In re Huyck, Bankruptcy No. 97-22373-SBB. Adversary No. 99-1818-SBB.
| Decision Date | 21 August 2000 |
| Docket Number | Bankruptcy No. 97-22373-SBB. Adversary No. 99-1818-SBB. |
| Citation | 252 BR 509 |
| Parties | In re William James HUYCK, III SS# XXX-XX-XXXX and Maria Zita Huyck SS# XXX-XX-XXXX, Debtors. Mayflower Capital Company, Plaintiff, v. William James Huyck, III and Maria Zita Huyck, Defendants. |
| Court | U.S. Bankruptcy Court — District of Colorado |
Neal K. Dunning, Harvey Kramer, Brown, Bernardini & Dunning, P.C., Denver, CO, for Mayflower Capital Company.
Stephen Berken, Denver, CO, for William James Huyck and Maria Zita Huyck.
THIS MATTER comes before the Court on the Motion for Summary Judgment filed by Plaintiff, Mayflower Capital Company ("Plaintiff"), and the Response thereto filed by the Defendant/Debtors, William James Huyck, III and Maria Zita Huyck ("Defendants" or "Debtors"). The Court, having reviewed the file, heard the statements of counsel, and being otherwise advised in the premises, enters the following findings of fact, conclusions of law and order.
This dispute raises an interesting question and one of first impression in this District. In the within case, the Chapter 13 Debtors, as is customary in many Chapter 13 cases, provided for a cure of their mortgage arrearage in their plan and for continuing payments on their mortgage "outside the plan." The Debtors completed their plan and received a discharge of debt. Thereafter, the Debtors' defaulted on their mortgage, and the Plaintiff foreclosed and made a deficiency bid in acquiring the property. Succinctly stated, the issue deals with what, if any, impact the Chapter 13 discharge of debt has on the creditors' deficiency claim.
For the reasons set forth herein, this Court concludes that the Plaintiff's Motion for Summary Judgment should be GRANTED, in part. The Court shall grant the relief requested in Plaintiff's First Claim for Relief declaring that the deficiency amount owed to Plaintiff by the Defendants has not been discharged by the completion of Defendants' Chapter 13 bankruptcy case.1
Three issues are presented to this Court by the Motion for Summary Judgment.
1. Whether a debtor can modify the rights of a creditor holding a claim which is secured by debtor's principal residence and other collateral.
2. Whether a claim which is (a) secured, in part, by debtor's principal residence and, in part, by other collateral, (b) scheduled by a debtor as oversecured and (c) dealt with, at least in part, in the Chapter 13 plan — which provided that the arrearage will be paid through the plan and that regular monthly payments will be made outside of the plan — qualifies as "debts provided for by the Plan" so as to make the debt dischargeable under 11 U.S.C. § 1328(a).
3. Whether a Chapter 13 debtor can retroactively declare a debt discharged after confirmation, discharge and case closing, where (a) the plan does not provide expressly for the discharge of the debt, (b) the debtor made no attempt during the pendency of the bankruptcy case to obtain a valuation of the property, and (c) the debt was scheduled as oversecured but when — after confirmation, discharge and case closing — a foreclosure sale results in a deficiency.
The underlying facts related to the Plaintiff's First Claim for Relief are uncontested by the parties. On February 4, 1997, Defendants executed a Promissory Note ("Note") in favor of Community Bank of Parker ("Community Bank"), in the sum of $202,195.96.00. According to the terms of the Note, Defendants agreed to make 37 monthly payments of $1,744.00 and a final balloon payment for the remaining balance on April 4, 2000. The Note was secured by a Deed of Trust on real property located in Douglas County, State of Colorado legally described as:
LOT 25 BLOCK 1, STONEGATE FILING NO. 6D, COUNTY OF DOUGLAS, STATE OF COLORADO
and commonly known as 15918 Ledge Rock Drive, Parker, Colorado 80134 ("Property"). On February 7, 1997, the Deed of Trust securing the Note was filed with the Douglas County Clerk and Recorder.
On September 8, 1997, Defendants filed for relief under Chapter 13 of the Bankruptcy Code. Defendants provide in Schedule D of their bankruptcy schedules that the Property is valued at $220,000.00 with a first Deed of Trust on the "residence and business" of the Defendants in the amount of $206,837.00. Thus, based on the Defendants' schedules, Community Bank was oversecured in the sum of $13,163.00.
On May 6, 1998, this Court confirmed the Defendants' Third Amended Plan ("Plan"). The Plan stated that the claim of Community Bank was "secured only by an interest in real property that is the debtor's principal residence." The Plan stated that a default in the amount of $5,323.29 would be cured at the rate of 10.00% over 24.47 months. Furthermore, the Defendants' Plan provided for regular monthly payments to be made outside of the Plan in the sum of $1,774.00. The Plan provided that the Defendants would make 36 payments of $270.00 to the Chapter 13 Trustee, with the final payment due on October 6, 2000.
On January 14, 1999, Defendants made an early payoff of their Plan. A lump sum payment of $9,720.00 was paid to the Chapter 13 Trustee. The payoff funds were obtained from a settlement in a breach of warranty or negligence suit against the builder of the Property for defective construction and or breach of warranty. The parties have agreed that the settlement funds received by the Defendants from the builder were property of the bankruptcy Estate. In addition, the balance of the settlement funds which the Defendants received from the home builder — beyond those sums utilized for the early payoff — were not paid into the bankruptcy Estate. On March 5, 1999, this Court entered its Order Discharging Defendants After Completion of Chapter 13 Plan ("Discharge Order") which provided that the Defendants would be discharged from "all debts provided for by the plan."
After the Court entered its Discharge Order and as a result of a default under the Note and Deed of Trust, Norwest Bank Colorado, N.A. ("Norwest"), as successor-in-interest to Community Bank, commenced a foreclosure action against the Defendants. At the foreclosure sale on June 22, 1999, Norwest was the successful bidder. Norwest made a deficiency bid of $164,250.00 for the Property. As a result of the deficiency bid, the Defendants were potentially liable to Norwest, under the terms of the Note, for a $61,529.07 deficiency.
On July 26, 1999, Norwest assigned its rights to the Note to Plaintiff. Plaintiff, on August 2, 1999, commenced a deficiency suit against Defendants in Douglas County District Court. Defendants did not file an answer in the Douglas County proceeding. However, bankruptcy counsel for Defendants, Mr. Stephen Berken, did correspond with counsel for the Plaintiffs advising that the Chapter 13 bankruptcy case "modified" Plaintiff's claim and that such "modification was made an order of the court when the case was confirmed." As result of the correspondence from Mr. Berken, Plaintiff dismissed its deficiency action. Subsequently, on November 4, 1999, Plaintiff filed its Complaint with this Court seeking (a) under its First Claim for Relief, a declaratory judgment from this Court determining that the Chapter 13 bankruptcy did not discharge the Defendants' personal liability to Plaintiff under the Note and (b) under its Second Claim for Relief, the revocation of discharge pursuant to 11 U.S.C. § 1328(e). Defendants filed their Answer to the Complaint on December 13, 1999
On June 13, 2000, Plaintiff's filed the present Motion for Summary Judgment. The Motion for Summary Judgment only addresses the First Claim for Relief. Defendants filed a late Response to the Motion for Summary Judgment on July 20, 2000. On July 25, 2000, this Court heard arguments by the Plaintiff and Defendants in regard to the pending Motion for Summary Judgment.
Summary judgment is to be granted if the pleadings, depositions, answers to interrogatories, admissions, or affidavits show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Bankr.P. 7056 which applies Fed. R.Civ.P. 56. A party seeking summary judgment bears the initial responsibility of informing the court of the basis for its motion and identifying those portions of the pleadings, depositions, interrogatories and admissions on file together with affidavits, if any, that it believes demonstrate the absence of genuine issues for trial. Thalos v. Dillon Companies, Inc., 86 F.Supp.2d 1079, 1082 (D.Colo.2000). The non-moving party has the burden of showing that there are issues of material fact to be determined. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The opposing party(ies) may not rest merely on the allegations contained in the answers, but must respond with specific facts showing the existence of a genuine factual issue to be tried. Thalos, 86 F.Supp.2d at 1082. This Court will review the evidence and draw reasonable inferences therefrom in the light most favorable to the nonmoving party — here the Defendants. Koch v. Koch Industries, 203 F.3d 1202, 1212 (10th Cir. 2000) petition for cert. filed, 68 U.S.L.W. 3023 (U.S. July 3, 2000) (No. 00-28).
As to the First Claim for Relief, it appears that the parties agree to the facts, but differ on the interpretation of the law. As discussed below, this Court believes that Plaintiff is entitled to judgment as a matter of law under its First Claim for Relief. The Motion for Summary Judgment does not address or provide supportive evidence and affidavits related to the facts giving rise to Plaintiff's Second Claim for Relief. The information which is not before the Court, but necessary for a determination under 11 U.S.C. § 1328(e) includes, but is not necessarily limited to: (1) the intent of the Defendants...
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