In re Macklin, Case No.: 05-12750-BGC-13 (Bankr. N.D. Ala. 9/23/2009), Case No.: 05-12750-BGC-13.

CourtUnited States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama
Writing for the CourtBenjamin Cohen
PartiesIn re: Elnora Macklin, Debtor. Elnora Macklin, Plaintiff, v. Jefferson Finance, LLC, Defendant.
Decision Date23 September 2009
Docket NumberCase No.: 05-12750-BGC-13.,A. P. No.: 08-00013-BGC-13.

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In re: Elnora Macklin, Debtor.
Elnora Macklin, Plaintiff,
v.
Jefferson Finance, LLC, Defendant.
Case No.: 05-12750-BGC-13.
A. P. No.: 08-00013-BGC-13.
United States Bankruptcy Court, N.D. Alabama, Southern Division.
September 23, 2009.
Memorandum Opinion on MOTION FOR SUMMARY JUDGMENT1

BENJAMIN COHEN, Bankruptcy Judge


I. Background

The defendant's Motion for Summary Judgment is the latest phase in a lengthy dispute between these parties. The following is a summary of that dispute.

The movant holds mortgage liens on property owned by the debtor. On August 25, 2006, the movant filed a Motion for Relief From Stay in the debtor's main case, Docket No. 57, seeking permission to foreclose on those mortgages. A hearing was held on December 19, 2006. At the hearing, the parties announced that they had settled the matter, and that movant's counsel would submit a proposed consent order. Docket No. 79.

On April 5, 2007, rather than filing a settlement document, movant's counsel filed a Request to Re-Set Motion for Relief from Stay Put Back on Calendar. Docket No. 84. Movant's counsel represented, "The issues in this case have not been resolved." Id.

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A hearing on the Request to Re-Set was held on May 1, 2007. At that hearing, the parties again announced that the matter had been settled, and that movant's counsel would submit a proposed consent order. Proceeding No. 99.

The Court received the parties' Consent Order and entered it on May 4, 2007. Proceeding No. 101. That order provided for circumstances under which the movant would be entitled to relief from the stay. The order included:

Upon any failure to meet any one of the above conditions or make any of the above payments or other mortgage charges or obligations, including but not limited to timely payment of any valorem taxes, late fees, insurance, interest, legal fees and expense, as they come due, the Court shall enter an order granting Jefferson Finance, LLC relief from the stay upon Jefferson Finance's written notice and request to the Court. The Debtor's counsel shall be copied with such notice and request and may file an objection thereto if the failure of a condition did not, in fact, occur.

Consent Order at 2. Proceeding No. 101.

On August 31, 2007, contending that the debtor violated the May 4, 2007, consent order, the movant filed a Request for Immediate Order of Relief from Stay. Docket No. 109.2 Specifically, the movant alleged the debtor: (1) failed to make the agreed upon "catch-up" payments; (2) failed to provide proof of insurance; (3) failed to make her regular mortgage payments; and (4) failed to make her Chapter 13 plan payments.

The debtor responded twice. On September 25, 2007, the debtor filed her Objection to Motion to Impose Automatic Stay Alternative Objection to Motion for Relief from Stay. Proceeding No. 113. In this response, the debtor argued that the movant had verbally agreed to allow her until October 16, 2007, to cure the defaults outlined in its request. On November 6, 2007, the debtor filed her Debtor's Response to Creditor, Jefferson Finance LLC's Motion for Relief from Stay Regarding Property Located at 828 Spring Street, Birmingham, AL 35214 and 119 Avenue Y, Pratt City, Birmingham, AL 35214. Proceeding No. 119. In this response, the debtor argued that the movant had not properly applied her mortgage payments, and that the movant took advantage of her because of her, "age and ... [her] lack of financial savvy...." Id. (parenthetical added). She added that there was ample equity in the two properties to protect the movant's interests. The debtor did not suggest in either response that she had not violated the terms of the consent order.

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A hearing on the Request for Immediate Order of Relief from Stay was eventually scheduled for January 16, 2008. Docket No. 137.

The debtor-plaintiff filed the pending complaint against Jefferson Finance, LLC, on January 15, 2008, one day before that scheduled hearing. That complaint became the pending Adversary Proceeding No. 08-00013. A.P. Docket No. 1.

The hearing on the Request for Immediate Order of Relief from Stay was held on January 16, 2008. At that hearing, the debtor asked the Court to delay the hearing of the motion for relief from stay until she had an opportunity to present her evidence on what she characterized as some related matters. Those matters included the ones from the Complaint filed against Jefferson Finance, LLC, one day earlier.

The Court denied the debtor's request and held the hearing on the Request for Immediate Order of Relief from Stay. The only testimony offered was by Mr. Ward Bailey, the movant's managing member. Despite being present in the courtroom, the debtor did not testify.

The plaintiff amended her complaint in the pending A.P No. 08-00013 on March 19, 2008. A.P. Docket No. 11.

On May 29, 2008, the Court entered an Order Granting Relief from Stay in the debtor's main case. Docket No. 166. That order granted both the movant's 2007 request for relief from the stay against the debtor and the relief requested in its Request for Immediate Order of Relief from Stay.3

The matter before the Court now is the Jefferson Finance, LLC's Pretrial Statement and Motion for Summary Judgment filed on January 14, 2009, seeking judgment as a matter of law on the complaint filed by the plaintiff on January 15, 2008.

After notice, the Motion for Summary Judgment was heard on February 4, 2009. Appearing were Mr. Jerome Tucker, the attorney for the plaintiff; Mr. John R. Lavette, the attorney for the defendant; and Ms. Mary Fallaw, the attorney for the Standing Chapter 13 Trustee.

The matter was submitted on the affidavit of Mr. Ward Bailey; Mr. Bailey's testimony from the hearing on January 16, 2008, on the defendant's motion for relief from the stay; the affidavit of Ms. Elnora Macklin; Ms. Macklin's deposition; the exhibits attached to and included with the defendant's motion for summary judgment; the pleadings, motions, and briefs filed by the parties; the arguments of counsel; the records in this adversary proceeding and Bankruptcy Case No. 05-12750-BGC-13.

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II. The Real Estate in Dispute
A. Property Located at 119 Avenue Y, Birmingham, Alabama 35214.

The defendant Jefferson Finance, LLC and Ms. Macklin entered into a purchase money mortgage loan agreement on December 4, 2001. At the time, the plaintiff was in her late seventies or early eighties. The mortgage was secured by property located at 119 Avenue Y, Birmingham, Alabama 35214. The debtor borrowed $19,000 at an annual interest rate of 12 percent. Her monthly payment was $230. The plaintiff's intention, which she shared with Mr. Bailey prior to receiving the loan, was to lease the property.

After about a year from acquiring the property, the plaintiff has continuously rented it to a paying tenant for $300 to $350 per month. According to her deposition, she has never occupied the property and never intended to occupy it.

In its proof of claim filed in the plaintiff's bankruptcy case, the defendant estimated the value of the property to be $33,000. At the hearing on the defendant's motion for relief from the stay on January 16, 2008, Mr. Bailey testified that the property was worth $33,000 at the time of the hearing.

B. Property Located at 828 Spring Street, Birmingham, Alabama 35214.

On June 7, 2005, the defendant made a loan to Ms. Macklin and her sister, Bernice Barnfield, on another piece of real estate.4 At the time, the plaintiff was in her early eighties. That loan was secured by a mortgage on property jointly owned by Ms. Macklin and Ms. Barnfield located at 828 Spring Street, Birmingham, Alabama 35214. They acquired the property by inheritance. Their purpose in obtaining the loan was to pay certain debts of the decedent's estate that otherwise would have had to have been paid through liquidation of the property. Their intention, which they shared with Mr. Bailey prior to receiving the loan, was to lease the property.

Ms. Macklin and Ms. Barnfield borrowed $10,600 at an annual interest rate of 19.75 percent. Their monthly payment was $235. In the proof of claim filed in the plaintiff's bankruptcy case, the defendant estimated the value of the property at

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$65,000. In contrast, at the hearing on the defendant's motion for relief from the stay, conducted on January 16, 2008, Mr. Bailey testified that the property was worth between $20,000 and $25,000 when the defendant made the loan and was worth approximately the same at the time of the hearing.

Neither Ms. Macklin nor Ms. Barnfield has ever occupied the property and according to the plaintiff's deposition, neither had the intention to do so. Since acquiring the property they have allowed a granddaughter to live in it continuously, rent free.

III. The Plaintiff's Complaint
A. Truth in Lending Act

The plaintiff contends that the defendant violated the Truth in Lending Act in connection with both mortgage loans. The plaintiff alleges that the defendant failed to provide her with the disclosures required by 15 U.S.C. § 1638 and 12 C.F.R. § 226.18, or failed to provide those disclosures in the form required by 15 U.S.C. § 1632 and 12 C.F.R. § 226.5

The plaintiff also contends that she had a right to rescind the June 7, 2005, mortgage loan by virtue of 15 U.S.C. § 1635(a) and 12 C.F.R. § 226.23(a). She alleges that the defendant violated those provisions by failing to provide her with notice of her right to rescind as required by 15 U.S.C. § 1635(a) and 12 C.F.R. § 226.23(b), or failed to provide that notice in the form and manner required by said 12 C.F.R. § 226.23(b).

B. Home Ownership and Equity Protection Act

The plaintiff also contends, in regard to both mortgage loans, that she was entitled to the disclosures required by the Home Ownership and Equity Protection Act. 15 U.S.C. § 1639; 12 C.F.R. § 226.32. She claims that she was entitled to those disclosures in connection with the June 7,...

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