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Akwa v. Residential Credit Solutions, Inc.

United States District Court, D. Maryland, Southern Division

April 30, 2015

EKAETTE TOM AKWA, Appellant,
v.
RESIDENTIAL CREDIT SOLUTIONS, INC., Appellees

Bank. Case Nos: PM 13-30265 & ADV PM 14-267.

For Ekaette Tom Akwa, Appellant, Debtor: John Douglas Burns, LEAD ATTORNEY, The Burns Law Firm LLC, Greenbelt, MD.

For Residential Credit Solutions, Inc., Appellee: Christina M Williamson, LEAD ATTORNEY, BWW Law Group, LLC, Bethesda, MD; Paul Jay Adams, Jr, BWW Law Group LLC, Rockville, MD.

Page 310

MEMORANDUM OPINION

George J. Hazel, United States District Judge.

Appellant Ekaette Tom Akwa filed this appeal from the July 18, 2014 Order of the United States Bankruptcy Court for the District of Maryland (the " Bankruptcy Court" ). See ECF No. 1. The July 18, 2014 Order dismissed Akwa's adversary proceeding, which requested bifurcation of Appellee Residential Credit Solutions, Inc.'s secured claim into secured and unsecured components. See ECF No. 1-15. This Court has appellate jurisdiction pursuant to 28 U.S.C. § 158(a). Oral argument is unnecessary. See Fed. R. Bankr. P. 8012 & Loc. Rule 105.6. For the reasons stated below, the Bankruptcy Court's Order will be AFFIRMED.

I. BACKGROUND

In December 2013, Appellant Akwa filed a voluntary petition for Chapter 13 bankruptcy. See ECF No. 8 at 6. One of Akwa's named assets was her residence located at 3100 Memory Lane in Silver. Spring, Maryland. See id. at 7. Appellee Residential Credit Solutions, Inc. (" Residential" ) is the current holder of the Deed of Trust for this property. See id. Residential filed a Proof of Claim for $476,535.97 on January 24, 2014 in connection with Akwa's Chapter 13 bankruptcy. See id. Akwa then filed a complaint, triggering an adversary proceeding, against Residential. See id. Akwa's complaint requested that Residential's claim be bifurcated, or split, into a secured claim representing the value of the property ($342,986.00) and an unsecured claim representing the difference between the entire mortgage and the value of the property ($133,849.97). See id. On June 9,

Page 311

2014, Residential filed a motion to dismiss the complaint, asserting that 11 U.S.C. § 1322(b)(2) did not permit splitting the claim into secured and unsecured portions. See id. at 8.

Akwa argued that certain provisions of the Deed of Trust[1] required collateral other than the real property, which would have removed the claim from 11 U.S.C. § 1322(b)(2)'s protection. See Id. at 2-3. Specifically, Akwa cited three provisions related to escrow funds (section three), property insurance (section five), and miscellaneous proceeds (section eleven). The Bankruptcy Court found that the provisions regarding escrow funds, insurance proceeds, and miscellaneous proceeds were all inextricably bound to the real property itself. See ECF No. 1-15 at 3. The court addressed each section cited by Akwa, stating:

. . . Section 3 deals with escrow payments for taxes, ground rents, community association dues and insurance. Should the borrower fail to make the payments, the lender may make these on the borrower's behalf. Paragraph 5 contains the provisions requiring the maintenance of insurance; failing such, the lender could place insurance to protect its interest in the property. The provision also covers use of insurance proceeds in the event of loss. Finally, paragraph 11 of the Deed of Trust governs the use of proceeds paid by a third party, such as insurance proceeds or condemnation proceeds. Once again, no additional collateral is created, as such payments are in substitution of the original damaged or appropriated collateral.

Id. Additionally, the court noted that the U.S. Bankruptcy Code defines escrow funds and insurance proceeds as incidental property to a debtor's principal residence. Id. (citing 11 U.S.C. § § 101(13A)(A) & (27B)(B)). Thus, the court dismissed Akwa's complaint because Akwa's principal residence is ...


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