DAVID M. WARREN, Bankruptcy Judge.
This matter comes on to be heard upon the Defendant's Motion for Summary Judgment ("Summary Judgment Motion") filed by PNC Bank, National Association ("PNC") as servicer for North Carolina Housing Finance Agency ("NCHFA") on January 29, 2015 and the response filed by Alma Ruth Duran ("Plaintiff"). The court conducted a hearing in Raleigh, North Carolina on May 20, 2015. S. Troy Staley, Esq. appeared for PNC, and Erich M. Fabricius, Esq. appeared for the Plaintiff. Based upon the oral arguments of counsel and those set forth in the parties' memoranda of law, the court makes the following findings of fact and conclusions of law:
1. The Plaintiff filed a petition for relief under Chapter 13 of the United States Bankruptcy Code on June 13, 2014 ("Petition Date").
2. On Schedule A filed with the court, the Plaintiff listed as her principal residence real property ("Property") located at 7064 Prospector Place in Raleigh, North Carolina. The Plaintiff estimated on Schedule A that the value of the Property was $70,000.00 as of the Petition Date, with a notation that an appraisal was pending, and the estimated value may change. On July 1, 2014, the Plaintiff filed an Amended Schedule A that valued the Property at $80,000.00.
3. On an Amended Schedule D filed July 1, 2014, the Plaintiff listed a claim ("Claim") in the amount of $140,546.12
4. According to the Note, Affidavit of Assignment, Corporation Assignment of Deed of Trust and Deed of Trust attached to the Proof of Claim filed by NCHFA on September 4, 2014, Walter Hernandez ("Hernandez") and Saul V. Rivera ("Rivera")
5. Section 2 of the DOT requires Hernandez and Rivera to pay monthly installments of property taxes and mortgage insurance premiums to the lender to be held in escrow ("Escrow Funds"). According to the terms of the DOT, and not the Note, the Escrow Funds are pledged "as additional security for all sums secured by" the DOT.
6. The Plaintiff received title to the Property under a deed recorded with the Wake County Register of Deeds on March 22, 2007. That deed does not reference the DOT as an existing encumbrance or state that the Plaintiff expressly assumed the DOT or executed any other agreement, such as an assumption agreement, a loan modification agreement, or due on sale wavier, with NCHFA or PNC regarding the Note or DOT.
7. On July 1, 2014, the Plaintiff filed a Verified Complaint to Value Collateral ("Complaint"), initiating this adversary proceeding. The Complaint asserts that the Property has a value "not greater than $80,000.00" based on an appraisal dated June 17, 2014.
8. The Plaintiff argues that 11 U.S.C. § 1322(b)(2), which prohibits the modification of "the rights of holders of . . . a claim secured only by a security interest in real property that is the debtor's principal residence" (emphasis added), does not apply to the obligation to NCHFA because the DOT is not secured only by the Property. The Complaint seeks a ruling from this court that because the DOT is also secured by the Escrow Funds, the Plaintiff may modify NCHFA's rights under the DOT, and the Claim should be treated as secured only to the extent of $80,000.00. The remainder would be treated as an unsecured claim in the Plaintiff's Chapter 13 case.
9. The Summary Judgment Motion asserts two primary grounds for denial of the Complaint. First, PNC argues that the Plaintiff does not have standing to bring the Complaint, because she is not a party to the DOT and therefore is not in privity with NCHFA or PNC. Second, PNC asserts that even were the court to find that the Plaintiff has standing to pursue the Complaint, the Claim should not be bifurcated because the anti-modification language of § 1322(b)(2) prohibits modification. PNC asserts this argument despite the fact that the DOT is secured by an interest in the Escrow Funds and that courts in this District have found § 1322(b)(2) inapplicable under such circumstances.
1. This matter is a core proceeding pursuant to 28 U.S.C. § 157, and the court has jurisdiction pursuant to 28 U.S.C. §§ 151, 157, and 1334.
2. The court has the authority to hear this matter pursuant to the General Order of Reference entered August 3, 1984 by the United States District Court for the Eastern District of North Carolina.
1. Rule 56 of the Federal Rules of Civil Procedure, made applicable to bankruptcy adversary proceedings by Rule 7056 of the Federal Rules of Bankruptcy Procedure, states that a court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).
2. "[T]he party seeking summary judgment bears an initial burden of demonstrating the absence of a genuine issue of material fact." Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003).
3. To determine whether summary judgment is warranted, the court "must consider whether a reasonable jury could find in favor of the non-moving party, taking all inferences to be drawn from the underlying facts in the light most favorable to the non-movant. . . ." Humboldt Express, Inc. v. Wise Co. (In re Apex Express Corp.), 190 F.3d 624, 633 (4th Cir. 1999).
4. In addressing PNC's first argument, the court must determine whether the Plaintiff has standing to bring the Complaint. If the Plaintiff has no standing, there is no issue of material fact for the court to determine and the Complaint should be dismissed.
7. Although the absence of standing alone necessitates allowance of the Summary Judgment Motion, the court notes that there are additional practical reasons that the Plaintiff should not receive the relief sought in the Complaint. These reasons are worth exploring.
c.
8. Because the Plaintiff has no standing to bring the Complaint, it is unnecessary for the court to find whether the Claim may be bifurcated because the Escrow Funds qualify as collateral in addition to "real property that is the debtor's principal residence." 11 U.S.C. § 1322(b)(2). At the hearing, the court acknowledged that it is bound by In re Ennis, which directs that state law be applied to determine whether collateral constitutes real or personal property for purposes of § 1322(b)(2). Ennis v. Green Tree Servicing, LLC (In re Ennis), 558 F.3d 343, 346 (4th Cir. 2009). The courts in In re Bradsher, 427 B.R. 386 (Bankr. M.D.N.C. 2010) and Bradshaw v. Asset Ventures, LLC (In re Bradshaw), 2014 Bankr. LEXIS 2427 (Bankr. E.D.N.C. June 4, 2014) followed and applied Ennis in determining whether escrow funds held by a secured creditor could qualify as real property under North Carolina law. "Under Ennis, [modification of a creditor's rights is prohibited by § 1322(b)(2)] only if escrow funds can be regarded as real property under applicable state law, i.e., North Carolina law." Bradsher, 427 B.R. at 390. Bradsher, and subsequently Bradshaw, both found that when North Carolina law was applied to the terms of the relevant deeds of trust, the pledged escrow funds qualified as personal — not real — property. Bradsher, 427 B.R. at 391; Bradshaw, 2014 Bankr. LEXIS, at *6. Although at the hearing PNC was unable to persuade the court how this case is distinguishable from Bradsher and Bradshaw, PNC ultimately prevails in its Summary Judgment Motion by proving Plaintiff does not have standing to pursue the Complaint; therefore, no issue of material fact exists for the court to determine; now therefore,
It is ORDERED, ADJUDGED and DECREED that the Summary Judgment Motion is allowed and the Complaint is hereby dismissed.
