Green Tree Servicing, LLC v. Wilson (In re Wilson)
Green Tree Servicing, LLC v. Wilson (In re Wilson)
Opinion of the Court
OPINION AND ORDER
Before the Court is Green Tree Servicing LLC’s appeal from the Bankruptcy Court’s November 6, 2014 order denying its Motion to Expunge and/or Disallow Claim # 18, (the “Claim # 18 Order,” Bk. Docs. 56, 59).
Dennis and Sheila Wilson (“Debtors”) filed a Chapter 13 bankruptcy petition on March 4, 2014. (Bk. Doc. 1.) On Schedule D of their petition, Debtors stated that there were two secured claims on their primary residence at 23 Dekay Road, Warwick, New York: the senior mortgage held by Select Portfolio Servicing, Inc. (“SPS”) and the junior mortgage held by Green Tree Servicing LLC (“Green Tree”). (Id. at 13.) On March 18, 2014, Green Tree filed a proof of claim for the junior mortgage, which was deemed Claim # 1.
On May 16, 2014, Debtors filed a motion to reclassify the junior mortgage as unsecured (or “strip” it), pursuant to 11 U.S.C. §§ 506(a), 1322(b), and In re Pond, 252 F.3d 122, 126 (2d Cir. 2001), (the “Pond motion,” Bk. Doc. 22). Debtors attached to their motion exhibits showing that the appraised value of their residence was less than the balance owed to SPS on the senior mortgage. (See Bk. Docs. 22, 23.) Green Tree opposed the motion on the ground that; because SPS had not filed a proof of claim for the senior mortgage, it did not have an “allowed claim” in the bankruptcy and Debtors thus could not use SPS’s mortgage as a basis to strip Green Tree’s mortgage. (Bk. Doc. 34.) In response, on July 16, 2014, pursuant to Bankruptcy Rule 3004,
On August 21, 2014, Green Tree moved to expunge Claim # 18, arguing that Debtors failed to provide Attachment A to Form B10 or any evidence substantiating SPS’s claim or proving that its security interest was perfected. (Bk. Doc. 47 at 3.) Green Tree also argued that SPS lacked standing as the creditor for the senior mortgage because other documents filed by Debtors showed that the mortgage was actually held by Deutsche Bank National Trust Company as Trustee on behalf of the holders of the J.P. Morgan Acquisition Trust 2007-CHI Asset Backed Pass-Through Certificates Series 2007-CHI (“Deutsche Bank”). (Id. at 3.) In opposing Green Tree’s motion, Debtors provided an affidavit from debtor Dennis Wilson in which he stated that “[t]here is absolutely no doubt in my mind ... that SPS properly represents [my] original mortgage .... [b]ut who sold what mortgage to whom, I just don’t have those documents.” (Bk. Doc. 52 Ex. D at 2.)
• a copy of the senior mortgage between J.P. Morgan Chase Bank, N.A. (“Chase”) and Debtors, dated December 27, 2005, including a cover sheet from the Orange County Clerk’s Office showing that the mortgage was recorded on January 26, 2006;
• a copy of an assignment of the senior mortgage from Chase. to Deutsche Bank, dated January 24, 2013; and
*489 • a letter from SPS attorney Jordan S. Katz, dated June 9, 2014, stating that SPS “is the servicing agent for the mortgage referenced in the attached Proof of Claim” and that SPS planned to file an additional amendment of the proof of claim “to reflect the actual amounts due and owing on the subject mortgage.”
On September 30, 2014, the Bankruptcy Court denied Green Tree’s motion to expunge Claim # 18 in an oral ruling. (See Bk. Doc. 56.) The Bankruptcy Court held that Debtors’ proof of claim was valid because they provided sufficient supporting documentation: “the assignment of the mortgage note, the mortgage note, and supplemental letters from SPS stating that it is the servicing agent.” (Id. at 12.) The court also held that SPS had standing as a creditor of the mortgage because Debtors established SPS’s interest by proffering an SPS mortgage statement, the mortgage note, the assignment of the mortgage note, a letter from SPS stating it is the servicing agent, and the affidavit of Mr. Wilson (“someone with personal knowledge of the facts supporting standing”), and because Debtors listed SPS on their schedule and in their plan.
Green Tree appealed the Claim # 18 Order. (See Bk. Doc. 60; Dist. Doc. 1.) On March 26, 2015, after the briefing of this appeal was completed, SPS filed an amended proof of claim for Claim # 18, (Proof of Claim 18-3), that provided the following additional documentation:
• an updated Official Form 10B that revised the claim amount upward to $320,725.34 (from $283,987.45);
• Attachment A to Form 10B (“Mortgage Proof of Claim Attachment”), which itemized the fees, expenses and charges within the total claim amount;
• a copy of the mortgage note, dated December 27, 2005;
• a modification agreement between Debtors and Chase, dated April 5, 2008;
■ a cover sheet showing that the January 24, 2013 assignment of the mortgage from Chase to Deutsche Bank was recorded in the Orange County Clerk’s Office on April 3, 2013; and
• an SPS statement addressed to Debtors, dated March 12, 2014.
In this appeal, Green Tree argues that the Bankruptcy Court erred by holding that the proof of claim for Claim # 18 is valid, that SPS has standing, and that its prior ruling granting Debtors’ Pond motion was correct. (See GT’s Mem. 2-3.)
II. Discussion
A. Standard of Review
This Court has jurisdiction pursuant to 28 U.S.C. § 158(a)(1) to hear appeals from final judgments, orders, and decrees of a bankruptcy court. A district court reviews a bankruptcy court’s findings of fact for clear error and reviews its legal conclusions de novo. Overbaugh v. Household Bank N.A. (In re Overbaugh), 559 F.3d 125, 129 (2d Cir. 2009) (per curiam). “Mixed questions of fact and law are subject to de novo review.” Babitt v.
B. Analysis
1. Proof of Claim #18 and SPS’s Standing
A proof of claim is “prima facie evidence of the validity and amount of the claim” if it is filed in accordance with the rules set forth in Federal Rule of Bankruptcy Procedure 3001. Fed. R. Bankr. P. 3001(f). These rules include that the proof of claim must “conform substantially to the appropriate Official Form,” Fed. R. Bankr. P. 3001(a); include “an itemized statement of the interest, fees, expenses, or charges” included within the claim total, Fed. R. Bankr. P. 3001(c)(2)(A); attach a copy of the writing that secures the claim (if applicable), Fed. R. Bankr. P. 3001(c)(1); include “the attachment prescribed by the appropriate Official Form” if the security interest is the debtor’s principal residence, Fed. R. Bankr. P. 3001(c)(2)(C); and provide “evidence that the security interest has been perfected,” Fed. R. Bankr. P. 3001(d). “Failure to attach the documentation required by Rule 3001 will result in . the loss of the prima facie validity of the claim.” In re Minbatiwalla, 424 B.R. 104, 112 (Bankr.S.D.N.Y. 2010). Additionally, where the claimant is a mortgage servicer, it must provide evidence that it is the servicer of the relevant mortgage in order to establish that it has standing to assert a claim for that mortgage. See Minbatiwalla, 424 B.R. at 109. If a claim is prima facie valid it “cannot be defeated by mere formal objection,” but rather an objector must introduce evidence as to the' claim’s invalidity to challenge it. Id. at 111 (quoting In re Sabre Shipping Corp., 299 F.Supp. 97, 99 (S.D.N.Y. 1969)).
In the Claim # 18 Order, the Bankruptcy Court held that Claim # 18 was valid because Debtors’ amended proof of claim (18-2) included the mortgage note, the assignment of the note, and letters from SPS stating that it is the servicer. (Bk. Doc. 56 at 12-13.) And the court held that because Debtors also provided an affidavit from Mr. Wilson confirming SPS’s role as servicer and listed SPS as a creditor in their schedule and plan, Debtors also established that SPS has creditor standing. (Id. at 9-10.)
Green Tree argues that the Bankruptcy Court abused its discretion by considering amended proof of claim 18-2 because it was filed without leave of court and less than 24 hours before the return date for the Claim # 18 Motion. (GT’s Mem. 14-15, 23.) Green Tree also argues that the Bankruptcy Court erred by failing to analyze whether 18-2 was a proper amendment before accepting it and by permitting it even though it is “materially different” from 18-1. (Id. at 15-16.) Finally, Green Tree argues that' even if 18-2 could be considered, it falls short of the proof required to establish SPS’s lien’s validity.
“It is well-settled that the decision to permit an amendment of a proof of claim rests within the sound discretion of the bankruptcy judge.” In re McLean Industries, Inc., 121 B.R. 704, 708 (Bankr. S.D.N.Y. 1990). Furthermore, “amendment to a claim is freely allowed where the purpose is to cure a defect in the claim as originally filed, to describe the claim with greater particularity, or to plead a new theory of recovery on the facts set forth in the original claim.” In re Integrated Res., Inc., 157 B.R. 66, 70 (S.D.N.Y. 1993). That said, “the court must subject post bar date amendments to careful scrutiny to assure that there was no attempt to file a new claim' under the guise of amendment.”
Green Tree is correct, however, that 18-2 fails to meet several of Rule 3001’s requirements. It does not include Attachment A to Official Form 10B, which was required because the- mortgage is secured by Debtors’ primary residence, see Fed. R. Bankr. P. 3001(c)(2)(C), nor any other itemized statement of the interest, fees, expenses, and charges included in the claim, see Fed. R. Bankr. P. 3001(c)(2)(A). Additionally, while Debtors provided some documents related to the security interest, including the mortgage agreement, they did not attach the mortgage note itself and the assignment that they provided transferred the agreement but did not mention the note.
Each of 18-2’s defects, however, has been remedied by the most recent amendment to the proof of claim, 18-3, which SPS filed on March 26, 2015. Proof of Claim 18-3 includes Official Form 10B Attachment A (itemizing the claim’s interest, fees and charges) as well as a copy of the mortgage note, which demonstrates the note’s delivery to SPS. Together with Mr. Wilson’s affidavit confirming that SPS is the servicer of the senior mortgage, SPS’s mortgage statements, and the fact that Debtors included SPS on their Schedule D and in their Chapter 13 plan, this evidence demonstrates that SPS is the servicer of the underlying mortgage and thus a creditor with standing to file a claim. See In re Conde-Dedonato, 391 B.R. 247, 250 (Bankr.E.D.N.Y. 2008) (servicer demonstrated its standing where it provided note, mortgage, and “an affidavit attesting that it is the servicer of the note and mortgage” and debtor did not dispute this and listed servicer in its schedules and plan).
Green Tree, on notice that SPS planned to file a further amendment of Claim # 18, (see. Proof of Claim 18-2 Pt. 3 (Katz letter)), argues that such amendment should not be permitted because SPS’s “right to file a proof of claim expired July 1, 2014 and the law does not allow a creditor to supersede a claim filed by the Debtor under Rule 3004.” (GT’s Mem. 27.) But while the July 1, 2014 deadline bars SPS from filing a “superseding” claim (defined as one that “by its nature may include a broader spectrum of demands against the debtors”), it does not prevent SPS from amending the existing claim that Debtors timely filed .on its behalf. See United States v. Kolstad (In re Kolstad),
2. The Stripping of Green Tree’s Lien
Even if I reversed the Bankruptcy Court’s order and expunged Claim # 18 (or if the Bankruptcy Court does so on remand), however, the effect on Green Tree’s now-unsecured claim would be nil. Green Tree’s attempt to restore its junior mortgage lien by attacking the proof of claim for SPS’s senior mortgage lien is based on a fundamental misunderstanding of the purpose that a claim serves in a bankruptcy proceeding.
The Bankruptcy Court was correct that “the lien amount of the first mortgage, the proof of claim of the second mortgage and a valuation of the debtor’s principal residence,” was sufficient to void Debtors’ junior mortgage. (Bk. Doc. 56 at 14); see Robert, 313 B.R. at 550-51 (stripping junior mortgage based on Debtors’ petition listing each mortgage lien amount and Debtors’ uncontested appraisal of residence’s value). “It is important to recognize ... that stripping off a lien is simply a result that flows under § 506(d) from the valuation of the allegedly unsecured mortgage.” In re Millspaugh, 302 B.R. 90, 98 (Bankr.D.Idaho 2003) (emphasis added).
III. Conclusion
For the reasons stated above, the Bankruptcy Court’s Claim # 18 Order is VACATED, and the case is REMANDED for further proceedings. The Clerk of Court
SO ORDERED.
. "Bk. Doc.” refers to a document filed on the docket in the bankruptcy case, No. 14-35413. "Dist. Doc.” Refers to a document filed on the docket' in this appeal before the District Court.
. Bankruptcy Rule 3004 provides that if a creditor does not file a proof of claim by its deadline to do so, the debtor may file a proof of claim on behalf of the creditor within 30 days of that deadline. See Fed. R. Bankr. P. 3004.
. An unexecuted copy of the senior mortgage and an SPS mortgage statement dated September 13, 2013, were attached to Mr. Wilson’s affidavit.
. Debtors included SPS’s mortgage lien in their Chapter 13 plan. (See Bk. Doc. 3 at 3.)
. "GT’s Mem.” refers to Appellant’s Brief, (Dist. Doc. 8).
. Green Tree is correct that the Bankruptcy Court mistakenly found that 18-2 included a copy of the mortgage note, when it did not. (See Bk. Doc. 56 at 12.)
. Green Tree cites two cases for its position that a creditor cannot amend a debtor's claim, but they do not stand for that proposition. In In re Hill, 286 B.R. 612, 620-21 (Bankr.E.D.Pa. 2002), the bankruptcy court rejected the creditor’s late-filed claim because the creditor “did not indicate anywhere on its Proof of Claim that it was an amendment to the Debtor's Proof of Claim or even that Debt- or had previously filed a proof of claim relating to its claim,” or otherwise indicate that it intended to amend the debtor's proof of claim. Such is not the case here, where SPS clearly signified its intention that 18-3 amend 18-2 by checking the amendment box on the copy of Form 10B submitted with 18-3 and by stating in its June 9, 2014 letter that it planned to file "an amendment to said Proof of Claim to reflect the actual amounts due and owing on the subject mortgage,” (see Proof of Claim 18-2 Pt. 3). In In re Kelley, 259 B.R. 580, 585 (Bankr.E.D.Tex. 2001), the bankruptcy court recognized that it "could, pursuant to its equitable power recognized in In re Kolstad, [928 F.2d 171,] construe [the creditor’s] late claim as 'amending' rather than 'superseding' the claim filed on its behalf by the Debtor,” but declined to do so where the creditor "failed to establish any facts which would warrant the exercise of this Court’s equitable power in such a manner.”
. Green Tree's appeal of the denial of its motion to expunge "to the extent said Motion requested the Bankruptcy Court to correct a clear error in [its order granting the Pond motion],” (GT's Mem. 3), is procedurally improper. Green Tree did not, in its motion to expunge, seek reconsideration of the order on the Pond motion. It may incorrectly have thought that success on the former would affect the latter, but the only relief sought was the expungement of Claim #18, (see Bk. Doc. 47), and the denial of that relief is the only order timely appealed to this Court, (see Dist. Doc. 1). See Fed. R. Bankr. P. 8002(a) ("[A] notice of appeal must be filed with the bankruptcy clerk within 14 days after entry of the judgment, order, or decree being appealed.”). Green Tree had the opportunity to appeal the order granting the Pond motion, but chose not to, and may not circumvent the rules by • attempting to introduce the issue in the cur- . rent appeal. Nevertheless, the Court addresses the issue in an excess of caution.
. Green Tree argues that In re Aziz, No. 10-16696, 2011 WL 5836895 (Bankr.S.D.N.Y. Nov. 18, 2011), supports its position .because that opinion "specifically referenced the competing proof of claims filed by the respective first and second mortgage lien before commencing the ... Pond analysis." (GT's Mem. 33.) First, it is obvious from the Aziz decision that the Court was simply reciting the procedural history of the case when it mentioned the proofs of claim. See Aziz, 2011 WL 5836895 at *1. There appears to have been no dispute as to the amounts outstanding on each mortgage, and the controversy was over the value of the collateral. Second, as a matter of logic, the fact that both mortgagees decided to file proofs of claim does not suggest that those proofs were required before the court could grant the debtors' Pond motion and strip the junior lien. See Robert, 313 B.R. at 550-51 (granting Pond motion without mentioning whether proof of claim was filed for senior mortgage). Again, Green Tree "seeks to make a connection between the filing of a proof of claim and the allowance of a creditor’s lien where no such connection exists.” Christo, 2012 WL 3839238, at *5.
. The recent Supreme Court decision on lien stripping, Bank of America, N.A. v. Caulkett, has no effect on the Bankruptcy Court’s order granting the Pond motion because Caulkett only applies in the Chapter 7 context. See - U.S. -, 135 S.Ct. 1995, 2000-01, 192 L.Ed.2d 52 (2015).
Reference
- Full Case Name
- In re Dennis WILSON and Sheila Wilson, Debtors. Green Tree Servicing, LLC v. Dennis Wilson and Sheila Wilson
- Cited By
- 11 cases
- Status
- Published