Opinion
Case No. 00-11842-RS.
January 23, 2007
MEMORANDUM OF DECISION
Before the Court is a dispute regarding amounts claimed against the Debtor by the Massachusetts Housing Finance Agency ("Agency") under a mortgage on the Debtor's residence ("Mortgage"). At issue is whether this claim should be allowed, in whole or in part, or, alternatively, disallowed and the Debtor declared current on her Mortgage obligations. For the reasons stated below, the Court disallows the Agency's claim in its entirety and declares the Debtor to be current on her Mortgage obligations as of September 28, 2006.
Background
A. The Case
On March 16, 2000, the Debtor commenced this Chapter 13 case ("Case"). On May 20, 2005, the Chapter 13 trustee filed her final report and account, indicating that the Debtor had completed her obligations under her Chapter 13 plan and requesting the issuance of an order discharging the Debtor. On July 27, 2005, the Court issued that order. The within dispute is the only matter pending in the Case.
B. The Pre-Petition Claim
On May 23, 2000, the Agency filed a proof of claim in the Case ("Proof of Claim"). The Proof of Claim reflected a claim for $92,219.83, based on money loaned and secured by real estate collateral. The Proof of Claim included an itemized statement setting forth a pre-petition arrearage of $12,519.50 ("Arrearage"). The Arrearage consisted of past due monthly mortgage payments, late fees, legal fees, property inspection charges, appraisal costs, condominium fees, an escrow shortage and a negative suspense balance. The Agency did not file an amendment or supplement to the Proof of Claim or otherwise assert any pre-petition claim other than as set forth in the Proof of Claim.
C. The Plan
On March 16, 2000, together with her case commencement papers, the Debtor filed a Chapter 13 plan, later amended ("Plan"). The Plan contemplated full payment of the Arrearage and full payment of general claims. On August 7, 2000, the Court confirmed the Plan. Thereafter, the Debtor made several post-confirmation changes to the Plan, obtaining court approval for each ("Amended Plan"). Once again, the Amended Plan contemplated full payment of the Arrearage and full payment of general claims. On August 13, 2004, the Court confirmed the Amended Plan.
Not surprisingly, given the Plan's treatment of the Arrearage, the Agency objected neither to the Plan nor to the Amended Plan. As noted above, the Debtor performed all of her obligations under the Plan and the Amended Plan, including full payment of the Arrearage.
D. The Motion
On June 6, 2005, the Debtor filed a motion asking the Court to declare that, as of that date, she was current in her obligations under the Mortgage ("Motion"). The Agency objected to the Motion, claiming that the Debtor owed the Agency $1,452.14 in post-petition legal and property inspection fees dating from 2000-2001 ("Claim"). On July 21, 2005, I held a non-evidentiary hearing on the Motion and, on March 30, 2006, settlement talks having failed, I issued a procedural order scheduling the matter for trial. I conducted that trial on September 28, 2006, took the matter under advisement, authorized post-trial submissions, which I have reviewed, and now render my decision.
As later discussed, the Agency altered the Claim in its amount and in its bases as this contested matter progressed. The term "Claim" refers to the Agency's claim in all its formulations.
Findings and Conclusions
As a preliminary matter, I note that the Claim arises in the post-petition period and covers charges arising under the Mortgage that may be adjudicated elsewhere. Here I exercise jurisdiction over the Claim as an element of my determination of its secured status under Section 506 of the Code. 11 U.S.C. § 506.
Having considered the testimony and exhibits at trial, the record of the case, the arguments of the parties and their post-trial submissions, I find that the Agency has demonstrated neither the amount nor the validity of the Claim. I do so for two reasons: first, the Agency has asserted different claim amounts and different claim bases at each signpost along this journey, from its response to the Motion, its statements at the preliminary hearing and at trial, and its post-trial submissions, none definitive and none persuasive (and some disappointingly arbitrary); and, second, the Agency has waited almost four years to raise the Claim despite many opportunities (if not dead-lines) to do so, rendering the imposition of this burden (even if the Claim were proved) unfair and inequitable, given the Debtor's conscientious performance in, and her justifiable reliance on, the bankruptcy process as contrasted with the Agency's languid performance and its diffident acknowledgment of that process.
The varying and conflicting elements of the Claim are revealed in the Agency's own presentation. On June 16, 2005, in response to the Motion, the Agency claimed that it was owed $1,452.14. On July 21, 2005, at the preliminary hearing on the Motion, the Agency claimed that it was owed $1,427, a negligible differential but a differential nonetheless and important given the exactitude with which the Agency insists on its case. On September 28, 2006, at the evidentiary hearing on this matter, the Agency claimed that it was owed $1,241.10 and disclosed for the first time in this dispute that it was also owed $5,250.59 on account of a negative escrow balance, an amount it was prepared to reduce to $1,144.80. Thereafter, in its post-trial submission, the Agency claimed that it was owed $5,733.66 on account of the escrow and $665.90 in legal and inspection fees.
The Agency's evidence in support of these ever-morphing sums and grounds is decidedly unpersuasive — the shifting origins of the claim components, the Agency's inconsistent application of funds paid by the Debtor, the accounting requested by the Debtor and largely unfurnished by the Agency, taken together, portray a lender profoundly confused about its rights, obligations and activities with respect to its loan to the Debtor. Depending upon the forum and the event, the Agency first asserts that it hasn't been paid, then that it has but only in part. It then contends that it has applied Debtor payments to one category of obligation and then, upon later reflection, yet another category. This is Chapter 13 behavior by a lender at its least reassuring: having diligently made the payments required under a confirmed plan to which the Agency raised no objection, the Debtor is faced with claims and costs whose derivation and calculation are at best obscure and at worst contrived. I find the Claim unproved.
Even if the Claim were proved, I find it barred by virtue of the timing of its assertion. Nowhere in the record is there persuasive (indeed, any) evidence that the Agency diligently gave notice of or pursued any part of the Claim (other than legal fees ordered by Judge Kenner which the Debtor paid) until awakened from its long slumber by virtue of the Motion. The Agency had many opportunities, ranging from its two stay relief motions (both voluntarily withdrawn) through plan confirmation through discharge to raise with the Debtor and the Court the matter of these charges. At no point in this process does the Claim appear, until the Debtor has fulfilled her plan and bankruptcy law obligations. A right is lost if one unreasonably delays its assertion to the prejudice of another. See In re Adams, 212 B.R. 703, 711 (Bankr. D. Mass. 1997). To permit the allowance of the Claim at this late date in the Debtor's Chapter 13 proceeding would be inequitable and prejudicial, and I decline to do so. I find the Claim barred by laches.
Conclusion
Accordingly, I rule that the Agency has not met its burden to prove by a preponderance of the evidence that the Debtor owes the Agency legal or inspection fees or escrow amounts or any other charges arising under the Mortgage through September 28, 2006.
My decision is limited to charges under the Mortgage and only through the date of trial, and does not address matters not herein raised such as whether the Debtor is current on her monthly Mortgage payments or the Agency has claims for charges after September 28, 2006.
A separate order will issue.