Michael E. Ridgway, United States Bankruptcy Judge.
This matter came before the Court on May 28, 2015, on the Amendment to Debtor's Motion for Authority to Transfer Real Property by Quitclaim Deed from Debtor to Ocwen Loan Servicing, LLC ("Amended Motion"). Lynn J.D. Wartchow appeared on behalf of the Debtor. Karl Johnson appeared on behalf of the chapter 13 trustee. The Court ordered supplemental briefing, which was completed on June 15, 2015. Based on the submissions and the arguments of counsel, the Court enters this memorandum opinion and order regarding the Amended Motion.
Sharon D.M. Stewart ("Debtor" or "Stewart") filed for relief under chapter 13 of the Bankruptcy Code on February 15, 2013. Her "Third Modified Chapter 13 Plan, dated April 18, 2013" (ECF No. 18) was confirmed on May 7, 2013. ECF No. 21. She subsequently sought to modify this confirmed plan in a "Modified Chapter 13 Plan, dated August 23, 2013" (ECF No. 30).
At the time of filing, the Debtor was renting a dwelling located in St. Louis Park, MN. The only real property she owned was a condominium unit located in Ellicott City, Howard County, Maryland.
The Debtor's confirmed plan provided, in pertinent part, that "Upon confirmation of this Chapter 13 plan, the Property shall vest in One West Bank, and the Confirmation Order shall constitute a deed of conveyance of the Property when recorded at the Registry of Deeds.... All secured claims secured by the Property will be paid by the surrender of the collateral real property and foreclosure of the security interest." ECF No. 30, ¶ 13. Although One West Bank was listed on the proof of claim, in the section that asked for the "name and address where notices should be sent," the actual "creditor" as shown on the proof of claim, as well as on the attachment, was "U.S. Bank National Association as Trustee for the LXS 2006-16N" ("U.S. Bank").
One West Bank was properly served with both the Debtor's modified plan dated April 18, 2013 (ECF No. 18), as well as the Debtor's post-confirmation modified plan dated August 23, 2013 (ECF No. 27). Both of those plans were confirmed by an order of this Court. ECF Nos. 21 and 32, respectively. In neither instance did One West Bank object. In point of fact, both of these plans were confirmed without objection.
The original motion seeking transfer of the real property at issue was served upon both Ocwen and its attorney.
Is the Debtor entitled to the relief she requests, e.g., can Ocwen be forced either to accept a conveyance of the encumbered real property in full satisfaction of the indebtedness owed or, in the alternative, to reject such conveyance and initiate foreclosure proceedings? This Court finds that she is.
While there are a few published cases dealing with the issue presented here, namely the interpretation to be given the "surrender" component under 11 U.S.C. § 1325(a)(5)(C), coupled with the "vesting" component of 11 U.S.C. § 1322(b)(9), there has been little uniformity in the outcome. The "common theme" in the reported cases that have addressed the issue focuses on whether the debtor's plan could be confirmed over the objection of the secured creditor.
In In re Rosa, 495 B.R. 522 (Bankr. D.Haw.2013), the bankruptcy court confirmed a debtor's plan that provided for the surrender of the property to the secured creditor and vesting of title to the property upon confirmation. The court found that § 1325(a)(5)(C) permitted surrender and § 1322(b)(9) specifically authorized vesting of the property. Because the debtor met the requirements of § 1325(a)(5)(A), the creditor was deemed to have "accepted" the plan because it did not object to the plan after having receiving notice. Id. at 524-25.
On the other hand, in In re Rose, 512 B.R. 790 (Bankr.W.D.N.C.2014), the bankruptcy court refused to compel a secured creditor to accept a conveyance of the property to the secured creditor. To do so, the court reasoned, would subject the lender to unwanted liabilities relating to the real estate and impair the creditor's rights under state law.
However, in In re Watt,
In contrast, Ms. Stewart's plan has already been confirmed. Notably, neither Ocwen, nor its predecessor in interest, One West Bank, objected to the treatment of its secured claim.
With that in mind, the analysis must begin with an examination of the effect of confirmation of a plan. Section 1327(a) states: "The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted or has rejected the plan." 11 U.S.C. § 1327(a).
A review of the record indicates that One West Bank received notice of the plan dated April 18, 2013. It did not object to its proposed treatment. The plan was confirmed by order of May 7, 2013. ECF No. 21. The Debtor then sought to modify the plan. Again, One West Bank received notice of the post-confirmation modified plan dated August 23, 2013. ECF No. 31. Once again, it did not object. The bank then transferred its claim to Ocwen. ECF No. 40.
The Debtor then sought to enforce her rights under the terms of the confirmed plan, and filed her initial motion seeking to compel Ocwen either to accept a conveyance of the property or to initiate foreclosure. By her Amended Motion, the Debtor served U.S. Bank, which did not file a response, nor did it appear at the May 28, 2015 hearing. Ocwen, by its attorney, filed a response of "no objection" to the Amended Motion.
Not only is the statute clear on the binding effect of confirmation of a plan, but the Supreme Court in Bullard v. Blue Hills Bank, 575 U.S. ___, 135 S.Ct. 1686, 191 L.Ed.2d 621 (2015) reinforces that concept:
Id. at 1692.
Particularly instructive here are two very recent bankruptcy cases: In re Sagendorph, II, 2015 WL 3867955 (Bankr.D. Mass. June 22, 2015) and In re Zair, 535 B.R. 15 (Bankr.E.D.N.Y.2015). The issue in both was the same: can the debtor confirm a plan, over the secured creditor's objection, in which he "surrenders" the property back to the secured creditor in full satisfaction of its claim, and then "vests" the title to the same property in the name of the secured creditor? Both Judge Hoffman, in Sagendorph, II, and Judge Trust, in Zair, answered that question in the affirmative.
Chief Judge Melvin S. Hoffman, in Sagendorph, II, does an outstanding job of analyzing the "surrender" provision of
Sagendorph, II at *4.
In Zair, Judge Trust compared and contrasted the various holdings in Rosa, Rose, Watt, and other cases, and agreed with Judge Hoffman that "surrender" and "vesting" can be used together to confirm a plan. Elaborating further, he stated, "This Court respectfully disagrees with Watt and to some extent, with Malave,
This Court adopts the reasoning of both Sagendorph, II and Zair. While the "surrender" concept found in § 1325(a)(5)(C), and the "vesting" concept embodied in § 1322(b)(9) are different, they may nonetheless be used in tandem when providing for the treatment of a secured claim in a chapter 13 plan. Indeed, in this case, there is an even stronger argument to be made that the Debtor should be able to do as she proposes — the terms of the treatment of Ocwen's claim were unambiguously spelled out in the plan. There were no objections to its treatment. Indeed, counsel for Ocwen filed a statement of "no objection" to the relief sought by the Debtor.
The Court feels compelled to address the issue raised by the chapter 13 trustee in his supplemental brief.
Ocwen, as the servicing agent for U.S. Bank, successor in interest to One Bank West, is bound by the terms of this Court's Order Confirming the Debtor's Modified Post-confirmation Plan dated August 23, 2013. ECF No. 32. The terms of the Debtor's modified plan are binding on Ocwen. See 11 U.S.C. § 1327(a) and Bullard v. Blue Hills Bank, 575 U.S. ___, 135 S.Ct. 1686, 191 L.Ed.2d 621 (May 4, 2015).
Based on the foregoing,
