RENÉE MARIE BUMB, District Judge.
This matter comes before the Court on the appeals brought by Appellant Eagle One Federal Credit Union ("Eagle One") from case number 17-24902 of the Bankruptcy Court for the District of New Jersey. Specifically, Eagle One has appealed two separate orders entered by the Honorable Jerrold N. Poslusny, Jr.
This matter stems from Appellee Rosalba Campanile's July 24, 2017 filing of a Chapter 13 Petition and Plan. Ms. Campanile had a home located at 320 Billingsport Road, Paulsboro, New Jersey. Wells Fargo NA ("Wells Fargo") was the senior mortgagee on the home; Eagle One was a junior mortgagee. [19-284 Docket No. 4, at 4.] Prior to filing the Petition and Plan, Wells Fargo had commenced foreclosure proceedings on the home because Ms. Campanile was in default on its loan. [
The Plan proposed a loan modification to address Ms. Campanile's default in payments owed to Wells Fargo. [
Within a week of the Plan being filed, Wells Fargo filed a timely objection to its confirmation, arguing that it was "speculative in nature." [Bankruptcy Docket No. 11, ¶ 6.] On April 5, 2018, despite Wells Fargo's objection, the Court confirmed the Plan as proposed. [
One requirement of the Plan was for Ms. Campanile to continue to make monthly payments to Wells Fargo. [Bankruptcy Docket No. 3, at 1.] But eighteen days later, on April 23, 2018, Wells Fargo filed a motion for relief from the automatic stay
On May 15, 2018, the Court granted Wells Fargo's motion. [Bankruptcy Docket No. 21.] This allowed Wells Fargo to conclude the foreclosure proceeding, which it did by purchasing the property at a Sheriff's sale on June 20, 2018. [19-284 Docket No. 6, at 2.] It is undisputed that "[t]he proceeds of the sale were insufficient for Eagle One to recover any funds from the sale . . . ." [Bankruptcy Docket No. 26, at 2.]
Throughout all of these developments, it is noteworthy that Eagle One did not file any objections or a proof of claim. [
Eagle One then filed a motion for relief from the automatic stay on January 9, 2019. [Bankruptcy Docket No. 32.] Judge Poslusny denied that motion on February 25, 2019. [Bankruptcy Docket Nos. 46-47.] Eagle One appealed that decision to this Court as well. [19-8103 Docket No. 1.]
The two appeals were consolidated on October 9, 2019. [19-8103 Docket No. 13.] For the reasons set forth herein, the Court will affirm both of Judge Poslusny's decisions.
The Court has jurisdiction over these appeals pursuant to 28 U.S.C. § 158(a)(1), as each appealed decision was a final order. Eagle One's appeals are timely because they were filed within 14 days after the relevant entries of judgment. FED. R. BANKR. P. 8002.
A district court's standard of review in a bankruptcy appeal is to "review the bankruptcy court's legal determination
As noted above, Eagle One presently appeals two decisions rendered by the Bankruptcy Court. The first decision denied Eagle One's motion to file a late claim. The second decision denied Eagle One's motion for relief from the automatic stay. The Court will address each in turn.
In the "Summary of the Argument" section of its brief, Eagle One appears to list three arguments in support of its appeal of the denial of its motion to file a late claim. Eagle One first states that "[t]he Bankruptcy Court erred when it found that Rule 3002 barred the filing of late claims under circumstances such as present in this case." [19-284 Docket No. 4, at 10.] Next it writes that "the Court below did not give proper consideration to the equities of the changed circumstances caused by the post Plan Confirmation actions of Wells Fargo, the senior lienholder, with the acquiescence of the Appellee." [
Despite listing those three bases, the remainder of Eagle One's brief argues solely that, because of the equitable nature of the Bankruptcy Code, the Court should apply an excusable neglect standard in this case. For the reasons set forth below, the Court declines to do so.
Section 501(a) of the Bankruptcy Code provides that a creditor may file a proof of claim when a debtor files for bankruptcy.
Rule 3002(c) states that a proof of claim in a Chapter 13 case must be filed within 90 days of the first scheduled date for the meeting of creditors.
Instead, Eagle One argues that the Court should apply the standard set out in Rule 9006(b)(1). That Rule states that
FED. R. BANKR. P. 9006(b)(1). The Supreme Court of the United States set forth the factors for determining what constitutes "excusable neglect" in
What Eagle One fails to address is the fact that the exception to Rule 9006 found in subsection (3). That subsection explicitly states that "[t]he court may enlarge the time for taking action under Rule[] . . . 3002(c) . . .
Nevertheless, Eagle One argues that, because of what it considers to be unique circumstances of this case, the Court should consider the equitable nature of the Bankruptcy Code and "bend the rules." Specifically, Eagle One argues that Section 105(a) allows for the application of Rule 9006(b)(1)'s excusable neglect analysis here. That Section states in relevant part:
11 U.S.C. § 105(a).
But "the equitable powers authorized by § 105(a) are not without limitation."
To the extent that Eagle One argues that the Court should ignore the above precedent and analysis because of the unique circumstances of this case, the Court demurs. Eagle One argues that Ms. Campanile acted in bad faith by proposing the Plan and then failing to object to Wells Fargo's motion for leave from stay, "the effect of which was to modify the [P]lan to extinguish [Eagle One's] secured claim on the Property." [19-284 Docket No. 4, at 8.] Of course, Ms. Campanile was under no obligation to object to Wells Fargo's motion. But even if Ms. Campanile acted in bad faith — which the Court does not hold — Eagle One overlooks the fact that its inaction was to its detriment.
Eagle One never objected to the Plan. Eagle One did not timely file a proof of claim. Eagle One did not seek to file a late claim at the appropriate time. Eagle One never objected to Wells Fargo's motion for leave from the automatic stay. Eagle One never appealed the Bankruptcy Court's decision to grant that motion. In short, Eagle One was in a position to protect its own interests by the bankruptcy rules and procedures. Eagle One, however, neglected to use the avenues available to it, instead resorting to pinning the blame on Ms. Campanile. But Eagle One's protest — that Ms. Campanile misled it and the Court at nearly every turn of this proceeding — falls flat when one considers that Eagle One sat idle.
In sum, Eagle One's attempts to avoid the consequences of its own mistakes by painting Ms. Campanile as a bad faith actor are unconvincing. The Court will not circumvent the clear language of the Bankruptcy Code and Rules of Procedure based on that argument. Therefore, the Court will affirm the Bankruptcy Court's decision denying Eagle One's motion to file a late claim.
Eagle One also appeals the Bankruptcy Court's decision denying Eagle One's motion for relief from stay. Section 362(d) of the Bankruptcy Code allows for relief from the automatic stay when a party shows "cause." 11 U.S.C. § 362(d)(1). A court determines whether cause exists by looking at three considerations:
1. Whether any great prejudice to either the bankrupt estate
The Court below found that
[Bankruptcy Docket No. 46, at 4.] Eagle One does not dispute that conclusion, and this Court agrees with it.
The second prong, however, is the cause for the present appeal. The Bankruptcy Court opinion laid out a detailed analysis as to why Eagle One would suffer no hardship if the stay were not lifted. Therefore, the Court below denied Eagle One's motion for relief from stay, which denial Eagle One now appeals.
In its appeal, Eagle One argues that it "has a substantial probability of succeeding on the merits if permitted to file an unsecured claim pursuant to Bankruptcy Rule 3002(c)(3)." [19-284 Docket No. 8, at 14.] That being true, Eagle One argues, "outweighs any prejudice to debtor." [
Whether Eagle One could file a timely claim under Rule 3002 depends on whether Rule 3002(c)(3), an exception to the 90-day deadline to file a claim, applies. Rule 3002(c)(3) states:
FED. R. BANKR. P. 3002(c)(3). In other words, an entity may file a claim within 30 days of a judgment becoming final so long as (1) an unsecured claim arises in favor of the entity; (2) said unsecured claim becomes allowable because of a judgment; and (3) the judgment denies or avoids the entity's interest in property.
The first step to this analysis is identifying the relevant judgment. Eagle One seems to argue that two such judgments could exist. The first is an as-yet-non-existent deficiency judgment, which Eagle One would seek to obtain if the stay were lifted. The second is the foreclosure judgment and sale, which occurred on July 20, 2018.
Even assuming arguendo that the July 20, 2018 foreclosure judgment and sale satisfies the requirements for 3002(c)(3), that would only have given Eagle One an additional 30 days — until August 20, 2018 — to file a claim. Eagle One did not file its motion to file late proof of claim until November 2, 2018. Eagle One, even assuming arguendo that the foreclosure judgment and sale avoided its interest, missed the deadline by which it would have been required to file its late proof of claim. Because Eagle One's claim would still be barred even if the stay were lifted, by virtue of their failure to meet the August 20, 2018 deadline, Eagle One suffers no hardship by the maintenance of the stay from which is requests relief. Therefore, based on the
Resultingly, Eagle One's appeal rests on its other theory: that, if the stay were lifted, Eagle One would be able to obtain a deficiency judgment, which would satisfy the Rule 3002(c)(3) elements. Then, the argument goes, Eagle One would have 30 days from the date of the deficiency judgment to file a late claim. Therefore, Eagle One would suffer hardship as a result of the maintenance of the stay, and relief would be appropriate.
With respect to this issue, Eagle One argues that the Bankruptcy Court "erred in finding that [Eagle One] was an unsecured creditor at the time . . . the Petition was filed." [19-284 Docket No. 8, at 15.] This issue is governed by Section 506 of the Bankruptcy Code, which provides that "[a]n allowed claim . . . is a secured claim to the extent of the value of such creditor's interest in . . . such property" and "an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim."
In this case, the Plan asserted that Ms. Campanile's home had a value sufficient to satisfy both Wells Fargo's and Eagle One's claims. This, Eagle One argues, means that its claim was secured. But in reality, Eagle One had an unsecured claim no later than on the Petition Date because the value of Ms. Campanile's home was insufficient to provide Eagle One any value on its lien. In other words, despite the estimations of the Plan, the value of the lien that Eagle One held was $0. This rendered its claim unsecured. Thus, a deficiency judgment would not avoid a secured claim held by Eagle One, because Eagle One's claim was and is already unsecured.
For the reasons set out above, this Court will affirm both Bankruptcy Court decisions that Eagle One has appealed. An accompanying order shall issue.
