from a form of optional provisions adopted by the bankruptcy judges of the Central District of California. The mortgage creditors presented common objections to those provisions, and continue those objections in these four appeals. Because the facts in each case are undisputed, and common legal issues are raised, we ordered that the appeals be jointly briefed and argued. This decision disposes of all four appeals. We AFFIRM the bankruptcy courts' plan confirmation orders.
We begin with a brief sketch of the relevant, undisputed facts and the procedural history of these four bankruptcy cases.
Anthony John Herrera and Mary Ellen Herrera ("Herreras")2 filed a chapter 13 petition on May 16, 2008, and a First Amended Plan on July 8, 2008. The First Amended Plan provided that Herreras would directly pay the secured creditor, Greenpoint Savings ("Greenpoint"), all post-petition monthly payments on the mortgage held by Greenpoint on their residence. They proposed to cure the $20,982.62 in mortgage arrearages they alleged they owed on the date of bankruptcy by making payments "through the plan" to the chapter 13 trustee for distribution to Greenpoint.
On July 9, 2008, Norman Leff and Rosita Blones Leff ("Leffs")3 filed their chapter 13 petition and proposed plan. The plan provided that Leffs would directly pay Deutsche Bank National Trust Co. ("Deutsche Bank") post-petition monthly mortgage payments on their residence, and would cure $23,555.00 in prepetition mortgage arrearages through the plan.
On February 6, 2009, Christine Paulette Hannon ("Hannon")4 filed her chapter 13 petition and proposed plan. Hannon proposed to directly pay U.S. Bank Home Mortgage ("U.S. Bank") post-petition monthly mortgage payments on her residence, and to cure $19,100.00 in prepetition mortgage arrearages through the plan.
Herreras, Leffs and Hannon each incorporated in their proposed plans an addendum known as "Local Form F 3015-1.1A" (the "Addendum"). The Addendum is a collection of chapter 13 plan provisions set forth in an optional form that had been approved by the bankruptcy judges of the Central District of California for use by debtors in chapter 13 cases who propose to repay debt secured by a mortgage on their residential real property, or by a lien on personal property the debtor occupies as the debtor's principal residence. The terms of the Addendum impose certain reporting and other obligations on the mortgage creditor during the term of the chapter 13 plan. More details concerning the Addendum are presented below.
Greenpoint objected to the First Amended Plan in Herreras' case, Deutsche Bank objected to the plan in Leffs' case, and U.S. Bank objected to the plan in Hannon's case. Although there were slight variations in the arguments in the separate cases, the mortgage creditors generally targeted the Addendum, arguing that its terms imposing post-confirmation reporting and other duties were inconsistent with the mortgage creditors' contractual rights, violated federal law, and constituted an undue administrative burden. The debtors in each case disputed the mortgage creditors' positions. The parties filed additional pleadings in each case regarding their positions on the Addendum.
On April 28, 2009, the presiding judges in the Herreras, Leff, and Hannon bankruptcy cases issued a Joint Memorandum of Opinion (the "Joint Memorandum"), together with an order implementing the Joint Memorandum, addressing the inclusion of the Addendum in the debtors' chapter 13 bankruptcy plans, and the mortgage creditors' objections to those plans. The Joint Memorandum generally overruled the creditors' objections,5 except for the objection to one provision of the Addendum (known as "subsection A7"), a requirement that mortgage creditors provide advance notice to debtors before filing a motion for relief from stay. The Joint Memorandum concluded that this term was inconsistent with the provisions of § 362(d). The Joint Memorandum directed the debtors in each case to file amended plans deleting subsection A7 of the Addendum.
Even though the Joint Memorandum did not purport to confirm the debtors' plans,6 on May 8, 2009, the mortgage creditors each filed a notice of appeal in the respective bankruptcy cases from the "Order Confirming Chapter 13 plan entered on April 28, 2009."7
As directed by the Joint Memorandum, Herreras, Leffs and Hannon each filed amended plans generally consistent with their original plans, but deleting subsection A7 of the Addendum. There were no hearings on plan confirmation. Herreras' amended plan was confirmed in an order entered May 20, 2009; Leffs' amended plan was confirmed in an order entered May 13, 2009; and Hannon's amended plan was confirmed in an order entered July 22, 2009.
On May 27, 2009, Greenpoint, Deutsche Bank and U.S. Bank filed amended notices of appeal, again designating the Joint Memorandum as the order on appeal in the three cases, instead of the confirmation order.
The bankruptcy judge in Monroys' case did not participate in the Joint Memorandum. However, the court came to similar conclusions and rulings.
On January 22, 2009, Arthur Daniel Monroy and Laura Monroy ("Monroys") filed their chapter 13 petition and plan. The plan provided that Monroys would directly pay the mortgage creditor Home Funds Direct ("HFD") post-petition monthly mortgage payments, and would cure $454.08 in prepetition mortgage arrearages through the plan. Monroys' plan incorporated the Addendum. HFD objected to the plan, challenging the Addendum.
The bankruptcy court conducted a confirmation hearing on March 18, 2009. At the conclusion of the hearing, the bankruptcy judge ruled on the record that "the Court agrees with the majority of courts as far as the notification provisions in [the Addendum] that those are procedural mechanisms that are consistent with the provisions of Chapter 13 and the Bankruptcy Code as a whole." Hr'g Tr. 8:12-17 (March 18, 2009). The court, however, did rule that subsection A7 impermissibly conflicted with § 362 and ordered that provision be stricken from the plan.
As permitted by the bankruptcy court's decision, Monroys submitted an amended plan on March 20, 2009, without subsection A7. Ruling on the record at the May 6 continued hearing on plan confirmation, the bankruptcy court confirmed the amended plan. The court entered its order confirming the amended plan on May 18, 2009.
HFD filed a timely notice of appeal of the confirmation order on May 21, 2009.
According to the chair of the ad hoc committee of Central District of California bankruptcy judges that apparently crafted the Addendum,9 it was designed and adopted in response to two needs: overcoming the reluctance of secured creditors to communicate with debtors in chapter 13, and preventing a secured creditor from assessing additional fees and costs against the debtor at the conclusion of the bankruptcy case that had not been communicated to the debtor or approved by the bankruptcy court. The committee originally proposed adoption of a general order by the bankruptcy court that would require that provisions such as those ultimately incorporated in the Addendum be included in all chapter 13 plans. However, this proposal was rejected by the district's board of judges, which preferred that such decisions be made in each bankruptcy case, and not imposed on chapter 13 debtors by a general order. As a result, the committee ultimately proposed a non-binding, optional form, the Addendum, the propriety of which could be adjudicated on a case-by-case basis.
The Addendum was approved by majority vote of the bankruptcy judges of the Central District of California, and the judges' decision was implemented via "Local Form 3015-1.1A." The Addendum provisions incorporated in each of the four confirmed plans and implicated in these appeals read as follows:10
A2. Except as provided in paragraphs (3) and (4) below, if the Mortgage Creditor provided monthly statements to the debtor pre-petition, the Mortgage creditor must provide monthly statements to the debtor. The monthly statements must contain at least the following information concerning post-petition payments to be made outside the Plan: (a) The date of the statement and the date of the next payment due; (b) The amount of the current monthly payment; (c) The portion of the payment attributable to escrow, if any; (d) The post-petition amount past due, if any, and from what date; (...
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