In re Thorpe

597 B.R. 253

IN RE: Renee Marie THORPE, Debtor

Bky. No. 13-15267 ELF

United States Bankruptcy Court, E.D. Pennsylvania.

Signed January 17, 2019

Roger V. Ashodian, William H. Hall, IV, Jennifer Song, The Regional Bankruptcy Center of Southeastern PA, Havertown, PA, for Debtor Renee Marie Thorpe.

Morton R. Branzburg, Christopher John Leavell, Kathryn Evans Perkins, Klehr Harrison Harvey Branzburg & Ellers, Philadelphia, PA, for Trustee.

Frederick L. Reigle, Reading, PA, pro se.

Michael B. Joseph, Wilmington, DE, pro se.

MEMORANDUM

ERIC L. FRANK, U.S. BANKRUPTCY JUDGE

I. INTRODUCTION

Bankruptcy courts are not courts of general jurisdiction able to resolve every dispute that may affect a bankruptcy debtor during the pendency of a bankruptcy case. A fundamental principle of federal jurisprudence is that federal courts are courts of limited jurisdiction. Bankruptcy court jurisdiction constitutes a strictly circumscribed subset of that limited federal court jurisdiction. Further, even when bankruptcy jurisdiction attaches, it tends to "wane" after the confirmation of a bankruptcy plan. See Nuveen Mun. Trust ex rel. Nuveen High Yield Mun. Bond Fund v. WithumSmith Brown, P.C., 692 F.3d 283, 294 (3d Cir. 2012).

In this case, years after the confirmation of her chapter 12 plan, the Debtor initiated a contested matter styled "Debtor's Objection to JPMorgan Chase Bank, N.A. Escrow: Taxes and Insurance Statement Dated April 21, 2018" (Doc. # 678) ("the Objection"). The Objection requests that this court resolve a post-confirmation mortgage servicing dispute that arose between the Debtor and JP Morgan Chase Bank N.A. ("JPMorgan"), a mortgage holder on the Debtor's residence.

Undoubtedly, the dispute is a real one and its outcome is important to both parties. However, the Debtor did not provide for JPMorgan's claim in her confirmed chapter 12 plan and the present dispute will have no discernible impact on her almost fully administered bankruptcy case.

Accordingly, for the reasons stated below, I will dismiss the Objection for lack of subject matter jurisdiction.

II. HISTORY OF THE CASE

A. General Background

This chapter 12 family farm bankruptcy case was filed on June 13, 2013. A plan was confirmed on January 23, 2014 and a post-confirmation modified plan was approved on November 14, 2014.

In seeking bankruptcy relief, the Debtor's goal was to implement a rehabilitation plan to prevent foreclosure of her family farm. Although the Debtor succeeded in confirming a chapter 12 plan, she ultimately was unsuccessful in her rehabilitation efforts and, pursuant to the terms of her confirmed plan, the farm was sold to a third party via a bankruptcy court auction. See In re Thorpe, 540 B.R. 552 (E.D. Pa. 2015).

After the sale, the main creditor secured by the farm property, Lititz Properties, Inc. ("Lititz"), asserted that a deficiency claim remained, secured by a second property owned by the Debtor – her residence. The Debtor disputed that her residence was subject to any further debt to Lititz and pressed an objection to Lititz's proof of claim. The parties agreed to mediate this dispute and later reached a settlement ("the Lititz Settlement").

Pursuant to the Lititz Settlement, the Debtor agreed to: (a) accept a settlement offer in a then-pending state court action in which she asserted an affirmative claim against her casualty insurer; and (b) pay 65% of those settlement proceeds to Lititz. The remaining 35% of the insurance settlement proceeds was (and continues to be) the subject of a dispute.

At the time of the Lititz Settlement, the attorney hired by the Debtor to represent her in the insurance litigation asserted that he was entitled to those proceeds pursuant to his contingent fee agreement. The Debtor disputed this, asserting that the attorney was entitled to neither a contingent fee nor any award on a quantum meruit basis. In light of the uncertainty regarding the proper disposition of the proceeds, in the Lititz Settlement, Lititz agreed to accept a fixed (relatively modest) portion of the disputed 35% in the event the Debtor prevailed in her dispute with the attorney.

Based on the settlement terms described above, Lititz released its claim against the Debtor's remaining (residential) real property. The settlement was approved by this court. See In re Thorpe, 563 B.R. 576, 581–83 (Bankr. E.D. Pa. 2017), adopted sub nom. U.S. Tr. v. Thorpe, 2017 WL 3084388 (E.D. Pa. July 20, 2017), vacated in part on other grounds and remanded sub nom. In re Thorpe, 2018 WL 6068445 (3d Cir. Nov. 20, 2018) (nonprecedential).

The dispute regarding the entitlement to the disputed 35% of the insurance settlement proceeds remains unresolved, the matter having recently been remanded by the Court of Appeals to the District Court and by the District Court to this court. See In re Thorpe, 2018 WL 6068445 (3d Cir. Nov. 20, 2018) (nonprecedential); Bky. No. 13-15265, Doc. # 695. Resolution of that dispute is the primary reason that this bankruptcy case remains open. Once the insurance proceeds dispute is resolved with finality, it will be possible to determine whether Lititz will receive a further distribution in connection with its proof of claim. Thereafter, it appears that the only issue remaining to complete administration of this case is whether the Debtor is entitled to a discharge pursuant to 11 U.S.C. § 1228.

B. Background as to JPMorgan

JPMorgan holds the first mortgage on the Debtor's residence.

Counsel for JPMorgan entered an appearance in the case on December 14, 2014, but otherwise did not participate in the plan confirmation process.

Both the plan confirmed by order dated January 23, 2014 and the modified plan approved on November 14, 2014 provided that the Debtor will make payments "directly to [JPMorgan] outside of the plan , according to the original contract terms, with no modification of contract terms." (Fourth Amended Plan, Doc. # 118) (emphasis added); (Fifth Amended Plan, Doc. # 286) (emphasis added). The only qualification of this treatment is that the Debtor reserved the right to apply for a loan modification.

On July 8, 2015, JPMorgan filed a proof of claim for $ 193,185.05, secured by the Debtor's residence, with pre-petition arrears of $ 2,382.11. Because this claim was filed after plan confirmation, it is difficult to discern its purpose.

On April 26, 2016, JPMorgan filed a motion requesting court approval of a loan modification and stating that the new monthly payment for principal and interest would be $ 1,008.35. The motion did not discuss whether the modified loan required the Debtor to pay a monthly escrow for taxes and insurance and, if so, the initial amount of the monthly escrow.

By order dated June 1, 2016, I granted the loan modification motion, authorized the Debtor to enter into the loan modification agreement described in the motion and, to the extent that relief from the automatic stay was necessary for the parties to enter into the transaction, granted JPMorgan such relief. (Doc. # 578) (emphasis in original).¹

C. The Pending Contested Matter

1.

The present dispute is an outgrowth of an earlier motion filed by JPMorgan for relief from the automatic stay ("the Stay Relief Motion").

On January 19, 2018, pursuant to 11 U.S.C. § 362(d), JPMorgan filed the Stay Relief Motion, alleging that the existence of a five (5) month default in monthly payments, totaling $ 8,693.45, denied it adequate protection. The Debtor filed a response denying the existence of a default, stating that the mortgage account was "current under a loan modification agreement with [JPMorgan]." (Debtor's Response to JPMorgan Motion for Relief from the Automatic Stay ¶ 8) (Doc. # 663 at 1).

On July 18, 2018, the parties reported a settlement of the Stay Relief Motion and followed up by filing a stipulation. In the stipulation, the Debtor acknowledged a post-petition delinquency of $ 6,242.21 and agreed to cure the delinquency by adding $ 520.19 to her regular monthly mortgage payment over the following eleven (11) months.²

2.

The Debtor filed the Objection presently before the court on September 15, 2018 and self-scheduled a hearing on October 25, 2018.

In the Objection, the Debtor alleges that, in connection with the Stay Relief Motion settlement negotiations, she learned that JPMorgan intended to increase her regular monthly mortgage payment from $ 1,738.69 to $ 2,316.12, effective July 2018. The Debtor disputes the propriety of the payment increase and requests that the court "determin[e] ... the correct amount of the regular monthly mortgage payment." (Objection ¶ 10).

3.

On September 17, 2018, I entered an order raising the question whether this court has subject matter jurisdiction to determine the proper amount of the Debtor's monthly mortgage payment on JPMorgan's claim.³ The order directed the parties to submit memoranda of law addressing the issue of jurisdiction on or before October 18, 2018, one (1) week prior to the hearing scheduled on the Objection.

At the request of the parties, I continued the hearing on the Objection and extended the deadline three (3) times for the parties to file their memoranda of law.

The parties made their third extension and continuance request on December 5, 2018. By Order dated December 6, 2018, I extended the deadline to file the memoranda of law to December 31, 2018 and stated that "[n]o further extensions shall be granted." The Order also continued the hearing on the Objection to January 9, 2019. At the parties' request, the January 9, 2019 hearing was continued to January 23, 2019.

Although the January 9, 2019 hearing was continued, a further extension for filing the memoranda was not granted. On January 2, 2019, JPMorgan filed a short response to the Objection which does not discuss the court's subject matter jurisdiction. On January 4, 2019, the Debtor filed a memorandum of law in support of her position. In that tardy submission, the Debtor argues that the court has jurisdiction to consider the merits of the Objection. ⁴

III....