In re Sandlin, Case No. 06-03792-TOM-13 (Bankr. N.D. Ala. 4/8/2010), Case No. 06-03792-TOM-13.

CourtUnited States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama
Writing for the CourtTamara O. Mitchell
PartiesIn re: JAMES R. SANDLIN and JAN H. SANDLIN, Debtors. JAMES R. SANDLIN and JAN H. SANDLIN, individually and on behalf of all other similarly situated Ameriquest Mortgage Company, Inc., Mortgagors, Plaintiffs, v. AMERIQUEST MORTGAGE CO., INC., AMC MORTGAGE SERVICES, INC. and Citi Residential Lending, Defendants.
Decision Date08 April 2010
Docket NumberCase No. 06-03792-TOM-13.

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In re: JAMES R. SANDLIN and JAN H. SANDLIN, Debtors.
JAMES R. SANDLIN and JAN H. SANDLIN, individually and on behalf of all other similarly situated Ameriquest Mortgage Company, Inc., Mortgagors, Plaintiffs,
v.
AMERIQUEST MORTGAGE CO., INC., AMC MORTGAGE SERVICES, INC. and Citi Residential Lending, Defendants.
Case No. 06-03792-TOM-13.
United States Bankruptcy Court, N.D. Alabama, Southern Division.
April 8, 2010.

Robert Keller and Lange Clark, attorneys for Plaintiffs.

John Scott, Rik Tozzi and Todd Cox, attorneys for Citi Residential Lending, Inc. Michael Hall, Stephen Bumgarner, S. Greg Burge, Edward Cotter and Marc Solomon, attorneys for Ameriquest Mortgage Company and AMC Mortgage Services, Inc.

MEMORANDUM OPINION

TAMARA O. MITCHELL, Bankruptcy Judge


This matter is before the Court on the following: the Plaintiffs', James R. Sandlin and Jan H. Sandlin (hereinafter, the "Plaintiffs"), Motion for Partial Summary Judgment (Adversary Proceeding (hereinafter, "A.P.") No. 121)1 (hereinafter, "Plaintiffs' Motion" cited as "Pls. Mot."); Ameriquest Mortgage Company (hereinafter, "Ameriquest") and AMC Mortgage Services, Inc.'s (hereinafter, "AMC") Response in Opposition to the Plaintiffs' Motion (A.P. No. 146)(hereinafter, "Ameriquest's Response" cited as "Amer. Resp."); Defendant Citi Residential Lending, Inc.'s (hereinafter, "CRL") Response in Opposition to the Plaintiffs' Motion (A.P. No. 150)(hereinafter,

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"CRL's Response" cited as "CRL Resp."); Plaintiffs' Reply to Ameriquest's Response (A.P. No. 152)(hereinafter cited as "Pls. Reply to Amer. Resp."); Plaintiffs' Reply to CRL's Response (A.P. No. 153)(hereinafter cited as "Pls. Reply to CRL Resp."); Ameriquest and AMC's Motion for Summary Judgment (A.P. No. 142)(hereinafter, "Ameriquest's Motion" cited as "Amer. Mot.") and Brief and Evidentiary Submission in Support of Ameriquest's Motion (A.P. No. 143)(hereinafter, "Ameriquest's Brief" cited as "Amer. Br."); Plaintiffs' Response to Ameriquest's Motion (A.P. No. 149)(hereinafter cited as "Pls. Resp. to Amer. Mot."); Ameriquest and AMC's Reply in Support of the Ameriquest Motion (A.P. No. 154)(hereinafter, "Ameriquest's Reply" cited as "Amer. Reply"); CRL's Motion for Summary Judgment and Memorandum of Law in Support of Its Motion for Summary Judgment (A.P. No. 144)(hereinafter, "CRL's Motion" cited as "CRL Mot."); Plaintiffs' Response to CRL's Motion for Summary Judgment (A.P. No. 148)(hereinafter cited as "Pls. Resp. to CRL Mot."); and CRL's Reply to Plaintiffs' Response to CRL's Motion (A.P. No. 155) (hereinafter, "CRL's Reply" cited as "CRL Reply"). Appearing at the August 31, 2009 hearing were: Lange Clark and Robert C. Keller, attorneys for the Plaintiffs; Michael Leo Hall and Steve Bumgarner, attorneys for Ameriquest; Rick Tozzi attorney for CRL; and Charles King, Assistant Chapter 13 Trustee. This Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b), 151, and 157(a) (1994) and the district court's General Order Of Reference Dated July 16, 1984, As Amended July 17, 1984.2 This is a core proceeding arising under Title 11 of the United States Code as defined in

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28 U.S.C. § 157(b)(2)(A).3 This Court has considered the pleadings, arguments of counsel, and the law and finds and concludes as follows.4

I. FINDINGS OF FACT5

On October 4, 2006, the Plaintiffs filed for relief under Chapter 13 of the United States Bankruptcy Code (hereinafter, the "Petition Date"). (Proceeding No. 1) On March 31, 2006, prior to the filing of this bankruptcy case, the Plaintiffs received financing from Ameriquest pursuant to an Adjustable Rate Note (hereinafter, the "Note") in the principal amount of $70,200.00. (See Amer. Br. 2 (citing Ameriquest Exhibit (hereinafter, "Amer. Ex.") A)) That same day, the Plaintiffs granted Ameriquest a mortgage (hereinafter, the "Mortgage") on their property to secure the Note. (Id.) (The Note and the Mortgage may collectively be referred to herein as the "Loan".) The property securing the Mortgage was located at: 107 Twin Lakes Road, Trussville, Alabama 35173 (hereinafter, the "Property"). (Id.) The Note required the Plaintiffs to make their payments by the

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first of each month, beginning June 1, 2006. (See Amer. Ex. A; Michael Gibson Affidavit (hereinafter, "Gibson Aff.") ¶ 3, Amer. Ex. D) The Plaintiffs timely made their first payment in June. (Gibson Aff. ¶ 6, Amer. Ex. D) However, the Plaintiffs were late in making the July and August payments, which resulted in the Plaintiffs incurring late fees totaling $61.56. (Id. at ¶ 7, Amer. Ex. D) The Plaintiffs submitted their September payment, but when the check was dishonored due to insufficient funds, Ameriquest returned it to Plaintiffs. (Id. at ¶ 9, Amer. Ex. D)

Following the Petition Date, AMC filed its proof of claim (hereinafter, the "Proof of Claim"), claim number 6, on November 2, 2006, in the amount of $71,429.27, which included an arrearage on the mortgage that accrued pre-petition. Addendum "A" to the Proof of Claim indicates that, as of the Petition Date, the Plaintiffs owed an arrearage of $1,323.42 based upon two missed payments of $615.54 each in September and October, 2006, plus late fees in the amount of $92.34 (hereinafter, the "Pre-Petition Arrearage"). The Plaintiffs' Second Amended Chapter 13 Plan (hereinafter the "Plan) proposed to pay their regular monthly mortgage payments directly to AMC beginning November, 2006 and to pay the Pre-Petition Arrearage with a fixed monthly payment of $50.00. (Proceeding No. 40) On December 28, 2006, the Court entered an order confirming the Plan (hereinafter, the "Confirmation Order")(Proceeding No. 45), which returned all property to Plaintiff that was unnecessary for fulfilling the Plan.

On January 8, 2007, Ameriquest filed a Motion for Relief from Stay(hereinafter, the "Motion for Relief") and supporting fact summary due to the Plaintiffs' default on post-petition payments. (Proceeding No. 47 and Proceeding No. 48) Several weeks later, on January 22, 2007, Ameriquest filed an amended fact summary along with the affidavit of Nadine Krueger (hereinafter, the "Krueger Affidavit" cited as "Krueger Aff."), a bankruptcy specialist for AMC. (Proceeding No. 54 and

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Proceeding No. 55) The Krueger Affidavit represents that the total post-petition delinquency included three missed payments of $615.54 each for November 2006 through January 2007 in addition to the assessment of two late charges totaling $61.56, one property inspection fee totaling $30.00 and bankruptcy fees and costs of $375.00, for a total delinquency of $2,313.18. According to the Krueger Affidavit, the Plaintiffs tendered a payment on December 1, 2006 which was dishonored due to insufficient funds, and Ameriquest returned the check to the Plaintiffs.

On January 12, 2007, the Plaintiffs filed a Motion to Sell Property of the Estate (hereinafter, the "Motion to Sell"). (Proceeding No. 51) The Motion to Sell indicated that the Plaintiffs had a contract to sell their home for $109,000.00, which would pay off the Mortgage. Ameriquest's response requested that the Court ensure that any proceeds from the sale of the Property be used to pay the Mortgage in full. (Proceeding No. 56) On February 20, 2007, the Department of Housing and Urban Development (hereinafter, "HUD") filed an objection to the Motion to Sell, alleging HUD had a valid mortgage on the Property and requesting that HUD's mortgage be paid in full from any proceeds from a sale of the Property. (Proceeding No. 62) Following a hearing before the Court on March 8, 2007, the parties settled their lien disputes through mediation with Mr. J. Thomas Corbett, the Chief Deputy Bankruptcy Administrator. (See Proceeding No. 67)

On April 5, 2007, the Court held a hearing on the Motion to Sell and the Motion for Relief. At this hearing, the parties reported that the settlement reached in mediation between the Plaintiffs, Ameriquest and HUD had fallen through. Consequently, the parties requested a ruling on the Motion. Mr. Sandlin testified at this hearing that the Plaintiffs had intended to sell their home to his brother, Mr. Bruce Sandlin. Although the sales contract indicated that his brother would purchase the home for $109,000.00, he had only received approved financing for $98,500.00, and the

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Plaintiffs agreed to sell it to him for this amount. (See Proceeding No. 51) However, due to the time delay from mediation, the lender for Mr. Bruce Sandlin withdrew the financing. Mr. Sandlin testified the Property appraised for $130,000.00, and they currently had it listed with an agent on the market for $129,000.00. Mr. Sandlin further indicated there was a potential buyer willing to pay this amount.

At the April 5 hearing, Mr. Sandlin was questioned about the Plaintiffs' missed payments to Ameriquest from October 2006 to April 2007. (See Gibson Aff. ¶¶ 12-13, Amer. Ex. D) He testified that they sent a payment to Ameriquest in December 2006, but when the check was dishonored due to insufficient funds, Ameriquest returned the check to them. (See Krueger Aff. 3, Proceeding No. 55) Mr. Sandlin explained that it was during this time period that he took leave from his job at Mazer under the Family Medical Leave [Act]. Mr. Sandlin testified that they had made one payment of $780.00 to the Trustee in March 2007.

On April 17, 2007, the Court entered a written order based upon the April 5 hearing (hereinafter, the "April Order") granting the Motion to Sell and conditionally denying the Motion for Relief. (Proceeding No. 78) Specifically, the Court ordered that if the sale of the Property did not occur by May 18, 2007, then Ameriquest would have relief from stay on May 21, 2007. The April Order further provided that from the sale proceeds all mortgages and liens of record be paid, along with "normal" closing costs. The Court further ordered that $2,500.00 from the net sale proceeds, if any, would be paid to the Trustee, along with a small...

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