United States District Court, D. South Carolina, Charleston Division
Johnson D. Koola, Plaintiff-Appellant,
Ditech Financial LLC; U.S. Bank Trust N.A., Defendants-Appellees.
ORDER AND OPINION
Richard Mark Gergel United States District Court Judge.
matter is before the Court on Appellant Johnson D.
Koola's appeal from the Final Orders of the United States
Bankruptcy Court for the District of South Carolina (Dkt.
Nos. 1, 3) denying confirmation of Appellant's plans,
denying Appellant a new trial, and dismissing Appellant's
case. For the reasons set forth below, the Court affirms the
orders of the bankruptcy court and dismisses the appeal.
February 20, 2004 Johnson D. Koola ("Appellant" or
"Debtor") executed a fixed rate note (the
"Note") for $136, 192.00 with Countrywide Home
Loans, Inc. On the same day, Koola executed a mortgage (the
"Mortgage") as security, which encumbered his
principal residence in Mount Pleasant, South Carolina
("Principal Residence"). The "mortgagee"
was Mortgage Electronic Registration Systems, Inc.
("MERS") and the lender was Countrywide Home Loans,
Inc. Federal National Mortgage Association ("Fannie
Mae") became the owner of the debt in March 2004.
March 20, 2009, Koola filed a bankruptcy petition under
Chapter 7 of the Bankruptcy Code, listing his Principal
Residence on his schedules and indicating that Countrywide
Home Loans, Inc. had a mortgage loan on that property. An
order discharging debt was issued in the Chapter 7 case, and
the case was closed on July 13, 2009.
the discharge order was entered, Koola defaulted on his
monthly mortgage payment in November 2009. (Dkt. Nos. 16 at
8; 17 at 12.) On July 27, 2010, BAC Home Loans Servicing, LP,
formerly known as Countrywide Home Loans Servicing, LP,
("BAC Home Loans") filed a foreclosure action on
the Mortgage against Koola in state court with the Case
Number 2010-CP-10-6060 (the "Foreclosure Case").
The Foreclosure Case remains pending.
Mortgage ultimately was reassigned and sold multiple times:
on August 27, 2010, MERs assigned the mortgage to BAC Home
Loans. (Dkt. No. 1 at 11.) Later, BAC Home Loans
merged with Bank of America, and the caption of the
Foreclosure action was amended in October 2011 to reflect the
change. The right to service the mortgage was
transferred again to Green Tree Servicing, LLC, which was
reflected in a letter sent to Koola. (Dkt. Nos. 1 at 12 - 13;
22-1 at 24, 26; 22-2 at 14 - 16; 22-4 at 40 - 42.) On August
31, 2015, Green Tree merged with DT Holdings and Ditech
Mortgage Corp., and the surviving entity was Ditech, an
Appellee here. (Id.) Finally, on July 25, 2018,
Fannie Mae sold the mortgage loan to U.S. Bank, an Appellee
here. (Dkt. No. 4-2 at 178.)
case was initiated pro se on March 20, 2018 under
Chapter 13 of the Bankruptcy Code, which stayed the
Foreclosure Case. In his bankruptcy case, Koola disclosed
that the monthly payments for his mortgage was $842.71 and
that he owed $87, 180.63 in mortgage payments. On May 7,
2018, Koola objected to the mortgage claim Ditech filed in
this case, alleging Ditech lacked standing. Ditech filed an
amended claim, stating that it intended to proceed as
enforcing a lost instrument and that Koola's plan could
not be confirmed as it attempted to modify the terms of the
Note and Mortgage. (Dkt. No. 4-1 at 126 - 127.) The
bankruptcy court denied Koola's objection. After the
bankruptcy court denied Koola's objection, Koola moved
for a new trial. Prior to ruling on the motion, U.S. Bank
filed an amended proof of claim. The bankruptcy court denied
the motion for a new trial and found that U.S. Bank had
standing to pursue enforcement of the mortgage. After the
motion was denied, Koola filed a second amended claim,
attempting to modify the repayment terms of the mortgage
under 11 U.S.C. § 1322(c)(2). The bankruptcy court
denied confirmation of this second plan as well, finding that
§ 1322(c)(2) did not apply, and dismissed Koola's
Chapter 13 case. This appeal followed. (Dkt. No. 4-3 at 260.)
Court has jurisdiction to hear appeals from final orders of
the bankruptcy court. 28 U.S.C. § 158; see, e.g., In
re Kirkland, 600 F.3d 310, 314 (4th Cir. 2010) (noting
district court's "capacity as a bankruptcy appellate
court"). The standard of review of a bankruptcy appeal
by a district court is the same as when a court of appeals
reviews a district court proceeding. See 28 U.S.C.
§ 158(c)(2). Accordingly, the bankruptcy court's
findings of fact are reviewed under a "clearly
erroneous" standard. Fed.R.Bankr.P. 8013. A finding of fact
is clearly erroneous when the entire record demonstrates
convincingly to the reviewing court that "a mistake has
been committed." United States v. U.S. Gypsum
Co., 333 U.S. 364, 395 (1948); United States v.
Hall, 664 F.3d 456, 462 (4th Cir. 2012). A bankruptcy
court's conclusions of law are subject to de
novo review. In re Biondo, 180 F.3d 126, 130
(4th Cir. 1999); In re K & L Lakeland, Inc., 128
F.3d 203, 206 (4th Cir. 1997).
raises the following issues on appeal: (1) whether the
bankruptcy court improperly failed to apply 11 U.S.C. §
1322(c)(2) when assessing Koola's plan; (2) whether the
bankruptcy court incorrectly determined that the creditors
had standing to object to the plan; (3) whether the
bankruptcy court improperly dismissed Koola's Chapter 13
case without assessing whether the interest of both the
debtors and creditors were served and whether there was bad
faith and, finally; (4) whether the bankruptcy court
inaccurate determined that no 11 U.S.C. § 588 defenses
were applicable when dismissing Koola's case. (Dkt. No.
16 at 5.) Appellee U.S. Bank filed a brief arguing that the
Court should affirm the bankruptcy court's decision, and
Koola filed a reply. (Dkt. Nos. 17, 20.) The Court also
granted U.S. Bank leave to file a surreply. (Dkt. No. 26.) In
addition to reviewing the bankruptcy court's orders and
the record on appeal, the Court also reviewed the
supplemental record submitted by the Parties. (Dkt. Nos. 1,
3, 4, 10, 21, 22.) Having reviewed all materials, the Court
finds no errors of law or clearly erroneous findings of fact,
the Court therefore affirms the orders of the bankruptcy
Application of § 1322(c)(2)
first argues that the bankruptcy court failed to apply 11
U.S.C. § 1322(c)(2), a provision which would have
permitted Koola to modify the repayment terms for his
Mortgage, and instead applied 11 U.S.C. § 1322(b)(2),
which prohibits modifying the terms of a claim secured only
by the debtor's principal residence. (Dkt. No. 16 at 7.)
However, § 1322(c)(2) provides an exception to the
no-modification provisions of U.S.C. § 1322(b)(2), and
[I]n a case in which the last payment on the original payment
schedule for a claim secured only by a security interest in
real property that is the debtor's principal residence is
due before the date on which the final payment under the plan
is due, the plan may provide for the payment of the claim as
modified pursuant to section 1325(a)(5) of this title.
11 U.S.C. § 1322(c)(2).
issue here is the phrase "last payment on the original
payment schedule" in § 1322(c)(2). Specifically,
Koola argues that while the loan originally had a last
payment date of March 1, 2034 under Paragraph 3 of the Note
(Dkt. No. 4-1 at 59), when he went into default on November
1, 2009, the loan was accelerated under the terms of the Note
such that the new contractual due date for loan was November
1, 2009. (Dkt.Nos.4-1 at59-60; 16at7-8.) On March 20, 2018,
Koola filed a Chapter 13 Bankruptcy Petition, which included
a plan with a last payment due on March 21, 2020. (Dkt. 4-2
at 227, 234.) Koola therefore argues that his proposed plan
complies with the terms of § 1322(c)(2) as his last
"last payment on the original payment ...