In re Wells, 10–17593 ELF.

• Decision Date: 28 December 2011
• Docket Number: No. 10–17593 ELF.,10–17593 ELF.
• Parties: In re Shirlene R. WELLS, Debtor.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

463 B.R. 320

In re Shirlene R. WELLS, Debtor.

No. 10–17593 ELF.

United States Bankruptcy Court, E.D. Pennsylvania.

Dec. 28, 2011.

Stanton M. Lacks, Lacks & Associates, Bensalem, PA, for Debtor.

MEMORANDUM

ERIC L. FRANK, Bankruptcy Judge.

I. INTRODUCTION

Shirlene R. Wells (“the Debtor”) is the owner of her residence, the real property located at 180 Walton Drive, Morrisville, PA (“the Property”). The Debtor commenced the above chapter 13 bankruptcy case on September 8, 2010. On February 16, 2011, PE–NC, LLC (“PE–NC”) filed a secured proof of claim (“the PE–NC Proof of Claim”), asserting that it is the holder of a note secured by a mortgage on the Property with an unpaid balance of $309,714.99 and pre-petition arrears of $137,529.12.

Presently before the court is the Debtor's objection to the PE–NC Proof of Claim (“the Objection”), filed on March 2, 2011. ( See Bky. No. 10–17593, Doc. # 21). An evidentiary hearing on the Objection was held on July 6, 2011 and September 20, 2011 (together, “the Hearing”). At the court's request, the parties submitted post-hearing memoranda, the last of which was filed on October 24, 2011.

For the reasons set forth below, the Objection will be sustained in part, resulting in a partial disallowance of the arrears claim.¹ PE–NC's secured claim for pre-petition arrears will be allowed in the amount of $92,586.34.

II. FINDINGS OF FACT

the note, the mortgage and the first assignment thereof

1. Since approximately 1980, the Debtor has owned the Property.

2. On August 10, 2002, the Debtor entered into a mortgage loan transaction with Cresleigh Financial Services, Inc. (“Cresleigh”).

3. In the mortgage loan transaction, the Debtor executed a thirty (30) year, adjustable rate note (“the Note”) in the amount of $166,000.00, repayable at an initial yearly interest rate of 6.9% and an initial monthly instalment of $1,093.28.²

4. The Note further provides that, commencing September 2004, the interest rate is to change every six months. The adjustable interest rate is indexed to the interbank rates known as “LIBOR.” The Note provides for a minimum interest rate of 6.9% and a maximum interest rate of 13.9%.

5. In the transaction, the Debtor also executed a mortgage on the Property (“the Mortgage”) in favor of Cresleigh.³

6. The Mortgage provides that, absent a waiver, the Debtor must make “escrow” payments to the lender for annual real estate taxes and property insurance and that the lender shall administer the escrow account in accordance with “RESPA,” ⁴ although the record does not reflect the extent to which the mortgagee has, in fact, accepted escrow payments and administered an escrow account since 2002.

7. The Mortgage also includes an “adjustable rate rider,” with terms consistent with those of the Note.

8. On or about January 23, 2004, Cresleigh assigned the Mortgage to MorEquity, Inc. (“MorEquity”). ( See Bky. No. 10–17953, Attachment to Proof of Claim No. 7).

the state court foreclosure action

9. On September 30, 2005 MorEquity instituted a mortgage foreclosure action against the Debtor in the Court of Common Pleas, Bucks County (“the Foreclosure Action”). The action was docketed as No. 2005–06462.⁵

10. MorEquity obtained a judgment by default in the Foreclosure Action on December 13, 2005 and took steps to schedule a sheriff's sale of the Property.

the Debtor's 2006 bankruptcy case

11. On March 6, 2006, the Debtor filed a chapter 13 bankruptcy case in this court, docketed at Bky. No. 06–10850 (“the 2006 Case”).

12. The filing stayed a sheriff's sale of the Property scheduled in the Foreclosure Action.

13. In her initial chapter 13 plan, the Debtor proposed to pay pre-petition mortgage arrears to MorEquity and identified that amount as being $40,270.71. ( See Bky. No. 06–10850, Doc. # 3).

14. On March 15, 2006, MorEquity filed a proof of claim (“the MorEquity 2006 Proof of Claim”), asserting that the Debtor owed pre-petition arrears of $43,432.74. (Bky. No. 06–10850, Claim No. 2).⁶

15. On June 13, 2006, after MorEquity filed its proof of claim, the Debtor filed an amended chapter 13 plan in which she proposed to cure the pre-petition default on the Mortgage by paying the full amount of the arrears claim. The Plan stated that the Debtor would pay two (2) plan payments of $388.00 followed by fifty-eight (58) plan payments of $810.40. (Bky. No. 06–10850, Doc. # 17).

16. By order dated August 10, 2006, about five months after the filing, the court dismissed the 2006 Case.

17. When the 2006 Case was dismissed, the Debtor had paid a total of $1,120.00 to the Trustee. ( See Bky. No. 06–10850, Doc. # 25, Chapter 13 Trustee's Final Report).⁷

the 2006 assignment of the Mortgage from MorEquity to Private Capital Group, LLC

18. By assignment dated March 16, 2006 (the day after it filed its proof of claim in the 2006 Case), MorEquity assigned the Mortgage to Private Capital Group, LLC (“PCG”). ( See Bky. No. 10–17593, Claim No. 7).

the Debtor's 2007 bankruptcy case

19. On October 10, 2007, the Debtor filed another chapter 13 bankruptcy case, docketed at Bky. No. 07–15925 (“the 2007 Case”).

20. The filing stayed a sheriff's sale of the Property scheduled in the Foreclosure Action.

21. In her initial chapter 13 plan, filed on the same day as her bankruptcy petition, the Debtor proposed to pay a total of $47,040.00 under the Plan (twelve (12) payments of $400.00, followed by forty-eight (48) payments of $880.00). ( See Bky. No. 07–15925, Doc. # 5).

22. In the Plan, the Debtor proposed to pay the pre-petition mortgage arrears to MorEquity and again identified that amount as being $43,432.74 (the same amount set forth in the MorEquity 2006 Proof of Claim filed nineteen (19) months earlier).

23. In her bankruptcy Schedule D, however, while the Debtor listed MorEquity as the holder of a mortgage, she also listed “Plaza Equities” as an “assignee” of MorEquity. (Bky. No. 07–15925, Doc. # 1).

24. In her bankruptcy Schedule J and Amended Schedule J, the Debtor represented that her ongoing monthly mortgage payment was $1,611.00 per month.

25. For reasons not explained, on May 21, 2008, more than two (2) years after assigning the Mortgage to PCG and seven (7) months after the commencement of the Debtor's 2007 bankruptcy case, MorEquity filed a proof of claim (“the MorEquity 2007 Proof of Claim”). The MorEquity 2007 Proof of Claim was based upon the Mortgage and the Note, but stated that there were $0.00 in arrears and that “the Account is paid in full.” ( See Bky. No. 07–15925, Claim No. 8).

26. Thereafter, on June 11, 2008, the Debtor filed an amended chapter 13 plan, reducing the plan funding from $47,040.00 to $10,900.00 ($400.00 per month for eight (8) months, followed by twenty-eight (28) payments of $275.00). (Bky. No. 07–15925, Doc. # 27).

27. On the next day, however, June 12, 2008, the court dismissed the 2007 Case on motion of the Chapter 13 Trustee. (Bky. No. 07–15925, Doc. # 31).

the 2010 assignment of the Mortgage from PCG to Plaza Equities, LLC

28. By assignment dated July 30, 2010, PCG assigned the Mortgage to Plaza Equities, LLC (“Plaza”). ( See Bky. No. 10–17593, Claim No. 7).

the Debtor's present chapter 13 case

29. On September 8, 2010, the Debtor filed her current chapter 13 bankruptcy case (“the Present Case”).⁸

30. The filing stayed a sheriff's sale of the Property scheduled in the Foreclosure Action.

31. In her bankruptcy Schedule D, the Debtor listed North Shore Investment, LLC (“North Shore”) as the holder of a mortgage on the Property with an unpaid balance of $296,357.00 and the Tax Claim Bureau as holding a secured claim of $15,337.74.

32. North Shore is an entity that has some sort of business relationship with Plaza. (Testimony of Michael Bode).⁹

33. In her Schedules I & J, filed on September 21, 2010, the Debtor represented that her monthly income is $3,697.00, her monthly expenses are $2,893.00 and that her monthly expenses include a monthly mortgage payment of $1,611.00. ( See Bky. No. 10–17593, Doc. # 8, Schedules I & J).¹⁰

34. On September 21, 2010, the Debtor filed a chapter 13 plan which proposed plan payments totaling $48,000.00 ($800.00/month x 60 mos.) for payment of the secured claims of the Tax Claim Bureau (estimated in the Plan to be $15,337.74) ¹¹ and North Shore (estimated in the Plan to be $134,375.97). ( See Bky. No. 10–17593, Doc. # 10).¹²

the 2010 assignment to PE–NC

35. By assignment dated November 10, 2010, Plaza assigned the Mortgage to PE–NC. ( See Bky. No. 10–17593, Claim No. 7).

36. PE–NC is another entity that is related Plaza. It “manages” and “works out” assets acquired by Plaza. (Testimony of Michael Bode).

PE–NC's Proof of Claim in the Present Case

37. On February 16, 2011, PE–NC, LLC filed a secured proof of claim (again, “the PE–NC Proof of Claim”) asserting that it is the holder of the Note, that the Debtor may have scheduled the holder as “North Shore Inve,” that the total secured claim is in the amount of $309,714.99 and that the prepetition arrears are $137,529.12. ( See Bky. No. 10–17593, Claim No. 7).

38. Although PE–NC's Proof of Claim does not separately itemize the arrears, its itemization of the entire claim ($309,714.99) includes the following charges allegedly due on the account as of the commencement of this bankruptcy case:

+----------------------------------------------------------------------------+
                ¦late charges (“accrued from prior servicer”)             ¦7,980.94     ¦    ¦
                +---------------------------------------------------------+-------------+----¦
                ¦taxes paid                                               ¦10,210.00    ¦    ¦
                +---------------------------------------------------------+-------------+----¦
                ¦FIP insurance                                            ¦9,546.62     ¦13  ¦
                +---------------------------------------------------------+-------------+----¦
                ¦IOA                                                      ¦6,971.16     ¦14  ¦

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