In re Sheed
| Decision Date | 03 October 2019 |
| Docket Number | Bankruptcy No. 17-17464-MDC |
| Citation | 607 B.R. 470 |
| Parties | IN RE: Satina SHEED, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Jonathan Sgro, Community Legal Services, Philadelphia, PA, for Debtor.
Before the Court for consideration in the bankruptcy case of Satina Sheed (the "Debtor") is the Debtor's objection (the "Claim Objection")1 to the amended proof of claim (the "Amended Claim")2 filed by U.S. Bank National Association ("U.S. Bank") as trustee for the Pennsylvania Housing Finance Agency ("PHFA," and together with U.S. Bank and the Debtor, the "Parties"). The Court held an evidentiary hearing on the Claim Objection on September 20, 2018 and November 19, 2018 (the "Hearing"), and the Parties submitted post-hearing briefs (each a "Post-Hearing Brief") on January 11, 2019.3 For the reasons set forth below, the Court will overrule the Claim Objection and allow the Amended Claim in full.
The Debtor owns and resides at 4007 J Street in Philadelphia, Pennsylvania (the "Property"). Stipulation of Facts at ¶1. On April 25, 2002, the Debtor executed a Note to Wells Fargo Home Mortgage, Inc. ("Wells Fargo") for a loan secured by a mortgage on the Property (the "Mortgage"). Stipulation of Facts at ¶2. On the same date, Wells Fargo executed an Assignment of Mortgage, assigning the Mortgage to PHFA. Debtor's Ex. R. The Mortgage is federally-insured by the Federal Housing Administration ("FHA") under Title II of the National Housing Act ( 12 U.S.C. § 1715 et seq. ). Stipulation of Facts at ¶3. The principal sum listed on the Mortgage is $56,522.00. Stipulation of Facts at ¶4. On August 31, 2007, PHFA executed an Assignment of Mortgage to U.S. Bank as trustee for PHFA. Stipulation of Facts at ¶5; Debtor's Ex. R.
On October 9, 2007, U.S. Bank filed a complaint in mortgage foreclosure (the "2007 Foreclosure Action") against the Debtor in the Court of Common Pleas of Philadelphia County (the "State Court"). Stipulation of Facts at ¶16. On March 26, 2009, prior to trial, the State Court approved a stipulation (the "Foreclosure Stipulation") between the Parties in the 2007 Foreclosure Action. Stipulation of Facts at ¶¶17, 19. The Foreclosure Stipulation provided that "in the event the [Debtor] shall file a Petition under Chapter 13 of the United States Bankruptcy Code, the amount of attorney fees as listed above shall be limited to the sum of $1,500.00 in any claims filed by [U.S. Bank] in the bankruptcy case." Stipulation of Facts at ¶18. On March 27, 2009, the State Court entered a consent judgment (the "Consent Judgment") against the Debtor in the amount of $66,077.65. Debtor's Ex. D at p.10. The Consent Judgment prohibited U.S. Bank from executing upon the Consent Judgment until on or after April 30, 2009. Debtor's Ex. D at p.10.
On April 29, 2009, the Debtor filed her first petition in this Court under chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. (the "2009 Bankruptcy Case").5 Stipulation of Facts at ¶20. On September 27, 2009, U.S. Bank filed a proof of claim in the 2009 Bankruptcy Case asserting the amount in arrears under the Note was $20,020.20, including $6,930.80 in "legal costs and fees." Stipulation of Facts at ¶21. On October 4, 2009, U.S. Bank filed an objection to confirmation of the Debtor's proposed plan, arguing that it understated the amount of U.S. Bank's claim. Stipulation of Facts at ¶22. On November 23, 2009, U.S. Bank filed an amended proof of claim in the 2009 Bankruptcy Case listing $2,268.30 in legal costs and fees, including $1,500.00 "per consent order attorney fees." Stipulation of Facts at ¶¶23, 24. On December 9, 2009, the Debtor filed an amended chapter 13 plan providing for an arrears claim of $14,756.30 to be paid to U.S. Bank. Stipulation of Facts at ¶25. On January 13, 2010, U.S. Bank filed a praecipe to withdraw its objection to confirmation. Stipulation of Facts at ¶26. On July 1, 2010, however, confirmation of the Debtor's proposed plan was denied and the Debtor's 2009 Bankruptcy Case was dismissed for the Debtor's failure to make plan payments. Stipulation of Facts at ¶27.
On August 9, 2010, with the 2009 Bankruptcy Case having been dismissed, U.S. Bank filed a Praecipe for Writ of Execution in the 2007 Foreclosure Action. Stipulation of Facts at ¶28. On March 28, 2011, the Debtor and U.S. Bank entered into a Mortgage Modification Agreement (the "Modification Agreement"). Stipulation of Facts at ¶29. The Modification Agreement includes certain provisions that are relevant to the Parties' arguments with respect to the pending Claim Objection, set forth below:
Modification Agreement at ¶¶1, 2, 5. PHFA sent the Debtor a letter dated April 11, 2011, regarding the Modification Agreement (the "Modification Cover Letter"). Stipulation of Facts at ¶34. The letter stated, in relevant part, that Debtor's Ex. K.
On May 17, 2011, after execution of the Modification Agreement, U.S. Bank filed a praecipe in the State Court to vacate the Consent Judgment in the 2007 Foreclosure Action. Stipulation of Facts at ¶35.
Nearly four years later, on May 6, 2015, PHFA sent the Debtor a "Notice of Intention to Foreclose Mortgage." Stipulation of Facts at ¶36. On February 2, 2016, U.S. Bank filed a second complaint in mortgage foreclosure against the Debtor in the State Court (the "2016 Foreclosure Action"). Stipulation of Facts at ¶38. After a series of conciliation conferences, on December 1, 2016, the State Court entered default judgment (the "Default Judgment") in favor of U.S. Bank against the Debtor in the amount of $49,636.23. Debtor's Exs. F, S. The assessment of damages U.S. Bank submitted to the State Court when seeking the Default Judgment were as follows:
Principal Balance $46,553.27
Interest (4/1/15 through 11/23/16) $ 865.59
Late Charges $ 187.91
Escrow Payments Due 11 × $192.87 $ 2,121.57
Escrow Balance ($131.41)
Suspense ($400.00)
Deferred Late Charges $ 439.30
$49,636.23
Debtor's Ex. S. Also, on December 1, 2016, the State Court issued a Writ of Execution directing the Sheriff of Philadelphia County to levy on and sell the Property to satisfy the Default Judgment. Debtor's Ex. S. On November 2, 2017 (the "Petition Date"), after a series of stays of a sheriff sale of the Property, the Debtor filed the instant bankruptcy case with a sheriff's sale scheduled for November 7, 2017. Debtor's Ex. F.
On March 16, 2018, U.S. Bank filed a proof of claim (the "Original Claim") against the Debtor, asserting a secured claim in the amount of $70,637.79 for "money loaned," of which $32,215.55 was asserted to represent the amount necessary to cure the Debtor's default as of the Petition Date. Debtor's Ex. B. Attached to the Original Claim was a Form 410A (the "410A") detailing the calculation of both the total claim amount and the arrearage as of the Petition Date, as well as the loan payment history. Debtor's Ex. B. The 410A set forth the following figures for the total claim:
Principal Balance: $45,927.74
Interest Due: $ 1,038.71
Fees, costs due: $20,313.13
Escrow deficiency for funds advanced; $ 3,608.21
Less total funds on hand: $ 250.00
Total Claim $70,637.79
With respect to the arrearage as of the Petition Date, the 410A set forth the following figures:
Principal and interest due: $ 6,919.64
Prepetition fees due: $20,313.13
Escrow deficiency for funds advanced: $ 3,608.21
Projected escrow shortage: $ 1,624.54
Less funds on hand: $ 250.00
Total prepetition arrearage $32,215.55
On April 10, 2018, the Debtor filed the Claim Objection. The Claim Objection asserted nine grounds for the Debtor's objection to the Original Claim, summarized in broad terms as follows:6
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