In re Slade-Lanier

Decision Date06 June 2014
Docket NumberCase No. 12-13436,Case No. 13-14328
CourtU.S. Bankruptcy Court — Northern District of Ohio
PartiesIn re: BARBARA J. SLADE-LANIER, Debtor. TOMEKA I. WEAVER, Debtor.

The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document was signed electronically on June 6, 2014, which may be different from its entry on the record.

IT IS SO ORDERED.

__________

ARTHUR I. HARRIS

UNITED STATES BANKRUPTCY JUDGE

Chapter 13 Proceedings

Judge Arthur I. Harris

MEMORANDUM OF OPINION1

These two Chapter 13 cases are currently before the Court on the debtors' objections to the claims of real estate tax certificate holders CapitalSource Bank FBO Aeon Financial, LLC ("CapitalSource") and Woods Cove II, LLC ("Woods Cove"). The parties initially focused on whether the tax certificate holders wereentitled to 18 percent interest on both the paid and unpaid principal balance—i.e., the total tax certificate price—despite periodic payments reducing the principal balance over the life of the Chapter 13 plan. Nevertheless, after notice to the parties and supplemental briefing, the Court has determined that the treatment of each of these secured tax claims is governed by the applicable confirmed Chapter 13 plan under 11 U.S.C. § 1327(a). For the reasons that follow, the Court sustains the debtors' claim objections in part. In Case No. 12-13436, Barbara J. Slade-Lanier, CapitalSource has an allowed secured claim in the amount of $10,234.59, with postpetition interest accruing at the rate of 18% on the unpaid principal balance, plus an allowed unsecured claim in the amount of $2,362.10. In Case No. 13-14328, Tomeka I. Weaver, Woods Cove has an allowed secured claim in the amount of $11,120.98, with postpetition interest accruing at the rate of 18% on the unpaid principal balance, plus an allowed unsecured claim in the amount of $2,875.78.

JURISDICTION

The Court has jurisdiction over these proceedings. 11 U.S.C. § 1334(b). An objection to a claim is a core proceeding under 28 U.S.C. § 157(b)(2)(B), which falls within the jurisdiction granted to this Court pursuant to Local General Order No. 2012-7, dated April 4, 2012.

FACTUAL AND PROCEDURAL BACKGROUND

Unless otherwise indicated, the following facts are undisputed. Ohio state law provides a procedure whereby Ohio counties may generate revenue by selling tax certificates on real estate parcels with delinquent property taxes. Ohio Rev. Code Ann. § 5721.30, et seq. Certificate holders purchase the county's right to payment on delinquent property taxes for a real estate parcel. The county receives necessary revenue, and the certificate holder generally receives a first-priority lien on the real estate parcel. All of the tax certificates held by creditors CapitalSource and Woods Cove in these cases came from negotiated sales with Cuyahoga County pursuant to Ohio Revised Code § 5721.33.

A. Case No. 12-13436, Barbara J. Slade-Lanier

On October 27, 2009, CapitalSource purchased a negotiated sale tax certificate for tax years 2006, 2007, and 2008 on a real estate parcel that is debtor Barbara J. Slade-Lanier's principal residence. On September 1, 2010, CapitalSource purchased an additional negotiated sale tax certificate with respect to the same parcel for the 2009 tax year.

On May 4, 2012, Barbara J. Slade-Lanier filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code. On Schedule E - Creditors Holding Unsecured Priority Claims (ECF No. 1, at 18), the debtor listed a $9,264.59 taxlien claim associated with CapitalSource. The debtor's creditor address matrix listed an address for CapitalSource's counsel in Chicago, Illinois. ECF No. 1, at 40.

On June 7, 2012, the day after the meeting of creditors, counsel for CapitalSource filed a secured claim for $12,596.69 with 18% interest. The debtor's original Chapter 13 Plan (ECF No. 9) provided for the payment of CapitalSource's claim as an unsecured priority claim in the amount of $9,264.59 with no interest. The original Chapter 13 plan did not provide for CapitalSource's secured claim. Despite having received notice of the plan, CapitalSource did not participate in the plan confirmation process, and the Court confirmed the debtor's original Chapter 13 plan on August 2, 2012.

Less than three weeks later, on August 20, 2012, CapitalSource filed a Motion (ECF No. 28) to dismiss the debtor's case. CapitalSource argued that the debtor committed a material default with respect to the confirmed Chapter 13 Plan (ECF No. 23) when the debtor failed to pay postpetition real estate property taxes and, as a result, incurred new debt. The debtor filed a timely Objection. ECF No. 30. On September 27, 2012, the Court held a hearing on the matter. At the hearing, counsel for CapitalSource withdrew the Motion to Dismiss.

On April 29, 2013, the debtor filed a Motion to Modify (ECF No. 44) theconfirmed Chapter 13 plan. CapitalSource, through counsel, received notice of the Motion to Modify by first class mail and email. The Motion to Modify altered the treatment of CapitalSource's claim. As opposed to the original plan, which provided for the treatment of the CapitalSource's claim as a priority claim, the modified plan provides for CapitalSource's secured claim to be paid $10,234.59 at 18% interest, with a monthly payment by the Chapter 13 trustee of $312. Paragraph 3B of the debtor's modified Chapter 13 plan provides:

Trustee shall pay the monthly amount to creditors up to the amount specified below to be paid through the plan. The portion of any allowed claim that exceeds the amount to be paid through the plan shall be treated as an unsecured claim.

CapitalSource never objected to the debtor's Motion to Modify.

Pursuant to 11 U.S.C. §§ 1329 and 1325(a), the Court granted the debtor's Motion to Modify on June 4, 2013. ECF No. 49. The confirmed plan provides that any portion of CapitalSource's claim exceeding $10,234.59 with 18% interest shall be treated as an unsecured claim. Under the confirmed plan, unsecured creditors are expected to receive a dividend of 1%.

B. Case No. 13-14328, Tomeka I. Weaver

On November 16, 2011, Woods Cove purchased a negotiated sale tax certificate for tax years 2008, 2009, and 2010 on a real estate parcel that is debtorTomeka I. Weaver's principal residence. On September 13, 2012, Woods Cove purchased an additional negotiated sale tax certificate with respect to the same parcel for the 2011 tax year.

On June 17, 2013, Tomeka Weaver filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code. On Schedule D - Creditors Holding Secured Claims (ECF No. 1, at 13-14), the debtor listed tax liens associated with Woods Cove. On the Statement of Financial Affairs (ECF No. 1, at 32), the debtor disclosed that she is a defendant in a pending foreclosure lawsuit filed by Woods Cove in the Cuyahoga County Court of Common Pleas. The debtor's creditor address matrix listed two addresses for Woods Cove: a corporate address in Beverly Hills, California, and an address for Woods Cove's local counsel in Cleveland, Ohio. ECF No. 1, at 41-43.

Counsel for Woods Cove filed a Notice of Appearance (ECF No. 13) on July 11, 2013, six days before the meeting of creditors. Woods Cove filed a claim for $24,005.65 on August 8, 2013, and, on August 27, 2013, amended the claim to specify that Woods Cove was due 18% interest. The debtor's Chapter 13 Plan (ECF No. 12) provided for the treatment of Woods Cove's secured claim. The debtor listed a debt to Woods Cove in the amount of $11,120.98 with 18% interest, and the debtor proposed for the Chapter 13 trustee to make monthlypayments of $270 to Woods Cove. Paragraph 3B of the debtor's Chapter 13 plan provides:

Trustee shall pay the monthly amount to creditors up to the amount and interest rate as specified below. The portion of any allowed claim that exceeds the amount to be paid through the plan shall be treated as an unsecured claim. Unless the court orders otherwise, upon confirmation, the amount, interest rate and monthly payment specified below will be binding under 11 U.S.C. § 1327.

ECF No. 23, at 4.

Woods Cove received notice of the debtor's Chapter 13 plan and the debtor's proposed treatment of Woods Cove's claim. ECF No. 12, at 1-2. Woods Cove never objected to confirmation of the debtor's plan. Pursuant to 11 U.S.C. § 1325(a), the Court confirmed the debtor's Chapter 13 plan on December 2, 2013. ECF No. 23. The confirmed plan provides that any portion of Woods Cove's claim exceeding $11,120.98 with 18% interest shall be treated as an unsecured claim. Unsecured creditors are expected to receive a dividend of 0%—nothing—in the debtor's case.

DISCUSSION

"Chapter 13 of the Bankruptcy Code provides a reorganization remedy for consumer debtors and proprietors with relatively small debts." Johnson v. Home State Bank, 501 U.S. 78, 82, 111 S. Ct. 2150 (1991) (citations omitted). AChapter 13 debtor "may submit for the bankruptcy court's confirmation a plan that 'modif[ies] the rights of holders of secured claims . . . or . . . unsecured claims,' § 1322(b)(2), and that 'provide[s] for the payment of all or any part of any [allowed] claim,' § 1322(b)(6)." Id. (alterations in original) (footnote omitted).

"The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan." 11 U.S.C. § 1327(a). A bankruptcy court order confirming a debtor's Chapter 13 plan is a final judgment. United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 269, 130 S. Ct. 1367 (2010). Even if a bankruptcy court order confirming a debtor's Chapter 13 plan violates the Bankruptcy Code, the order is a final judgment. Id. A party who wishes to challenge a bankruptcy court's final judgment may timely appeal the final judgment, i.e., obtain direct review, or, if warranted under the...

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