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In Re Rodriguez

629 F.3d 136 (3d Cir. 2010)

BANKRUPTCY; ESCROWS — Where a bankrupt debtor had an obligation to deposit monies with its mortgage lender to be escrowed for future taxes, insurance, and other charges, that is a pre-filing obligation even though the mortgage lender might use those funds for payments of taxes and similar obligations first arising after the bankruptcy filing.

A home was financed with a purchase money mortgage. Pursuant to the mortgage, the monthly payments included amounts to be paid into an escrow account to use as needed by the lender to pay for taxes and insurance and other charges as they became due. When the borrowers fell behind on their mortgage payments, they filed for relief under Chapter 13 of the Bankruptcy Code. At the time of filing, there were approximately $20,000 in arrears covering eight months of mortgage payments. Of that, approximately $6,000 was an escrow arrearage for taxes, insurance, and other charges. Included in that was about $2,000 for which the lender had not yet made corresponding payments.

After the bankruptcy filing, the lender issued a revised escrow analysis and sued for the $2,000 outside of the bankruptcy. The debtors filed a motion to enforce the automatic stay as to the $2,000 claim, asserting it was a pre-petition claim. They argued that the automatic stay prohibited collection of any revised post-petition escrow payment. Both the bankruptcy court, and then the United States District Court disagreed, holding that the delinquent escrow amounts were not subject to the automatic stay because they were for tax and insurance payments to be made after the filing. The Bankruptcy Court regarded the escrowed as money the lender could retain until such funds were needed to make a corresponding payment for taxes or insurance.

On appeal, the United States Court of Appeals vacated and remanded the matter, holding that the lender, under the Code, had a “claim” against the debtors for unpaid escrow monies even before those amounts were, in fact, needed to cover the taxes, insurance, and other charges and the borrower’s obligation to pay into the escrow account was enforceable. The Court held the Bankruptcy Code defined a “claim” very broadly to mean “a right to payment,” whether or not such right was reduced to judgment, was contingent or had matured. According to the Court, such a claim can exist under the Code for purposes of applying the automatic stay before a right to payment exists under state law.

The Court of Appeals reasoned that, under the governing loan documents, the lender had recourse to pursue a claim against the debtors any time the debtors failed to make an escrow payment. Such a demand would generate an enforceable right to payment from the debtors. As such, the lender had a claim against the debtors prior to the bankruptcy filing when the debtors failed to pay the required escrow amounts. The Court said the contingent right to payment did not change the fact that the right to payment existed, and thereby the request for the $2,000 constituted a claim for purposes of the automatic stay. In the remand, the lower court was asked to determine whether the lender had willfully violated the automatic stay by pursuing the $2,000 outside of the bankruptcy proceeding.

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