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Burch v. Freedom Mortgage Corp.

United States District Court, N.D. Texas, Fort Worth Division

July 2, 2019

WILLIAM PAUL BURCH, et al., Plaintiffs,
v.
FREEDOM MORTGAGE CORPORATION, et al., Defendants.

          FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          HAL R. RAY, JR. UNITED STATES MAGISTRATE JUDGE

         This foreclosure-related case was automatically referred to the undersigned for pretrial management pursuant to Special Order 3 on December 31, 2018. (ECF No. 5). Before the Court is Freedom Mortgage Corporation's (“Freedom”) Motion to Invoke the Bankruptcy Reference (ECF No. 43) filed on May 21, 2019. By Order dated May 22, 2019 (ECF No. 44), the Court ordered Plaintiff William Paul Burch (“Burch”) to file any response to the Motion on or before June 3, 2019. Burch has not done so.

         Because the case constitutes a core proceeding arising under title 11 or arising in a case under title 11, it should be referred to the appropriate bankruptcy judge in this district. Accordingly, the undersigned RECOMMENDS that United States District Judge Reed O'Connor withdraw the case from the undersigned and refer it to United States Bankruptcy Judge Mark X. Mullin pursuant to this Court's Miscellaneous Order No. 33.

         I.BACKGROUND

         In 2006, Burch obtained a mortgage loan from Freedom on a property located at 203 Hemlock in Arlington, Texas (“the Hemlock Property”). (ECF No. 17 at 2). On December 1, 2008, he filed for Chapter 11 bankruptcy to prevent foreclosure on multiple properties that he owned, including the Hemlock Property. (Id.). See also Cause No. 08-45761-rfn11. Burch alleges that at the time of his 2008 bankruptcy, “Chase Bank or Chase Properties (now JPMorgan Chase Bank[, ] N.A.)” (“Chase”) was the mortgagee on the loan. (Id. at 3). On December 9, 2009, the bankruptcy court approved a plan that allegedly voided the terms of the original mortgage loan. (Id.; see also ECF No. 43 at 1-2). The plan also set out new terms for the mortgage loan, which are disputed by the parties. (ECF No. 17 at 3). Also, in dispute is whether Chase or one of the other Defendants still has a valid lien on the Hemlock Property. (Id. at 4). The 2008 bankruptcy case was closed on September 11, 2012. (ECF No. 43 at 2).

         On December 28, 2012, Burch filed for Chapter 13 bankruptcy. (Id.). See Cause No. 12-46959-mxm7. The case converted to Chapter 11 in 2013. (Id.). See Cause No. 12-46959-mxm7, ECF No. 100. Freedom, the mortgage servicer, filed a proof of claim concerning the Hemlock Property. (ECF No. 43 at 2). On February 1, 2016, the bankruptcy court entered an order confirming Burch's plan of reorganization (“the Plan”). (Id.). The order states as follows:

regarding the Class 9 Allowed Secured Claim of Seterus, Inc., as the Authorized Subservicer for . . . (‘Fannie Mae'), Creditor c/o Seterus, Inc[.], on the Effective Date . . . (the ‘Hemlock Property') shall be surrendered to the holder of the Allowed Class 9 Claim and the claim shall be deemed paid in full. Upon the Effective Date[, ] the automatic stay shall lift without further order of this Court to allow the Class 9 claimant, or its assigns or successors in interest, to take . . . all steps necessary to exercise any and all rights it may have in the Hemlock Property . . . .

         (ECF No. 43-2 at 10).

         The order further provided “that the [bankruptcy court] shall retain jurisdiction to the maximum extent possible to enforce the Plan, interpret the Plan, and provide for all proceedings and matters for which jurisdiction is preserved by the Plan, and otherwise . . . .” (Id.).

         The case then converted to Chapter 7 on January 30, 2018. See Cause No. 12-46959-mxm7, ECF No. 354. In August 2018, the bankruptcy court entered an order allowing the trustee to abandon the Hemlock Property based on the trustee's assertion that offers received for its sale were insufficient to pay the outstanding principal balance of the mortgage and closing costs. Id. at ECF No. 466. The bankruptcy court's order also stated that it retained jurisdiction to hear and determine all matters “arising from or related to the implementation, interpretation and/or enforcement of this Order.” Id. at ECF No. 514. Burch's bankruptcy case, originally filed in 2012, is still open. (ECF No. 43 at 3). Freedom now moves the Court to refer the case to Judge Mullin, presiding judge in Cause No. 12-46959-mxm7. (Id. at 6). Freedom has informed the Court that its Co-Defendants do not oppose the Motion. (Id. at 9).

         II.LEGAL STANDARD

         Under 28 U.S.C. § 157(a), “each district court may provide that proceedings arising under title 11 as core proceedings or arising in or related to a case under title 11, shall be referred to the bankruptcy judges for the district.” The Fifth Circuit has held that a proceeding is “core” if “it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case.” Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir. 1987). The district court may also refer a case to the bankruptcy judge if the case is related to a bankruptcy case. In re Wood, 825 F.2d at 93. A case is “related” to a bankruptcy proceeding if “the outcome of [the non-bankruptcy] proceeding could conceivably have any effect on the estate being administered in bankruptcy.” Id. (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3rd Cir. 1984)).

         A court should refer a case to the bankruptcy court if two conditions are met: (1) the court normally would refer the case to the bankruptcy court under Miscellaneous Order No. 33 for the Northern District of Texas; and (2) the court would be unlikely to withdraw the reference under 28 U.S.C. § 157(d). Texas United Hous. Program, Inc. v. Wolverine Mortg. Partner Ret., No. 3:17-CV-977-L, 2017 WL 3822754, at *3 (N.D. Tex. July 18, 2017). A court may permissively withdraw the reference from the bankruptcy court for cause shown. 28. U.S.C. § 157(d). Withdrawal to the district court is mandatory, however, if on a timely motion by a party the court determines “resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.” Id.

         II ...


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