In re Porzio

622 B.R. 20

IN RE: Michael PORZIO, Debtor.

CASE NO. 19-50866 (JAM)

United States Bankruptcy Court, D. Connecticut.

Signed September 22, 2020.

Mr. Michael Porzio, Pro se Debtor

Roberta Napolitano, 10 Columbus Boulevard, 6th Floor, Hartford, CT 06106, Chapter 13 Trustee

MEMORANDUM OF DECISION AND ORDER GRANTING MOTION TO DISMISS

Julie A. Manning, Chief United States Bankruptcy Judge

I. INTRODUCTION

Michael Porzio (the "Debtor") filed this Chapter 13 case on June 28, 2019. On July 12, 2019, the Debtor filed a Chapter 13 Plan. ECF No. 16. On September 9, 2019, the Chapter 13 Trustee filed a Motion to Dismiss the Debtor's case for exceeding debt limits (the "Motion to Dismiss," ECF 30).

The Court held a hearing on the Chapter 13 Plan and the Motion to Dismiss on November 14, 2019. The Debtor, the Chapter 13 Trustee, and counsel for certain creditors appeared at the hearing. At the conclusion of the hearing, the Court took the Chapter 13 Plan and the Motion to Dismiss under advisement. For the reasons set forth below, the Motion to Dismiss is granted. Due to the dismissal of the Debtor's case, the Chapter 13 Plan is moot, the claims asserted in the adversary proceeding challenging the claim of a secured creditor are also moot, and the adversary proceeding is dismissed.

II. BACKGROUND

The Debtor's Chapter 7 Case

1. The Debtor's first bankruptcy case, Case No. 14-51960, was filed as a Chapter

13 case on December 29, 2014, and was converted to a Chapter 7 case on April 14, 2015 (the "Debtor's Chapter 7 Case").

2. The Debtor received a Chapter 7 Discharge on September 28, 2015.

The Debtor's 2017 Chapter 13 Case

3. On April 18, 2017, the Debtor filed a Chapter 13 case, Case No. 17-50418 (the "Debtor's 2017 Chapter 13 Case").

4. There were four secured Proofs of Claim filed in the Debtor's 2017 Chapter 13 case: (i) Wells Fargo Bank, N.A. ("Wells Fargo")'s Proof of Claim in the amount of $1,096,860.62 secured by property commonly known as 328 Post Road W., Westport, Connecticut; (ii) JPMorgan Chase Bank, National Association ("JPMorgan")'s Proof of Claim in the amount of $4,106,109.96 secured by the property commonly known as 2 Angora Road, Westport, Connecticut; (iii) Deutsche Bank Trust Company, Americas, as Trustee for Residential Accredit Loans, Inc., Mortgage Asset-Backed Pass-Through Certificates, Series 2005-QA10 ("Deutsche Bank")'s Proof of Claim in the amount of $615,977.97 secured by property commonly known as 11 Bulkley Ave., Westport, Connecticut; and (iv) Deutsche Bank National Trust Company, as Trustee, on behalf of the holder of the WaMu Mortgage Pass-Through Certificates, Series 2005-AR2 ("Deutsche Bank National")'s Proof of Claim in the amount of $1,362,933.37 secured by property commonly known as 12 Winslow Road, Weston, Connecticut.

5. Wells Fargo filed an Amended Motion for In Rem Relief from the automatic stay on June 28, 2017.

6. Deutsche Bank filed a Motion for In Rem Relief from the automatic stay on August 30, 2017.

7. On October 27, 2017, the Court entered an Order granting Wells Fargo's Amended Motion for In Rem Relief. The Order refers to the prepetition Connecticut Superior Court Judgment of Strict Foreclosure entered against the Debtor with respect to the property commonly known as 328 Post Road W., Westport, Connecticut on March 23, 2015 in the case entitled Wells Fargo Bank N.A. v. Porzio, L Michael, aka Porzio Lawrence M, et. al , Case No. FBT-CV-14-6044277-S.

8. Also on October 27, 2017, the Court entered an Order granting Deutsche Bank's Motion for In Rem Relief. The Order refers to the prepetition Connecticut Superior Court Judgment of Strict Foreclosure entered against the Debtor with respect to the property commonly known as 11 Bulkley Ave., Westport, Connecticut on April 29, 2014 in the case entitled Deutsche Bank Trust Company Americas, as Trustee for Rali 2005 QA10 v. Michael Porzio, et. al , Case No. FST-CV-11-6011134-S.

9. The Court also entered an Order dismissing the Debtor's 2017 Chapter 13 Case on October 27, 2017. The Dismissal Order provided as follows:

The Debtor's case is dismissed based upon the Debtor exceeding Chapter 13 secured debt limits under 11 U.S.C. § 109(e). To determine whether a debtor's secured debt exceeds Chapter 13 secured debt limits under § 109(e), a court may consider the debtor's in rem liability on a foreclosure judgment entered prepetition. See In re Branam , 476 B.R. 333, 337-38 (Bankr. S.D. Fla. 2012) (citing Johnson v. Home State Bank , 501 U.S. 78, 78-79, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991) ). A Chapter 7 discharge extinguishes the in personam liability on a debt secured by the debtor's property but the in rem liability survives or passes through bankruptcy. See Johnson , 501 U.S. at 83, 111 S.Ct. 2150 (Chapter 7 discharges in personam liability but a creditor's right to foreclose on the mortgage survives or passes through the bankruptcy.). Even if a debtor disputes the existence of liability, if the amount of a debt is calculable with certainty or operation by law, and if the events giving rise to liability occurred prepetition, then the readily calculable debt can be counted for eligibility purposes under § 109(e). See In re Mazzeo , 131 F.3d 295, 304-05 (2d Cir. 1997) ; In re Slack , 187 F.3d 1070, 1073-75 (9th Cir. 1999) ; United States v. Verdunn , 89 F.3d 799, 802 (11th Cir. 1996) (claim is plainly liquidated if its amount is made certain by operation of law); In re Barcal , 213 B.R. 1008, 1012 (8th Cir. BAP 1997) ; In re Imagine Fulfillment Servs., LLC , 489 B.R. 136, 147 (Bankr. C.D. Cal. 2013) (claim is not contingent if events giving rise to liability occurred prepetition); In re Mitchell , 255 B.R. 345 (Bankr. D. Mass. 2000) (claim is liquidated so long as amount of liability is readily calculable even if debtor disputes liability). Here, the Debtor's secured debt arising under the prepetition foreclosure judgments exceed the applicable statutory maximum of $1,184,200.

The Debtor's 2019 Chapter 13 Case

10. The Debtor filed the instant Chapter 13 case on June 28, 2019 (the "Debtor's 2019 Chapter 13 Case").

11. In his Petition, the Debtor lists his address as 2 Angora Road, Westport, Connecticut.

12. The Debtor filed his Chapter 13 Plan on July 12, 2019.¹

13. There are three secured Proofs of Claim filed in the Debtor's 2019 Chapter 13 case: (i) JPMorgan's Proof of Claim in the amount of $4,432,759.40 secured by the real property commonly known as 2 Angora Road, Westport, Connecticut; (ii) Deutsche Bank's Proof of Claim in the amount of $652,377.41 secured by property commonly known as 11 Bulkley Ave., Westport, Connecticut; and (iii) Deutsche Bank National's Proof of Claim in the amount of $1,469,671.80 secured by property commonly known as 12 Winslow Road, Weston, Connecticut.

14. The total amount of the secured claims filed in the Debtor's 2019 Chapter 13 case equals $6,554,808.61.

15. On September 9, 2019, the Chapter 13 Trustee filed the Motion to Dismiss, seeking dismissal of the Debtor's 2019 Chapter 13 Case on the grounds that the Debtor's secured debt exceeds the statutory limit under 11 U.S.C. § 109(e).

16. On September 20, 2019, JPMorgan filed a Motion for Relief from Stay seeking in rem relief with respect to 2 Angora Road, Westport, Connecticut (the "Motion for In Rem Relief").

17. On October 16, 2019, the Debtor commenced an adversary proceeding against JPMorgan. See Porzio v. JPMorgan , Adv. Pro. No. 19-5027. The complaint alleges several causes of action challenging the validity of JPMorgan's claim (the "Complaint").

18. On December 6, 2019, the Court issued a Memorandum of Decision and Order granting the Motion for In Rem Relief. The Court found that in rem relief was warranted because the Debtor and the Debtor's son had engaged in a scheme to delay, hinder, or defraud JPMorgan by filing multiple bankruptcy cases for the sole purpose of preventing JPMorgan from taking title to the property after the Connecticut Superior Court entered a Judgment of Strict Foreclosure against the Debtor on March 20, 2015.

19. The Debtor filed a Notice of Appeal to District Court of the Memorandum of Decision and Order granting the Motion for In Rem Relief on December 17, 2019.

20. On September 18, 2020, the United States District Court for the District of Connecticut issued a ruling affirming the decision and order granting the Motion for In Rem Relief. See No. 19-cv-1994 (SRU), ECF No. 13.

III. DISCUSSION

Section 1307, which governs dismissal of Chapter 13 cases, states, in part, as follows:

(c) Except as provided in subsection (f) of this section, on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause...

11 U.S.C. § 1307(c). Subsection (c) further provides "a non-exhaustive list of events that would be considered ‘for cause.’ " In re Ciarcia , 578 B.R. 495, 499 (Bankr. D. Conn. 2017). Pursuant to section 109(e) of the Bankruptcy Code, only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, secured debts of less than $1,257,850.00 is eligible to be a debtor under Chapter 13. See 11 U.S.C. § 109(e). "[I]f the court finds the debtor to be ineligible for chapter 13, the court has discretion either to dismiss or to convert the case, depending on the best interests of the creditors and the estate." 8 Collier on Bankruptcy ¶ 1307.4 (16th ed. 2020). "Cause" under section 1307(c) "may include a debtor's failure to meet eligibility requirements." In re Villaverde , 540 B.R. 431, 433 (Bankr. C.D. Cal. 2015) (citing Smith v. Rojas (In re Smith) , 435 B.R. 637, 649 (9th Cir. BAP 2010) (affirming dismissal of chapter 13 case due to debtor exceeding the § 109(e) debt limits)); Pratola , 589 B.R. 779, 793 (N.D. Ill. 2018) (finding ineligibility under section 109(e) pro...