IN RE SHARPE

• Decision Date: 26 January 2010
• Docket Number: Bankruptcy No. 03-04644-BGC-13.,Adversary No. 04-00250.
• Citation: 425 B.R. 620
• Parties: In re Roderick SHARPE, Debtor. Roderick D. Sharpe and Linda Sharpe, Plaintiffs, v. Wells Fargo Home Mortgage; and GE Mortgage Services, LLC; fka GE Capital Mortgages Services, Inc., Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Alabama

425 B.R. 620

In re Roderick SHARPE, Debtor Roderick D. Sharpe and Linda Sharpe, Plaintiffs, v. Wells Fargo Home Mortgage; and GE Mortgage Services, LLC; fka GE Capital Mortgages Services, Inc., Defendants.

Bankruptcy No. 03-04644-BGC-13. Adversary No. 04-00250.

United States Bankruptcy Court, N.D. Alabama, Southern Division.

January 26, 2010.

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Paula C. Greenway, Greenway Law, LLC, Birmingham, AL, for Debtor.

MEMORANDUM OPINION

BENJAMIN COHEN, Bankruptcy Judge.

The matters addressed in this Memorandum Opinion are the third and final part of an almost eight-year dispute before this Court.¹ That dispute grew out of a loan note of $51,300 the plaintiffs executed with Southern Atlantic Financial Services, Inc. on May 15, 1998. Defendant's Exhibit 3. In exchange for that loan, the plaintiffs gave Southern a security interest in their home at 2617 Avenue H, Birmingham, Alabama. Defendant's Exhibit 2. Southern Atlantic transferred its interest in the property and the note to GE Capital Mortgage Services, Inc (later known as GE Mortgage Services, LLC) on June 3, 1998. Defendant's Exhibit 2. On September 30, 2000, Wells Fargo Home Mortgage, the defendant, started servicing this loan for GE. Affidavit of Dixie Teagle attached to First Amendment to Motion to Dismiss Defendant GE Mortgage Services, filed December 18, 2007. A.P. Docket No. 152. Wells Fargo acquired the loan from GE on December 1, 2004. Id. When the plaintiffs did not make all of the required payments, the defendant attempted to collect.

The parties' dispute has three parts. Those are:

Part One—The Foreclosure: This first part began with the plaintiffs' default on their mortgage during Mr. Sharpe's first bankruptcy case, case number 01-04442. It ended when the defendant foreclosed the mortgage on August 30, 2004.

Part Two—The Plaintiffs' Complaint and the Defendant's Liability: This second part began when the plaintiffs filed the pending complaint, Adversary Proceeding No. 04-00250, against the defendant on December 30, 2004. It ended on May 29, 2008, when this Court ruled on the majority of the liability issues raised by the complaint.

Part Three—Damages: This third part began with a trial on November 12-13, 2008, on the damages phase of the pending complaint. It ends with entry of this memorandum opinion and accompanying order.

Each part is discussed below.

I. PART ONE—THE FORECLOSURE

As stated above, part one of the parties' dispute began with the plaintiffs' default on the above-described mortgage during Mr. Shape's first bankruptcy case, case number 01-04442. Part one ended on August 30, 2004, when the defendant foreclosed the plaintiffs' mortgage. Plaintiffs' Exhibit 6. The pertinent events are summarized below.²

Mr. Sharpe filed his first, case number 01-04442, on June 22, 2001. Docket No. 1, Case No. 01-04442.³ At that time, the plaintiffs were severely in default on their mortgage to GE. According to the proposed Chapter 13 plan Mr. Sharpe filed with his petition, the plaintiffs were in arrears for $4,800. Id.⁴ GE filed claim number 5 on August 21, 2001, for $5,908.30, representing the plaintiffs' prepetition mortgage arrears on this loan.

After filing case number 01-04442, the plaintiffs again became delinquent on their mortgage payments. In response, Wells Fargo filed its first Motion for Relief from Automatic Stay on February 25, 2002, seeking permission to foreclose its mortgage. Docket No. 19, Case No. 01-04442. That motion was resolved when the parties entered into an agreement regarding the plaintiffs' future mortgage payments. That agreement was incorporated into an order entered by this Court on April 12, 2002. Docket No. 25, Case No. 01-04442. That order allowed the defendant relief from the stay (after certain notice to the plaintiffs) if the plaintiffs failed to make any future mortgage payment beginning with the April 2002 payment.

GE filed claim number 8 on May 20, 2002, for $2,578.75, representing the postpetition arrears accumulated during case number 01-04442. The plaintiffs did not contest that claim. The case was dismissed on July 9, 2002, and closed on August 16, 2002.

Mr. and Mrs. Sharpe filed a second case, case number 02-07768 on October 2, 2002, at 11:44 a.m. Docket No. 1, Case No. 02-07768.⁵ According to the Statement of Financial Affairs they filed on October 9, 2002, a foreclosure sale was scheduled by GE for October 2, 2002.

According to the proposed Chapter 13 plan they filed on October 11, 2002, the plaintiffs were $8,600 in arrears on their mortgage to GE.

This case was converted from Chapter 13 to Chapter 7 on April 4, 2003. Docket No. 20, Case No. 02-07768.

The plaintiffs again failed to make all of their postpetition mortgage payments. On May 6, 2003, Wells Fargo filed its second Motion for Relief from Automatic Stay, again seeking to foreclose. Docket No. 27, Case No. 02-07768. On June 5, 2003, this Court entered an order granting the defendant's motion for relief, with the consent of the plaintiffs. Docket No. 31, Case No. 02-07768.

Wells Fargo filed claim number 2 on January 2, 2003, for $9,336.

The plaintiffs' Chapter 7 discharge was granted on October 6, 2003, and the case was closed that day.⁶

Mr. Sharpe filed the current case, case number 03-04644, his third, on May 28, 2003, during the pendency of the 2002 Chapter 7 case.⁷ Docket No. 1, Case No. 03-04644. Consequently, that case was filed before the Court entered its June 5, 2003, consent order granting the defendant relief from the stay in the Chapter 7 case.

The effect of the May 28, 2003, case filing was of course, at least as to Mr. Sharpe, to nullify the Court's June 5, 2003, order. That result is quite significant, for at that time, the plaintiffs were again severely in default on their mortgage. According to the proposed Chapter 13 plan filed with the petition, the plaintiffs were in arrears for $9,500. Docket No. 1, Case No. 03-04644. They were contractually due for their September 2001 mortgage payment. Transcript of hearing on October 11, 2007, at 25-26.

After the current case was filed, the plaintiffs became more delinquent on their mortgage payments. On August 28, 2003, the defendant filed its third Motion for Relief from Stay and Motion for Relief from Co-Debtor Stay again seeking permission to foreclose its mortgage. Docket No. 10, Case No. 03-04644. That motion was resolved when the parties entered into a third agreement regarding the plaintiffs' future mortgage payments. That agreement was incorporated into an order entered by this Court on November 19, 2003. Docket No. 21, Case No. 03-04644. Among other things, that order provided relief from the automatic stay to the defendant if the plaintiffs failed to make all future mortgage payments. Order on Motion for Relief from Automatic Stay entered November 19, 2003, Docket No. 21, Case No. 03-04644.

Contending that the plaintiffs did not make all payments required after the Court's order of November 19, 2003, and therefore that the stay lifted, the defendant began foreclosure proceedings against the plaintiffs in June 2004. A foreclosure sale was held on August 30, 2004. The defendant-mortgagee bid $33,500, the winning bid. Transcript at 285. A foreclosure deed was recorded on September 13, 2004. Plaintiffs' Exhibit 6.

II. PART TWO—THE PLAINTIFFS' COMPLAINT and the DEFENDANT'S LIABILITY

Part two of the parties' dispute began with the filing of the pending complaint on December 30, 2004, and ended on May 29, 2008, with this Court's ruling on certain liability issues raised by the complaint. See In re Sharpe, 391 B.R. 117 (Bankr. N.D.Ala.2008). The pertinent events are summarized below.

Contending that the August 30, 2004, foreclosure was wrongful, the plaintiffs filed the pending complaint against the defendant on December 30, 2004. Docket No. 1.⁸ The plaintiffs alleged breach of contract, wrongful foreclosure, conversion, trespass, violation of the automatic stay, estoppel, fraud, unjust enrichment, and breach of fiduciary duty.⁹

Wells Fargo filed an Answer to the original complaint on March 4, 2005. Docket No. 5. The Court scheduled a trial for July 21, 2005. On July 6, 2005, Wells Fargo filed a Motion for Summary Judgment. Docket No. 18. The Court entered an order that scheduled oral arguments for August 9, 2005, and cancelled the trial set for July 21, 2005. Docket No. 19. Before the hearing, the plaintiffs filed a Response to Defendant Wells Fargo's Motion for Summary Judgment. Docket No. 23. Oral arguments were held on August 9, 2005.

On September 30, 2005, nine months after the plaintiffs filed their original complaint, and seven months after the defendant filed an answer, the plaintiffs filed a Demand for Jury Trial. Docket No. 26.

On October 4, 2005, the defendant filed a Motion to Strike Plaintiffs' Demand for Trial by Jury. Docket No. 27. On November 18, 2005, the Court entered an order denying the plaintiffs' demand for a jury, finding the plaintiffs' demand was not timely. Docket No. 30.

On January 3, 2006, the Court entered an Order (Docket No. 32) granting the defendant's Motion for Summary Judgment. Docket No. 18.

On January 13, 2006, the plaintiffs filed a Motion to Reconsider, Docket No. 34, and a Notice of Appeal, Docket No. 35.¹⁰ The Court scheduled a hearing for February 8, 2006.

On January 25, 2006, the defendant filed a Response to Motion to Reconsider. Docket No. 42. On February 7, 2006, the plaintiffs filed a Supplement to Motion to Reconsider. Docket No. 44.

The February 8 hearing was held. On May 23, 2006, the Court entered an Order reversing the January 3, 2006, Order that granted the defendant's Motion for Summary Judgment. Docket No. 19.

A status conference was held on June 14, 2006, a hearing was held on July 26, 2006, and the proceeding was set for trial for December 7, 2006.

On August 23,...