Pittner v. Castle Peak 2011-1 Loan Trust

DUSAN PITTNER, Debtor.

DUSAN PITTNER, Plaintiff-Appellant, v. CASTLE PEAK 2011-1 LOAN TRUST andSELENE FINANCE LP, Defendants-Appellees.

BAP NO. MB 17-021

Bankruptcy Case No. 12-12438-MSH

Adversary Proceeding No. 15-01222-MSH

UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE FIRST CIRCUIT

February 1, 2018

NOT FOR PUBLICATION

Appeal from the United States Bankruptcy Court for the District of Massachusetts

(Hon. Melvin S. Hoffman, U.S. Bankruptcy Judge)

Before Godoy, Finkle, and Cary, United States Bankruptcy Appellate Panel Judges.

David G. Baker, Esq., on brief for Plaintiff-Appellant.

Richard C. Demerle, Esq., on brief for Defendants-Appellees.

Finkle, U.S. Bankruptcy Appellate Panel Judge.

Dusan Pittner ("Debtor") appeals from the bankruptcy court's May 23, 2017 order granting the appellees' motion to dismiss the remaining count of his amended complaint, and the June 20, 2017 order denying reconsideration of that order. In the remaining count of the amended complaint, the Debtor alleged that the appellees had taken certain actions in violation of his confirmed plan of reorganization and sought a finding of contempt of the "confirmation order" pursuant to § 105(a).¹ For the reasons set forth below, the Panel AFFIRMS.

BACKGROUND

I. Pre-Bankruptcy Events

The Debtor and his wife, Ludmila Pittnerova ("Pittnerova"), own residential real property located in Boca Raton, Florida (the "Property"). When they purchased the Property in 2007, only Pittnerova executed a promissory note in favor of SMC Mortgage Company. As security for Pittnerova's obligations under the note, both Pittnerova and the Debtor executed a mortgage on the Property. The note and mortgage were assigned to appellee Castle Peak 2011-1 Loan Trust ("Castle Peak"), and, at all times relevant to this appeal, appellee Selene Finance LP ("Selene Finance") serviced the mortgage. (Castle Peak and Selene Finance are referred to collectively as "the Appellees.").

II. Bankruptcy Proceedings

In March 2012, the Debtor filed a chapter 11 petition.² In November 2012, the Appellees filed an amended proof of claim, asserting a claim in the amount of $673,044.42, partially secured by the Property, which they valued at $375,000.00.

A. March 2013 Plan

After filing an initial and then amended plan of reorganization, the Debtor filed his second amended plan in March 2013 (the "March 2013 Plan"). The terms of that plan are central to this appeal. In Article III of the March 2013 Plan, entitled "Classification of Claims and Interests-Specific," the Debtor listed three real properties under the heading "Class 1-Allowed Secured Claims." The provision relating to the Property (the "Property Provision") stated, in its entirety:

This property is a single family dwelling with three bedrooms and two bathrooms, consisting of about 2,000 square feet. It was built in 1970. By agreement with Selene Finance, the servicer of the mortgage, the value of the property is $354,000. Mr. Pittner purchased the property in April, 2007, and lived in it for a time, but began renting it in or about May, 2008, and it has been rented more or less continuously since then. The current tenant pays $2,525 per month in rent.

A note with a principal amount of $354,000 at 4% interest for a term of 23 years requires a monthly payment of $1,963.82. This amount is less than the rent being received from this property, so the payment is feasible. Upon information and belief, Selene Finance has been paying the taxes and insurance for the property; the amounts stated below are believed to be the amounts Selene has been paying.

There are no junior liens, to the best of Mr. Pittner's knowledge and belief.

The debtor projects the following operating budget for this property:

  Income:  Rent:  $2,525.00  Expenses:  Mortgage:  - 1,963.82   Insurance:  - 125.75   Property taxes:  - 493.00   Maintenance, etc.:  - 40.00  Net pre-tax income   ($97.57) 

Mr. Pittner considers this loss to be de minimus and can be made up by increasing the rent the next time the lease renews.

The Appellees objected to the March 2013 Plan on the grounds that it failed to provide a reasonable interest rate for their claim, payment of pre-petition arrears, or reimbursement of post-petition advances they made for real estate taxes and hazard insurance.

On July 17, 2013, the bankruptcy court held a hearing on confirmation of the March 2013 Plan and the Appellees' objection. After the confirmation hearing, the bankruptcy court entered an order ("July 17, 2013 Order"),³ stating that the March 2013 Plan was "[g]ranted" and the Appellees' objection was "[o]verruled." Additionally, the court directed the Debtor to file a formal confirmation order by July 24, 2013. The docket reflects that no such confirmation order was filed, although the Debtor's counsel insists that he submitted a proposed confirmation order "to chambers."⁴ It is undisputed that the court never entered a separate more formalconfirmation order, and that the July 17, 2013 Order was the only order entered relating to confirmation of the March 2013 Plan.

B. Post-Confirmation Modification of the March 2013 Plan

Six days after the confirmation hearing, the Debtor filed, with the Appellees' consent, a motion to modify the Property Provision of the March 2013 Plan, indicating that the parties had agreed: (1) to increase the interest rate payable on the Appellees' claim from 4.00% to 4.25%; and (2) that the Appellees could seek allowance of an administrative claim for their post-petition advances. On July 25, 2013, the bankruptcy court granted the motion without explanation. (Hereafter, the March 2013 Plan as modified by these terms will be referred to as the "Operative Plan.").

C. Final Decree

In February 2014, the Debtor moved for entry of a final decree closing the case, stating the Plan of Reorganization ha[d] been substantially consummated" and the Debtor had commenced making payments pursuant to the Operative Plan, including payments to the Appellees. The bankruptcy court granted the request, and the case was closed in April 2014.

D. Adversary Proceeding

A year and a half later, in October 2015, the Debtor successfully moved to reopen his bankruptcy case to seek redress for the Appellees' alleged violations of the Operative Plan.⁵ He then commenced an adversary proceeding against the Appellees with a four-count complaint("Original Complaint") alleging they had violated the Operative Plan after the bankruptcy case was closed by, among other things, rejecting proffered payments and refusing to speak to him about the loan. In Count I, the Debtor asserted a cause of action for contempt of "the confirmation order." In the remaining counts, the Debtor alleged: breach of contract (Count II); violation of Mass. Gen. Laws ch. 93A, § 11 (Count III); and violation of 12 U.S.C. § 2605(e), the Real Estate Settlement Procedures Act ("RESPA") (Count IV).

E. Motion to Dismiss Original Complaint

The Appellees filed a motion to dismiss the Original Complaint, maintaining that the bankruptcy court lacked subject matter jurisdiction over Counts II through IV, and that the Debtor had failed to allege a prima facie case for contempt in Count I. After a hearing, the bankruptcy court denied the motion to dismiss, but directed the Debtor to file an amended complaint with a more complete explanation of his causes of action within 30 days. The Appellees appealed the order denying the motion to dismiss to the U.S. District Court for the District of Massachusetts (the "District Court"), which granted leave to hear their interlocutory appeal.⁶

F. Amended Complaint

While the District Court appeal was pending, the Debtor filed an amended complaint ("Amended Complaint"), presumably in response to the bankruptcy court's directive issuedbefore the appeal was filed.⁷ The Amended Complaint contained the same causes of action as the Original Complaint but added additional factual allegations to support the claims asserted.

Specifically, in Count I of the Amended Complaint, entitled "Contempt of the Confirmation Order," the Debtor alleged that the Appellees had violated the "clear and unambiguous" terms of the Operative Plan by accepting payments for one year following its confirmation, and then refusing to accept additional payments from the Debtor or to communicate with him regarding the debt. As redress, the Debtor requested that the bankruptcy court exercise its equitable powers under § 105 and hold the Appellees in contempt of the "confirmation order."⁸

To support his claim for contempt in the Amended Complaint, the Debtor alleged, in pertinent part that: (1) the Operative Plan modified the mortgage to provide a principal balance of $354,000, to be paid at 4% interest over 23 years; (2) after a hearing on July 17, 2013, the court "entered an order granting the plan," although "no formal confirmation order was entered"; (3) shortly thereafter, at the Appellees' request, the Property Provision was modified to increase the interest rate payable on their claim, and the court approved the modification; (4) for a year after the confirmation hearing, Selene Finance accepted payments "in accordance with the[Operative P]lan"; (5) on May 19, 2014, Selene Finance sent a "Notice of Default and Intent to Accelerate" to Pittnerova, asserting that the mortgage was in default, and demanding payment of $3,226.21 to cure the default; (6) Selene Finance refused to provide the information he requested under RESPA, responding by letter that it "d[id] not have a record of [the Debtor] as a customer"; (7) on September 16, 2014, Selene Finance sent Pittnerova another "Notice of Default and Intent to Accelerate," and demanded payment of $5,953.91 to cure the default; and (8) Selene Finance repeatedly refused to communicate with the Debtor, send him monthly statements, or accept payments from him "tendered in accordance with the 'granted' chapter 11 plan" and returned the payments he made in March and April 2015.

G. May 2016 Plan

A few weeks after filing the...