In re: Robin E. Dickens v. PHH Mortgage Services

Background

This appeal arose from Robin E. Dickens’s Chapter 13 bankruptcy case. Dickens inherited a property from her mother, Bernice Dickens, and resides there. Bernice had obtained a reverse mortgage secured by the property. The mortgage was non-recourse, meaning Bernice was not personally liable for the debt. Her death was a maturity event under the mortgage documents, causing the amount due to become payable before Dickens filed for bankruptcy.

Dickens filed for Chapter 13 bankruptcy on May 23, 2023, and listed the property as an asset. PHH Mortgage Services, servicing a claim made by Low Valley Trust, filed a proof of claim for $1,234,468.16. PHH later filed an amended proof of claim representing prepetition advances, stated in the opinion as $176,599.15. The opinion also notes that the materials before the court suggested $175,599.15 and that Dickens reported a different amount.

Dickens moved to expunge the claim, meaning she asked the bankruptcy court to remove it from her case. The bankruptcy court denied the motion after a hearing. Dickens appealed to the district court.

Arguments on Appeal

Dickens argued that PHH did not hold a valid bankruptcy claim because she did not personally owe the debt, had never signed or guaranteed the note or mortgage, and was not contractually connected to the loan. She also argued that an heir who inherited and lives in a home subject to a reverse mortgage should be able to protect the home in Chapter 13 by maintaining the status quo—paying real-estate taxes and maintaining homeowner’s insurance—without paying the creditor’s claim through the bankruptcy plan.

PHH argued that a creditor’s right to enforce its mortgage against the property is a valid bankruptcy claim even when the debtor has no personal liability and was not a party to the mortgage contract. PHH also argued that Dickens could maintain or modify the reverse mortgage through a Chapter 13 plan only if the plan provided for payment of the amount due.

Court’s Analysis

The district court held that the mortgage was a valid bankruptcy claim. Relying on the Supreme Court’s decision in Johnson v. Home State Bank, the court explained that a mortgage interest surviving the debtor’s personal liability is still a “claim” under the Bankruptcy Code because the mortgage holder retains a right to payment from the property. The Bankruptcy Code also provides that a claim against a debtor includes a claim against the debtor’s property.

The court further relied on decisions holding that a mortgage creditor may have a Chapter 13 claim even when there is no contractual relationship between the creditor and the debtor. The court found those decisions applicable because Dickens inherited property encumbered by a reverse mortgage. It distinguished a case in which no claim existed because the debtor did not own the property.

The court also rejected Dickens’s status-quo argument. It concluded that her reliance on In re Griffin was misplaced because that decision allowed the full accelerated mortgage debt to be paid over the course of a Chapter 13 plan; it did not allow the debtor to pay only taxes and insurance while excluding the mortgage claim.

Disposition

The district court found no reversible error in the bankruptcy court’s analysis and AFFIRMED the bankruptcy court’s order denying Dickens’s motion to expunge the claim. The clerk was directed to enter judgment consistent with the opinion and close the case.