Birmingham v. PNC Bank, N.A.
- Summarized by Kristen Siracusa , Office of the U.S. Trustee
- 7 years 11 months ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- No. 15-1800 (4th Circuit, Jan 18,2017) Published
- Tag(s):
-
- Ruling:
- The Fourth Circuit determined that the provisions of the deed of trust cited to by the Debtor do not create " ' separate or additional security interest[s]. nut [are] merely [] provision[s] to protect the lender's security interest in the real property.'" citing Akwa, 530 B.R. at 314. Thus, the Circuit Court held that "the district court properly found, as a matter of law, that escrow funds, insurance proceeds, and miscellaneous proceeds are incidental property that do not constitute separate security interests.."
- Procedural context:
- Bankruptcy Judge Wendelin Lipp of the U.S. Bankruptcy Court for the District of Maryland granted the Defendant-Appellee's Motion to Dismiss. The Debtor appealed the Bankruptcy Court's decision to the U.S. District Court for the District of Maryland, raising the same arguments on appeal--that the inclusion of miscellaneous proceeds, escrow funds, and insurance proceeds in the Deed of Trust constitute a waiver of the anti-modification provision of section 1322(b)(2). The district court affirmed the bankruptcy court's decision, holding that "the miscellaneous proceeds, escrow funds, and insurance proceeds provisions describe 'benefits which are merely incidental to an interest in real property' and generally are not 'additional security for purposes of [section] 1322(b)(2)". The Debtor filed a timely appeal to the Circuit Court. The case was consolidated with a nearly identical case, which appeal was dismissed on February 16, 2016. Akwa v. Residential Credit Solutions, Inc., No. 14-cv-02703-GJH, 530 B.R. 309 (D. Md. 2015).
- Facts:
- The Debtor filed a chapter 13 petition on Mary 23, 2014. The appellee held a mortgage in the amount of $343,101.87, which is secured by a deed of trust on the Debtor's primary residence. The property was valued at $206,400 and the Debtor's chapter 13 plan included a cram-down of PNC's interest in the Property. Following a series of objections to confirmation and amendments to the plan, the Debtor filed an adversary proceeding against Appellee requesting a declaration that the claim be treated as a partially unsecured claim subject to modification. The debtor argued that provisions of the Deed of Trust (specifically, escrow items, property insurance proceeds and miscellaneous proceeds) required collateral other than the property, which would remove the claim from the anti modification protections of section 1322(b)(2). Said another way, he argued that those provisions of the deed of trust provide additional security for appellee's interest such that it is no longer secured solely by an interest in real property. Appellee filed a motion to dismiss the complaint, contending that the items referred to in the provisions cited to by the Debtor constituted "incidental property" that is part of the debtor's principal residence and such items would not expose the mortgage to a cram-down.
- Judge(s):
- U.S. Disitrict Judge Gerald Bruce Lee, sitting by designation, and Circuit Judges Thacker and Harris
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