Bawa v. Newrez LLC

Filing 19

MEMORANDUM OPINION. Signed by Judge Paula Xinis on 7/14/2021. (c/m 7/14/2021 heps, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
HARMEET BAWA,
Appellant,
v.

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NEWREZ LLC, et al.
Appellees.

Civil Action No. 8:20-cv-02326-PX

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MEMORANDUM OPINION

Pending before the Court is pro se Debtor-Appellant Harmeet Bawa (“Bawa”)’s appeal
of the Bankruptcy Court’s decision overruling Bawa’s objection to Appellee NewRez LLC, d/b/a
Shellpoint Mortgage Servicing (“NewRez”)’s claim in Bawa’s Chapter 13 bankruptcy. 1 ECF
Nos. 1, 16. NewRez pursued the claim as servicing agent for the secured creditor, Bank of New
York Mellon (the “Bank”), concerning the Bank’s mortgage loan on Bawa’s home. ECF No. 17.
For the reasons stated below, the Bankruptcy Court’s July 27, 2020 order is affirmed.
I.

Background
On or about April 13, 2006, Harmeet Bawa and her husband, Jaswant Bawa (collectively

“the Bawas”), purchased real property at 12802 Grand Elm Street in Clarksburg, Maryland (the
“Property”). ECF No. 16-2 at 11. To finance the purchase, the Bawas executed a Promissory
Note, secured by a Deed of Trust on the Property (collectively “the mortgage loan”). Id. at 11–
14, 21–32. For quite some time, the Bawas struggled to make payments on the mortgage loan.
On September 22, 2016, Jaswant Bawa entered into a “Home Affordable Modification
Agreement” (the “HAMP”) with Select Portfolio Servicing, Inc. Id. at 15–20. The HAMP

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Bawa was previously represented by counsel at the beginning of this appeal; however, counsel has
withdrawn from the case and Bawa now proceeds pro se. ECF No. 13.

adjusted the monthly mortgage payments for 164 months, culminating in a final “balloon”
payment of the loan balance on May 1, 2036. Id. Per the terms of the HAMP, Jaswant was able
to execute the agreement without Harmeet. Id. at 15, 20.
In April 2019, the Bank began foreclosure proceedings on the Property. Carrie M. Ward
v. Harmeet Bawa, Civ. No. 465352V (Cir. Ct. Montgomery Cnty. filed April 5, 2019); ECF No.
17-2. While the foreclosure action was pending, Harmeet Bawa filed for Chapter 13 bankruptcy.
ECF No. 6-1. NewRez, in turn, filed a Proof of Claim for the outstanding balance on the
mortgage loan as secured by the Property. ECF No. 16-2 at 1–10. In response, Harmeet Bawa
filed an objection to the claim, pursuant to Bankruptcy Rule 3007, arguing that the HAMP, as
executed solely by Jaswant, rendered the lien on the Property invalid because the Property was
held by the Bawas as tenants by the entirety. ECF No. 6-49.
In a July 27, 2020 Order, the Bankruptcy Court overruled Bawa’s objection. The
Bankruptcy Court construed the objection as a challenge to the validity of the lien on the
Property which must be pursued in an adversarial proceeding, pursuant to Bankruptcy Rules
7001 and 3007(b). ECF No. 1-1. Bawa now appeals that decision. ECF Nos. 1; 16. Because
the Bankruptcy Court is correct as a matter of law, this Court affirms the decision below.
II.

Standard of Review
On appeal, this Court reviews the Bankruptcy Court’s legal conclusions de novo and

findings of fact for clear error. In re Dornier Aviation (N. Am.), Inc., 453 F.3d 225, 231 (4th Cir.
2006). A finding of fact is “clearly erroneous” when “although there is evidence to support it,
the reviewing court on the entire evidence is left with the definite and firm conviction that a
mistake has been committed.” United States v. United States Gypsum Co., 333 U.S. 364, 395

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(1948). On review, this Court may affirm, modify, or reverse the Bankruptcy Court’s order, or
remand with instructions for further proceedings. See Fed. R. Bankr. P. 8013.
III.

Analysis
As the Bankruptcy Court rightly pointed out, “[i]nitiation of an adversary proceeding is a

prerequisite to challenging the validity or existence of a lien against property of the estate in the
Chapter 13 proceeding.” ECF No. 1-1 at 2 (quoting Cen–Pen Corp. v. Hanson, 58 F.3d 89, 93
(4th Cir. 1995)). Bankruptcy Rule 7001 makes clear that “a proceeding to determine the validity,
priority or extent of a lien or other interest in property” must be litigated as an adversary
proceeding. Fed. R. Bankr. P. 7001(2). See also Cen–Pen Corp. v. Hanson, 58 F.3d at 93; In re
Mansaray-Ruffin, 530 F.3d 230, 234–37 (3d Cir. 2008). By contrast, an objection to claim
brought pursuant to Bankruptcy Rule 3007, expressly excludes any “demand for relief of a kind
specified in Rule 7001 in an objection to the allowance of a claim.” Fed. R. Bankr. P. 3007(b).
Accordingly, the Bankruptcy Court was plainly correct in overruling the objection on the
grounds that, as a challenge to the validity of the mortgage lien, the debtor must initiate an
adversary proceeding.
On appeal, Bawa reiterates her position below, arguing that the HAMP rendered the lien
on the Property invalid and thus unenforceable. Compare ECF No. 16 at 1–23 & No. 18 at 3
with No. 6-49. To be sure, Bawa seems to suggest that her case is unique, and somehow
deserving of special treatment, because the lien is in fact invalid. ECF No. 16 at 20–21. But this
argument is tautological, for every challenge to the validity of a lien is, by definition, premised
on the debtor’s position that the lien is invalid. And yet, the plain language of Rules 7001 and
3007(b) require that such challenge be brought as an adversary proceeding, not as a claim
objection. See Fed. R. Bankr. P. 7001(2) & 3007. This Bawa did not do. Thus, the Bankruptcy

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did not err in its July 27, 2020 Order overruling Bawa’s objection. The decision below is,
therefore, AFFIRMED.

07/14/21

/s/
Paula Xinis
United States District Judge

Date

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