509 B.R. 422
Bankr. D. Conn.2014Background
- Debtors filed Chapter 13 petition on June 27, 2013 seeking to cure a mortgage arrearage on their principal residence.
- Debtors’ First Amended Chapter 13 Plan (Aug 14, 2013) proposed $1,300 monthly payments for 60 months predominantly toward a $64,708.50 arrearage with Wells Fargo as mortgagee.
- Wells Fargo objected to confirmation on grounds tied to modification of mortgage rights under 1322(b)(2) to bar enforcement of a due‑on‑sale clause.
- Debtors contended the due‑on‑sale clause was conditional, not automatic, and that acceleration/notice issues and waiver arguments bar enforcement.
- Wells Fargo filed a motion for summary judgment (Jan 2, 2014); the court ultimately denied confirmation, overruled the claim objection, and denied the motion for summary judgment.
- The court’s decision rests on whether the debtor can modify Wells Fargo’s rights under the due‑on‑sale clause in the principal residence Mortgage described in the record.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can a due‑on‑sale clause be modified in a Chapter 13 plan under 1322(b)(2)? | Español argues the clause can be cured/waived via plan. | Wells Fargo contends 1322(b)(2) bars modification of rights attached to the debt on the principal residence. | No; modification is barred under 1322(b)(2). |
| Did Wells Fargo waive the right to assert a default under the clause? | Debtors claim waiver due to delay and notice issues. | Wells Fargo did not waive; language and conduct do not show intentional relinquishment. | No waiver; waiver not shown. |
| Should confirmation be sustained given the above, including objections to the claim and summary judgment? | Plan seeks to modify default provisions to cure arrears over time. | Plan cannot modify the lender’s rights under 1322(b)(2). | Confirmation denied; claim objection overruled; motion for summary judgment denied. |
Key Cases Cited
- Nobelman v. American Savings Bank, 508 U.S. 324 (U.S. 1993) (rights referenced in 1322(b)(2) are those in mortgage instruments)
- Johnson v. Home State Bank, 501 U.S. 78 (U.S. 1991) (per‑sonam vs in rem treatment for discharged obligations)
- In re Martin, 176 B.R. 675 (Bankr.D.Conn.1995) (modification of rights barred; persuasive authority)
- In re Mullin, 433 B.R. 1 (Bankr.S.D. Tex.2010) (due‑on‑sale clauses and 1322(b)(2) limitations discussed)
- In re Tewell, 355 B.R. 674 (Bankr.N.D.Ill.2006) (modification of mortgage rights under 1322(b)(2) questioned)
- Olean v. Treglia, 190 Conn. 756 (Conn. 1983) (state law enforceability of restrictive covenants and related clauses)