PERCY WILSON MORTG. AND FINANCE CORP. v. McCurdy, Adv. No. 3-82-0201

• Decision Date: 25 June 1982
• Docket Number: Bankruptcy No. 3-82-00638,3-82-00538 and 3-82-0036.,3-82-0174 and 3-82-0115,Adv. No. 3-82-0201
• Citation: 21 BR 535
• Parties: PERCY WILSON MORTGAGE AND FINANCE CORPORATION, Plaintiff, v. Tillie J. McCURDY, George W. Ledford, Trustee, Defendants. In the Matter of Tillie J. McCURDY, Debtor. CITIZENS FEDERAL SAVINGS AND LOAN ASSOCIATION OF DAYTON, Plaintiff, v. Anna M. MURRAY, George W. Ledford, Trustee, Defendants. In the Matter of Anna M. MURRAY, Debtor. Carl R. GROOMS, Plaintiff, v. Fonnie Louise KOMES f.n.a. Fonnie Louise Grooms, George W. Ledford, Trustee, Defendants. In the Matter of Fonnie Louise KOMES, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

21 B.R. 535 (1982)

PERCY WILSON MORTGAGE AND FINANCE CORPORATION, Plaintiff, v. Tillie J. McCURDY, George W. Ledford, Trustee, Defendants.

In the Matter of Tillie J. McCURDY, Debtor.

CITIZENS FEDERAL SAVINGS AND LOAN ASSOCIATION OF DAYTON, Plaintiff, v. Anna M. MURRAY, George W. Ledford, Trustee, Defendants.

In the Matter of Anna M. MURRAY, Debtor.

Carl R. GROOMS, Plaintiff, v. Fonnie Louise KOMES f.n.a. Fonnie Louise Grooms, George W. Ledford, Trustee, Defendants.

In the Matter of Fonnie Louise KOMES, Debtor.

Adv. Nos. 3-82-0201, 3-82-0174 and 3-82-0115, Bankruptcy Nos. 3-82-00638, 3-82-00538 and 3-82-0036.

United States Bankruptcy Court, S.D. Ohio, W.D.

June 25, 1982.

COPYRIGHT MATERIAL OMITTED

Jeffrey V. Laurito, Dayton, Ohio, for plaintiff Percy Wilson Mortgage Corp.

Jeffrey P. Albert, Dayton, Ohio, for debtor/defendant Tillie J. McCurdy.

Clifton E. Plattenburg, Jr., Dayton, Ohio, for debtor/defendant Anna M. Murray.

John Curp, Dayton, Ohio, for plaintiff Citizens Federal Loan Corp.

Ronald H. Finkleman, Don Imhoff, Jr., Middletown, Ohio, for plaintiff Carl Grooms.

James F. Cannon, Dayton, Ohio, for debtor/defendant Fonnie L. Komes.

George W. Ledford, Englewood, Ohio, Trustee/defendant for Chapter 13.

PERCY WILSON MORTGAGE AND FINANCE CORPORATION vs. MCCURDY:

FINDINGS OF FACT

— March 5, 1982 — Original petition for relief under Chapter 13 filed.

— Proposed 3-year Plan provides that mortgage arrearages on residence, secured claims, and tax liens shall be paid pro rata. Secured claims, except arrearages on real estate mortgage and tax liens, paid dividends on the value of the collateral plus interest at the contract rates, with lien retention, and the balance paid as unsecured claims pro rata, all at 100%.

The arrearage on the mortgage on residence real estate would be paid inside the Plan and the current installments outside the Plan. A foreclosure suit was pending in state court upon the filing, but the status of the action was not shown. The mortgage was scheduled as 15 payments in arrears at $135.00 per month.

— April 8, 1982 — Complaint filed by Percy Wilson Mortgage and Finance Corporation objecting to confirmation and seeking relief from the automatic stay. The original mortgage, executed 31 August 1979, was in the amount of $12,600.00 with interest at 10% per annum. The Debtor is in default under the terms of the note for the installments due for October 1, 1980 and subsequent installments due until the Chapter 13 petition was filed, and now owes a total of $12,529.24 with interest.

— June 12, 1981 Plaintiff filed an action in foreclosure in the state court which is in judgment since January 8, 1982. The sheriff\'s appraisal on order of sale issued January 8, 1982, was $12,000.00. The sheriff\'s sale was scheduled for April 30, 1982. The Debtor lives on social security disability income of $573.90 and did not know her mortgage was in default because funds had been delivered to her son-in-law regularly for the payments, who did not remit.

CITIZENS FEDERAL SAVINGS AND LOAN ASSOCIATION OF DAYTON vs. MURRAY:

— February 25, 1982 — Original petition for relief under Chapter 13 filed. The 60-month proposed Plan provides for 100% payment on secured claims to the value of the secured claim, and the balance paid as an unsecured claim pro rata with the other unsecured claims at 35.24 per cent. Total secured claims were scheduled in the amount of $4,070.00 and unsecured in the amount of $2,780.74. The deficiency in the amount of $1,920.39 on the residence real estate mortgage is paid inside the Plan and current installments outside.

— March 24, 1982 — Complaint filed by Citizens Federal Savings and Loan Association of Dayton, Ohio, objecting to confirmation and seeking relief from automatic stay. The Debtor derives her interest in the residence real estate by land contract from the original mortgagors executed without the consent of mortgagee, and in violation of the terms of the mortgage giving rise to an acceleration clause. The arrearages total is $1,920.39. The mortgage covered two other parcels of real estate, also sold on land contract; and, the mortgage deficiency is the result of deficiencies in land contract payments on land contracts on the other two parcels because the Debtor is current in her land contract payments to the mortgagors. Under the Plan, Plaintiff would be paid monthly payments of only $145.00, although the terms of the original mortgage note, including interest and tax escrow, require $385.00 per month.

The factual situation is complicated because the total balance on the mortgage to Citizens is $25,723.49, secured by three parcels of real estate, of which only one is subject to bankruptcy court jurisdiction. If the stay is not lifted, the practical effect would be to limit legal action to the collateral on two parcels. The Debtor's residence is valued at between $18,000.00 and $20,000.00.

CARL R. GROOMS vs. FONNIE LOUISE KOMES:

— February 11, 1981 — Original petition for relief under Chapter 13 filed.

— Proposed 3-year Plan provides that secured claims shall be paid pro rata value of the claims plus 12% interest as secured, with lien retention, and unsecured claims paid 10% pro rata subsequent to secured claims.

— As scheduled, secured claims were listed in the total amount of $11,402.00 and unsecured of $1,065.00. Two mortgages were listed on the residence real estate. A first mortgage with 2 months arrearages totaling $402.00 paid through the Plan and a second mortgage to Carl Grooms in the amount of $6,000.00, paid pro rata with secured creditors.

— March 3, 1982 — Complaint filed by Carl R. Grooms seeking removal of the automatic stay "to permit Plaintiff to foreclose...." The note and mortgage involved is dated July 23, 1970 and was executed by Defendant (Debtor-Fonnie Louise Komes, formerly known as Fonnie Louise Grooms) in the amount of $5,000.00 plus interest at 6% per annum.

— The note and mortgage was in compliance with a decree of marriage dissolution between the parties; and, the note provides that the total principal and accrued interest would be due: "upon the earliest of the following events:

(a) Maker\'s remarriage;

(b) Maker\'s living with a man not related to her;

(c) Whenever the Maker ceases to use the house as a principal residence for her and the children;

(d) Maker\'s death;

(e) By August 15, 1985."

— Plaintiff now seeks to accelerate the payment of the note, because of an undisclosed marriage by Defendant, and modification of the automatic stay to permit foreclosure.

These three cases exhibit three variables in fact patterns involving requests for relief from the automatic stay to permit secured creditors to proceed with foreclosure actions to sell the residence real estate of the Debtors.

DECISION

I

The adversarial proceedings were combined to dispose of the issues in light of this Court's decision in First Inv. Co. v. Custer, et al., 18 B.R. 842, 8 B.C.D. 1067 (Bkrtcy. 1982), and an apparent misunderstanding and misinterpretation of that decision. First, it should be emphasized that the rationale of Custer is not intended to be at variance with that of In Re Soderlund, 18 B.R. 12, B.L.D. ¶ 68,605 (D.C.1981), as to the law of acceleration of obligations as between a debtor-mortgagor and the mortgagee under Ohio law. The thrust of Custer is to recognize the effect of Ohio law as found in Soderlund in a Chapter 13 context, but to preserve and protect monetary values existing for the benefit of all of the parties interested in the debtors' estates, particularly other creditors, which is not presented in Soderlund. An accelerated mortgage remains a security interest, and nothing else, entitled to adequate protection.

The Chapter 13 jurisdiction recognizes the acceleration, as between the parties to the original mortgage contract, but protection may be provided by the court to all of the parties by confirming a proposed plan which effectuates the interest and purposes of the Congress, whether by statute or in equity, despite the contractual acceleration.

To this extent, each proposed plan must be scrutinized as to statutory requirements, especially its feasibility.

One important factor to consider is the amount and duration of pre-accelerated defaults in mortgage contract payments. Stated differently was the acceleration precipitated for the purpose of an artificial liquidation of a debtor's home? Or, is there a serious delinquency which cannot be feasibly cured during the term of a Chapter 13 administration?

Another factor is the extent and length of...