FILED DEC 21 2018 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. NC-18-1104-BKuF

DANIEL ALFONSO ALVAREZ and Bk. No. 12-55010-MEH MARIE CECELIA HAMILTON- ALVAREZ ,

Debtors. DANIEL ALFONSO ALVAREZ; MARIE CECELIA HAMILTON-ALVAREZ ,

Appellants,

v. MEMORANDUM*

BAYVIEW LOAN SERVICING, LLC, SERVICING AGENT FOR THE BANK OF NEW YORK MELLON F/K/A THE BANK OF NEW YORK, as TRUSTEE FOR THE CERTIFICATEHOLDERS OF THE CWALT, INC., ALTERNATIVE LOAN TRUST 2006-OA12, MORTGAGE PASS- THROUGH CERTIFICATES, SERIES 2006-OA12,

Appellee.

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. Argued and Submitted on November 29, 2018 at San Francisco, California

Filed – December 21, 2018

Appeal from the United States Bankruptcy Court for the Northern District of California

Honorable M. Elaine Hammond, Bankruptcy Judge, Presiding

Appearances: Cathleen Cooper Moran of Moran Law Group, Inc. argued for appellants; Lior Katz argued for appellee.

Before: BRAND, KURTZ and FARIS, Bankruptcy Judges.

INTRODUCTION

Appellants Daniel Alvarez and Marie Hamilton-Alvarez appeal an

order denying their request for attorney's fees under Rule 3002.1(i)1 for

having to prosecute a motion to determine final cure and payment under

Rule 3002.1(h). The Alvarezes alleged that the motion was necessary

because the loan servicer's accounting in its response with respect to

postpetition mortgage arrears was inaccurate. The bankruptcy court

determined that the accounting was not inaccurate, or, even if it was, the

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code,

, and all "Rule" references are to the Federal Rules of Bankruptcy Procedure.

2 inaccuracy did not warrant sanctions. We AFFIRM.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Events prior to the motion

The Alvarezes purchased their home in 2006. They signed a note and

deed of trust in favor of Countrywide Home Loans, Inc., the original

lender. In 2011, the beneficial interest in the deed of trust was transferred

by assignment to The Bank of New York Mellon fka The Bank of New

York, as Trustee for the Certificateholders of the CWALT, Inc. Alternative

Loan Trust 2006-OA12, Mortgage Pass-Through Certificates, Series 2006-

OA12. Bayview Loan Servicing, LLC ("Bayview") became the servicer of the

loan in June 2015.

The Alvarezes filed their chapter 13 bankruptcy case on July 3, 2012.

Their chapter 13 plan was confirmed on December 3, 2012. At least eight

Notices of Mortgage Payment Change ("Payment Change Notices") were

filed by either Bayview or its predecessor during the case.

After all plan payments had been made, the chapter 13 trustee filed a

Notice of Final Cure Payment in compliance with Rule 3002.1(f). Bayview

timely filed a response to the trustee's notice (the "Original Response")

asserting that the Alvarezes were not current on all postpetition mortgage

payments, owing $24,507.60. Attached to the Original Response was a

detailed payment history for the Alvarezes' postpetition mortgage

payments. The payment history included undefined terms such as "GL"

3 and "GL refund" and noted at least one unexplained "reversal."

Shortly thereafter, Bayview filed an amended response ("Amended

Response") which reflected a slightly different postpetition amount due of

$24,520.37, an increase of $12.77. The suspense amount had changed to

$3,456,41, which apparently accounted for the $12.77 difference. The

Amended Response included a revised detailed payment history for the

relevant five year period.

B. The Alvarezes' motion

Two days after Bayview filed its Amended Response, the Alvarezes

filed their Motion to Determine Final Cure and Payment under Rule

3002.1(h) (the "Motion"). The Motion addressed only Bayview's Original

Response. In short, the Alvarezes alleged that Bayview's payment history

accounting was inaccurate and inconsistent. They claimed that changes in

the mortgage payments occurred several times without the filing of

Payment Change Notices, that at least two payments (checks #760 and

#767) were not credited in the payment history although both checks were

cashed, and that monthly mortgage statements were inconsistent with the

filed Payment Change Notices. They also asserted that several extra

principal payments may not have been applied.

Because of the alleged inaccuracies, the Alvarezes asked the court to

(1) find that Bayview had failed to provide the information required by

Rule 3002.1(g), (2) bar Bayview from presenting evidence in support of its

4 claimed arrearages, and (3) award them their attorney's fees and costs

associated with the Motion. The Alvarezes sought an order deeming the

mortgage current or, alternatively, determining the amount that was

presently due and unpaid.

Bayview opposed the Motion ("Opposition"). Referencing only its

Amended Response, Bayview maintained that the Alvarezes had received

credits totaling $3,423.23 (noted as "GL" in the payment history) for any

payment changes that were not properly noticed and admitted that, while

its predecessor used confusing accounting methods, checks #760 and #767

were applied. Bayview argued that mortgage statements failed to support

any alleged inaccuracies in the payment history, because payments were

made in accordance with the Payment Change Notices, not the amounts

stated in the mortgage statements. Bottom line, argued Bayview, the

Alvarezes did not tender all of their postpetition mortgage payments and

failed to provide any evidence to contradict the arrearage calculated by

Bayview. Bayview opposed any award of fees; the Motion lacked merit

and, even if it had merit, fees were not appropriate because counsel for the

Alvarezes made no attempt to resolve the alleged issues prior to filing the

Motion.

According to Bayview, the postpetition default amount as of

November 14, 2017, after giving the Alvarezes credit for payments made

since the filing of the Amended Response, was $18,691.21. To account for

5 the new outstanding amount, Bayview attached an updated payment

history.

In their reply filed on the day of the hearing for the Motion, the

Alvarezes noted what they contended were more inconsistencies with

Bayview's accounting, namely discrepancies between the payment histories

attached to the Original Response and the Amended Response; the

Original Response listed a September 14, 2012 payment for $2,570.68, but

this payment was missing from the Amended Response.2 Further, Bayview

had admitted its failure to file all Payment Change Notices, which was

sanctionable under Rule 3002.1(I).

At the hearing, the parties and the court went through a painstaking

review of the payment history attached to the Amended Response, which

counsel for the Alvarezes admitted she had not yet reviewed except for the

first few lines. Bayview's counsel explained why funds are held in

suspense, how check payments #760 and #767 were applied, what credits

were applied due to the non-filed Payment Change Notices, and that "GL"

stood for "general ledger". The court expressed its own confusion over the

payment history and the accounting practices used.

After discussing the payment history at great length, the court asked

counsel for the Alvarezes what items were still in dispute. Counsel replied

that she wanted some time "to go back and work the numbers[.]"

2 We do not see this alleged discrepancy in the payment histories.

6 Thereafter, the parties announced that they had reached a resolution

to the Motion, with the exception of attorney's fees. The parties agreed that

the amount of postpetition mortgage arrears as of November 14, 2017, was

$18,691.21, as stated in Bayview's Opposition. The court entered an order

approving the parties' filed stipulation.

C. The fee dispute

In their brief in support of attorney's fees, the Alvarezes argued that

inconsistencies between the two payment histories and inconsistencies

between those accountings and the filed Payment Change Notices caused

them, their counsel and the court to spend a significant amount of time

puzzling out the reversal of entries, payments made but not credited, and

unexplained corrections and credits. In the end, they argued, the arrearage

was $6,285.57 less than Bayview had originally claimed. The Alvarezes

argued that Bayview's filing of inaccurate information was the equivalent

of failing to provide any information and warranted sanctions under Rule

3002.1(I). They requested fees of $12,870.00 and costs of $262.18, which did

not include the filing of a reply or the upcoming hearing.

Bayview opposed the Alvarezes' fee request, arguing that the amount

of postpetition arrears was accurate and that the Alvarezes' claim to the

contrary was proven meritless; they ultimately agreed with the $18,691.21

figure reflected in the Opposition and never expressed any remaining

issues with Bayview's postpetition accounting. The alleged $6,285.57

7 "decrease" in the arrears amount did not result from the Motion; it was due

to additional payments the Alvarezes made after the Amended Response

had been filed. As to the Payment Change Notices, Bayview argued that

they were either timely provided or that the Alvarezes received credits for

any notices not filed and those credits were given prior to the Motion.

Further, the $12.77 difference in the payment histories was solely a result of

how much credit should have been given for any Payment Change Notices

not timely filed.

Bayview argued that, because the Alvarezes had ultimately agreed to

the arrearage amount, they could not argue that Bayview had provided

them with "inconsistent information" justifying attorney's fees. Bayview

argued that fees and costs of $13,000 was excessive for something that

could have been resolved informally with very little attorney's fees

incurred by both sides. At the end of the day, argued Bayview, the Motion

established only that Bayview's accounting of postpetition arrears was

"basically correct."

In reply, the Alvarezes argued that Bayview was attempting to shift

the cost of identifying and correcting their pattern of servicing errors to the

debtors, who successfully challenged the accuracy of the filed responses.

Further, argued the Alvarezes, Bayview was trying to obscure the fact that

its Amended Response was $5,829.16 more than the parties stipulated to

resolve the dispute; that was $5,829.16 Bayview would have pocketed if the

8 Alvarezes had not challenged the payment histories. Finally, the Alvarezes

disputed Bayview's contention that the matter could have been resolved by

conference among counsel. The lengths of the pleadings, the admitted

failures to file accurate and well-supported Payment Change Notices, and

the duration of the hearing on the matter addressing the payment history

accounting all spoke to the complexity of the issues.

After a hearing, the bankruptcy court announced its oral ruling

denying the Alvarezes their attorney's fees, finding that the accounting

Bayview provided under Rule 3002.1(g) was not inaccurate, or, to the

extent it was inaccurate, it did not reach a level that warranted sanctions.

The Alvarezes timely appealed the court's later written order.

II. JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(A). We have jurisdiction under

.

III. ISSUES

1. Were sanctions available under Rule 3002.1(I) for a motion brought

under Rule 3002.1(h)?

2. Did the bankruptcy court clearly err in finding that the accounting in

Bayview's response was not inaccurate?

3. Did the bankruptcy court abuse its discretion by denying the

Alvarezes their attorney's fees?

9 IV. STANDARDS OF REVIEW

The bankruptcy court's decision to deny attorney's fees is reviewed

for an abuse of discretion. See Shaw v. City of Sacramento,

(9th Cir. 2001). Supporting findings of fact are reviewed for clear

error. Roy Allen Slurry Seal v. Laborers Int'l Union Local Union 1184,

, 1145 (9th Cir. 2001). A bankruptcy court's factual finding is clearly

erroneous if it is illogical, implausible, or without support in the record.

Retz v. Samson (In re Retz),

(9th Cir. 2010). A bankruptcy

court abuses its discretion if it applied the wrong legal standard or its

findings were illogical, implausible or without support in the record.

TrafficSchool.com, Inc. v. Edriver Inc.,

(9th Cir. 2011).

V. DISCUSSION

A. Rule 3002.1

Under Rule 3002.1, after the debtor completes all payments under the

plan, the chapter 13 trustee must "file and serve on the holder of the claim,

the debtor, and debtor’s counsel a notice stating that the debtor has paid in

full the amount required to cure any default on the claim." Rule 3002.1(f).

Upon service of the trustee's final cure notice, the creditor has

twenty-one days to respond by filing a statement indicating (1) whether it

agrees that the debtor has cured the default on the claim, and (2) whether

the debtor is current on all postpetition payments consistent with the

"maintenance of payments" requirement in § 1322(b)(5). Rule 3002.1(g). If

10 the creditor asserts that postpetition amounts are owed, it must itemize any

amounts it claims are due and unpaid as of the date of the statement. Id.

While the rule states generally that the creditor must provide an "itemized"

statement, Form 4100R — Response to Notice of Final Cure Payment — to

be filed with the statement specifically requires in Part 4 that the creditor

"must attach an itemized payment history disclosing the following

amounts from the date of the bankruptcy filing through the date of this

response: all payments received; all fees, costs, escrow, and expenses

assessed to the mortgage; and all amounts the creditor contends remain

unpaid." See also In re Howard,

(Bankr. N.D. Cal. 2016) (the

itemization must be sufficiently detailed and state with particularity the

amounts that remain unpaid) (citing In re Carr,

(Bankr.

E.D. Va. 2012)).

Within twenty-one days after service of the creditor's response under

Rule 3002.1(g), the debtor or the trustee may file and serve a motion

requesting the court to determine whether the amounts claimed by the

creditor are owed and seeking an order declaring that the debtor has cured

the default and paid all required postpetition amounts. Rule 3002.1(h).

Rule 3002.1(I) provides teeth to ensure a creditor's compliance with

Rule 3002.1. If the creditor fails to (1) file its notice of payment change

within twenty-one days, Rule 3002.1(b), (2) file its notice of fees, costs or

expenses within twenty-one days, Rule 3002.1(c), or (3) respond to the final

11 cure notice within twenty-one days, Rule 3002.1(g), the court may either

preclude the items from being introduced into evidence or award other

relief, including awarding the debtor its reasonable attorney's fees caused

by the creditor's failure, or both. Rule 3002.1(I). Sanctions under Rule

3002.1(I) are permissive in that the court "may" award them for a creditor's

violation of subdivisions (b), (c) or (g).

B. Analysis

Although the bankruptcy court did not expressly address the legal

question of whether sanctions under Rule 3002.1(I) are available for a

motion under subdivision (h), which is what the Alvarezes brought here, it

implicitly ruled that they are (given the proper showing). Bayview asserts

that attorney's fees are not recoverable for a motion filed under subdivision

(h) because subdivision (h) does not provide for them. However, beyond

this one-sentence argument, Bayview provides no authority or further

argument for its contention. In any case, we believe we must address this

threshold issue.

We could locate only one case where a court has addressed this

precise legal question. See In re Howard,

, at *4 (Bankr.

N.D. Cal Aug. 15, 2016). Without analysis, the Howard court held that

remedies under Rule 3002.1(I) are not available for a motion under Rule

3002.1(h):

This Motion was made pursuant to subpart (h), which does not

12 have a provision for award of attorney's fees, and is independent from subpart (I). The court will not import provisions of Rule 3002.1(I) into Rule 3002.1(h).

Other courts, while not addressing this legal question head on, have

implicitly ruled that sanctions provided by Rule 3002.1(I) are available for a

motion under Rule 3002.1(h) when the question is whether the creditor has

complied with subdivision (g). See In re Ferrell,

, 186-88 (Bankr.

D. S.C. 2017) (indicating that a motion under Rule 3002.1(h) is the proper

procedure for debtors who wish to challenge the creditor's Rule 3002.1(g)

statement); In re Farhat, Case No. 12-30103 (Bankr. N.D. Cal. Aug. 17, 2017);

In re Longmire, Case No. 09-14629 (Bankr. W.D. Tenn. Sept. 11, 2015); In re

Kreidler.

(Bankr. M.D. Pa. Mar. 29, 2013). This

makes sense since subdivision (h) specifically references subdivision (g),

and subdivision (I) specifically references subdivision (g).

The Code is silent as to procedure, but clearly sanctions are available

for a creditor's failure to comply with Rule 3002.1(g). Perhaps a debtor

could file an opposition to the creditor's Rule 3002.1(g) response as

opposed to filing a motion under Rule 3002.1(h). However, this would be

putting form over substance. Whether one calls it an opposition to the

creditor's response under Rule 3002.1(g) or a motion to determine the final

cure amount under Rule 3002.1(h), the debtors here were seeking relief for

13 what they contended was the creditor's failure to comply with subdivision

(g). In that event, the remedies under subdivision (I) including the award

of attorney's fees were available, and the bankruptcy court did not err in

concluding so.

Some courts have ruled that a creditor's inaccurate response under

Rule 3002.1(g) is equivalent to a failure to provide the required information

under the rule. See Tollstrup,

, at *3 (Bankr. D. Or. Mar. 16,

2018); In re Howard,

(an inaccurate response under Rule

3002.1(g) "complies with neither the letter nor the spirit" of the rule); In re

Ferrell, 580 B.R. at 187 (incorrect statement may be "worse than no

statement"); but see In re Trevino,

(Bankr. S.D. Tex. 2015)

(concluding that inaccurate notice does not violate Rule 3002.1, only the

lack of one). While the bankruptcy court apparently did not disagree with

that legal proposition, it found that the accounting Bayview provided in its

responses was not inaccurate, as the Alvarezes had contended. The

Alvarezes challenge the court's factual finding regarding accuracy.

In viewing the Original Response and the Amended Response, the

difference in the amount owed was $12.77. This was apparently due to a

change in the suspense amount. Much of the balance in the suspense

account was attributable to credits issued by Bayview based upon its

predecessor's failure to file certain Payment Change Notices. While this

$12.77 difference could point to an error or inaccuracy, that was not so in

14 this case. Further, the reduced arrears amount provided in the Opposition

merely reflected the fact that the Alvarezes had made some payments after

the Amended Response had been filed; it did not establish that errors

existed in the accounting.

Although Bayview admitted that the accountings and payment

histories described the application of certain payments in a confusing

fashion and failed to explain in laymen's terms why certain credits were

given, that does not equate to error. Further, and what cuts most against

the Alvarezes' argument, is that they eventually agreed that the amount in

postpetition arrears claimed by Bayview was correct. Accordingly, the

court's finding that the Amended Response was not inaccurate is not

illogical, implausible or unsupported by the record.

Alternatively, the bankruptcy court determined that even if an

inaccuracy did exist, it did not reach the level of the inaccuracies in In re

Howard warranting sanctions under Rule 3002.1(I). In Howard, the creditor's

first Rule 3002.1(g) response asserted that the debtor owed prepetition

mortgage arrears of $20,712 but that the debtor was current with all

postpetition payments.

. No itemized statement was

attached. The next day, the creditor filed a second response, this time

stating that the debtor had paid all prepetition arrears and was current

with all postpetition obligations.

Two days after that, the creditor filed a

third response, this time stating that the debtor had paid the prepetition

15 arrears in full but was delinquent on postpetition payments in the amount

of $674,693.60 plus other fees and expenses of $62,623.90. No itemized

statement was attached to the third response either.

The debtor moved to strike all three responses, award attorney's fees,

and deem the mortgage postpetition current.3

The debtor argued that

she could not respond to the creditor's allegations because none of the three

dissimilar responses was supported by an itemization as required under

Rule 3002.1(g).

Although the creditor opposed the motion, which

asserted yet another dollar amount owed, it did not appear at the hearing.

. Ultimately, the creditor asserted that the third response was

the correct one, at least with respect to the amount of postpetition arrears of

$62,623.90.

.

Deciding that the creditor had failed to comply with Rule 3002.1(g),

the Howard court awarded the debtor her attorney's fees, which the creditor

did not oppose:

The award of attorney's fees is more than justified in this case. Within a span of four days, PNC filed three responses to Trustee's Notice that were confusing and inaccurate. None of the responses included an itemized statement as required by Rule 3002.1(g) so

3 The debtor brought the motion under Rule 3002.1(I).

. The court instructed debtor's counsel (Ms. Moran, who also represents the Alvarezes) to file a subsequent motion under subdivision (h) if the debtor wanted the declaratory relief of the mortgage deemed current.

. The court decided later that sanctions under Rule 3002.1(I) were not available for a motion under Rule 3002.1(h). In re Howard,

, at *4.

16 neither the court nor Debtor could verify the amounts stated in the responses. Debtor and her attorney had to expend time, energy, and efforts to get an accurate itemization of the alleged amount owed postpetition, including the filing of this Motion, when it was PNC's duty to file an accurate response and itemized statement.

.

A creditor's conduct was similarly egregious in In re Ferrell. In that

case, the creditor's response under Rule 3002.1(g) asserted that the debtors

owed a postpetition arrearage of $6,671.65. 580 B.R. at 183. Upon receipt of

the response, debtors' counsel immediately contacted the creditor and

provided it with evidence that the debtors had tendered some, if not all, of

the alleged missing payments. In response, the creditor maintained that the

debtors owed $12,459.64. The creditor provided no explanation for the

differences between the two figures and never filed an amended response

under Rule 3002.1(g).

The debtors then filed a motion under Rule 3002.1(h) seeking, among

other things, sanctions under Rule 3002.1(I). The creditor failed to oppose

the motion or appear at the hearing. Id. at 185-86. The court determined

that the creditor's inaccurate response, failure to object to debtors' motion

and failure to appear and support its claimed arrearage amount failed to

comply with the purpose of Rule 3002.1(g) and warranted sanctions under

Rule 3002.1(I). Id. at 187. The court awarded the debtors their attorney's

17 fees of $1,500.00.

The Alvarezes do not assign any error to the bankruptcy court's

alternative ruling. Nonetheless, given the egregiousness of the creditors'

conduct in Howard and Ferrell and a court's discretion to impose or not

impose sanctions under Rule 3002.1(I), we conclude that the court did not

abuse its discretion in deciding that sanctions were not warranted in this

case. Bayview timely filed its Original Response and its Amended

Response, both of which included itemized accountings of the Alvarezes'

postpetition payment history. The accountings were difficult to decipher,

but the dollar amounts claimed differed by only $12.77. The Alvarezes

eventually admitted that they owed postpetition arrears and agreed with

Bayview as to how much. Bayview also filed an Opposition to the Motion

and appeared at the hearing, opposing the Alvarezes' contentions of error

and request for attorney's fees. Bayview did not file wildly inaccurate

responses or sit idly by once the Alvarezes filed the Motion. In fact, counsel

for Bayview repeatedly reached out to their counsel to settle the matter

informally to no avail.

VI. CONCLUSION

For the reasons stated above, we AFFIRM.4

4 In their issues on appeal, the Alvarezes raise the question of whether a debtor has the burden of proof on a motion under Rule 3002.1(h). They provide little argument on the subject, citing some out-of-district cases and asserting in a one-sentence (continued...)

18 4 (...continued) argument that the creditor has the burden as to whether postpetition charges are allowed under Rule 3002.1(h). The Alvarezes do not articulate any error by the bankruptcy court as to burden of proof. We decline their invitation to issue an advisory opinion on this matter.

19