In re Koola

• Decision Date: 28 September 2018
• Docket Number: C/A No. 18-01373-JW
• Court: U.S. Bankruptcy Court — District of South Carolina
• Parties: IN RE: Johnson D. Koola, Debtor(s).

IN RE: Johnson D. Koola, Debtor(s).

C/A No. 18-01373-JW

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF SOUTH CAROLINA

September 28, 2018

Chapter 13

ORDER

This matter comes before the Court upon Johnson D. Koola's ("Debtor") Objection ("Objection") to the Proof of Claim filed by Ditech Financial LLC fka Green Tree Servicing LLC ("Ditech"). Ditech filed a Response to the Objection, and a hearing was held on the matter. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334, and this is a core proceeding pursuant to 28 U.S.C. § 157. Pursuant to Fed. R. Civ. P. 52, as made applicable to this proceeding under Fed. R. Bankr. P. 7052, the Court makes the following Findings of Fact and Conclusions of Law.¹

FINDINGS OF FACT

1. On February 20, 2004, Debtor executed a fixed rate note ("Note") in the amount of $136,192.00 to Countrywide Home Loans, Inc.

2. Also on February 20, 2004, Debtor executed a first mortgage ("Mortgage") as security. The Mortgage encumbers Debtor's principal residence, 1587 Cambridge Lakes Drive, Mount Pleasant, South Carolina ("Principal Residence"), and was recorded in the public records for Charleston County. The Mortgage indicated that the "mortgagee" is Mortgage Electronic Registration Systems, Inc. ("MERS") and that the "lender" is Countrywide Home Loans, Inc. Forpurposes of this Order, the obligations and duties evidenced in the Note and Mortgage will be collectively referred to as the "Debt".

3. On March 20, 2009, Debtor filed a petition for relief under chapter 7 of the Bankruptcy Code ("Chapter 7 Case") in this District (C/A No. 09-02104-dd). In the schedules for the Chapter 7 Case, Debtor indicates that Countrywide Home Loans had a first mortgage loan secured by his Principal Residence. It appears notice of the Chapter 7 Case was properly served on Countrywide Home Loans. On April 30, 2009, the Chapter 7 Trustee filed a Report of No Distribution, and on July 13, 2009, an Order Discharging Debtor was entered pursuant to 11 U.S.C. § 727. The Chapter 7 Case was closed on July 13, 2009.

4. On July 27, 2010, BAC Home Loans Servicing, LP FKA Countrywide Home Loans Servicing LP ("BAC Home Loans") filed a foreclosure action of the Mortgage against Debtor in state court (2010-CP-10-6060) ("Foreclosure Action").

5. On August 27, 2010, MERS executed an assignment of the Mortgage to BAC Home Loans, which was recorded on September 9, 2010 in the public records of Charleston County, South Carolina.

6. In June of 2011, Bank of America, N.A. ("Bank of America") sent a Fair Debt Collection Practices Act Notice to Debtor which indicated that Federal National Mortgage Association ("Fannie Mae") was "the creditor to whom the debt is owed" and that Bank of America "only services your loan on behalf of [the] creditor . . . ."

7. On October 13, 2011, the caption in the Foreclosure Action was amended to reflect that the Plaintiff was Bank of America because BAC Home Loans and Bank of America merged, leaving Bank of America as the surviving entity.

8. On May 22, 2012, after a motion filed by the Debtor and a hearing, this Court entered an Order Granting Motion to Reopen Case in Debtor's Chapter 7 Case to permit Debtor to file amended schedules. On June 6, 2012, Debtor filed an amended schedule B indicating that he had a contingent unliquidated claim against "BAC Home Loans Servicing, LP a/k/a Bank of America f/k/a Countrywide Home Loans Servicing, LP for failure to inspect and all related claims." On November 13, 2013, the Court entered an Order Discharging Trustee and Order to Close Case.

9. On April 23, 2013, Green Tree Servicing LLC ("Green Tree") sent a letter to Debtor entitled "Notice of Assignment, Sale, or Transfer of Servicing Rights." The letter stated that "the servicing of [Debtor's] mortgage loan, that is, the right to collect payments from you, is being assigned sold or transferred from Bank of America, N.A. ("Bank of America") to Green Tree Servicing LLC ("Green Tree") effective May 1, 2013." The letter also indicated the address that Debtor is to send payments to Green Tree.

10. On May 16, 2013, Bank of America executed an assignment of the Mortgage to Green Tree, which was recorded on May 28, 2013 in the public records of Charleston County, South Carolina.

11. On June 4, 2013, MERS executed a purported assignment of the Mortgage to Green Tree, which was recorded on June 17, 2013 in the public records of Charleston, County, South Carolina.

12. On August 31, 2015, Green Tree merged with DT Holdings LLC and Ditech Mortgage Corp., with the surviving entity being Ditech.

13. Throughout this time, when not stayed, the Foreclosure Action continued to proceed. During this period, the state court's Master-in-Equity granted summary judgment to Bankof America regarding Debtor's counterclaims. Debtor appealed the judgment to the Court of Appeals of South Carolina, which affirmed the lower court's holdings. See Bank of America v. Koola, Appellate Case No. 2014-001323, 2016 WL 640530 (S.C. Ct. App. Feb. 17, 2016). In addition, Debtor removed the Foreclosure Action from the state court to the U.S. District Court for the District of South Carolina. The District Court held that the Foreclosure Action should be remanded back to state court. See Bank of America, N.A. v. Koola, 2016 WL 8672929 (D.S.C. July 29, 2016). Thereafter, Debtor appealed the District of South Carolina's opinion to the Fourth Circuit Court of Appeals, where, the Fourth Circuit dismissed Debtor's appeal. See Bank of America, N.A. v. Koola, 691 Fed. App'x 128 (4th Cir. 2017). After appealing the Fourth Circuit Court of Appeals' decision to the Supreme Court of the United States, the Supreme Court denied certiorari on February 20, 2018. See Koola v. Bank of America, N.A., 138 S.Ct. 1004 (2018) (Mem.). A Judgement of Foreclosure and Sale has not yet been entered in the Foreclosure Action.

14. On March 20, 2018, Debtor filed a pro se petition for relief under chapter 13 of the Bankruptcy Code, staying the Foreclosure Action.

15. In Debtor's schedule D filed on March 20, 2018, Debtor indicates that Bank of America holds a secured claim on Debtor's principal residence. Debtor also listed "Green Tree Bankruptcy Department" and Ditech as others to be notified about his bankruptcy in Part 2 of schedule D. Further, Debtor included a supplement to Schedule D, which states:

Countrywide Home Loans, LLC, initiated a foreclosure case against debtor in 2010. Later, Bank of America became the plaintiff. In December 2017, attorneys for Bank of America informed the State Court that: (i) in 2013, Bank of America lawfully assigned the mortgage to Green Tree Servicing LLC; (ii) at some time later DITECH Financial became the mortgage holder but without any formal assignment and recordation of the mortgage; and (iii) Bank of America continued to litigate the foreclosure case against the debtor even though it ceased to be the real party in interest.

There are questions who is the real party in interest and whether statute of limitations bars any claims by plaintiff.

16. Also on March 20, 2018, Debtor filed a proposed chapter 13 plan. In Part 3.1 of the proposed chapter 13 plan, Debtor proposed "to engage in loss mitigation efforts with first mortgagee according to the applicable guidelines or procedures of the Judge assigned to this case." Debtor amended the plan on April 23, 2018, which continued to provide for loss mitigation. On July 6, 2018, Debtor filed a correspondence indicating that he intends to abandon his pursuit of loss mitigation; however, Debtor has not filed a new amended plan to change the treatment of the Debt.

17. On April 4, 2018, Ditech filed an Objection to Confirmation of Plan, in which it alleged it is a holder of a secured claim against Debtor consisting of the Note and Mortgage.

18. On April 19, 2018, Ditech filed its proof of claim ("Proof of Claim"). The Proof of Claim indicated that the creditor was Ditech Financial LLC fka Green Tree Servicing LLC and that Ditech had not acquired the claim from someone else. The Proof of Claim indicated a secured claim of $173,805.30 and an amount of $87,180.63 to cure the pre-petition default.

19. On May 7, 2018, Debtor filed the Objection to the Proof of Claim, which among other things, challenged Ditech as the proper party to file the Proof of Claim.

20. On June 8, 2018, Ditech filed an Amended Proof of Claim. It appears the Amended Proof of Claim contains the same information on Official Form 410 and Official Form 410 A as the Proof of Claim filed on April 19, 2018. On June 11, 2018, Ditech filed its response to the Objection. The response states that "[Ditech] would show that its [in] possession of original note, which has been endorsed in blank, and that makes [Ditech] a real party in interest and that it has standing to proceed in this case. . . . [Ditech] intends to present the original note for the Court's inspection at the hearing."

21. Also on June 11, 2018, Debtor filed a Memorandum in Support of Objections to Creditor's Proof of Claim and Motion to Disallow the Claim. In this Memorandum, Debtor asserts Ditech has no standing to file the Proof of Claim, alleging: (1) that the Proof of Claim does not establish who is the current holder of the Note; (2) that two of the assignments of the Mortgage are forged and fraudulent documents; (3) that because Bank of America is the Plaintiff in the Foreclosure Action, if Ditech were permitted to collect on the Debt, it would subject Debtor to double collection; and (4) that Ditech should not be permitted to recover certain attorney's fees and costs listed in the Proof of Claim.

22. On June 18, 2018, in anticipation of the hearing on Debtor's Objection to the Proof of Claim, both Debtor and Ditech filed separate Statements of Dispute, which outlined the issues to be decided by the Court, the positions of the parties, the evidence and testimony to be presented, and the legal authority to be presented at the hearing. In Ditech's...