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Benoit v. Deutsche Bank National Trust Co.

United States Bankruptcy Appellate Panel of the First Circuit

March 16, 2017

SHAWN L. BENOIT, Debtor.
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee For Residential Asset Securitization Trust Series 2007-A1 Mortgage Pass-Through Certificates Series 2007-A, Appellee. SHAWN L. BENOIT, Appellant,

         Appeal from the United States Bankruptcy Court for the District of Maine (Hon. Michael A. Fagone, U.S. Bankruptcy Judge)

          Thomas F. Shehan, Jr., Esq., on brief for Appellant.

          Brigid F. Cech Samole, Esq., Ari Newman, Esq., and Stephanie L. Varela, Esq., on brief for Appellee.

          Before Deasy, Tester, and Finkle, United States Bankruptcy Appellate Panel Judges.

          FINKLE, U.S. BANKRUPTCY APPELLATE PANEL JUDGE.

         Shawn L. Benoit (the "Debtor") appeals from the bankruptcy court's June 28, 2016 order dismissing his chapter 13 case (the "Order"). We find no abuse of discretion and AFFIRM the Order.

         BACKGROUND

         The Debtor commenced a chapter 13 bankruptcy case on September 26, 2013. On his Schedule A-Real Property, the Debtor disclosed that he owned property in Corea, Maine (the "First Property"). He valued the property at $300, 000 and indicated it was subject to a secured claim of approximately $550, 000.[1] The Debtor also indicated on Schedule A that he held a $108, 000 mortgage on the neighboring property (the "Second Property"). He noted by way of explanation: "Debtor initiated foreclosure proceedings. Mortgagor filed bankruptcy. The foreclosure needs to be re-initiated in [s]tate court." On Schedule B-Personal Property, he further disclosed that he had a contingent and unliquidated counterclaim against "Deutsche Bank National Trust, " which he valued at $850, 000. In his Statement of Financial Affairs, the Debtor reported that pre-petition "Deu[t]sche Bank National Trust Company" had commenced a foreclosure proceeding relating to the First Property.

         The appellee, Deutsche Bank National Trust Company, as Trustee for Residential Asset Securitization Trust Series 2007-A1 Mortgage Pass-Through Certificates Series 2007-A ("Deutsche"), filed a proof of claim reflecting an approximate $813, 000 indebtedness secured by its mortgage on the First Property and a payment arrearage in the approximate amount of $315, 000 as of the petition date. Deutsche designated in the proof of claim that all notices and payments should be sent to OneWest Bank, FSB ("OneWest"). In March 2014, Ocwen Loan Servicing, LLC ("Ocwen") filed a Transfer of Claim, indicating it had received a transfer of a claim from OneWest in the approximate amount of $813, 000.[2]

         After withdrawing two prior proposed plans, the Debtor submitted a Third Proposed Chapter 13 Plan (the "Plan") on June 11, 2014, in which he disputed Deutsche's claim and proposed to pay it $710 monthly, on account of its claim pending resolution of the matter. This sum was substantially less than the contractual monthly installment payment due on the indebtedness. In a "special provision" of the Plan, the Debtor further proposed to "begin the foreclosure of [the mortgage on the Second Property] . . . within 60 days after approval of the [P]lan." He also indicated that he intended to "hire a civil litigation attorney to pursue lender liability claims against Deutsche" within "180 days after approval of the [P]lan."

         On July 21, 2014, the bankruptcy court entered an Interim Order Confirming Chapter 13 Plan and Setting Deadlines for Certain Actions (the "Interim Order"), explicitly providing that it "d[id] not constitute final confirmation of the [P]lan . . . ." The Interim Order incorporated the deadlines the Debtor proposed in the Plan, including: (1) the commencement of an adversary proceeding against Deutsche within 180 days; (2) the filing of a complaint to foreclose the mortgage on the Second Property within 60 days; (3) the filing of a motion to allow or disallow claims within 90 days of the government claims bar date; (4) the filing of any applications to employ the necessary professionals to prosecute such actions within 30 days; and (5) the filing of a motion to avoid liens within 30 days. The Debtor did not comply with any of these deadlines.

         On July 30, 2014, the bankruptcy court issued an Order to Show Cause, directing the Debtor to appear in court on August 21, 2014, to demonstrate why the case should not be dismissed for failure to prosecute the Plan, as the Debtor had failed to timely file a motion to allow or disallow claims. Prior to the hearing, the Debtor filed the required motion (the "Claim Motion") and a proposed order. In that motion he objected to "Ocwen's" claim on the grounds it had engaged in predatory lending practices, and proposed to treat that claim as follows: "Debtor will file an adversary proceeding against claimant. Until that is resolved Debtor requests that the Chapter 13 Trustee pay claimant $710[] per month." The chapter 13 Trustee (the "Trustee") objected to the Claim Motion and asked the bankruptcy court to continue the "interim confirmation, " pending the outcome of the Debtor's contemplated adversary proceeding against Deutsche.

         Thereafter, the Debtor withdrew the Claim Motion and filed an amended motion to allow and disallow claims (the "Amended Claim Motion"), seeking to modify the Plan by increasing his monthly payments to $800. He represented he could not afford to pay a greater amount due to his poor health and anticipated lay-off during the winter months.

         Deutsche filed an objection to the Amended Claim Motion, arguing the Debtor's chapter 13 plan: (1) failed to "fully account" for Deutsche's mortgage arrearage; (2) failed to "provide for payment of the contractually due mortgage payments"; and (3) was "not confirmable as a matter of law." Deutsche maintained that its right to repayment of the principal in monthly installments was "protected from modification by § 1322(b)(2)."[3] The Trustee likewise objected to the Amended Claim Motion.

         At a hearing conducted on March 26, 2015, the bankruptcy court granted the Amended Claim Motion and directed the Debtor to submit a "[r]evised [p]roposed [o]rder" on the motion by April 2, 2015. The Debtor's failure to comply with that deadline prompted the bankruptcy court to enter another order-this time directing him to submit the ...


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