In re Peacock

In re WALTER LEROY PEACOCK, Debtor.

Case No. 16-00615

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLUMBIA

Filed: March 20, 2018

March 19, 2018

(Chapter 13)

Not for publication in West's Bankruptcy Reporter.

MEMORANDUM DECISION AND ORDER DENYING MOTION FOR RECONSIDERATION

The debtor's Motion for Reconsideration seeks to vacate an order entered on February 21, 2018, granting a motion for relief from the automatic stay filed by Ocwen Loan Servicing LLC ("Ocwen"), as a loan servicer on behalf of an entity I will refer to as Deutsche Bank.¹ The order permits Deutsche Bank to go forward with foreclosure proceedings, incident to a Deed of Trust securing payment of a Note, against real property owned by the debtor. The Motion for Reconsideration alleges that Deutsche Bank lacks standing to enforce the Note. For the followingreasons, I will deny the Motion for Reconsideration.

I

Under 11 U.S.C. § 362(a), the debtor obtained the benefit of the automatic stay when the debtor filed the petition commencing this case on November 30, 2016, as a case under Chapter 13 of the Bankruptcy Code (11 U.S.C.). In that regard, the petition was analogous to debtor, as a plaintiff, filing a complaint for an injunction, with the injunction being granted immediately, but with the enjoined parties free to show later that the injunction ought not stay in place. When the allegations of a creditor's motion for relief from the automatic stay show that the injunction (in the form of the automatic stay) ought not remain in place, and the debtor fails to oppose the motion, the court is free to take the allegations as admitted and to grant the motion for relief from the automatic stay.²

Ocwen filed the motion for relief from the automatic stay on January 31, 2018 (a year and two months afer the commencement of the case). The debtor failed to oppose the motion, and the court granted the motion on February 21, 2018. The debtor filed the Motion for Reconsideration on February 28, 2018, seeking underFed. R. Civ. P. 59(e) to vacate the order.

The debtor does not contend that if the facts alleged in Ocwen's motion for relief from the automatic stay are taken as true, Ocwen nevertheless failed to show that relief from the automatic stay is appropriate. I review the grounds for granting relief from the automatic stay because they bear on the issue of the debtor's opportunities to contest Deutsche Bank's standing to enforce the Note and on the harm to Deutsche Bank arising from the automatic stay, matters pertinent to the issue of whether declining to vacate the order granting relief from the automatic stay would result in a manifest injustice.

Ocwen's motion alleged that Deutsche Bank holds the Note secured by the Deed of Trust that encumbers the real property at issue. Under 11 U.S.C. § 1322(b)(5), the debtor was entitled to propose a plan providing for the curing of prepetition arrearages on Deutsche Bank's claim within a reasonable time and maintenance of monthly payments while the case is pending. The debtor's confirmed plan provided, with respect to allowed secured claims, that the holder of such a claim would retain its lien, and, in relevant part, that:

THE DEBTOR SHALL MAINTAIN POST-PETITION PAYMENTS DIRECTLY WHILE CASE IS PENDING AND THE TRUSTEE WILL CURE ALL PRE-PETITION ARREARS, COSTS, AND FEES OF THE FOLLOWING CLAIMS: . . .

-- WITH FULL 100% PAYMENT PRO RATA:

HSBC Bank USA National Association; Deutsche Bank

The debtor concedes, as was alleged in Ocwen's motion, that thedebtor has made no postpetition monthly payments to Ocwen (as servicer for Deutsche Bank) for the fifteen months the case has been pending.

Deutsche Bank is owed substantial prepetition arrearages, and the non-payment of the bulk of those arrearages is a harm pertinent to the Rule 59(e) Motion for Reconsideration.³ The prepetition arrearages include, for example, interest that has accrued in excess of $333,000 on what was a $396,000 loan to the debtor.⁴ The confirmed plan provided that the Chapter 13 trustee would pay any prepetition arrearages owed on any allowed secured claim of Deutsche Bank, but the Chapter 13 trustee is paying only $200 of the arrearages. This is because the Chapter 13 trustee only pays a claim when it becomes an allowed claim via the filing of a proof of claim. The debtor filed on behalf ofDeutsche Bank a claim for only $200 of prepetition arrearages.⁵ Under the order confirming the plan, Deutsche Bank's lien, which extends to the monthly payments accruing postpetition as well as the claim for unpaid prepetition arrearages, will be unaffected by the revesting in the debtor of the property of the estate (including the property at issue here) upon completion of the plan.⁶ This was not altered by the debtor being allowed to file a proof of claim on behalf of Deutsche Bank for only $200 of theprepetition arrearages.⁷

Cause existed to grant relief from the automatic stay. The debtor has made no postpetition monthly payments to Ocwen (as servicer for Deutsche Bank) for the fifteen months the case has been pending. Ocwen's motion showed that there is no equity cushion protecting Deutsche Bank's claim against the property.⁸ That lack of an equity cushion will result in Deutsche Bank not being able to collect from the property the continuing postpetition monthly accruals of interest and other charges under the Note and the Deed of Trust. That established cause for relief from the automatic stay under 11 U.S.C. § 362(d)(1), and it also establishes harm to Deutsche Bank, relevant to the issue of whether vacating the order granting the motion for relief from the automatic stay would result in a manifest injustice.

In addition, also relevant to that issue of manifestinjustice is Deutsche Bank's substantial claim for prepetition arrearages. Except for $200, that claim is not being paid under the debtor's confirmed plan, and reinstating the automatic stay to bar collection of the claim would harm Deutsche Bank. In contrast, there is little harm to the debtor in letting Deutsche Bank attempt to foreclose on the property: there is no equity in the property.⁹ And the debtor has not contended that the debtor can deal with such arrearages under the confirmed plan if allowed to file a belated proof of claim for the full amount of such arrearages. The confirmed plan provides for payments to the trustee aggregating only $40,196.92, and the debtor has not suggested that the debtor could increase plan payments in order to cure the prepetition arrearages claim in excess of $333,000 and still sufficiently fund other amounts the trustee is required to pay under the plan.

II

When the debtor failed to oppose Ocwen's motion, the court was entitled to conclude that the debtor had not shown that there was any reason to keep in place the automatic stay the debtor had obtained by filing the petition commencing the case. Under Fed.R. Bankr. P. 9023, the debtor timely invoked Fed. R. Civ. P. 59(e) in seeking reconsideration, contending that Ocwen lacked standing to pursue relief from the automatic stay, but relief under Rule 59(e) is unwarranted.

The Motion for Reconsideration includes an allegation that:

8. The Debtor did not make mortgage payments to Ocwen Loan Servicing because upon reasonable information and belief, the Debtor does not trust that Ocwen Loan Servicing has standing to collect payments upon the note.

As is evident from that allegation, the debtor has questioned from the commencement of the case fifteen months ago whether Ocwen has standing to enforce the Note. Yet the debtor failed to file an opposition to Ocwen's motion for relief from the automatic stay denying the allegation that Deutsche Bank (for whom Ocwen acts as the loan servicer) holds the Note, and contesting the right of Deutsche Bank to have standing (and Ocwen on its behalf) to enforce the Note and obtain relief from the automatic stay. It is too late for the debtor to raise, via a Rule 59(e) motion, a defense of lack of standing that the debtor could have raised (but did not raise) by filing a timely opposition to the motion for relief from the automatic stay. As noted in Odhiambo v. Republic of Kenya, 947 F. Supp.2d 30, 35 (D.D.C. 2013):

Rule 59(e) . . . 'may not be used to relitigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment.'" Exxon Shipping Co. v. Baker, 554 U.S. 471, 486 n.5, 128S.Ct. 2605, 171 L.Ed.2d 570 (2008), quoting 11 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2810.1 (2d ed. 1995); see also Estate of Gaither ex rel. Gaither v. District of Columbia, 771 F.Supp.2d 5, 10 (D.D.C. 2011) ("In this Circuit, it is well-established that motions for reconsideration, whatever their procedural basis, cannot be used as an opportunity to reargue facts and theories upon which a court has already ruled, nor as a vehicle for presenting theories or arguments that could have been advanced earlier.") (internal quotation marks and citations omitted).

See also Patton Boggs LLP v. Chevron Corp., 683 F.3d 397, 403 (D.C. Cir. 2012) (noting that a Rule 59(e) motion "is not a vehicle to present a new legal theory that was available prior to judgment"); Fox v. American Airlines, Inc., 389 F.3d 1291, 1296 (D.C. Cir. 2004) ("Nor do we find any abuse of discretion in the district court's refusal to vacate its judgment based on their allegedly valid ACAA claim as this argument was available to them earlier." (citations omitted)). Because the lack of standing could have been raised as a defense to the motion for relief from the automatic stay, and was not raised, the Motion for Reconsideration under Rule 59(e) may not be used to raise that theory of defense now. This is particularly true in the context of a motion for relief from the automatic stay which was granted based on failure to oppose the motion. Under 11 U.S.C. § 362(e), procedures apply whereby the automatic stay may expire automatically if certain steps are not taken...