Trevino v. HSBC Mortg. Servs., Inc. (In re Trevino)

Decision Date31 January 2020
Docket Number ADVERSARY NO. 13-7031,CASE NO: 10-70594
Citation615 B.R. 108
Parties IN RE: Jose Sr. TREVINO, et al., Debtors Teresa Trevino, et al., Plaintiffs v. HSBC Mortgage Services, Inc., et al., Defendants
CourtU.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.

MEMORANDUM OPINION

Resolving ECF No. 78

Eduardo V. Rodriguez, United States Bankruptcy Judge

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.

I. FINDINGS OF FACT

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

a. Plaintiffs' home mortgage

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:

3. Funds for Escrow Items. Borrower shall pay to lender on the day Periodic Payments are due under the Note, until the Note is paid in full, a sum (the "Funds") to provide for payment of amounts due for (a) taxes and assessments and other items which can attain priority over this Security Instrument as a lien or encumbrance on the Property ...
* * *
9. Protection of Lender's Interest in the Property and Rights Under this Security Instrument. If (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument, (b) there is a legal proceeding that might significantly affect Lender's interest in the Property and/or rights under this Security Instrument (such as a proceeding in bankruptcy ...), or (c) Borrower has abandoned the Property, then Lender may do and pay for whatever is reasonable or appropriate to protect Lender's interest in the Property and rights under this Security Instrument, including protecting and/or assessing the value of the Property, and securing and/or repairing the Property. Lender's actions can include, but are not limited to: (a) paying any sums secured by a lien which has priority over this Security Instrument .... Any amounts disbursed by Lender under this Section 9 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment ....4

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

b. Plaintiffs' chapter 13 plan

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

c. Relevant proofs of claim

The following proofs of claim were filed in the Court's claim register:

i. Claim No. 15: filed on December 14, 2010 by South Texas College regarding Plaintiffs' 2010 property taxes in the amount of $133.85;13
ii. Claim No. 16: filed on December 14, 2010 by Edinburg CISD regarding Plaintiffs' 2010 property taxes in the amount of $1,108.55;14
iii. Claim No. 17: filed on December 14, 2010 by South Texas ISD regarding Plaintiffs' 2010 property taxes in the amount of $43.99;15
iv. Claim No. 21: filed on December 31, 2010 by HSBC filed a proof of claim in the amount of $111,476.53.16 Included within HSBC's proof of claim was an itemization of all arrearages—totaling $19,685.50—as well as loan documents that required the Trevinos to pay their post-petition taxes, provide HSBC with notice of payment of the same, and also authorized HSBC to seek reimbursement from the Trevinos for property tax advances made on their behalf;17
v. Claim No. 23: filed on January 6, 2011 by Hidalgo County and Hidalgo County Drainage Ditch #1 (collectively, "Hidalgo County," together with South Texas College, Edinburg CISD, South Texas ISD, the "Hidalgo Taxing Authorities") regarding Plaintiffs' 2010 property taxes in the amount of $592.37.
d. Payment of claims

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

e. The July 24, 2013 3002.1 notice

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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