EDWARD ELLINGTON, Bankruptcy Judge.
After considering same and the Joint Stipulation of Undisputed Facts (Dkt. # 68), the Court finds that the Objection to Proof of Claim (Dkt. # 44) and the Amended Objection to Proof of Claim (Dkt. # 55) both filed by Stephen L. Mason, Sr. are well taken and should be granted. Therefore, the Trustee's Motion for an Order Declaring Carrington Mortgage Services 1322(B)(5) Claim Defaults Cured Pursuant to the Amended Proof of Claim Filed on January 11, 2011 (Dkt. # 29) filed by James L. Henley, Jr., Chapter 13 Trustee, is well taken and should be granted.
On August 22, 2002, Stephen L. Mason, Sr. and Kimiko Mason entered into a Disclosure Statement, Note and Security Agreement and a Deed of Trust with Travelers Bank & Trust, FSB. The original amount financed was $98,425.17, and is secured by real property owned by the Masons.
On November 29, 2010, Stephen L. Mason, Sr. (Debtor) filed a petition for relief under Chapter 13 of the United States Bankruptcy Code. James L. Henley, Jr. (Trustee) was appointed as the Chapter 13 Trustee for the Debtor's bankruptcy case.
The Debtor filed his Chapter 13 Plan (Dkt. # 2) (Plan) on November 29, 2010. The Debtor filed an Amended Chapter 13 Plan (Dkt. # 13) (Amended Plan) on December 10, 2010.
CitiMortgage timely filed a Proof of Claim (Claim # 1-1) (First Proof of Claim) on December 28, 2010. In Box 1, CitiMortgage lists the amount of its claim as of the date the case was filed as $62,776.41. In Box 4, CitiMortgage lists the arrearage owed on its mortgage as $439.21.
On January 11, 2011, CitiMortgage timely filed an amended Proof of Claim (Claim # 1-2) (Amended Proof of Claim). In Box 1 of the Amended Proof of Claim, CitiMortgage lists the amount of its claim as of the date the case was filed as $62,706.22, slightly less than the figure contained on its First Proof of Claim. In Box 4 of the Amended Proof of Claim, CitiMortgage lists the arrearage owed on its mortgage as $439.21, the same figure contained in its First Proof of Claim.
The Order Confirming the Debtor's Plan, Awarding a Fee to the Debtor's Attorney and Related Orders (Dkt. # 15) (Confirmation Order) was entered on January 24, 2011. The Confirmation Order approved the Debtor's Amended Plan for a period not to exceed sixty (60) months. In the Confirmation Order, the amount of the Debtor's mortgage payment and the amount of the mortgage arrearage was changed to conform with CitiMortgage's Amended Proof of Claim. Therefore, in the Confirmation Order the amount of the mortgage arrearage to be paid to CitiMortgage was reduced from $12,000.00 to $439.21. Pursuant to the Confirmation Order, the Debtor proposed to pay 100% to his unsecured creditors who timely filed proofs of claim.
On March 28, 2013, and on May 29, 2013, CitiMortgage filed its Notice of Mortgage Payment Change (See doc entries on the Claims Registry.). The March 28th notice informed the Debtor that on May 1, 2013, the Debtor's escrow payment would increase from $221.23 to $233.68. Therefore, beginning May 1, 2013, the Debtor's total mortgage payment would be $1,392.17.
The May 29th notice informed the Debtor that on July 1, 2013, the Debtor's escrow payment would decrease from $221.18 to $210.90.
On October 7, 2013, a Transfer of Claim Other Than for Security (Dkt. # 25) was filed. The transfer states that CitiMortgage transferred its claim to Christiana Trust, A Division of Wilmington Savings Fund Society, FSB, as Trustee for Normandy Mortgage Loan Trust, Series 2013-8. The transfer further states that all notices should be sent care of Carrington Mortgage Services, LLC. For purposes of this Opinion, Christiana Trust, A Division of Wilmington Savings Fund Society, FSB, as Trustee for Normandy Mortgage Loan Trust, Series 2013-8 will be referred to as Carrington Mortgage.
The Debtor made his last payment to the Trustee on February 20, 2014. From the date the Confirmation Order was entered, the Debtor paid into his Chapter 13
Since the Debtor had completed all of his plan payments, on March 5, 2014, the Trustee filed a Notice of Final Cure Payment (Dkt. #31) (Final Cure) in accordance with Federal Rule of Bankruptcy Procedure 3002.1(f).
Pursuant to Rule 3002.1(h), the Trustee also filed on March 5, 2014, Trustee's Motion for an Order Declaring Carrington Mortgage Services 1322(B)(5) Claim Defaults Cured Pursuant to the Amended Proof of Claim Filed on January 11, 2011 (Dkt. # 29) (Motion). In the Motion, the Trustee notifies Carrington Mortgage that the Debtor had paid all mortgage payments from December 2010 through February 2014 and that the Debtor had paid the arrearage owed on his mortgage to Carrington Mortgage. The Motion states that "[a]ll payments required by the Trustee via the Amended Proof of Claim have been paid in full,"
Pursuant to Rule 3002.1(g), once the Trustee filed the Final Cure, Carrington Mortgage had twenty-one (21) days to filed a response. Specifically, Rule 3002.1(g) states:
On March 25, 2014, Carrington Mortgage filed its Response to Trustee's Motion to Deem Section 1322(b)(5) Claim Current and Defaults Cured, Doc No. 29 (Dkt. # 33) (Response) and filed on the Claims Registry its Supplemental Statement to Claim in Response to Notice of Final Cure Payment, Doc No. 31 (Statement). In its Response and Statement, Carrington Mortgage simply requests that the Motion and its Response be set for hearing.
On May 23, 2014, Carrington Mortgage filed an amended Proof of Claim (Claim 1-3) (Second Amended Proof of Claim). In its Second Amended Proof of Claim, in Box 1, Carrington Mortgage lists the amount of its claim as of the date the case
The Debtor filed his Objection to Proof of Claim (Dkt. # 44) (Objection) on June 10, 2014. The Debtor states that the Second Amended Proof of Claim was filed well beyond the deadline for filing proofs of claim and that it drastically differs from the previously filed proofs of claim.
Carrington Mortgage filed its Response to Debtor's Objection to Proof of Claim, Doc No. 44 (Dkt. # 45) on June 10, 2014, in which Carrington Mortgage simply requests that the Court set the matter for hearing. On September 10, 2014, Carrington Mortgage filed its Amended Response to Debtor's Objection to Claim, Doc. No. 45 (Dkt. # 66) (Amended Response). In its Amended Response, Carrington Mortgage states that the initial claim should have "included arrearage in the amount of $12,608.52."
On July 29, 2014, the Debtor filed his Amended Objection to Proof of Claim (Dkt. #55) (Amended Objection). In his Amended Objection, the Debtor recites the facts regarding the filing of the case and the various proofs of claim and the pleadings. In addition, the Debtor cites to authority he claims supports his position that the Second Amended Proof of Claim was untimely and should be disallowed. Carrington Mortgage filed a pleading styled Second Amended Response to Debtor's Objection to Claim, Doc. No. 45 (Dkt. # 67) (Second Amended Response). However, as stated previously, upon reading the Second Amended Response, it is clear that it is actually a response to the Debtor's Amended Objection. In its Second Amended Response, Carrington Mortgage addresses the authority cited by the Debtor and asserts that the Court should deny the Debtor's objections to its Second Amended Proof of Claim.
In the meantime, Carrington Mortgage filed a Transfer of Claim Other Than for Security (Dkt.# 56). The transfer states that Christiana Trust, A Division of Wilmington Savings Fund Society, FSB, as Trustee for Normandy Mortgage Loan Trust, Series 2013-8 (Carrington Mortgage) transferred its claim to Rushmore Loan Management Services LLC as servicing agent for Christiana Trust, A Division of Wilmington Savings Fund Society, FSB, as Trustee for Normandy Mortgage Loan Trust, Series 2013-8. The transfer further states that all notices should be sent to Rushmore Loan Management Services. For clarity, and because Carrington Mortgage was the mortgage holder/servicer at the time all of the pleadings were filed, this Opinion will refer to the mortgage holder/servicer as Carrington Mortgage.
On September 17, 2014, the parties submitted a Joint Stipulation of Undisputed Facts (Dkt. # 68) (Stipulation) in which the parties basically stipulated to the facts
This Court has jurisdiction of the subject matter and of the parties to this proceeding pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. This is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(B).
The Court will note at the onset that neither party provided the Court with much legal authority to support their respective positions. In his Amended Objection, the Debtor cites In re DePugh, 409 B.R. 84 (Bankr.S.D.Tex.2009) and In re Durango Georgia Paper Co., 314 B.R. 885 (Bankr.S.D.Ga.2004) in support of his position that the Second Amended Proof of Claim was untimely filed and should be denied. Carrington Mortgage addresses Durango in its Second Amended Response and argues that it does not apply to the case at bar, but Carrington Mortgage does not on its own cite to any authority to support its position that the Second Amended Proof of Claim should be allowed.
In a Chapter 13, a trustee distributes money to creditors in accordance with the debtor's confirmed Chapter 13 plan. In order for a creditor to receive distributions under a Chapter 13 plan, a creditor "must also file a proof of claim. See In re Hogan, 346 B.R. 715 (Bankr.N.D.Tex.2006); In re Macias, 195 B.R. 659, 660-61 (Bankr.W.D.Tex.1996) (concluding that Federal Rule of Bankruptcy Procedure 3021 `appears to mandate that the creditor may receive distributions out of the plan only if it holds an allowed claim')." In re Quintana, 05-42417-DML-13, 2006 WL 2620505 (Bankr.N.D.Tex. Sept. 12, 2006) subsequently aff'd, 247 Fed.Appx. 564 (5th Cir.2007).
Rule 3001 provides the procedure for the filing of a proof of claim. Rule 3001 provides in pertinent part:
Fed. R. Bankr.P. 3001.
The deadline for the filing of a proof of claim is found in Rule 3002. Rule 3002 provides in pertinent part:
Fed. R. Bankr.P. 3002.
There is no dispute that the First Proof of Claim and the Amended Proof of Claim complied with Rule 3001. In addition, there is no dispute that Carrington Mortgage timely filed is First Proof of Claim and its Amended Proof of Claim pursuant to Rule 3002. Rather, the dispute involves the Second Amended Proof of Claim. The Debtor contends that the Second Amended Proof of Claim, which was filed approximately thirty-eight (38) months after the claims bar date had passed, should not be allowed.
The Court of Appeals for the Fifth Circuit addressed a situation analogous to the case at bar in United States v. Kolstad (In re Kolstad), 928 F.2d 171 (5th Cir.1991). In Kolstad, a Chapter 11 case, the Internal Revenue Service (IRS) did not file a proof of claim before the bar date ran. After the bar date had passed, the debtor filed a proof of claim in the amount of $20,359.71 on behalf of the IRS. Approximately ten (10) months later, the IRS filed an "amended" proof of claim in the amount of $85,882.67. The debtor objected to the proof of claim filed by the IRS and argued that because the bar date had passed, the IRS lost the right to file a proof of claim for a higher amount.
The Fifth Circuit disagreed with the debtor's position. In addressing the purpose of bar dates in bankruptcy, the Fifth Circuit found:
In re Kolstad, 928 F.2d at 173-74 (footnotes omitted).
In the case at bar, there is no dispute that the First Proof of Claim and the Amended Proof of Claim were both timely filed and that the Debtor did not object to either proof of claim. Consequently, the Amended Proof of Claim was "deemed allowed" under 11 U.S.C. § 502(a).
In re Kolstad, 928 F.2d at 175.
In order to determine whether an amendment to a proof of claim is not setting forth totally new grounds of liability, the Fifth Circuit established a test for determining whether to permit an amendment to a proof of claim to be filed: (1) is the creditor "attempting to stray beyond the perimeters of the original proof of claim and effectively file a `new' claim that could not have been foreseen from the earlier claim"
The Court does not find that Carrington Mortgage is "attempting to stray beyond the perimeters"
In In re Taylor, 280 B.R. 711 (Bankr. S.D.Ala.2001), Judge Margaret A. Mahoney was faced with a factual situation almost identical to the facts of the case before the Court. At the time the case was filed (1996), the debtors filed a Chapter 13 plan in which the debtors proposed to pay all of their unsecured creditors 100%. Prior to confirmation of their plan, their mortgage holder, Fleet Finance (Fleet), timely filed a proof of claim in the amount of $36,162.77 and listed it as an unsecured, nonpriority claim. On July 2, 1996, the debtors' plan was confirmed without an objection by Fleet.
On January 5, 2001, Empire (a successor to Fleet) filed a proof of claim. The Empire proof of claim was filed in the amount of $18,000.04 which Empire claims was secured by the debtors' real property. The debtors objected to the Empire claim. The debtors had (or would shortly) complete their plan payments and pay the original unsecured claim of Fleet, namely $36,162.77, in full. The debtors argued that they would be unfairly prejudiced if the Empire proof of claim was allowed at such a late date in their bankruptcy case.
First, Empire argued that the debtors' plan should not have been confirmed because it violated § 1322(c)(2). Judge Mahoney disagreed and found that:
Taylor, 280 B.R. at 714.
Second, Judge Mahoney found that "the order of confirmation is binding on Empire regardless of the propriety of its treatment. 11 U.S.C. § 1327. Collier on Bankruptcy ¶ 1327.02[1][c] (15th Ed. 1999.)." Id.
After addressing § 1322, Judge Mahoney next turned to the issue of whether Empire's claim was a new claim and should be allowed. The court found that if Empire was offering the claim as a new claim, it should not be allowed because it was filed over four years after the claims bar date.
In the alternative, if Empire was attempting to treat its claim as an amendment to the claim filed by Fleet, Judge Mahoney found that the amendment would not be allowed because its claim was an entirely new one. Further, the court found that
Id. at 716.
The same result was reached in the very recent case of In re Martinez, 513 B.R. 779 (Bankr.D.Puerto Rico 2014). In Martinez, after the debtors had completed their plan payments the creditor filed an amended proof of claim to correct a "clerical error"
After reviewing how distributions are made in a Chapter 13 plan, the court found that the creditor's initial proof of claim was deemed allowed and that the trustee correctly made distributions pursuant to the creditor's proof of claim. The court then turned to the amended proof of claim. Citing the test established by the Fifth Circuit in Kolstad, the court first found that the amended proof of claim was not a new claim, but rather, simply an attempt to correct the secured and unsecured sections of its original proof of claim. The court did not allow the amended proof of claim and found that the creditor's mistake in its original proof of claim could only be attributable to its error. If the court allowed the creditor to amend its proof of claim after receiving payments according to the confirmed plan for five years, it would "cause undue prejudice to the Debtors and other creditors." In re Martinez, 513 B.R. at 788.
In the case at bar, Carrington Mortgage timely filed its First Proof of Claim and its Amended Proof of Claim.
Based on the holdings in Kolstad, Taylor and Martinez, the Court finds that allowing Carrington Mortgage to amend its proof of claim, in such a large dollar amount, after the Debtor had completed all of his plan payments would be unfairly prejudicial to the Debtor. The Debtor paid Carrington Mortgage's claim exactly as Carrington Mortgage requested. Now that the Debtor has completed his plan payments, the fact that Carrington Mortgage now claims that it is owed an additional $12,608.52, "lies squarely with [Carrington Mortgage]."
In its Amended Response, Carrington Mortgage claims that the Debtor is not prejudiced by the late filed claim because the Debtor's plan was confirmed for a period of sixty (60) months. According to Carrington Mortgage, the Debtor is
Carrington Mortgage is misguided in its belief that the Debtor must stay in the plan for the entire sixty (60) months as proposed. Section 1325(b)(4)(B) provides that "[f]or purposes of this subsection, the `applicable commitment period'—(B) may be less than 3 or 5 years, ..., but only if the plan provides for payment in full of all allowed unsecured claims over a shorter period."
In other words, when a debtor has paid all of his/her unsecured creditors in full, that becomes the applicable commitment period under § 1325(b)(4)(B). "In sum, we hold that a plain reading of the Bankruptcy Code, and Section 1325 in particular, mandates that an above-median-income debtor maintain a bankruptcy plan for five years unless all unsecured creditor claims are paid in full and irrespective of projected disposable income." Pliler v. Stearns, 747 F.3d 260, 266 (4th Cir.2014). See also In re Tennyson, 611 F.3d 873, 880 (11th Cir.2010)("The only exception to this minimum period, if unsecured claims are fully repaid, is provided in § 1325(b)(4)(B)."); In re Flores, 735 F.3d 855, 858 (9th Cir.2013)("[T]he statute defines the applicable commitment period as having a duration: `3 years,' `not less than 5 years,' or `less than 3 or 5 years,' depending on the debtor's current monthly
In the case at bar, the Debtor proposed to pay his unsecured creditors in full or 100%. The Debtor did exactly as he proposed and paid his unsecured creditors in full over thirty-eight (38) months. Pursuant to § 1325(b)(4)(B), the Debtor is entitled to exit his bankruptcy case in less than the sixty (60) months proposed in his plan.
In Colonial Mortgage & Loan Corp. v. Ellzey, 445 B.R. 674 (E.D.La.2011) the debtor filed a plan in which he listed the debt to his mortgage holder, Colonial, as $15,000.00. Colonial filed a proof of claim for $9,634.02.
The debtor completed all plan payments. Colonial was paid the full amount of the claim it filed, namely $9,634.02, and the debtor received his discharge. Post-discharge, Colonial sought an additional $4,659.41 in pre-petition debt and $6,198.58 in post-petition expenses from the debtor. Before the district court, Colonial asserted that "the Chapter 13 Plan should dictate the amount owed to Colonial and not the Proof of Claim, based on a recent Supreme Court decision [United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010)]."
In rejecting Colonial's Espinosa argument, the district court found that Espinosa was distinguishable from the facts of the case before it. The court found:
Colonial Mortgage, 445 B.R. at 677.
Likewise, in the case at bar, the Court finds that Espinosa does not apply. The Debtor's plan provided for a mortgage arrearage of $12,000.00 to be paid to Carrington Mortgage. However, Carrington Mortgage filed its First Proof of Claim and its Amended Proof of Claim in which it states that the arrearage owed to it was only $439.21. Neither the Debtor nor the Trustee filed an objection to either proof of claim, and the proof of claim with a mortgage arrearage of $439.21 was
That is exactly what happened in the case at bar: Carrington Mortgage filed its Amended Proof of Claim for an amount less than what was proposed in the Chapter 13 plan. The Debtors paid exactly what Carrington Mortgage requested the Debtor to pay as an arrearage on his mortgage. Neither the Trustee nor the Debtor had a responsibility to tell Carrington Mortgage how to complete its proof of claim. Carrington Mortgage waited until the Debtor had completed all of his plan payments before it filed its Second Amended Proof of Claim. As in Taylor, the Debtor "should not suffer because this loan has changed hands at least [two] times and [Carrington Mortgage] did not know what the initial proof of claim stated." In re Taylor, 280 B.R. at 716.
In order to receive distributions under a confirmed Chapter 13 plan, a creditor must file a proof of claim. Without objection by a party, the proof of claim is deemed allowed and "shall constitute prima facie evidence of the validity and amount of the claim." Fed. R. Bank. P. 3001(f).
Carrington Mortgage filed its proof of claim, and it was deemed allowed. Consequently, the Trustee paid Carrington Mortgage exactly what it requested in its Amended Proof of Claim, namely $439.21. After the Debtor had paid according to his Confirmation Order for 38 months and completed all plan payments, it would cause undue prejudice to the Debtor to allow Carrington Mortgage to three (3) months later file an amended proof of claim in which it claims it is actually owed a mortgage arrearage in the amount of $12,608.52.
As aptly stated by the Court of Appeals for the First Circuit in Candelario-Del-Moral v. UBS Fin. Servs. (In re Efron), 746 F.3d 30 (1st Cir.2014):
In re Efron, 746 F.3d at 32.
Consequently, the Court finds that Objection to Proof of Claim (Dkt. # 44) filed by Stephen L. Mason, Sr. and the Amended Objection to Proof of Claim (Dkt. # 55) filed by Stephen L. Mason, Sr. are well taken and should be granted. Therefore, the Trustee's Motion for an Order Declaring Carrington Mortgage Services 1322(B)(5) Claim Defaults Cured Pursuant to the Amended Proof of Claim Filed on January 11, 2011 (Dkt. #29) is well taken and should be granted.
A separate judgment consistent with this Opinion will be entered in accordance with Rule 9014 of the Federal Rules of Bankruptcy Procedure.
