In re: Paul Winfield Henthorn, Jr.; Trudy A. Henthorn v. Gmac Mortgage Coporation

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-4156
IN RE: PAUL WINFIELD HENTHORN, JR.; TRUDY A. HENTHORN,
Debtors
PAUL WINFIELD HENTHORN, JR.;
TRUDY A. HENTHORN,
Appellants
v.
GMAC MORTGAGE COPORATION;
JOHN DOES ONE THROUGH FIFTY
FREDERICK L. REIGLE, ESQ., Trustee
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. Civil Action No. 03-cv-02363
(Honorable J. Curtis Joyner)
Submitted Pursuant to Third Circuit LAR 34.1(a)
November 18, 2004
Before: SCIRICA, Chief Judge, McKEE and CHERTOFF, Circuit Judges
(Filed: February 9, 2005)

-- 1 of 6 --

2
OPINION OF THE COURT
SCIRICA, Chief Judge.
Appellants Paul and Trudy Henthorn, debtors under Chapter 13 of the Bankruptcy
Code, challenge under 11 U.S.C. § 506(b) the reasonableness of attorney’s fees and other
costs assessed to them by Appellee GMAC Mortgage Corporation (“GMAC”). The
Bankruptcy Court dismissed the action for failure to state a claim, and the District Court
affirmed. We will affirm.
I.
In March of 2000, Paul Winfield Henthorn, Jr. and his wife, Trudy A. Henthorn,
petitioned for Chapter 13 bankruptcy. See 11 U.S.C. § 1301 et seq. GMAC, the assignee
of a mortgage on the Henthorns’ residence, was one of several creditors to appear and file
proofs of claim in the proceeding. As expressly contemplated by the parties’ mortgage
contract – which authorized GMAC to recover any “reasonable attorney’s fees” incurred
in connection with a bankruptcy proceeding – GMAC thereafter assessed the Henthorns
$845.00 in costs and fees. Beginning on August 2, 2000, this amount appeared on the
Henthorns monthly mortgage statement from GMAC labeled as “other” charges. GMAC
did not amend its bankruptcy proof of claim to include the $845.00 charge, nor did it
participate further in the Chapter 13 proceeding.

-- 2 of 6 --

3
In January of 2001, the Bankruptcy Court confirmed the Chapter 13 plan filed by
the Henthorns. See 11 U.S.C. § 1321 (“The debtor shall file a plan.”). The plan proposed
by the Henthorns provided that they would continue making payments on the GMAC
mortgage (which was not in arrears) outside of bankruptcy, and that upon plan
confirmation the mortgaged property would re-vest in the Henthorns. In other words, the
mortgaged property was excluded from the bankruptcy estate, and from the oversight of
the bankruptcy trustee and the Bankruptcy Court.
Approximately one year after plan confirmation, the Henthorns sold the property
and satisfied their mortgage obligation to GMAC. From the proceeds of the sale, the
Henthorns paid GMAC not only the outstanding principal and interest on the mortgage,
but also the $845.00 in costs and attorney’s fees.
The Henthorns subsequently filed suit on behalf of a national class of bankruptcy
debtors who allegedly were assessed similar costs and fees. Citing Bankruptcy Code §
506(b) – which authorizes an oversecured creditor to recover “any reasonable fees, costs
or charges” incurred in connection with a bankruptcy and provided for by contract – the
putative class action challenged the “reasonableness” of the charges imposed by GMAC.
By stipulation of the parties, and pursuant to 28 U.S.C. 1334(b), the action was
transferred to the court presiding over the underlying bankruptcy, and re-docketed as an
adversary proceeding. The Bankruptcy Court dismissed under Fed. R. Civ. P. 12(b)(6)
for failure to state a claim. The District Court, exercising jurisdiction under 28 U.S.C. §

-- 3 of 6 --

1Section 506(b) provides:
To the extent that an allowed secured claim is secured by
property the value of which, after any recovery under
subsection (c) of this section, is greater than the amount of
such claim, there shall be allowed to the holder of such claim,
interest on such claim, and any reasonable fees, costs, or
charges provided for under the agreement under which such
claim arose.
11 U.S.C. § 506(b).
4
158(a), affirmed. We have jurisdiction under 28 U.S.C. §§ 158(d) and 1291. Our review
is plenary. McNamara v. PFS (In re Personal and Bus. Ins. Agency), 334 F.3d 239, 242
(3d Cir. 2003).
II.
The issue is whether, on the facts of this case, plaintiffs can state a claim under §
506(b) and § 105(a) of the Bankruptcy Code.1 On the facts of this case, they cannot.
Section 506(b) does not apply here because the debtors excluded the GMAC mortgage
obligation from their confirmed bankruptcy plan, and the challenged fees were paid to
GM AC from the debtors’ post-confirmation sale of the mortgaged property. See Telfair
v. First Union Mortgage Corp., 216 F.3d 1333, 1339 (11th Cir. 2000) (holding § 506(b)
only governs fee petitions until the time of confirmation), cert. denied, 531 U.S. 1073
(2001).
Beginning several months prior to plan confirmation, plaintiffs’ monthly
statements from GMAC included $845.00 in “other” charges. Plaintiffs never challenged

-- 4 of 6 --

2Because plaintiffs fail to state a claim under § 506(b), their reliance on § 105(a) as an
enforcement mechanism for § 506(b) is unavailing. Section 105(a) “does not give the
court the power to create substantive rights that would otherwise be unavailable under the
Code.” In re Combustion Eng’g, Inc., 2004 U.S. App. LEXIS 24834, *114 (3d Cir. Dec.
2, 2004) (citations omitted). To the extent plaintiffs additionally rest their appeal on
Bankruptcy Rule 2016(a), the argument is waived, Laborers Int’l Union v. Foster
Wheeler Corp., 26 F.3d 375, 398 (3d Cir. 1994) (a “passing reference to an issue” in a
brief does not “bring that issue before this court”), and in any event appears meritless.
5
the “reasonableness” of these charges prior to confirmation, nor sought to address them
under the bankruptcy plan. See 11 U.S.C. § 1321 (“The debtor shall file a plan.”). The
plan itself excluded the mortgaged property and the corresponding lien agreement with
GMAC from bankruptcy, and the property re-vested in plaintiffs upon confirmation. 11
U.S.C. § 1327(b). Plaintiffs then sold the property, and satisfied their obligations to
GM AC, “outside” of bankruptcy. See generally In re Aberegg, 961 F.2d 1307, 1309-10
(7th Cir. 1992) (discussing debtors’ satisfaction of residential mortgage obligations
outside a bankruptcy plan).
Having excluded their contractual relationship with GMAC from the plan – a
decision that, among other things, allowed plaintiffs to sell the mortgaged property
without oversight from the Bankruptcy Court, payment of bankruptcy trustee’s fees, or
remittance of any profits on the sale to creditors with stripped liens – plaintiffs cannot
later, post-confirmation, invoke § 506(b) and § 105(a) to superintend the
“reasonableness” of fees collected by GMAC from the proceeds of the sale of its
collateral.2

-- 5 of 6 --

6
III. Conclusion
We will affirm the judgment of the District Court.

-- 6 of 6 --