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Jones v. U.S. Bank, N.A.

United States District Court, M.D. Pennsylvania

October 18, 2019

LLOYD ALLEN JONES, Appellant,
v.
U.S. BANK, N.A., and AMERICA'S SERVICING COMPANY, Appellees.

          MEMORANDUM OPINION

          Robert D. Mariani United States District Court Judge.

         I. Introduction

         This case comes before the Court on appeal from the order issued by Middle District of Pennsylvania Bankruptcy Court Judge John J. Thomas on March 22, 2018, granting summary judgment to U.S. Bank. (Doc. 1-1). Appellant, Lloyd Allen Jones, argues that Judge Thomas erred in rejecting Appellant's Proposed Second Amended Plan on the basis that Appellant's proposal for satisfaction of a secured claim in Debtor's residence as provided by the Proposed Second Amended Plan constituted a modification prohibited by 11 U.S.C. § 1322(b)(2) and Nobelman v. American Sav. Bank., 508 U.S. 324 (1993). For the reasons that follow, the Court will deny Jones' appeal, affirm the Bankruptcy Court's March 22, 2018, order, and remand the case to the Bankruptcy Court for further proceedings

         II. Factual Background and Procedural History

         On August 18, 2006, Appellant and Debtor Lloyd Allan Jones ("Jones") and his then-wife, Carla A. Jones, executed an Adjustable Rate Note in favor of Mortgage Lenders Networks USA, Inc., evidencing their obligation to repay a loan made to them by MMLN in the original principal amount of $208, 800 (Doc. 2, at 231-34). Pursuant to the Note, Jones was required to repay the Loan in full over thirty years by making 360 consecutive monthly payments of the principle, with accrued interest based on an adjustable interest rate. (Id.). Moreover, the Note provided that the initial interest rate was 11.7508% per annum, and the initial monthly payment was $2, 107.65. (Id.). On August 18, 2006, Appellant executed a first lien mortgage encumbering the property, (Id.).

         On September 22, 2008, Jones and Appellees entered into a "Loan Modification Agreement," where Appellants agreed that the Note would be modified as follows:

(a) as of October 1, 2008, the unpaid principal balance of the Note would be $231, 314.23; (b) interest would accrue on this new unpaid principal balance at a fixed rate at 11.750% per annum; (c) the new principal and interest payments would be in the amount of $2, 354.97 per month beginning with the payment due on November 1, 2008; (d) the original maturity date of September 1, 2036 would remain in effect; (e) the Borrowers would make the new monthly principal and interest payments to the lender' until all principal and interest was paid in full; and (f) if the Borrowers still owed amounts under the Note and Mortgage, as modified by the Loan Modification Agreement, on the Maturity Date, those sums would be paid in full on the Maturity Date.

(Doc. 12, at 22) (citing Doc. 2, at 265-67).

         Jones filed a Chapter 13 Bankruptcy case on May 25, 2016, with the United States Bankruptcy Court for the Middle District of Pennsylvania. (Doc. 7, at 1). On that same day, Jones also filed an original proposed Chapter 13 plan. (Id.). On September 29, 2016, Appellees filed a secured proof of claim of a mortgage, establishing that the amount of debt owed by Appellant to U.S. Bank as of the petition date was $446, 812.25. (Doc. 2, at 53). In addition to the proof of claim, Appellees attached a Mortgage Proof of Claim Attachment (Official Form 410-A) (to indicate that the mortgage is secured by the Debtor's principal business), an adjustable rate note, a mortgage, an assignment of the mortgage, a loan modification agreement, and an escrow account disclosure statement. (Id. at 53-67).

         On November 4, 2016, Appellant filed a First Amended Chapter 13 Plan, wherein Appellant proposed payments equal to the fair market value of the property plus interest at 5.5% per annum. (Id. at 70-77). On December 12, 2016, U.S. Bank objected to confirmation of the First Amended Plan. (Id. at 78-79). On March 6, 2017, Appellant then initiated an adversary proceeding, based on the First Amended Plan against U.S. Bank to seek declaratory relief to: (1) value the property as of the petition date at $135, 000 and to determine that the U.S. Bank had a secured claim in the amount of $135, 000 and an unsecured claim for all additional amounts owed by the debtor in excess of $135, 000; (2) declare void the amount of the lien which exceeded $135, 000, to the extent that U.S. Bank held a lien against the property that was greater than $135, 000; and (3) declare that the First Amended Plan could be confirmed in that Section 1322(b)(2) and Nobelman v. American Sav. Bank., 508 U.S. 324 (1993), did not apply to Debtor's case because the First Amended Plan did not propose "to 'modify' U.S. Bank's mortgage or claim, but rather to satisfy it." (Id. at 1-14).

         On January 4, 2018, pursuant to an agreement between the parties, Appellant filed a Second Amended Plan, which is the same in all respects as the First Amended plan, except that it reflected the agreed-upon fair market value of the property of $136, 000. (Doc. 2-1). Thereafter, the adversary action reviewed the Second Amended Plan.

         In the Bankruptcy Court, after the close of discovery, Appellees moved for summary judgment. (Id. at 167-72). On March 20, 2018, oral argument was held on the motion for summary judgment. (Doc. 3). On March 22, 2018, the United States Bankruptcy Court for the Middle District of Pennsylvania entered an order granting summary judgment in favor of Appellees. (Doc. 1-1). In that order, the Bankruptcy Judge: (1) valued the Debtor's residence at $136, 000 (as agreed by the parties); (2) allowed the U.S. Bank Secured Claim to have a secured claim in the Debtor's underlying bankruptcy case in the amount of $136, 000 and unsecured claim for all sums due under the Loan Documents as of the Petition Date that are in excess of $136, 000; (3) declined to declare void the amount of the lien which exceeded $136, 000; (4) held that Appellant was not entitled to declaratory relief because the Second Amended Plan's proposed treatment of Appellees' secured claim violated 11 U.S.C. § 1322(b)(2) and the Supreme Court's holding in Nobelman; (5) denied confirmation of the Second Amended Plan because it did not comply with 11 U.S.C § 1322(b)(2); and (6) directed Appellant to file a Third Amended Chapter 13 Plan within thirty days of the date of entry of the Summary Judgment Order that did not modify U.S. Bank's rights and otherwise complied with the Bankruptcy Code. [Id.). To date, Appellant has yet to file the Third Amended Plan as required by the March 22, 2018, order.

         On April 19, 2018, Appellant filed a notice of appeal regarding the March 22, 2018, order to appeal the order directly to the United States Court of Appeals for the Third Circuit. (Doc. 7, at 2). On that same day, Jones filed a Request for Certification of Direct Appeal to the Court of Appeals, which Judge Thomas granted on May 9, 2018. (Doc. 2, at 7). In the Bankruptcy Court, on May 7, 2018, Appellant moved to stay the summary judgment order pending appeal, but that motion was denied on June 5, 2018, by Judge Thomas. (Doc. 5-2). On June 8, 2018, Jones filed a Petition for Permission to Appeal and a Motion to Stay Order Pending the Appeal with the Third Circuit. (Doc. 9, at 2). However, on August 22, 2018, the petition to appeal and a subsequently-filed motion for stay of order pending appeal were both denied by the Third Circuit without opinion. (Doc. 5-3). On August 23, 2018, an appeal "from [the Bankruptcy Court's] order granting summary judgment in favor of Defendants, which also denied confirmation of a Chapter 12 Plan on the Basis of ...


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