Trevino v. HSBC Mortg. Servs., Inc. (In re Trevino)
| Decision Date | 31 January 2020 |
| Docket Number | ADVERSARY NO. 13-7031,CASE NO: 10-70594 |
| Parties | IN RE: Jose Sr. TREVINO, et al., Debtors Teresa Trevino, et al., Plaintiffs v. HSBC Mortgage Services, Inc., et al., Defendants |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas |
Karen L. Kellett, Theodore O. Bartholow, Caitlyn Nicole Wells, Kellett Bartholow PLLC, Dallas, TX, Catherine Stone Curtis, Pulman, Cappuccio & Pullen, LLP, McAllen, TX, for Debtors/Plaintiffs.
Melissa S. Hayward, Hayward & Associates PLLC, Julian Preston Vasek, Munsch Hardt Kopf & Harr P.C., Dallas, TX, Michael Peter Parmerlee, Golden Operating Corporation, Richardson, TX, for Defendants.
Federal Rule of Bankruptcy Procedure 3002.1 requires a creditor to disclose to the debtor any changes to the amount of the home mortgage during the chapter 13 case. This rule prevents unexpected deficiencies in a home mortgage when a case is completed and closed. While the rule allows a court to take appropriate action when a creditor fails to notify a debtor, the rule is silent regarding incorrect information. The instant dispute before this Court primarily concerns an allegedly improperly filed Rule 3002.1(c) notice by Defendant HSBC Mortgage Services, Inc. ("HSBC "). HSBC sought reimbursement from Plaintiffs in the amount of $2,933.83 related to the payment of 2010 ad valorem taxes to Hidalgo County, Texas. Shortly thereafter, HSBC sold the loan to Defendant U.S. Bank Trust, N.A., as Trustee for LSF8 Master Participation Trust ("USBT "), with Defendant Caliber Home Loans, Inc. ("Caliber ") acting as servicer.
After a six-year discourse in this Court, a trial was held on August 7, 2019, and concluded on October 1, 2019. Based on Plaintiffs' complaint, evidence admitted at trial, arguments of counsel, credibility of the witnesses, and relevant case law, this Court finds that Counts I and IX are well founded and should be granted, Count VI should be sustained, Count XVI is subsumed by Count I; Counts XII, XVII, and XVIII are without merit and should be denied, and Counts XIX and XX should be granted in part and denied in part. The Court finds that it should award Plaintiffs $1,000.00 in statutory damages, $9,000 in punitive damages, and reasonable and necessary fees and expenses in an amount to be determined by this Court, as detailed infra.
This Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52, which is made applicable to adversary proceedings pursuant to Federal Rule of Bankruptcy Procedure 7052. To the extent that any finding of fact constitutes a conclusion of law, it is adopted as such. To the extent that any conclusion of law constitutes a finding of fact, it is adopted as such. To the extent not inconsistent herewith, this Court adopts and incorporates by reference each of the findings of facts in the two memorandum opinions entered by this Court.1
On February 21, 2005, Jose Trevino signed and executed an adjustable rate note for $91,500.00 in connection with the purchase of real property located at 3315 Sandie Lane, Edinburg, Texas 78541 (the "Property ").2 Executed alongside the adjustable rate note was a deed of trust signed by Jose Trevino and Teresa Trevino ("Plaintiffs ") in favor of lender Crevecor Mortgage, Inc, with Mortgage Electronic Registration Systems, Inc. as the beneficiary.3 The deed of trust contained the following provisions regarding Plaintiffs' obligations to provide funds to taxing authorities:
It is undisputed that the Plaintiffs' mortgage loan was a debt that was incurred for personal, family or household purposes.5 On July 10, 2009, HSBC acquired the loan and the servicing rights.6
Approximately a year later, on August 25, 2010, Plaintiffs filed their chapter 13 bankruptcy petition.7 Under schedule D of their bankruptcy petition, Plaintiffs listed HSBC as having a claim for $14,521.19 in mortgage arrearages, and a $95,537.00 claim on the mortgaged Property.8 Plaintiffs' chapter 13 plan ("Plan ") provided that they would continue making post-petition monthly loan payments on the Property to HSBC, and would cure the pre-petition loan arrearages owed to HSBC.9 Importantly, however, Plaintiffs failed to list—under either the Plan or in their bankruptcy schedules—the 2010 ad valorem real estate taxes which were assessed pre-petition, but would not come due until the following year, but certainly within the life of the Plan. Additionally, Plaintiffs' monthly mortgage payment was $697.80, principal and interest only.10 Despite Plaintiffs' failure to include $1,878.7611 in pre-petition 2010 ad valorem taxes in their bankruptcy schedules and Plan, the Court entered an order confirming the Plan on November 18, 2010.12
The following proofs of claim were filed in the Court's claim register:
On January 24, 2011, Cindy Boudloche, the chapter 13 trustee, (the "Trustee ") filed a Notice of Intent to Pay Claims, showcasing payments the Trustee would be making under the Plan.18 Even though the Plan did not provide for it, included within the Trustee's Claims Notice was, inter alia, the taxing authorities' claims.19 On September 29, 2011, the Trustee filed her Amended Notice of Intent to Pay Claims ("Amended Claims Notice "), which again demonstrated the Trustee's intent to pay, inter alia, the taxing authorities' 2010 tax claims, even though Plaintiffs' Plan still did not provision payment of the 2010 taxes.20
Not surprisingly, this generated quite a bit of confusion. On one hand, Plaintiffs' failure to include the 2010 ad valorem taxes made their Plan unfeasible. On the other hand, the Trustee still paid the 2010 ad valorem taxes. Born out of this confusion came HSBC's payment and refunding of Property taxes to Hidalgo County between 2011 and 2013:
Date Amount Tax Year Refunded? When?21 3002.1
Notice
5/21/2011 $2,057.80 2010 Yes 10/12/2012 No
5/21/2011 $641.59 2010 Yes 9/16/2011 No
8/10/2011 $777.01 2010 Yes 10/12/2012 No
4/22/2013 $4,450.15 2010, 2012 Yes 6/7/2013 Yes
7/11/2013 $2,835.66 2010 Yes 10/16/2013 No
10/17/2013 $2,734.59 2010 Yes 10/31/2013 No
Editor's Note: The preceding image contains the reference for footnote21
Of particular import are the 2010 and 2012 taxes that HSBC paid to Hidalgo County on April 22, 2013.22 Notwithstanding the refunding of $4,450.15 on June 7, 2013,23 HSBC filed its July 24, 2013 Notice of Post-Petition Mortgage Fee, Expenses, and Charges ("3002.1 Notice "), claiming it was owed $4,450.15 from Plaintiffs' bankruptcy estate.24 The 3002.1 Notice stated that HSBC paid the 2010 county taxes in the amount of $2,933.83, and the 2012 county taxes in the amount of $1,516.32.
As a consequence of HSBC's 3002.1 Notice, on September 19, 2013, the Trustee filed her motion to dismiss Plaintiffs' case for failure to propose a feasible Plan.25 Plaintiffs filed a response to ...
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