SUSAN D. BARRETT, Bankruptcy Judge.
This order addresses the Summary Judgment Motion filed by U.S. Bank National Association a/k/a U.S. Bank, N.A. ("U.S. Bank") and the cross summary judgment motion filed by James Edwin Hicks ("Debtor"). This is a core proceeding pursuant to 28 U.S.C. §157(b)(2)(A), (E), (G), (K), and (O). The Court has jurisdiction to address the motion under 28 U.S.C. §1334. For the following reasons, both motions are denied.
In March 2012, Debtor executed a promissory note and granted a security interest to Peoples Bank in real property located in Burke County, Georgia. Dckt. No. 63. Peoples Bank assigned the note and security deed to U.S. Bank.
In support of its motion, U.S. Bank submits the affidavit of Mr. William M. Wells, an Assistant Vice President with U.S. Bank, setting forth its time-line of events. According to Mr. Wells, U.S. Bank sent Debtor a notice of Default and Right to Cure letter. Dckt. No. 62, Aff. of Wells, Ex. B. Thereafter, U.S. Bank sent Debtor a letter advising him he was in default for failing to make his monthly payments and giving Debtor thirty (30) days to cure the default. Dckt. No. 62, Aff. of Wells, Ex. A. After Debtor inquired as to any alternatives to foreclosure, U.S. Bank notified him of the Home Affordable Modification Program ("HAMP"). Dckt, No. 62, Aff. of Wells, Ex. C. The letter informed Debtor that for U.S. Bank to determine if he was eligible for its HAMP the following documents were needed: Request for Modification and Affidavit ("RMA"); IRS Form 4506-T; documentary evidence of income; and a Dodd-Frank certification.
Dckt. No. 62, Aff. of Wells, Ex. C. According to Mr. Wells, Debtor faxed a Fannie Mae/Freddie Mac Form 710, titled "UNIFORM BORROWER ASSISTANCE FORM" to U.S. Bank, which is a different form than the RMA form requested. Dckt. No. 62, Aff. of Wells, Ex. D. Thereafter, U.S. Bank informed Debtor that he must submit the following documents: RMA; Form 4506-T; two current and consecutive pay stubs; and a list of all monthly expenses.
Dckt. No. 62, Aff, of Wells, Ex. F. On October 22, 2013, a Loss Mitigation Review Cancellation Notice informed Debtor that U.S. Bank was unable to determine his eligibility because it had not received the necessary documentation by the deadlines previously provided.
Dckt. No. 62, Aff. of Wells, Ex. I. U.S. Bank has not submitted to this Court, Debtor's Loss Mitigation Application or Debtor's completed Form 4506-T although it acknowledges receiving these documents.
Debtor contends he submitted the financial information and the forms requested. On December 18, 2013, U.S. Bank sent Debtor another new RMA form package and requested the same information again.
Debtor states he sent the requested proof of income. Dckt. No. 70. However, Debtor says in July 2014, U.S. Bank asked for all new forms stating the forms on file had expired. Dckt. No. 62, Aff. of Wells, Ex. K. In August 2014, Debtor emailed bank statements and a RMA form.
U.S. Bank contends it called and emailed Debtor that he needed to provide
U.S. Bank hired the law firm of Pendergast & Associates, P.C. to handle the foreclosure. U.S. Bank provided the affidavit of Mr. Howell A. Hall, an attorney with Pendergast & Associates, P.C. who retained Traditional Title to conduct a foreclosure sale on the Burke County Courthouse steps. Dckt. No. 62, Ex. C, Mr. Hall avers the appropriate letters were sent to Debtor notifying him of the foreclosure and that the proper notices appeared in the legal newspaper during the month of November.
Mr. Jason Mitchem, an employee of Traditional Title, was assigned to "cry out" the foreclosure. Dckt. No. 62, Ex. D. In his affidavit, Mr. Mitchem avers he personally conducted the foreclosure sale on the Burke County Courthouse steps on December 2, 2014 at 12:28 p.m. and the sale was open for seventeen (17) minutes.
In contrast. Debtor contends in an affidavit that he and a friend, Kevin Stewart, personally were at the Burke County Courthouse steps from 8:30 a.m. to 4:00 p.m. on December 2, 2014 with the intent to bid or attempt to persuade U.S. Bank to stop the foreclosure sale. Dckt. No. 70, Ex. C. Debtor avers they never heard, nor witnessed anyone from U.S. Bank foreclosing on the property. Dckt. No. 70, Ex. C. Furthermore, Debtor points out that U.S. Bank's latitude and longitude coordinates of where it claims the foreclosure sale occurred are not the coordinates for the Burke County Courthouse.
By affidavit, Mr. Michael Watkins, president of Traditional Title, avers a cellular geographical data glitch occurred throughout the day of December 2, 2014, which caused the device's specific location points to be "slightly inaccurate and skewed from its actual location." Dckt. No. 62, Ex. E. However, he avers despite the inaccurate geographical longitudinal and latitudinal coordinates, the sale did take place on the Burke County Courthouse steps. Dckt. No. 62, Ex, E.
Mr. Wells avers Debtor called U.S. Bank after the foreclosure sale and stated he had sent all his documents in by November 25, 2014, but U.S. Bank told Debtor he specifically did not provide a pension statement deposits showing his name so U.S. Bank could not consider them. Dckt. No. 62, Aff. of Wells, ¶30. Debtor contends he submitted a "substantially complete package" several times, but U.S. Bank apparently had difficulties keeping track of the documents as evidenced by its repeated document requests for documents he had previously submitted. Dckt. No. 70, Ex. C. Debtor contends his bank statements showed deposits and he sent U.S. Bank all the additional documentation he could obtain from the Veteran's Administration and the Department of Defense.
After the purported foreclosure. Debtor avers he continued to receive contradictory letters from U.S. Bank informing him of the need to maintain insurance on the property, some letters telling him where to send his payments and some informing him of his eligibility for loan servicing with an outstanding balance. Dckt. No. 70, Ex. C. Debtor avers U.S. Bank even left voicemail inquiring whether he was interested in loan modification.
Debtor filed a chapter 13 bankruptcy petition on January 2, 2015. Around the petition date, Debtor received a 1099-C "Cancellation of Debt" IRS form from U.S. Bank showing a $89,875.24 debt as discharged. Dckt. No. 70, Aff. of Debtor, Ex. A. On his bankruptcy petition, Debtor listed his street address as the property which was allegedly foreclosed upon; however, this property was not listed on his initial schedule of real property. Dckt. No. 1, Sch. A/B, Chap, 13 Case No. 15-10005 (Bankr. S.D. Ga. Jan. 2, 2015). On May 13, 2015, Debtor amended his real property bankruptcy Schedule A to include the property listing it as "Primary Residence-Single Family Home, 5 acres with improvements (1284 Marks Walden Road)."
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c);
U.S. Bank and Debtor have filed cross summary judgment motions. U.S. Bank requests summary judgment contending its valid pre-petition foreclosure sale forestalled the property from becoming property of Debtor's bankruptcy estate. Conversely, Debtor argues there are material facts in dispute as to whether a valid foreclosure sale was conducted pre-petition. Debtor also seeks summary judgment avoiding U.S. Bank's transfer of the property pursuant to 11 U.S.C. §544(a)(3) because the foreclosure deed was not recorded pre-petition. For the following reasons, both motions are denied.
U.S. Bank seeks summary judgment on several grounds. First, U.S. Bank contends its pre-petition foreclosure was valid and therefore the property never entered Debtor's bankruptcy estate under 11 U.S.C. §541. It argues because the property was never part of Debtor's bankruptcy estate there can be no violation of the automatic stay for its post-petition recording of the deed under power and the Court lacks jurisdiction over the property so plan confirmation is not res judicata on the property of the estate issue; and Debtor had no right to modify U.S. Bank's claim in his chapter 13 plan. U.S. Bank also asserts Debtor is judicially estopped from challenging foreclosure since the property was not listed on his initial Schedule A/B and his chapter 13 plan refers to the discharge of debt by U.S. Bank. Alternatively, U.S. Bank argues it is entitled to relief from the automatic stay.
In response, Debtor contends there is a dispute of material fact as to whether a properly conducted pre-petition foreclosure sale occurred. Debtor avers he was present at the Burke County Courthouse during the legal hours of the sale and did not witness any U.S. Bank foreclosure involving the property. Furthermore, Debtor points out, and U.S. Bank's witness Mr. Mitchem acknowledges, the latitudinal and longitudinal coordinates on U.S. Bank's exhibits for the sale location are not the exact coordinates of the Burke County Courthouse. Debtor contends these disputed facts are material and sufficient to overcome U.S. Bank's summary judgment motion.
The majority of U.S. Bank's summary judgment arguments assume the validity of the foreclosure sale. The security deed obligates U.S. Bank to conduct a foreclosure sale in accordance with applicable law. Dckt. No. 23, Ex. B. ¶18. The security deed further requires U.S. Bank to "sell the Property at public auction to the highest bidder at the time and place and under the designated in the notice of sale. . . . The recitals in [U.S. Bank's] deed shall be prima facie evidence of the truth of the statements made therein."
U.S. Bank has offered the affidavits of those who aver that the property was duly cried off on the Burke County Courthouse steps. In contrast, Debtor avers in his affidavit that he was present at the Burke County Courthouse during the legal hours of the sale and did not witness anyone conducting the sale of the property.
Furthermore, based upon the affidavits, U.S. Bank has not established it is entitled to summary judgment on the issue of whether Debtor had submitted a "substantially complete package" sufficient to forestall the foreclosure. Debtor contends he has repeatedly submitted a substantially complete package to U.S. Bank, but U.S. Bank kept asking for documents that he had already submitted. U.S. Bank states it has set forth the documents submitted to U.S. Bank through the affidavit of Mr. Wells and avers Debtor failed to timely submit all the required documentation required to consider a loan modification.
Reviewing Mr. Well's affidavit and accompanying attachments, it is apparent not all documents Debtor submitted are set forth in the affidavit as some correspondence indicates Debtor has submitted the proper Form 4506-T and yet U.S. Bank was seeking the same form again.
For these reasons, U.S. Bank is not entitled to summary judgment as to whether the property is property of the bankruptcy estate, whether this Court had jurisdiction over the property when the case was filed, whether the automatic stay remains in effect as to the property and whether confirmation order is res judicata as to the property of the estate issue because these arguments depend on whether a valid pre-petition foreclosure sale occurred.
U.S. Bank further argues Debtor admitted to all the facts contained in its Statement of Facts and failed to create a material factual dispute because Debtor failed to comply with Local Rule 56.1. Southern District of Georgia Local Rule. 56.1 provides:
S.D Ga. L.R. 56.1. "The Southern District of Georgia's LR 56.1 only requires the [the Statement of Undisputed Material Facts] be `controverted by a statement served by the opposing party.'"
Debtor further challenges the validity of the foreclosure based upon U.S. Bank's purported failure to comply with applicable HUD regulations such as conducting a one-on-one interview in 24 C.F.R. 203.604, relief for mortgagors in the military, 24 C.F.R. 203.616 which Debtor contends are conditions precedent to foreclosing. Debtor's security deed states that "Default. Lender may, except as limited by the regulations by the Secretary, in the case of payment defaults, require immediate payment. . . . (d) in many circumstances regulations issued by the Secretary will limit Lender's rights, in the case of payment defaults, to require immediate payment in full and foreclose if not paid. This Security Instrument does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary." Dckt. No. 62, Security Deed, Ex. D, ¶9. Debtor contends these HUD regulations apply to him and they were not followed and therefore the foreclosure is invalid. U.S. Bank counters that there is no private right of action to enforce the HUD regulations.
U.S. Bank is correct that there is no private right of action for violation of the HUD regulations.
U.S. Bank argues Debtor is judicially estopped from placing the foreclosure sale into question. U.S. Bank argues Debtor's initial bankruptcy schedules and chapter 13 plan admit there was a valid foreclosure sale because he failed to list the property on his real property schedules and failed to address the real property in his initial chapter 13 plan. Dckt. Nos. 1, and 6, Chap. 13 Case No. 15-10005 (Bankr. S.D. Ga. June 3, 2015). Furthermore, U.S. Bank argues Debtor's amended chapter 13 plan acknowledges the debt was discharged by the Form 1099-C. Dckt. No. 37, Chap. 13 Case No. 15-10005 (Bankr. S.D. Ga. June 3, 2015). His amended plan states: "U.S. Bank debt & lien has been reduced to value of collateral, $120,900.00 by debt discharge of $89,875.24 on December 2, 2014, as per 1099-C issued by creditor. Debtor will retain all loan servicing rights with U.S. Bank and will be authorized to enter into a note modification as to payments on the remaining secured claim, ($120,900.00)." Dckt. No. 37, Chap. 13 Case No. 15-10005 (Bankr. S.D. Ga. June 3, 2015).
"Our circuit employs a two-part test to guide district courts in applying judicial estoppel: whether (1) the party took an inconsistent position under oath in a separate proceeding, and (2) these inconsistent positions were ^calculated to make a mockery of the judicial system.'"
Furthermore, U.S. Bank has not established as a matter of law that Debtor intended to make a mockery of the judicial system. Debtor's initial schedules/plan and amendments thereto and the adversary proceeding involve the same bankruptcy case; before the same judge, so the Court is fully aware of Debtor's positions unlike cases where a contrary position is asserted in a separate proceedings. At the summary judgment stage, all reasonable doubts and inferences are resolved in the non-movant Debtor's favor and U.S. Bank is not entitled to summary judgment as result of judicial estoppel.
Lastly, to the extent applicable, U.S. Bank seeks relief from the automatic stay in its motion for summary judgment.
11 U.S.C. §362(d). In support of its motion for relief, U.S. Bank argues Debtor's deposition testimony where he acknowledges he has been in default for nearly two (2) years entitles U.S. Bank to relief from the stay. Dckt. No. 62, Ex. F. Debtor asserts this adversary proceeding needs to be adjudicated first to determine if Debtor is entitled to loan modification. If Debtor is entitled to a mortgage modification then the payment amounts and amount owed may be modified as contemplated by Debtor's confirmed chapter 13 plan.
At the summary judgment stage where all reasonable doubts and inferences are resolved in non-movant Debtor's favor, U.S. Bank has not put forth sufficient evidence to establish cause, to grant relief. U.S. Bank has failed to establish lack of equity or adequate protection or established other cause for relief from the stay. For these reasons, U.S. Bank's summary judgment motion is denied.
Debtor moves for summary judgment to avoid the purported transfer arguing the bankruptcy petition was filed prior to the recordation of the Deed Under Power and therefore the transfer is subject to avoidance by Debtor. In response, U.S. Bank states Debtor does not have standing to avoid the transfer under 11 U.S.C. §544 (a) (3). Furthermore, U.S. Bank contends even if Debtor has standing, he does not qualify as a bona fide purchaser for value because its security deed was of record giving notice of the debt and would put a buyer on "inquiry notice" to investigate further.
A chapter 13 debtor has standing to avoid a transfer using the 11 U.S.C. §544 "strong arm powers" of the trustee if it impairs Debtor's exemptions under §522(g) and the trustee does not attempt to avoid the transfer.
Furthermore, even if Debtor has standing, he is not entitled to summary judgment because to avoid the transfer under 11 U.S.C. §544 because he would have been on inquiry notice of U.S. Bank's interest in the property and therefore does not qualify as a bona fide purchaser for value. What constitutes notice to the hypothetical purchaser is determined by state law.
At the time of filing of the bankruptcy petition, U.S. Bank's security deed had not been cancelled. The recording of the security deed would have put a hypothetical purchaser on notice to inquire into the status of the debt owed to U.S. Bank.
Furthermore, because there is a dispute as to whether the property was property of the bankruptcy estate at the time of filing of the petition, summary judgment avoiding a post-petition transfer under 11 U.S.C. §549 and voiding of the transfer as a violation of the automatic stay of 11 U.S.C. §362(a) and any subsequent damages is not appropriate at this time. Therefore, Debtor is not entitled to judgment as a matter of law.
For the foregoing reasons, it is ORDERED that U.S. Bank's Motion for Summary Judgment and Debtor's Motion for Summary Judgment are DENIED.
