United States District Court, M.D. Pennsylvania
D. Mariani United States District Court Judge.
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
Factual Background and Procedural History
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
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).
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).
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).
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.
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.
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 ...