Cascade Funding Mortg. Trust v. Smeltzer, C. & M. ( 2021 )

J-A12027-21
2021 PA Super 199CASCADE FUNDING MORTGAGE : IN THE SUPERIOR COURT OF
TRUST 2017-1 : PENNSYLVANIA
:
Appellant :
:
:
v. :
:
: No. 321 MDA 2020
CHARLEEN L. AND MICHAEL S. :
SMELTZER :
Appeal from the Judgment Entered May 4, 2020
In the Court of Common Pleas of Lancaster County Civil Division at
No(s): CI-17-03241
BEFORE: LAZARUS, J., STABILE, J., and MUSMANNO, J.
OPINION BY LAZARUS, J.: FILED OCTOBER 05, 2021
Cascade Funding Mortgage Trust 2017-1 (Cascade) appeals from the
judgment entered in favor of Appellees, Charleen L. and Michael S. Smeltzer
(the Smeltzers), after the court dismissed Cascade’s underlying mortgage
foreclosure action against the Smeltzers. We affirm.
In February of 2007, the Smeltzers purchased their primary residence
(Property) located in Mount Joy, Lancaster County, Pennsylvania, for $90,000.
In connection with the sale, the Smeltzers signed a promissory note and
mortgage agreement granting Mortgage Electronic Registration Systems, Inc.,
as nominee for Imperial Lending, LLC, a first priority mortgage lien against
the Property. The mortgage was recorded on March 6, 2007, in the Office of
the Recorder of Deeds of Lancaster County. The mortgage was subsequently
assigned to Cascade.
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On February 1, 2008, the Smeltzers entered into a loan modification
agreement that lowered the interest rate and monthly payment amount of the
mortgage but increased its principal balance to $97,073.74. On September
27, 2011, the Smeltzers filed a Chapter 13 bankruptcy petition, in the United
States Bankruptcy Court for the Eastern District of Pennsylvania, to
restructure their debt. On October 11, 2011, the Smeltzers filed a proposed
Chapter 13 plan, which included the mortgage on the Property. On June 4,
2012, the Smeltzers filed a proposed Amended Chapter 13 Plan (the Plan)
which was confirmed by order on July 3, 2012. Under the Plan, the Smeltzers
intended to cure pre-petition arrears of $19,438.73, over a 5-year period,
while continuing to make regular monthly mortgage payments. The
bankruptcy filing stayed all actions pursuant to the automatic stay provision
of the Bankruptcy Code. See 11 U.S.C.S. § 362. The Smeltzers made the
following post-petition payments: October 1, 2011; November 1, 2011;
December 1, 2011; and January 1, 2012. On October 19, 2012, Cascade’s
predecessor-in-interest, Waterfall Victoria Master Fund (Waterfall), filed a
motion for relief from stay, claiming that the Smeltzers were in arrears of
$18,550.18, having defaulted on monthly post-petition payments from
February 1, 2012, through October 1, 2012.
On April 3, 2013, the parties resolved the motion for relief from stay by
entering into a stipulation, in federal bankruptcy court, that permitted
Waterfall to receive the Smeltzers’ monthly mortgage payments directly,
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beginning with the May 1, 20131 payment.2 The stipulation also contained
conditions for default that would permit Waterfall to file a certificate with the
bankruptcy court and seek relief from the automatic stay. On March 5, 2014,
Waterfall sent the Smeltzers’ attorney a letter informing him that the
Smeltzers were in default, being past due for their October 1, 2013 through
February 1, 2014 payments, and owed a total of $4,955.60. The letter
demanded payment within 15 days of the date of the notice of default and,
should the default not be cured, Waterfall indicated that it would be filing a
certificate of default. In April of 2014, Waterfall filed a certificate of default
claiming that the Smeltzers “had defaulted under the terms of a Stipulation
between the parties[,] that notice of default was provided to [the Smeltzers]
pursuant to the terms of such Stipulation[,]” and requesting that the
bankruptcy court “[k]indly submit the [attached] Order . . . for Relief from the
Automatic Stay.” Certification of Default under Stipulation, 4/[undated]/13.
On April 28, 2014, the bankruptcy court granted Waterfall “modified” relief
from the automatic stay.
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1 Between October 2012 and April 2013, the Smeltzers made three full
payments and one partial payment toward the mortgage.
2 Cascade notes in its brief that the Smeltzers’ pre-petition delinquency
payments under the Plan were to be repaid by the Smeltzers indirectly through
the Chapter 13 trustee, while their post-petition regular monthly payments
were to be paid directly by the Smeltzers on an ongoing basis. See Appellant’s
Brief, at 16 n.10.
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On July 12, 2016, the Smeltzers and Waterfall were served with a notice
of final cure payment3 and completion of payments under the Plan from the
Chapter 13 trustee assigned to the Smeltzers’ case; the notice lists Waterfall
as the creditor. On August 16, 2016, the bankruptcy court sent a notice, to
all creditors and parties in interest, that the Chapter 13 trustee had filed his
final report and account in the matter and that “[a]ny answer, objection,
responsive pleading[,] or request for hearing with regard to the discharge of
the debtors, including any request to delay the entry of discharge . . ., must
be filed in writing with the Clerk of the U.S. Bankruptcy Court . . . within 30
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3 The notice of final cure payment states:
[T]he debtor(s) in this matter ([]debtor[]) has completed all
payments required to cure the default in the claim filed by
the following creditor, and this claim has been paid in
full:
Creditor: Waterfall Victoria Master Fund
* * *
Within 21 days of the service of this Notice, in accordance
with Federal Bankruptcy Rule 3002.1(g), a creditor holding
a claim secured by a security interest in the principal
residence of debtor shall file and serve on debtor, counsel
for debtor, and the standing trustee a statement indicating
whether (1) it agrees the debtor has paid in full the amount
required to cure the default on the claim and (2) debtor is
otherwise current on all payments consistent with 11
U.S.C. § 1322(b)(5).
Notice, 7/11/16 (emphasis in original and added; unnecessary capitalization
omitted).
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days from the date of this notice. [Furthermore, i]n the absence of any
objection, the Court may enter the Order of Discharge.” Notice, 8/16/16
(emphasis added). On September 22, 2016, when no objection to the
discharge had been filed, the Smeltzers were granted a discharge from
bankruptcy and permitted to complete the Plan. See 11 U.S.C. § 1328(a).
The mortgage was deemed to be current as of the date of discharge. The
bankruptcy discharge order specifically states that while creditors cannot
personally collect from the debtors for discharged debts, “a creditor may have
the right to foreclose [on] a home mortgage.” Order of Discharge, 9/22/16,
at 1.
On October 20, 2016, the Smeltzers’ attorney sent the loan servicing
company, Statebridge Company, LLC, a letter enclosing the October mortgage
payment and also a notice from the bankruptcy court indicating that all
payments would be deemed up-to-date unless objections were filed by the
mortgage company. The letter further states that because no objections were
filed, the bankruptcy was discharged on September 22, 2016. Letter,
10/20/16.
On November 14, 2016, Waterfall sent the Smeltzers a pre-foreclosure
notice of intention to foreclose, stating that they are “in serious default” on
their mortgage payments, with a total past due amount of $42,137.81. See
41 P.S. § 403 (Act 6); 12 Pa.Code § 31.203. The notice permitted the
Smeltzers to cure the default within 30 days; if the default was not cured in
full within that time period, Waterfall stated that it “intend[ed] to instruct [its]
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attorneys to start a lawsuit to foreclose [on their] mortgaged property.” Pre-
Foreclosure Notice, 11/14/16, at 2. On March 31, 2017, Waterfall filed a
mortgage foreclosure complaint against the Smeltzers alleging that the
Smeltzers defaulted on paying the mortgage in July of 2012, and, as of
January 17, 2017, they owed $145,301.924 on the mortgage.
On May 2, 2017, the Smeltzers filed an answer with new matter to the
complaint specifically denying that the mortgage was in default, see
Defendant’s Response to Plaintiff’s Civil Action, 5/2/17, at ¶ 8, and averring
that they executed and completed a Chapter 13 plan that “include[ed] all
payments due to Plaintiff.” Id. Moreover, the Smeltzers stated that “the
Chapter 13 Bankruptcy cured the deficiency which existed at the filing of [their
b]ankruptcy and at the time of their discharge.” Id. Finally, the Smeltzers
claimed that: (1) “Plaintiff failed to provide [them] any [required] notice” that
the mortgage was not up to date; (2) “the mortgage has been deemed to be
current by operation of law[;]” (3) “subsequent to the discharge of the
Bankruptcy, the [Smeltzers] tendered monthly payments, by and through
counsel [to] the servicer for the mortgage company[;]” and (4) “[they] are
fully prepared to make all post-discharge payments on the mortgage.” Id. at
¶¶ 8, 10. The Smeltzers asked the court to dismiss Cascade’s complaint with
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4 This figure includes the principal balance, interest on the loan through
January 17, 2012, at a rate of 8%, and funds owed by and to the borrower.
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prejudice, order Cascade to accept payments due from October of 2016
through the present, and fully reinstate their mortgage. Id. at 3.
Waterfall filed a reply to the Smeltzers’ new matter specifically denying
“that [Waterfall] received a Notice from the Bankruptcy Trustee[, but, rather,
t]he Notice was sent to an old address of Statebridge.” 5 Plaintiff’s Reply to
New Matter and Counterclaim, 5/22/17, at ¶ 13. Moreover, Waterfall’s reply
sought “judgment in rem be entered in its favor . . . for foreclosure and sale
of the mortgaged premises . . . in the amount due as set forth in [its]
complaint plus additional pre- and post-judgment interest at the contractual
rate, together with additional late charges, additional corporate advances
[and] escrowed advances . . [and] attorney’s and court costs[.]” Id. at 2.
On April 8, 2018, Waterfall filed a motion for summary judgment; the
Smeltzers filed a response to the motion on May 4, 2018. On November 26,
2018, the trial court denied Waterfall’s summary judgment motion.
A bench trial was held on October 1, 2019, before the Honorable Jeffrey
D. Wright, at which a Statebridge employee and Mrs. Smeltzer testified. On
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5 The notice of intent to foreclose on the Smeltzer’s property was sent from
Statebridge Company, LLC, Waterfall’s loan servicer. The notice lists
Statebridge’s address as 100 S. Greenwood Village, CO 80111. The
bankruptcy court’s notice of final cure payment and completion of payments
under the Plan was sent to Waterfall, c/o Statebridge Company, LLC, 4600 S.
Syracuse, Ste. 700, Denver, CO 80237. However, Waterfall lists the address
for Statebridge Mortgage Company, LLC, as 5680 Greenwood Plaza Blvd.,
Suite 100, Greenwood Village, CO 80111, in its reply to new matter and
counterclaim. Because Cascade never raised the issue of the notice of final
cure being sent to the wrong address at trial, in post-trial motions, or in its
appellate brief, we find any notice claim to be waived. See Pa.R.A.P. 302.
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December 19, 2019, the court entered an order in favor of the Smeltzers and
dismissed Cascade’s6 complaint. The court found that “[the Smeltzers]
presented enough evidence to show their debt for arrearages on the mortgage
was paid in full pursuant to the Chapter 13 Plan.” Trial Court Opinion,
6/25/20, at [4]. On December 26, 2019, Cascade filed a post-trial motion
seeking a new trial for damages. The trial court denied the motion on
December 30, 2019. Cascade timely filed a notice of appeal7 and court-
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6 On May 20, 2019, Cascade praecipied for voluntary substitution as the party
plaintiff, pursuant to Pa.R.C.P. 2352, as Waterfall’s successor. On February
7, 2018, an assignment transferring the mortgage from Waterfall to Cascade
was recorded in the Office of the Recorder of Deeds for Lancaster County.
7 On March 16, 2020, this Court issued a rule to show cause as to whether
judgment had been entered on the trial court docket, as required by Pa.R.A.P.
301, and whether post-trial motions were timely filed. See Chalkey v.
Roush, 805 A.3d 491 (Pa. 2002) (under Pa.R.C.P. 227.1, party must file post-
trial motions at conclusion of trial to preserve claims that party may wish to
raise on appeal). On April 27, 2020, Cascade filed a response to the rule to
show cause stating that Pa.R.C.P. 236 notice of entry of the trial court’s
December 13, 2019 order was not reflected on the Lancaster County online
docket until December 26, 2019—when it filed its post-trial motions. Post-
trial motions were denied on December 30, 2019, and Rule 236 notice of this
order was entered on January 2, 2020. Cascade filed its notice of appeal on
January 29, 2020. Thereafter, Cascade praecipied for judgment to be entered
in the matter on April 1, 2020, in compliance with the Pennsylvania Supreme
Court’s second supplemental order stating that “any legal papers or pleadings
which are required to be filed between March 19, 2020, and April 30, 2020,
shall be deemed to have been timely filed if they are filed by May 1, 2020, or
on a later date as permitted by the appellate or local court in question.”
Appellant’s Response to the March 16, 2020 Rule to Show Cause, 4/27/20, at
3. On April 30, 2020, the trial court entered judgment in favor of the
Smeltzers. On May 29, 2020, our Court issued an order discharging its prior
rule to show cause, referring the issue to the merits panel, and advising
Cascade “that the issues may be revisited by the merits panel, and [that it]
(Footnote Continued Next Page)
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ordered Pa.R.A.P. 1925(b) concise statement of errors complained of on
appeal, raising 24 potential issues. On June 25, 2020, the trial court filed its
Rule 1925(a) opinion. On appeal, Cascade has limited its issues to the
following two claims:
(1) Did the trial court err as a matter of law in entering
judgment in favor of the Smeltzers against the weight of the
evidence?
(2) Did the trial court err as a matter of law in making a
determination reserved for the [b]ankruptcy [c]ourt?
Appellant’s Brief, at 4-5 (renumbered for ease of disposition).
Upon appeal of a non-jury trial verdict, an appellate court
considers the evidence in a light most favorable to the verdict
winner and will reverse the trial court only if its findings of fact
lack the support of competent evidence or its findings are
premised on an error of law. When the appellate court reviews
the findings of the trial judge, the evidence is viewed in the light
most favorable to the victorious party below and all evidence and
proper inferences favorable to that party must be taken as true
and all unfavorable inferences rejected. The court’s findings are
especially binding on appeal, where they are based upon the
credibility of the witnesses, unless it appears that the court abused
its discretion or that the court’s findings lack evidentiary support
or that the court capriciously disbelieved the evidence.
Nicholas v. Hoffman, 158 A.3d 675, 688 (Pa. Super. 2017).
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should be prepared to address, in [it]s brief . . . the issue raised by this
Court’s March 16, 2020 Order.” Order, 5/29/2020. Cascade filed a reply brief
addressing the timeliness issue reiterating the same rationale presented in its
response to our Court’s rule to show cause. We concur with its Rule 236
analysis, rendering this appeal timely.
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In its first issue, Cascade claims that the trial court committed reversible
error in entering judgment in favor of the Smeltzers8 where it “properly set
forth the facts necessary to establish it has standing to foreclose and properly
set forth the amounts due and owing [on the mortgage].” Appellant’s Brief,
at 12. Specifically, Cascade asserts that the evidence of record shows that
the Smeltzers failed to make required payments to Waterfall during the
bankruptcy case, as evidenced by the certificate of default filed by Waterfall
and the bankruptcy court’s order granting Waterfall relief from the court’s
automatic stay.
Instantly, the trial court found that: (1) because Cascade never
complained, or presented evidence, of the Smeltzers’ default, it is barred from
now arguing that the Smeltzers are in arrears in their mortgage payments;
and (2) the Smeltzers are not required to return to bankruptcy court to
redetermine the status of their mortgage. The court also concluded that notice
from the bankruptcy court, provided to both the debtor and creditor, indicated
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8 With regard to Cascade’s reference that the “[t]rial [c]ourt erred in finding
for the Smeltzers against the weight of the evidence,” Appellant’s Brief,
at 12 (emphasis added), we recognize that the trial court credited Charleen
Smeltzer’s testimony that she and her husband had successfully completed
the bankruptcy plan, cured their mortgage default, and that the mortgage
servicers had rejected their monthly post-discharge mortgage payments. See
Trial Court Opinion, 6/25/20, at [6]. On the other hand, the court found that
“Cascade and [its] predecessors engaged in an array of deceptive and
uncooperative behavior during th[e] process.” Id. As the trial court’s
credibility determinations are supported in the record from the witnesses’
testimony at the bench trial, we do not find that the judgment was against
the weight of the evidence. Nicholas, supra.- 10 -
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that all payments required to cure the default in the claim filed by the creditor
were paid in full. Additionally, the court found that the Smeltzers presented
credible testimony that for years they had not been credited with payments
on the mortgage made through the bankruptcy trustee and the mortgage
servicing company. Finally, the court determined that because the bankruptcy
matter is closed, the bankruptcy court no longer has exclusive jurisdiction of
the matter.
The Smeltzers assert that Cascade waived or was estopped from
bringing its foreclosure action because it failed to object to the bankruptcy
court’s notice that the Smeltzers had completed all payments under the Plan.
See Defendants’ Response and New Matter, 5/2/17, at ¶ 14 (Smeltzers
claiming Cascade “waive[d] the right to claim any pre-discharge payments
remaining due [on the mortgage]” due to its predecessor’s “fail[ure] to
provide any response to the [bankruptcy t]rustee or the [b]ankruptcy
[c]ourt.”). Throughout the case, the Smeltzers consistently pled that they
tendered additional pre- and post-petition mortgage payments to Cascade
that were returned to them. At trial, Mrs. Smeltzer testified that she and her
husband had deposited monthly post-discharge mortgage payments. See
N.T. Bench Trial, 10/1/19, at 28 (Mrs. Smeltzer testifying she instructed
attorney to “start beginning payments at the time the bankruptcy was
discharged. . . . Every month it gets deposited into an account for mortgage
payments.”). Additionally, Mrs. Smeltzer testified that the monies deposited
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into the mortgage account “would bring the mortgage nearly current for the
period of time from [their] discharge.” Id.Chapter 13 of the Bankruptcy Code provides a reorganization remedy
for consumer debtors and proprietors with relatively small debts. Johnson
v. Home State Bank, 501 U.S. 78, 82 (1991). If a debtor meets the eligibility
requirements for relief under Chapter 13, he or she may submit to the
bankruptcy court, for confirmation, a plan that modifies the rights of holders
of secured or unsecured claims and provides for the payment of all or any part
of any permitted claim. 11 U.S.C.S. § 1322(b)(6). A bankruptcy filing stays
all actions under the Bankruptcy Code. See 11 U.S.C.S. § 362. The stay
remains in force until the case is closed or dismissed, or a discharge is
granted or denied. Id. at § 362(c)(2) (emphasis added).
Federal Rule of Bankruptcy Procedure 3002.1 provides, in relevant part:
(f) Notice of final cure payment. Within 30 days after the
debtor completes all payments under the plan, the trustee shall
file and serve on the holder of the claim, the debtor, and debtor’s
counsel a notice stating that the debtor has paid in full the amount
required to cure any default on the claim. The notice shall also
inform the holder of its obligation to file and serve a
response under subdivision (g). If the debtor contends that
final cure payment has been made and all plan payments have
been completed, and the trustee does not timely file and serve
the notice required by this subdivision, the debtor may file and
serve the notice.
(g) Response to notice of final cure payment. Within 21
days after service of the notice under subdivision (f) of this
rule, the holder shall file and serve on the debtor, debtor’s
counsel, and the trustee a statement indicating (1)
whether it agrees that the debtor has paid in full the
amount required to cure the default on the claim, and (2)
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whether the debtor is otherwise current on all payments
consistent with § 1322(b)(5) of the Code[, 11 U.S.C.S. §
1322(b)(5)]. The statement shall itemize the required
cure or post[-]petition amounts, if any, that the holder
contends remain unpaid as of the date of the statement.
The statement shall be filed as a supplement to the holder’s proof
of claim and is not subject to Rule 3001(f).
(h) Determination of final cure and payment. On motion of
the debtor or trustee filed within 21 days after service of the
statement under subdivision (g) of this rule, the court shall,
after notice and hearing, determine whether the debtor has
cured the default and paid all required post[-]petition
amounts.
(i) Failure to notify. If the holder of a claim fails to provide any
information as required by subdivision (b), (c), or (g) of this rule,
the court may, after notice and hearing, take either or both of the
following actions:
(1) preclude the holder from presenting the omitted
information, in any form, as evidence in any contested
matter or adversary proceeding in the case, unless the court
determines that the failure was substantially justified or is
harmless; or
(2) award other appropriate relief, including reasonable
expenses and attorney’s fees caused by the failure.
USCS Bankr.R. 3002.1(f)-(i) (emphasis added).
Instantly, on April 3, 2013, the Honorable Bruce I. Fox of the United
States Bankruptcy Court for the Eastern District of Pennsylvania granted
Waterfall relief from the court’s automatic stay, but, at the same time,
approved the parties’ stipulation that “the relief shall be stayed so long as the
[Smeltzers] make each and every payment in a timely and complete manner
beginning with the May 1, 2013 payment.” Stipulation Resolving Motion for
Relief from Stay, 4/3/13. The stipulation further provided that should the
Smeltzers default on any payment, Waterfall shall send the Smeltzers’ counsel
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notice advising of said default, give the Smeltzers 15 days to cure such
default, and, if the default is not cured within that timeframe, Waterfall’s
“counsel shall file a Certificate of Default with the Court and a proposed Order
requesting final relief from the automatic stay.” Id. Finally, the stipulation
provides that “[a]ny Certificate of default filed with the Court shall indicate
that Creditor’s counsel has confirmed that no payments have been made to
Waterfall Victoria Master Fund 2008-1 Grantor Trust, Series A.” Id.In April of 2014, Waterfall filed a certificate of default certifying that the
Smeltzers had defaulted under the terms of the parties’ stipulation and
requesting that the bankruptcy court enter an order for relief from the
automatic stay. On April 28, 2014, the bankruptcy court entered an order
modifying the automatic stay and “allow[ing Waterfall] to exercise any and
all of its remedies under its loan documentation and under state law to proceed
with foreclosure and/or Sheriff’s Sale of the subject property located at: 499
Martin Avenue, Mount Joy, PA 17552.” Order, 4/28/14. Cf. Rule 3002.1(a)
(“Unless the court orders otherwise, the notice requirements of this rule cease
to apply when an order terminating or annulling the automatic stay
becomes effective with respect to the residence that secures the claim.”)
(emphasis added). However, Waterfall did not file the instant mortgage
foreclosure action against the Smeltzers until March 31, 2017, almost three
years later, alleging that the Smeltzers defaulted on paying the mortgage in
July of 2012, and, as of January 17, 2017, they owed $145,301.92 on the
mortgage.
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Prior to Waterfall filing the foreclosure action, but after it filed the
certification of default, the bankruptcy court notified Waterfall that the
Chapter 13 trustee had filed his final report and account in the matter and
that “[i]n the absence of any objection, the Court may enter the Order of
Discharge.” Notice of Final Report and Account, 8/16/16. On September 22,
2016, when no objection to the discharge had been filed, the Honorable Ashely
M. Chan of the United States Bankruptcy Court for the Eastern District of
Pennsylvania, entered an order discharging the Smeltzers from bankruptcy
and permitting them to complete the Plan. Order of Discharge, 9/22/16. See
11 U.S.C. § 1328(a). The mortgage was deemed to be “paid in full” as of the
date of discharge. See Notice of Final Cure Payment and Completion of
Payments Under the Plan, 7/12/16.
Rule 3002.1(f) notice “applies in Chapter 13 cases to claims secured by
an interest in the debtor’s principal residence for which a plan provides the
debtor will make contractual installment payments.” In re: Meyer v. Wells
Fargo Bank N.A., 2018 WL 1663292, at *7 (Bankr. M.D. Pa. 2018) (citation
omitted).9 Rule 3002.1 was intended to “provide a prompt, efficient, and cost-
effective means to determine whether there is a question as to the status of
a debtor’s home at the conclusion of the [C]hapter 13 case.” Id. at *2 (Bankr.
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9 Notably, Chapter 13 permits modification of “the rights of holders of secured
and unsecured claims, except those wholly secured by real estate
mortgages.” 11 U.S.C.S. § 1322 (Senate Report No. 95-989) (emphasis
added).
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M.D. Pa. 2018), citing In re Carr, 486 B.R. 806, 808 (Bankr. E.D. Va. 2012)
(“Rule 3002.1 is an effort to ensure that a debtor is fully informed about the
amounts he owes and is not surprised upon leaving bankruptcy.”).
Despite Cascade’s right10 to pursue a foreclosure action against the
Smeltzers, Rule 3002.1(f) is clear that a holder of a claim has an “obligation
to file and serve a response under subdivision (g)” of the rule. USCS Bankr.R.
3002.1(f) (emphasis added). Moreover, under Rule 3002.1(g), a holder’s
obligation to file and serve a statement is mandatory. Id. at 3002.1(g)
(holder “shall file and serve . . . a statement indicating [] whether it agrees
that the debtor has paid in full the amount required to cure the default on the
claim, and [] whether the debtor is otherwise current on all payments[.]”).
Thus, it was Cascade’s burden to establish the Smeltzers’ arrearage prior to
the bankruptcy discharge. See In re Kreidler, 494 B.R. 201 (Bankr. M.D.
Pa. 2013) (since holder had burden to establish post-petition arrearage, when
holder failed to appear at hearing in response to Rule 3002.1 notice, holder
waived opportunity to advance claim).
Here, where Waterfall, Cascade’s predecessor-in-interest, never filed a
responsive statement to the court’s Rule 3002.1 notice of final cure payment
indicating its disagreement with the proposed cure of default on the Smeltzers’
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10 Our decision today by no means precludes Cascade from filing a foreclosure
action in the future if the Smeltzers default on the mortgage. Owen v. Owen,
500 U.S. 305, 308-09 (1991) (Bankruptcy Code provides creditor’s right to
foreclose on mortgage; mortgage survives or passes through bankruptcy).
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mortgage obligation or claiming that the Smeltzers were not current on their
Plan payments, it has waived any right to contest whether the Plan was
completed satisfactorily, the accuracy of the post-petition amount, or whether
any pre-discharge payments remain due.11 See Trial Court Opinion, 6/25/20,
at [5] (court found no testimony or evidence “to even hint” that Cascade or
any of its predecessors filed any Rule 3002.1(g) statement contesting
Smeltzers’ full compliance with court-approved bankruptcy plan). See also
Kreidler v. Bank of N.Y. Mellon Trust Co., 494 B.R. 201 (U.S. Bankr. Ct.
M.D. Pa. 2013) (Rule 3002.1 creates procedure requiring creditor to respond
to notice indicating whether “there are disagreements to be resolved by the
court on request of the debtor or trustee”).
Moreover, the trial court credited Mrs. Smeltzer’s testimony that she
and her husband “continued to pay their monthly mortgage into escrow,
despite the many roadblocks that their creditors set up to prevent the
fulfillment of their monthly mortgage obligation,” Trial Court Opinion, 6/25/20,
at [6], and that “[e]ven when [they] submit[ted] what the Smeltzers, together
with their attorney, ascertained was the requested monthly payment, the
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11 Moreover, because Cascade filed no Rule 3002.1(g) statement disagreeing
with the final cure payment notice, the Smeltzers had no reason to file a Rule
3002.1(h) motion seeking a hearing to determine whether they cured the
default and paid all required post-petition amounts. Accordingly, Cascade
should not now be able to come to state court to foreclose on the mortgage,
seeking additional payments that were never outlined in a statement or
response to the bankruptcy trustee’s notice that the Smeltzers had paid in full
any amount required to cure a default on the claim.
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servicers rejected payment.” Id. See also Cascade’s Trial Brief, 10/31/19,
at 3 n.2 (“Defendant[s’] alleged five payments were tendered in October 2016,
November 2016, December 2016, January 2017, and February 2017. Four of
the five payments were returned, one payment in the amount of $993.19 was
applied [to] the suspense balance on Defendants’ loan account.”).
Thus, when the evidence is viewed in the light most favorable to the
Smeltzers, Nicholas, supra, we find that the court properly concluded that
the Smeltzers “had completed all payments required to cure the default in the
claim filed by [Waterfall], and [that] this claim had been paid,” Notice of Final
Cure Payment and Completion of Payments under the Plan, 7/12/16, and that
the Smeltzers had tendered all post-discharge payments from October 2016-
February 2017.12 Thus, the court did not err in entering judgment in the
Smeltzers’ favor and dismissing Cascade’s foreclosure complaint.
To the extent that Cascade argues the bankruptcy court has exclusive
jurisdiction over this matter, we find no merit to the claim. A “United States
Bankruptcy Judge is a judicial officer and orders and decrees which he or she
may issue within the scope of his or her powers are entitled to the same credit
____________________________________________
12 While Mrs. Smeltzer testified on cross-examination that she, personally, had
not made any payments during 2017 or 2018, she did not state whether her
attorney or husband had made payments during those years. N.T. Bench
Trial, 10/1/19, at 31. Because the trial judge found “Cascade and its
predecessors engaged in an array of deceptive and uncooperative behavior
during th[e] process,” Trial Court Opinion, 6/25/20, at [6], we will not disturb
the court’s determination that the Smeltzers made their monthly post-
discharge payments, together with their attorney, either directly to the
servicer or into escrow. Id.
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as orders and decrees of courts of general jurisdiction.” Mintz v. Carlton
House Partners, Ltd. 595 A.2d 1240, 1246 (Pa. Super. 1991) (citation
omitted). See also U.S.C.A. Const. Art. 4, § 1; 28 U.S.C.A. § 1738 (state
courts must give full faith and credit to judicial records and proceedings of
federal court). The trial court specifically noted that its decision did not invade
any determination made by the bankruptcy court. In actuality, Judge Wright’s
ruling upheld the bankruptcy court’s order that stated the Smeltzers had been
discharged from bankruptcy and that their payments had properly cured the
mortgage default as of the time of discharge. See id.; see also Trial Court
Opinion, 6/25/20, at 6 (“[T]his [c]ourt will not interpret the subsequent Notice
and Discharge beyond their four corners without further guidance,
explanation, or order from the Bankruptcy Court.”).
Judgment affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/05/2021
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