Chase v. CitiMortgage, Inc. (In re Chase)

578 B.R. 43

IN RE Andrew C. CHASE and Cheryl M. Chase, Debtors

Andrew C. Chase and Cheryl M. Chase, Plaintiffs-in-Counterclaim

v.CitiMortgage, Inc. and Washington Trust Company, Defendants-in-Counterclaim

Case No. 12–10772–JNF

Adv. P. No. 17–1008

United States Bankruptcy Court, D. Massachusetts.

Signed December 13, 2017

Richard N. Gottlieb, Law Offices of Richard N. Gottlieb, Boston, MA, for Plaintiffs-in-Counterclaim.

Scott R. Magee, Locke Lord LLP, Boston, MA, for Defendants-in-Counterclaim.

MEMORANDUM

Joan N. Feeney, United States Bankruptcy Judge

I. INTRODUCTION

The matter before the Court is the Motion for Summary Judgment filed by the Defendants, CitiMortgage, Inc. ("CMI" or "Citi") and Washington Trust Company ("Washington Trust") (collectively, the "Creditors") with respect to the two-count Complaint filed by Andrew C. Chase and Cheryl M. Chase (the "Plaintiffs" or the "Debtors"). Pursuant to their Complaint, the Debtors seek damages for the Creditors' alleged violation of a confirmation order as a result of their refusal to accept mortgage payments, as well as damages for their alleged unfair and deceptive trade practices and resulting "substantial and otherwise unnecessary emotional distress." See Mass. Gen. Laws ch. 93A, §§ 2, 9.¹

The Debtors filed an Opposition to the Motion for Summary Judgment. The Court heard the matter on September 25, 2017 and directed the Creditors to file a supplemental brief and an affidavit.

The Court concludes that the matter is ripe for summary judgment and finds and rules as follows.

II. UNDISPUTED FACTS²

The Debtors filed a Chapter 13 petition on January 31, 2012. On Schedule A–Real Property, they listed an ownership interest in property located at 67 Brookside Avenue, Belmont, Massachusetts (the "property"). The Debtors obtained a loan from ABN AMRO Mortgage Group, Inc. on June 28, 2004 in the amount of $493,000 secured by a mortgage on the property. Although CMI was not the originator of the Loan, it became the servicer of the loan prior to the filing of the petition; Washington Trust, according to the Creditors "was and remains the investor holding the note on the Loan."

On January 31, 2012, the Debtors filed a plan in which they proposed to treat the Creditors' secured claim by curing the prepetition default in the amount of $47,198 over the term of the plan through payments to the Chapter 13 Trustee and making regularly monthly mortgage payments directly to CMI.

On January 27, 2014, this Court entered an order confirming the Debtors' 60–month Chapter 13 plan pursuant to which they agreed to pay the Chapter 13 Trustee the monthly sum of $1,915.00. The Summary of Disbursements submitted by the Chapter 13 Trustee provided that CMI would be paid $786.63 per month to satisfy its prepetition arrears which were listed in the amount of $47,198.00, despite the significantly higher amount set forth in the proof of claim filed by CMI on June 12, 2012.³

On October 21, 2014, approximately eight months after confirmation of the plan, the Debtors filed a First Amended Chapter 13 Plan together with a "Motion of Debtors to Approve First Amended Chapter 13 Plan." Pursuant to their First Amended Plan, the Debtors proposed to pay the sum of $1,866.00 to the Chapter 13 Trustee and to cure the Creditors' prepetition arrears in the amount of $62,855.00, a sum corresponding in round numbers to the proof of claim filed by CMI. On November 21, 2104, this Court granted the Debtors' Motion to Approve their First Amended Plan. The order confirming that plan did not enter, however, until June 29, 2015 at which time the Court entered an "Amended Order Confirming Plan." The Summary of Disbursements submitted by the Chapter 13 Trustee with respect to the Debtors' amended plan provided: "As of October 31, 2014, the Debtor shall pay the amount of $49,790.00 to the Trustee. Commencing November 01, 2014 and on the 1 ^st day of the month thereafter, the Debtor(s) shall pay to the Chapter 13 Trustee, the sum of $1,866.00 for the remaining 28 months of the Plan."

Both before and after confirmation of their original Chapter 13 plan and their amended plan, the Debtors were unable to consistently make plan payments. The Chapter 13 Trustee filed six motions to dismiss the Debtors' Chapter 13 case for failure to make plan payments between September 24, 2012 and February 21, 2017. The Debtors' Chapter 13 case was dismissed on at least two occasions, prompting the Debtors to file motions to vacate and/or motions to reopen, evidencing the Debtors' struggle to comply with the terms of their plan. Indeed, in recognition of their financial difficulties, the Debtors attempted to obtain a voluntary modification of the mortgage loan. Their first loan modification application was submitted to CMI on or around December 24, 2014 and was rejected; their second application, which was submitted on June 5, 2015, also was rejected as containing outdated information from December of 2104.

On July 30, 2015, approximately one month after the entry of the Amended Confirmation Order on June 29, 2015, the Chapter 13 Trustee filed a Motion for Order Dismissing Case in which she stated:

The Court entered an Order confirming the Debtor's Plan, effective 03/01/2012. The Debtor is in arrears according to the terms of the proposed plan totaling $ 11,268.00, which is equal to 6.03 months of plan payments. This amount does not include the current month and may increase prior to hearing. Failure to make timely payments to the Trustee is a material default with respect to the confirmed plan and is "cause" for dismissal within the meaning of 11 U.S.C. § 1307(c)(4).

The Debtors promptly filed an Objection to the Trustee's motion, stating:

The Debtors admit so much of the allegations contained in Paragraph 2 of the Motion regarding the fact that they are presently in arrears of their payments under their current Chapter 13 Plan. By way of explanation the Debtor, Andrew Chase, has recently changed employment and anticipates that he will be able to cure the alleged arrears within thirty (30) days of the date of this Objection. The Debtor denies that he has failed to "commence making payments" under his plan as implied by the Chapter 13 Trustee's citation to 11 U.S.C. § 1307(c)(4) in Parapgraph [sic] 2 of the Motion. Moreover, the Debtor asserts that, based upon the Debtor's renewed employment, the amount of the alleged arrears does not constitute a "material default" with respect to the Debtors' Chapter 13 Plan.

The Debtors and the Chapter 13 Trustee resolved the Trustee's motion through the submission of an Agreed Order which provided, in pertinent part, the following in bold, capital letters:

ORDERED THAT IF THE DEBTOR FAILS: (A) TO PAY TO THE TRUSTEE BY CERTIFIED FUNDS, BANK CHECK, MONEY ORDER OR ELECTRONIC PAYMENT THROUGH TFS (AN AUTHORIZED THIRD PARTY PAYEE) THE SUM OF $16,866.00 BY 12:00 NOON* ON WEDNESDAY, SEPTEMBER 30th, 2015; AND, IN ADDITION, (B) TO REMAIN CURRENT DURING THE PENDENCY OF THIS AGREED ORDER ON THE MONTHLY PAYMENT OF $1,866.00 TO THE TRUSTEE, THIS CHAPTER 13 CASE MAY BE DISMISSED BY THE CLERK OF THE COURT UPON AFFIDAVIT OF THE TRUSTEE, WITHOUT HEARING ...

The Court entered the Agreed Order on September 2, 2015.

On October 9, 2015, the Trustee filed an Affidavit of Non–Compliance with respect to the Agreed Order, in which her counsel represented: "the Debtors failed to cure the arrears, and are currently in arrears in the amount of $11,268.00 which equals 6.04 months of plan payments NOT including the current month." The Debtors did not file a timely response to the Affidavit. On October 20, 2015, the Court dismissed the Debtors' Chapter 13 case.

The dismissal of their Chapter 13 case prompted the Debtors to file a "Motion to Vacate Dismissal and Reinstate Chapter 13 Proceeding." The Debtor asserted that "[t]he lapse was caused due to the payment limit imposed by the TFS payment System and the Debtor's difficulties in overcoming this limitation. However, at this point, the Debtors have cured all payment arrears with the Chapter 13 Trustee and are now completely current with respect to their Chapter 13 Plan." On November 2, 2015, in the absence of objection, the Court granted the Debtors' Motion.

In the meantime, on April 23, 2015, CMI had filed a Motion for Relief from the Automatic Stay in which it alleged that, as of March 31, 2015, the Debtors owed the sum of $523,521.91, plus additional amounts for late fees, costs of collection and attorneys' fees. It also represented that postpetition payments were due for the period from May 1, 2012 through March 1, 2105 totaling $113,662.82, less funds held in suspense in the amount of $389.40. After obtaining several extensions of time to respond, the Debtors filed an opposition to the lift stay motion on May 18, 2015 in which they referenced the submission of the loan modification application to CMI.

Neither party was eager to litigate the lift stay motion. Although the Court scheduled a hearing, the Court continued hearings on the lift stay motion multiple times at the parties' requests. On October 8, 2015, however, the Court granted the motion as counsel to the Debtor failed to appear at the scheduled hearing.

The Debtors moved for reconsideration of that order and the Court scheduled a hearing for November 19, 2015, but subsequently continued the hearing a number of times, again at the parties' request. On January 25, 2016, in light of the numerous continuances, the Court continued the lift stay motion generally, indicating that it would reschedule the hearing at CMI's request.

On July 18, 2016, CMI moved to reschedule the hearing. The Court granted the motion and scheduled a hearing for August 18, 2016. In response, the Debtors filed a Supplemental Opposition to the lift stay motion in which they indicated that they were seeking a loan modification to "re-capitalize" the arrears. They added:

Although the Debtors recognize that the failure to make post-petition mortgage payments may constitute "cause"

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