563 B.R. 451
D. Mass.2017Background
- Debtor Willie D. Brown filed Chapter 7 in May 2014 owning a condominium subject to multiple liens; Bank of America obtained relief from the automatic stay to foreclose in July 2014.
- Brown converted his case to Chapter 13 in August 2014 and proposed a plan that surrendered the condo to the mortgagee and provided that title would “vest” in the creditor on confirmation.
- Bank of America assigned the mortgage to Selene Finance, which objected to the plan’s forced-vesting provision and appealed the Bankruptcy Court’s confirmation.
- While the appeal was pending, Selene scheduled and completed a foreclosure sale and bought the property; Brown recorded the confirmed plan on the deed.
- Selene moved for a nunc pro tunc order excising the vesting provision and for a declaration that the foreclosure was valid; the district court heard the appeal and Selene’s motion together.
- The district court denied the nunc pro tunc relief, held the appeal was not equitably moot, and vacated the Bankruptcy Court’s confirmation order because nonconsensual forced vesting is not authorized when the plan treats a secured claim as surrendered under § 1325(a)(5)(C).
Issues
| Issue | Plaintiff's Argument (Brown) | Defendant's Argument (Selene) | Held |
|---|---|---|---|
| Whether district court could grant nunc pro tunc modification of confirmed plan while appeal pending | District court has authority to modify/adjust plan entry | No; rules cited do not permit district court to modify lower-court orders outside appeal merits | Denied — no authority for such roving modification; implementation continues absent stay |
| Whether appeal is equitably moot after foreclosure and implementation | Appeal remains live because relief (vacating vesting) is practicable and few parties are affected | Foreclosure and actions taken while appeal pending render appellate relief impracticable | Not equitably moot — appellate relief could be effective; appeal proceeds |
| Whether a Chapter 13 plan may force-vest title in an unwilling secured creditor when the plan provides for surrender under § 1325(a)(5)(C) | Vesting permissible under § 1322(b)(9); surrender and vesting are compatible; Bankruptcy Code can supersede state-law creditor rights to effect debtor’s fresh start | Surrender preserves creditor’s state-law remedies; forced vesting would strip those rights and impose burdens on creditor without consent | Held: Forced vesting is not authorized when a plan treats the claim as surrendered under § 1325(a)(5)(C); plan confirmation vacated and case remanded |
Key Cases Cited
- Carcieri v. Salazar, 555 U.S. 379 (statutory-interpretation starting point; plain-text analysis)
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (bankruptcy fresh-start principle)
- Stellwagen v. Clum, 245 U.S. 605 (federal law can displace conflicting state-law rights)
- Patriot Portfolio, LLC v. Weinstein (In re Weinstein), 164 F.3d 677 (preemption of state-law rights by Bankruptcy Code)
- Public Service Co. of New Hampshire v. New England Utilities Serv. Group (In re Public Service Co. of New Hampshire), 963 F.2d 469 (equitable mootness doctrine and unwinding complex reorganizations)
- Prudential Ins. Co. of Am. v. SW Boston Hotel Venture, LLC (In re SW Bos. Hotel Venture, LLC), 748 F.3d 393 (equitable mootness standard)
- Hicks, Muse & Co. v. Brandt (In re Healthco Int’l, Inc.), 136 F.3d 45 (articulating equitable mootness factors)