Joy G. Smith
Before the Court is Selene Finance LP‘s (“Selene‘s“) Motion to Reopen the Chapter 13 Case (“Motion to Reopen“) of Joy G. Smith (“Debtor“) and its Motion to Determine the Recoverability of PostPetition Escrow Advances (“Recovery Motion“). Dckt. Nos. 32, 33. In its Recovery Motion Selene requests a determination that it may recover $12,239.93 from Debtor for its payment of
FINDINGS OF FACT
On March 25, 2019, Debtor filed her chapter 13 bankruptcy petition. Dckt. No. 1. Debtor‘s schedules disclose she owns a single-family home (“Property“) secured by a loan from Selene.1 Id. at 8, 20. The Property is Debtor‘s principal residence. Dckt. No. 50, at 3. Debtor values the Property at $60,555.00. Dckt. No. 1, at 8. Debtor lists Selene as holding a $10,901.16 claim. Id. at 20. It is undisputed that Selene‘s claim is oversecured—the value of the Property exceeds the outstanding debt. See id. at 8, 20.
The loan matured during the pendency of Debtor‘s chapter 13 plan. Proof of Claim No. 4-1, at 5, May 22, 2019 (“Claim No. 4-1“). Debtor filed her proposed chapter 13 plan in March 2019. Dckt. No. 5. Her plan proposed for Debtor to pay the chapter 13 trustee (“Trustee“) $1,200.00 per month. Id. at 1. From these funds, Debtor proposed for the Trustee to pay Selene‘s allowed secured claim in full with 6% interest at a rate of $200.00 per month for five years. See id. § 4(d). The plan states “[h]olders of allowed secured claims shall retain the liens securing said claims to the full extent provided by
Selene filed a secured claim in the amount of $11,492.20 with an annual interest rate of 6%. Claim No. 4-1, at 2. Selene attached a copy of the promissory note (“Note“) and the security deed (“Security Deed“) to the proof of claim. Id. at 5–15. Debtor did not file an objection to Selene‘s claim, and the $11,492.20 claim was paid in full with 6% interest during the pendency of the chapter 13 plan. Dckt. No. 26, at 1.
Selene received proper notice of the plan and did not object to confirmation, and the case was confirmed in July 2019. Dckt. No. 5, at 6–8; Dckt. No. 15. Thereafter, in August 2019, Selene filed a Notice of Postpetition Mortgage Fees, Expenses, and Charges (“Notice of Postpetition Fees” or “PPFN“) on Official Form 410S2 for $900.00 in Postpetition Fees, comprised of the following:
- $300.00 incurred May 22, 2019 for Bankruptcy/Proof of claim fees;
- $350.00 incurred April 1, 2019 for Other, Specify: Plan/Review; and
- $250.00 incurred May 22, 2019 for Other, Specify: 410A Fee
See Claim No. 4, Notice of Postpetition Mortgage Fees, Expenses, and Charges at 1, Aug. 5, 2019. Selene filed the Notice of Postpetition Fees in the claims register as a supplement to its proof of claim pursuant to
Furthermore, in response to the Notice of Postpetition Fees, Debtor‘s counsel sent Selene‘s agent a letter stating:
A Notice of Postpetition Mortgage Fees, Expenses and Changes was filed in [this] case. This loan is not subject to Bankr. Rule 3002.1 in that the debtor is not making contractual payments on this loan. Instead, the debt is being paid as a secured debt not subject to the anti-modification provisions of the [bankruptcy] code. Please make sure Selene [] is not adding post filing fees and expenses to the account. Upon discharge the lien should be released on debtor‘s property.
Dckt. No. 50, at 8. Selene did not respond, or take action, regarding this letter.
Given the plan treatment and the short-term nature of the debt—the last mortgage payment was due before the final plan payment—the parties now agree
On May 1, 2024, at the end of Debtor‘s five-year chapter 13 plan, the Trustee issued her Notice to Debtor of Completion of Plan Payments and Notice of Final Cure Payments (“Final Cure Notice“), which provides in relevant part:
[T]his notice [is issued] pursuant to
Federal Rule of Bankruptcy Procedure 3002.1(f) and General Order 2012-1 of the United States Bankruptcy Court for the Southern District of Georgia.The Trustee reports to the Court that the above-named Debtor has completed all payments under the confirmed Chapter 13 plan.
. . . .
Name of Creditor: Selene Finance LP
Mortgage on Debtor‘s Principal residence was paid in full, according to the Confirmed Plan, by the Trustee.
. . . .
IF YOUR CLAIM WAS PAID BY THE TRUSTEE, THE DEBTOR HAS PAID IN FULL THE AMOUNT REQUIRED TO CURE ANY DEFAULT ON YOUR CLAIM AND REMAIN CURRENT POST FILING.
Dckt. No. 26.
On May 22, 2024, Selene filed a Response of Notice of Final Cure Form 4100R (“Final Cure Response“) acknowledging Debtor had cured her prepetition default, but stating she was “not current on all postpetition payments consistent with
| a. | Total postpetition ongoing payments due: | (a) | $0.00 |
| b. | Total fees, charges, expenses, escrow and costs outstanding (PPFN Filed on 08/05/2019) | (b) | $900.00 |
| c. | Total. Add lines a and b. | (c) | $900.00 |
Creditor asserts that the debtor(s) are contractually obligated for the postposition payments(s) that first become due on *Total Debt Plan
Notice of Post Petition Notice filed on 08/05/2019 in the amount of $900.00 is still outstanding. Escrow disbursement in the amount of $12,239.93.
See Claim No. 4, Response to Notice of Final Cure at 1, May 22, 2024. This Final Cure Response was filed within the time period set forth in the Final Cure Notice but after Debtor had completed making all her plan payments and sixty-one months after Debtor‘s first bankruptcy payment was due. See Dckt. No. 28 ¶ 5.
On May 14, 2024, Debtor filed her Certification of Plan Completion and Request for Discharge (“Debtor‘s Certification and Request for Discharge“). Dckt. No. 27. Debtor‘s Certification and Request for Discharge was filed on the Court‘s docket and provides the request for discharge may be granted unless an objection is filed within 21 days of service. Id. Selene was duly served with Debtor‘s Certification and Request for Discharge but did not respond or object to entry of the discharge within the 21-day time frame. Id. As a result, discharge was entered on June 10, 2024, and the case was closed. Dckt. Nos. 29, 31. Thereafter, Selene filed the Motion to Reopen and the Recovery Motion to assert the claims addressed in this Order. Dckt. Nos. 32, 33.
Selene contends its “lien should remain on the Property until the remaining outstanding balance is paid in full. This includes any and all Postpetition Escrow Advances for tax and insurance disbursements [in the amount of $12,239.93]” comprised of:
| Description | Payment Date | Amount |
|---|---|---|
| County Tax | 09/23/19 | -$926.23 |
| Hazard Insurance | 11/13/19 | -$1,278.00 |
| County Tax | 09/08/20 | -$884.31 |
| Hazard Insurance | 11/19/20 | -$1,366.00 |
| County Tax | 09/23/21 | -$901.30 |
| Hazard Insurance | 11/18/21 | -$1,602.00 |
| Hazard Insurance | 12/22/21 | $47.00 |
| County Tax | 10/03/22 | -$510.50 |
| Hazard Insurance | 11/15/22 | -$1,994.00 |
| County Tax | 09/19/23 | -$432.72 |
| Refund of Real Estate Tax Money | 10/13/23 | $1.13 |
| Hazard Insurance | 12/20/23 | -$2,393.00 |
| Total: | $12,239.93 |
Debtor acknowledges she did not pay these postpetition real estate taxes or homeowner‘s insurance premiums during the pendency of her chapter 13. Dckt. No. 50, at 5–7. At the October 2025 hearing, Selene‘s counsel confirmed the insurance payments made by Selene were for force-placed insurance.
Debtor contends Selene is bound by the terms of the confirmed plan and these claims are discharged. See id. Alternatively, Debtor contends Selene waived any reimbursement claim by its failure to comply with the Real Estate Settlement Procedures Act (“RESPA“),
| Statement Date |
|---|
| 10/19/19 |
| 12/3/19 |
| 12/16/21 |
| 10/18/23 |
| 1/8/24 |
| 11/7/24 |
| 12/9/24 |
| 1/7/25 |
| 2/7/25 |
Dckt. No. 63, at 4–39.
Selene seeks to reopen the bankruptcy to proceed with its Recovery Motion to determine the recoverability of the Escrow Advances and Postpetition Fees.
Motion to Reopen.
Section 350(b)3 of the Bankruptcy Code provides “[a] case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause.”
Recovery Motion.
For the following reasons, the Court finds Selene waived its right to collect the Escrow Advances by its failure to comply with RESPA.
RESPA.
[RESPA] requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process . . . . [Among other things, the Act] requires [annual] disclosures for mortgage escrow accounts . . . itemizing the charges to be paid by the borrower and what is paid out of the account by the servicer.
The applicable RESPA notification provisions for escrow accounts are found in
(b) Notification of shortage in escrow account
If the terms of any federally related mortgage loan require the borrower to make payments to the servicer (as the term is defined in section 2605(i) of this title) of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall notify the borrower not less than annually of any shortage of funds in the escrow account.
Notice of shortage or deficiency in escrow account. The servicer shall notify the borrower at least once during the escrow account computation year if there is a shortage or deficiency in the escrow account. The notice may be part of the annual escrow account statement or it may be a separate document.
Ad Valorem Taxes.
As shown on the chart below, notwithstanding Selene‘s payment of the outstanding tax bills, the only communications sent by Selene to Debtor for the Escrow Advances for taxes were for payments made in 2019 and 2023.
| Item | Payment Date | Amount | Communication Sent to Debtor? | Communication Date |
|---|---|---|---|---|
| County Tax | 09/23/19 | -$926.23 | Yes | 10/19/19 |
| County Tax | 09/08/20 | -$884.31 | No | |
| County Tax | 09/23/21 | -$901.30 | No | |
| County Tax | 10/03/22 | -$510.50 | No | |
| County Tax | 09/19/23 | -$432.72 | Yes | 10/18/23 |
| Refund of Real Estate Tax Money | 10/13/23 | $1.135 | Yes | 10/18/23 |
See Dckt. No. 33, at 2; Dckt. No. 63, at 4–39. Selene did not send any notices to Debtor for tax payments made in 2020, 2021, and 2022. See Dckt. No. 63, at 4–39. Furthermore, the communications sent by Selene which reference tax payments made in 2019 and 2023 fail to comply with RESPA‘s notice provisions for escrow shortages/deficiencies. Id. at 5, 17.
First, both the 2019 and 2023 communications were sent to Debtor‘s bankruptcy counsel, not Debtor. Dckt. No. 63, at 4–6, 16–19. In addition, the 2019 communication fails to identify Debtor by name anywhere. See id. at 4–6. In fact, Debtor‘s counsel is listed as the “Mortgagor.” Id. at 4. The only information linking the 2019 tax communication to Debtor is the last 4 digits of the account number and the Property address. Id. at 4–6. This does not satisfy RESPA‘s notice requirements
Similarly, the 2023 communication for tax payment also is inadequate. It merely denotes an “escrow advance” without denoting the advance was for ad valorem taxes, or that there is a shortage. See id. at 17. The “explanation of outstanding balances” references “escrow (taxes and insurance),” but it fails to provide any information on how that balance was calculated or the tax component of the sum. Id. Additionally, the document lists $930.00 in recoverable advances but provides no information or description of the composition of this amount, including whether there is any tax component. Id. Based on this, the Court finds Selene did not comply with the notification provisions of RESPA for these taxes.
Hazard Insurance.
Selene also seeks to recoup the following Escrow Advances related to force-placed insurance it placed upon the Property:
| Item | Payment Date | Amount | Communication Sent to Debtor? | Communication Date |
|---|---|---|---|---|
| Hazard Insurance | 11/13/19 | -$1,278.00 | Yes | 12/3/19 |
| Hazard Insurance | 11/19/20 | -$1,366.00 | No | |
| Hazard Insurance | 11/18/21 | -$1,602.00 | Yes | 12/16/21 |
| Hazard Insurance | 12/22/21 | $47.00 | No6 | |
| Hazard Insurance | 11/15/22 | -$1,994.00 | No | |
| Hazard Insurance | 12/20/23 | -$2,393.00 | Yes | 1/8/24 |
In regards to force-placed insurance, RESPA requires lenders to provide borrowers with prior notice before procuring force-placed insurance.
For the following reasons, the Court finds Selene failed to timely provide Debtor with the force-placed notices:
First, Selene did not provide any notice for the insurance payments it made in 2020 or 2022. See Dckt. No. 63, at 4–39. Furthermore, the insurance communications tendered by Selene for payments made in 2019, 2021 and 2023 reflect the force-placed insurance was procured by Selene before any notice was sent to Debtor. See id. Therefore, the Court finds Selene has not complied with the RESPA provisions requiring notice for force-placed insurance be sent to Debtor prior to obtaining the coverage and therefore may not impose any charge upon Debtor for this coverage.
The issue then becomes the appropriate remedy for Selene‘s failure to comply with RESPA. “[T]he majority of courts have determined that the proper remedy for a failure to abide by the required notice of escrow account analysis under RESPA is essentially a death knell: deeming a waiver of any right to recover any deficiencies encompassed by the failed period.” In re Tavares, 547 B.R. 204, 220–21 (Bankr. S.D. Tex. 2016) (citing In re Garza, 2012 WL 4738651, at *3 (Bankr. S.D. Tex. 2012)); see also In re Dominique, 368 B.R. 913, 921–22 (Bankr. S.D. Fla. 2007) (lender waived its claim for postpetition escrow advances, including taxes and insurance, by failing to comply with RESPA and state law); Chase Manhattan Mortg. Corp. v. Padgett (In re Padgett), 268 B.R. 309, 313–14, n.8 (S.D. Fla. 2001) (lender failed to comply with RESPA‘s notice requirements and waived its right to collect escrow advances for taxes and insurance); In re Johnson, 384 B.R. 763, 775–76 (Bankr. E.D. Mich. 2008) (lender‘s failure to comply with RESPA‘s notice requirements was factor in finding lender waived its right to recoup escrow advances for taxes and insurance). Given the particular facts and circumstances of this case, the Court agrees and joins these other courts in finding waiver the appropriate remedy.
Under federal law, “[w]aiver is the voluntary, intentional relinquishment of a known right.” Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1347 (11th Cir. 1994). Georgia‘s waiver law is substantially similar. See Thompson v. State Farm Fire and Cas. Co., 264 F. Supp. 3d 1302, 1320 (M.D. Ga. 2017) (“In order for a factfinder to infer that a party has waived a contractual right,
RESPA and the Security Deed require notice:
As noted above, the mandate of both RESPA and the Code of Federal Regulations is clear. The servicer must do an annual analysis and must provide an annual statement. [12] C.F.R. §[1024].17(b), referencing §[1024].17(f) states, “if a servicer advances funds for a borrower, then the servicer must perform an escrow account analysis before seeking repayment of the deficiency.” Once the annual determination of a shortfall or deficiency is made, any adjustment, should the servicer choose to seek an adjustment, must be made in accordance with [12] C.F.R. §[1024].17(f). However, there is no option to adjust the escrow account for a shortfall or deficiency unless the annual analysis is completed and annual notice provided.
In re Dominique, 368 B.R. at 921; see Security Deed §2 (“If the amounts of funds held by Lender at any time are not sufficient to pay the Escrow Items when due, the Lender may notify the Borrower and require Borrower to make up the shortage as permitted by RESPA.“). Additionally, RESPA and the Code of Federal Regulations clearly mandate notice is required before a servicer assesses any charges on a borrower related to force-placed insurance. See
Postpetition Fees.
In August 2019, Selene filed the PPFN for $900.00 in Postpetition Fees incurred postpetition and preconfirmation. See Claim No. 4, Notice of Postpetition Fees, Expenses, and Charges at 1, Aug. 5, 2019. As previously discussed, Debtor‘s counsel notified Selene that Rule 3002.1 did not apply because Debtor was not making contractual installment payments. Dckt. No. 50, at 8 (“This loan is not subject to Bankr. Rule 3002.1 in that the debtor is not making contractual payments on this loan.“). Debtor‘s plan also expressly provides “[t]he Trustee shall not pay any fees, expenses, or charges disclosed by a creditor pursuant to
Thus, the Postpetition Fees fall under §506(b) which requires an analysis of whether the fees are reasonable under the lodestar approach, considering the hours reasonably spent and the reasonable hourly charge. See generally Norman v. Hous. Auth. of the City of Montgomery, 836 F.2d 1292, 1299–1302 (11th Cir. 1988); see also Bank of the Ozarks v. Coastal Realty Invs., Inc. (In re Coastal Realty Invs., Inc.), No. 12-20564, 2014 WL 929612, at *13 (Bankr. S.D. Ga. Mar. 10, 2014) (“Bankruptcy courts in the Eleventh Circuit apply the ‘lodestar analysis’ to determine the reasonableness of an oversecured creditor‘s attorneys’ fees” under §506(b).). The Notice of Postpetition Fees lists the following three charges:
- $300.00 incurred May 22, 2019 for Bankruptcy/Proof of claim fees;
- $350.00 incurred April 1, 2019 for Other, Specify: Plan/Review; and
- $250.00 incurred May 22, 2019 for (Other, Specify: 410A Fee)
See Claim No. 4, Notice of Postpetition Fees, Expenses, and Charges at 1, Aug. 5, 2019. “[O]ver-secured creditors have the ultimate burden of proof of showing they are entitled to post-petition fees. . . .” In re Jack Kline Co., Inc., 440 B.R. 712, 732–33 (Bankr. S.D. Tex. 2010). The only evidence in
Unjust Enrichment.
Even if the Court denies Selene‘s claim on the merits, Selene contends it is entitled to recoup these amounts under the doctrine of unjust enrichment and the Court‘s equitable §105 power. Dckt. No. 33 ¶ 12; see also Dckt. No. 49, at 4–5. Selene contends Debtor should not be unreasonably and unjustly enriched from Selene‘s payment of the taxes and insurance on Debtor‘s behalf. Id. Given the facts and circumstances of this case, the Court denies Selene‘s claim of unjust enrichment.
The elements of an unjust enrichment claim are that “(1) a benefit has been conferred, (2) compensation has been given for receipt of the benefit, and (3) the failure to so compensate would be unjust.” Clark v. Aaron‘s, Inc., 914 F. Supp. 2d 1301, 1309 (N.D. Ga. 2012) (citations omitted). In this case, neither party presents factually appealing or sympathetic positions. First, Debtor received the benefit of Selene‘s payment of her outstanding ad valorem taxes and insurance premiums for five years, and now seeks to be absolved from any responsibility for these obligations. As a homeowner, Debtor should be aware such charges are due and owing. On the other hand, Selene is now “springing” this large outstanding indebtedness in excess of $12,000.00 (more than the amount Debtor owned Selene when she filed her bankruptcy) on a debtor just emerging from bankruptcy subsisting on social security retirement benefits. Selene knew with each advance that Debtor had not
The Bankruptcy Code provides Selene with many avenues to pursue and protect its interests during the pendency of the bankruptcy. See, e.g.,
Instead, Selene did not bring these issues before the Court until 64 months after Debtor filed her bankruptcy, foreclosing Debtor‘s opportunity to address these issues in this bankruptcy. See
For these reasons, it is ORDERED that:
- (1) Selene‘s Motion to Reopen is GRANTED; and
- (2) Selene‘s Recovery Motion is DENIED.
[END OF DOCUMENT]