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In re Howes

United States District Court, D. Maryland

December 12, 2016

IN RE JEFFREY V. HOWES

          MEMORANDUM OPINION

          Ellen L. Hollander United States District Judge.

         On March 21, 2016, Jeffrey V. Howes, the self-represented Debtor/Appellant, noted an appeal to this Court from two orders issued sua sponte by the United States Bankruptcy Court for the District of Maryland (Gordon, J.) in Howes's Chapter 13 bankruptcy case, RAG-12-30614. ECF 1.[1] In particular, Howes challenges “Interim Order Requiring Debtor to Escrow Funds Pending Final Judgment in Adversary Proceeding” (ECF 1-2, the “Escrow Order”), dated January 8, 2016, and “Order Dismissing Case with Prejudice to Debtor's Refiling for Twenty-Four Months” (ECF 1-1, the “Dismissal Order”), dated March 4, 2016.

         In addition, on April 25, 2016, Howes filed “Motion to Vacate or Stay Sua Sponte Order Dismissing Case and Requiring Additional Escrow Payments to Trustee” (ECF 6), with exhibits. A few days later, on May 4, 2016, Howes filed a motion with the same title as ECF 6, which appears to amend ECF 6. See ECF 10 (“Motion to Vacate”). And, on May 13, 2016, Howes filed “Unopposed Motion to Stay Briefing Schedule.” ECF 11 (“Motion to Stay”).

         This appeal is related to Case ELH-14-2814 and to Case ELH-15-1617. The 2014 case involved an appeal from the Bankruptcy Court's dismissal of an adversary proceeding filed by Howes and his wife in Howes's underlying Chapter 13 case. The adversary proceeding has its own case number, RAG-13-510, although some pleadings are docketed in both the adversary proceeding and the underlying bankruptcy case. In ELH-14-2814, this Court affirmed the Bankruptcy Court's dismissal of the adversary proceeding, and that ruling is now on appeal to the Court of Appeals for the Fourth Circuit (Appeal No. 15-2332).[2]

         With respect to the case sub judice, there are no other litigants. As a result, the Court has not had the benefit of any opposing viewpoints. But, by Order of June 6, 2016, I asked the Interim Chapter 13 Trustee to respond to the Motion to Stay. ECF 12. In his response (ECF 13), the Interim Chapter 13 Trustee explained that he is not a party to the appeal; he had not requested the two orders that are the subject of the appeal; and he has no interest in the outcome of the appeal. Id. at 8-10. Nevertheless, the Interim Chapter 13 Trustee provided a helpful analysis of the issues raised in the Motion to Stay. Id. at 10-13.

         By Order of July 21, 2016, I directed Howes to submit a brief in support of his appeal, due no later than August 26, 2016. ECF 14. Moreover, I noted that, in effect, the Motion to Vacate and the Motion to Stay ask the Court to address the appeal on the merits. Id.

         Then, on August 19, 2016, Howes filed his “Unopposed Motion to Stay or Extend Briefing Schedule Pending Circuit Court Ruling Authorizing Direct Appeal.” ECF 15. That motion asked this Court either to stay the briefing in this case until after the Fourth Circuit's decision as to the appeal of the adversary proceeding or, in the alternative, to grant a thirty-day extension to file the brief. Id. By Order of August 23, 2016, I denied Howes's motion to stay the briefing schedule, but I granted the request for extension. ECF 17. Howes then filed his brief on September 6, 2016. ECF 18.

         Also on September 6, 2016, Howes filed “Debtor's Motion for Stay Pending Appeal and Incorporated Memorandum.” ECF 19. In that motion, Howes asked the Court to stay the Escrow Order and the Dismissal Order pending the outcome of this appeal. Id. I denied the motion by Memorandum and Order of September 15, 2016, stating that such a request must first be made in the Bankruptcy Court. ECF 20; ECF 21.

         In sum, this Memorandum Opinion resolves Howes's appeal of the Bankruptcy Court's Escrow Order (ECF 1-2) and Dismissal Order (ECF 1-1); his Motion to Vacate (ECF 10); and his Motion to Stay (ECF 11).

         No hearing is necessary to resolve the pending motions. See Local Rule 105.6.[3] For the reasons that follow, I shall affirm the two orders of the bankruptcy court. The Motion to Vacate (ECF 10) essentially duplicates the substance of the appeal. Therefore, I shall deny it as moot. Moreover, I shall deny the Motion to Stay (ECF 11) as moot.

         I. Factual Background and Procedural History

         I incorporate the factual and procedural history set forth in my Memorandum Opinion with respect to Howes's appeal concerning the disposition of his adversary proceeding. ECF 30 in ELH-14-2814.[4] I repeat and amplify facts to the extent that they are relevant and provide context for my analysis.

         According to Howes, on November 30, 2001, Howes and his wife, Tonya Howes, executed a “Construction Note” (“Note”) payable to The Columbia Bank, in the amount of $696, 130. ECF 1 in RAG-13-510 (Adversary Complaint or “A.P. Complaint”), ¶ 15; ECF 1-1 in RAG-13-510 (Note). They also executed a deed of trust, conveying their interest in the real property to Trustee for The Columbia Bank, to secure the repayment of the Note. ECF 1 ¶ 15 in RAG-13-510. The property that is the subject of the deed of trust is located in Howard County, Maryland, and serves as the principal residence of the Howes. Id. ¶ 16.

         The Note was amended by a Loan Modification Agreement dated April 16, 2003. See ECF 1-15 in ELH-14-2814. The Loan Modification Agreement, which reflects a loan balance of $650, 000, provided that the Howes were to make a monthly mortgage payment of $3, 793.22, reflecting both principal and interest. Id.

         According to Mr. Howes, the Howes “suffered a decline in their income in 2008 . . ., with insufficient income to cover the Note payments, so they used their savings to bridge the gap until their savings were exhausted.” ECF 1 ¶ 17 in RAG-13-510. They “defaulted on the Note on April 2, 2009, and then fell more than 60 days behind in June 2009.” Id. Thereafter, the Howes made several partial mortgage payments in June, July, and August of 2009, but ultimately stopped when they “discovered that they were receiving no benefit from their payment . . . .” Id. Mr. Howes stated that this was because Wells Fargo was “holding their partial payments in suspense and not applying them to their account . . . .” Id. Howes claimed that from July 2009 through September 2012, the Howes made extensive efforts to modify the terms of their mortgage loan to make it “more affordable.” See Id. ¶¶ 18-34.

         In the meantime, U.S. Bank, “as principal, ” and Wells Fargo, as “agent” of U.S. Bank, “caused” a foreclosure case “to be filed against the Howes, ” in the Circuit Court for Howard County (“First Foreclosure Case”). Id. ¶ 36. According to Howes, the First Foreclosure Case was voluntarily dismissed by the plaintiffs on January 3, 2011, due to “defective” affidavits. Id. ¶¶ 36, 40.

         Howes claimed that on February 21, 2012, U.S. Bank, as “principal, ” and Wells Fargo, as its “agent . . . caused” the filing of another foreclosure case (the “Second Foreclosure Case”) against the Howes, also in the Circuit Court for Howard County. Id. ¶ 36. According to the Howes, when the Second Foreclosure Case was filed, neither U.S. Bank nor Wells Fargo had the right to enforce the Note. Id. ¶ 41. This is because, at some point, the Howes's Note was pooled with several other notes in a residential mortgage-backed securitization trust, which was terminated in January 2012. As a result, he alleged that it was not clear who had the right to enforce the Note. Id. ¶¶ 42-43. The Second Foreclosure Case was stayed because, on November 15, 2012, Howes, through counsel, filed a voluntary petition for bankruptcy under Chapter 13 of the United States Bankruptcy Code. Id. ¶ 49; see ECF 1 in RAG-12-30614 (Chapter 13 Petition).

         Howes, as Debtor, filed his proposed Chapter 13 Plan on December 13, 2012. ECF 13 in RAG-12-30614 (“First Plan”). According to the First Plan, at the time that Mr. Howes filed his bankruptcy case, he had outstanding arrears on his mortgage of $35, 662. ECF 13 at 1 in RAG-12-30614.[5] The First Plan proposed thirty-five monthly payments of $1, 018.98 each by Howes, directly to Wells Fargo Home Mortgage, “as servicer.” Id.

         Wells Fargo filed an “Objection to Confirmation of Plan” on January 9, 2013. ECF 25 in RAG-12-30614. Wells Fargo, identifying itself as “Servicer for U.S. Bank National Association, as Trustee, ” stated, id.: “The plan does not provide for full payments of the arrearages. The plan provides for $35, 662.00, which is less than the amount of the full arrears. The arrears are approximately $200, 196.79.” Thereafter, U.S. Bank, which claimed to be the trustee for the then-current holder of the Howes's mortgage debt, filed a proof of claim contending that the outstanding arrears were actually $200, 196.79. Claim 4-1 at 1 in RAG-12-30614. Wells Fargo then filed an amended claim on March 15, 2013, which identified Wells Fargo as the creditor, rather than U.S. Bank. See Claim 4-2 at 1 in RAG-12-30614 (“Claim Four”).

         On April 2, 2013, Howes filed “Debtor's Objection to Allowance of Claim Filed by Wells Fargo Bank N.A.” ECF 36 in RAG-12-30614. In the objection, Howes claimed that Well Fargo lacked “standing” to file the claim and that the claim failed “to contain a credit for the trial modification payments Debtor made.” Id. at 2.

         The Bankruptcy Court held a hearing on June 17, 2013, with respect to Howes's objection to Claim Four. ECF 62 in RAG-12-30614. Ultimately, it denied relief because Howes failed to serve the assignees. ECF 65 in RAG-12-30614. According to Howes, the Bankruptcy Court noted that Howes could “initiat[e] an adversary proceeding incorporating the claim objection to determine the party entitled to enforce the Note.” ECF 1 ¶ 58 in RAG-13-510.

         Through counsel, Howes and his wife filed a nine-count adversary proceeding on September 3, 2013. ECF 1 in RAG-13-510.[6] They sued Wells Fargo Bank N.A.; U.S. Bank N.A.; Carrington Mortgage Services, LLC (“Carrington”); Christiana Trust, a Division of Wilmington Savings Fund Society, FSB (“Christiana”); and ten other “unknown” defendants. Id. ¶¶ 9-13. Plaintiff asserted: “None of the Defendants has the right to enforce the Note and Deed of Trust lien under applicable state law.” Id. ¶ 85.

         The adversary proceeding also included, inter alia, a claim against Wells Fargo and U.S. Bank alleging “fraud upon the court.” Id. ¶¶ 64-73 (“Count One”). The A.P. Complaint stated: “Wells Fargo and U.S. Bank filed the Claim on behalf of the Trust with the intent to defraud this Court, the Debtor, and the estate created by this Bankruptcy Case, by hiding the fact that the Trust terminated back in January 2012.” Id. ¶ 65.

         In October 2013, defendants Carrington and Christiana filed a motion to dismiss for failure to state a claim (ECF 5 in RAG-13-510), which they subsequently amended. Id., ECF 16. Also in October 2013, Wells Fargo and U.S. Bank moved to dismiss the adversary proceeding for failure to state a claim. ECF 8 in RAG-13-510. On January 6, 2014, the Bankruptcy Court held a hearing on the defendants' motions. ECF 18 in RAG-13-510. The Bankruptcy Court requested supplemental briefing to address the allegations that the Trust had no legal right to enforce the Note. ECF 46 at 26-27 in RAG-13-510 (Transcript of 1/6/14 Hearing). At the end of the hearing, Judge Gordon stated that he wanted to “take a close look at the legal authorities, ” and continued the hearing. Id. at 24.

         Wells Fargo and U.S. Bank submitted a supplemental brief on January 21, 2014. ECF 21 in RAG-13-510. The Howes responded on February 5, 2014. ECF 22 in RAG-13-510.

         The Bankruptcy Court held another hearing on the motions to dismiss on March 4, 2014. ECF 23 in RAG-13-510. At that hearing, the Bankruptcy Court granted the motions to dismiss, dismissing Count I of the A.P. Complaint with prejudice and the remaining counts without prejudice. ECF 28 at 2-3 in RAG-13-510. Thereafter, the Howes filed a motion to reconsider with the Bankruptcy Court on May 27, 2014 (ECF 34 in RAG-13-510), which the Bankruptcy Court denied on July 22, 2014. ECF 36 in RAG-13-510.

         On September 4, 2014, Howes noted an appeal to this Court, challenging the Bankruptcy Court's decision on the motions to dismiss and the motion to reconsider. ECF 1 in ELH-14-2814. On November 5, 2014, while the briefing in this Court was ongoing, the Bankruptcy Court issued a “Memorandum Opinion in Support of Order Dismissing Complaint and Denying Motions to Reconsider, ” which elaborated on its prior oral rulings. ECF 51 in RAG-13-510.

         In a Memorandum Opinion and Order issued on September 30, 2015, I affirmed the Bankruptcy Court's dismissal of the adversary proceeding and its denial of the motion for reconsideration. ECF 30 and ECF 31 in ELH-14-2814. Thereafter, on October 27, 2015, Howes noted an appeal to the Fourth Circuit. ECF 32 in ELH-14-2814. That appeal is currently pending; oral argument was held on December 6, 2016 (Appeal No. 15-2332).

         On September 12, 2014, while the matter of the adversary proceeding was pending in this Court, the Bankruptcy Court issued an Order scheduling a confirmation hearing for Debtor's Chapter 13 Plan, to be held on December 17, 2014. ECF 127 in RAG-12-30614. Howes attempted to have the Bankruptcy Court stay the main bankruptcy case during the pendency of the appeal as to the adversary proceeding. ECF 140 in RAG-12-30614. But, on December 9, 2014, the Bankruptcy Court denied his request. ECF 142 in RAG-12-30614. On December 15, 2014, in ELH-14-2814, Howes filed an “Emergency Motion to Stay Plan Confirmation Pending Appeal” (“Emergency Motion to Stay”). See ECF 18-1 at 80 in ELH-16-840; ECF 23 in ELH-14-2814.

         According to the Emergency Motion to Stay, ECF 18-1 at 80: “The bankruptcy court scheduled a December 17, 2014 hearing on confirmation of Mr. Howes' chapter 13 plan (the ‘Plan Confirmation Hearing'). Since the hearing on plan confirmation may result in bankruptcy case dismissal, Appellants seek an order from this Court” staying the case, pending appeal.[7]

         Counsel for the Chapter 13 Trustee opposed the Emergency Motion to Stay, arguing that “any stay should be conditioned upon” “appropriate security.” ECF 18-1 at 73 in ELH-16-840. Christiana, Carrington, Wells Fargo, and U.S. Bank each responded as well. ECF 25 in ELH-14-2814 (Christiana and Carrington); ECF 26 in ELH-14-2814 (US Bank and Wells Fargo). By Order of December 16, 2016, I granted the Emergency Motion to Stay, “subject to the posting of a bond by appellants within 24 hours of the docketing of this Order, in the bond amount of $100, 000.” ECF 29 in ELH-14-2814. Further, I said, id. at 3: “In the event that the bond (or other adequate security agreed to by the Trustee and/or the bankruptcy court), is not timely posted, the bankruptcy court may promptly reschedule the hearing with respect to confirmation of the plan.”

         On December 17, 2014, Howes entered into a consent agreement (the “Agreement”) with the U.S. Trustee, “in lieu of posting the security bond.” ECF 10 at 5 (Motion to Vacate). Howes states that the terms of the Agreement required him to increase his monthly plan payments from $321 to $5, 980, satisfying the Court's security requirement, pending resolution of the appeal. Id. Howes then filed an amended Chapter 13 Plan on December 23, 2014, reflecting the Agreement. ECF 148 at 1 in RAG-12-30614.

         However, on March 9, 2015, the Bankruptcy Court ordered several modifications to the Agreement, “to better fit the circumstances of this case.” ECF 153 at 2 in RAG-12-30614. In particular, the Bankruptcy Court reduced to five days the time for the Debtor to cure any deficiencies in payment, running from the date of notice. Id. at 3. The Bankruptcy Court also provided that the Debtor's failure to cure a default within five days, or to make timely payment more than twice, would result in the dismissal of the bankruptcy case, with prejudice, for twenty-four months. Id. Finally, the Bankruptcy Court ordered that a confirmation hearing “shall be held within thirty (30) days of the entry by the District Court of a final order resolving the appeal.” Id.

         The Bankruptcy Court also provided its rationale for its modifications to the Agreement. It said, id. at 1: “Before this case was commenced on November 15, 2012, the Debtor, by his own admission, managed to avoid paying his home mortgage debt for almost a decade. Now, for the past two years, the case has been mired in the status quo with the Debtor continuing to sidestep his mortgage payment obligations.” After discussing the history of the adversary proceeding and the appeal, the Bankruptcy Court also said, id. at 2: “In a word, the Court believes the AP is by and large frivolous.”

         Howes filed a motion for reconsideration on March 23, 2015, asking the Bankruptcy Court to reverse its order modifying the consent agreement. ECF 156 in RAG-12-30614. The Bankruptcy Court denied the motion for reconsideration on May 14, 2015. ECF 161 in RAG-12- 30614. Howes then noted an appeal to this Court from the Bankruptcy Court's order modifying the terms of the Agreement and from its denial of his motion for reconsideration. ECF 1 in ELH-15-1617. By Memorandum and Order of December 8, 2015, I dismissed that appeal as moot, given my resolution of the appeal as to the adversary proceeding. ECF 13; ECF 14 in ELH-15-1617. Howes took no further action with respect to that matter. See docket.

         By Order of September 30, 2015, the stay of the underlying bankruptcy case was lifted. ECF 31 in ELH-14-2814. The Bankruptcy Court held a confirmation hearing on November 18, 2015, with respect to Howes's Amended Chapter 13 Plan. ECF 185, ECF 188 in RAG-12-30614. According to the Bankruptcy Court, “Debtor asserted at the hearing that he had made all but 31 of the postpetition mortgage payments that had come due.” ECF 1-2 at 5 n.7 in ELH-16-840. At that hearing, the Bankruptcy Court indicated, id. 1-2 at 5, that it would

likely enter an order that required the Debtor to (a) continue to make the $5, 980 monthly plan escrow payments to the Trustee (b) deposit into an escrow account a sum sufficient ($150, 970) to secure thirty-one (31) months of unpaid postpetition mortgage payments[] and (c) continue to deposit additional, "current" monthly postpetition mortgage payments of $4, 870 into the same postpetition escrow account.

         None of the parties in the Chapter 13 case had asked the Bankruptcy Court to issue the proposed order. Id. at 6-7. But, the Bankruptcy Court gave Howes ten days to respond to its proposal. Id. at 5 n. 7.

         Howes responded on November 30, 2015, in opposition to the Bankruptcy Court's proposal. ECF 191 in RAG-12-30614. He made three primary arguments, (1) the pending case in the Fourth Circuit deprived the Bankruptcy Court of jurisdiction; (2) no party had requested the relief proposed by the Bankruptcy Court; and (3) such an order would be inconsistent with a stay order ...


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