In re Depugh

409 B.R. 84

In re Donald G. DEPUGH, Debtor.

No. 08-37521-H4-13.

United States Bankruptcy Court, S.D. Texas, Houston Division.

June 26, 2009.

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John Ernest Smith, John E. Smith & Associates, Houston, TX, for Debtor.

MEMORANDUM OPINION REGARDING: (I) DEBTOR'S OBJECTION TO LVNV FUNDING LLC'S PROOF OF CLAIM NUMBERS 12, 13, 14, AND 15; AND (II) MOTION OF LVNV FUNDING, LLC FOR LEAVE TO AMEND PROOF OF CLAIM NOS. 12-15

NUNC PRO TUNC

[Docket Nos. 37, 38, 39, 40, & 46]

JEFF BOHM, Bankruptcy Judge.

I. INTRODUCTION

In October of 2008, this Court issued a memorandum opinion in In re Gilbreath in which this Court took to task two unsecured creditors—LVNV Funding, LLC (LVNV) and eCast Settlement Corporation (eCast)—who filed woefully deficient proofs of claim with utter disregard for the requirements clearly set forth in Bankruptcy Rule 3001 requiring creditors to attach documentation in support of their claims.¹ Following its ruling in Gilbreath, in order to prevent future violations of Bankruptcy Rule 3001 and to foster judicial efficiency and economy, on December 11, 2008, this Court issued a written notice and order in all of its Chapter 13 cases requiring creditors to seek leave of court or written consent of the debtor before amending a deficient proof of claim after the debtor has lodged a claim objection (the Notice and Order). See Notice and Order that Federal Rule 15, as Made Applicable by Bankruptcy Rule 7015, Shall Apply Whenever an Objection to a Proof of Claim Is Lodged, available at http://www. txs.uscourts.gov/bankruptcy/judges/jb/notice.htm.

Despite this Court's rulings in Gilbreath, the requirement that creditors seek leave of court to amend proofs of claim to which objections have been lodged, and this Court's continuing efforts to have creditors to comply with Bankruptcy Rule 3001,² LVNV, through its same counsel of record, Mark Stromberg (Stromberg), filed four proofs of claim in the present case on March 31, 2009 with no documents attached to them. Stromberg apparently finally got around to reading this Court's ruling in Gilbreath sometime thereafter because LVNV amended all of its deficient proofs of claim in this case on May 5, 2009—twelve days after the bar date and twenty-eight days after the Debtor objected to LVNV's original proofs of claim. Following this action, Stromberg also apparently decided to check this Court's website for the first time since November of 2008. Much to his chagrin, no doubt, he discovered this Court's Notice and Order, because on May 8, 2009 he filed a motion for leave to amend nunc pro tunc LVNV's proofs of claim in this case.

Stromberg's failure to keep apprised of this Court's prior rulings—including those rendered against his own client in Gilbreath—and his abject disregard for this Court's Notice and Order, which was issued in part, due to his client's prior violation of Bankruptcy Rule 3001, will, as in Gilbreath, preclude LVNV from pursuing its claims in the present case. For the reasons set forth below, LVNV's motion for leave to amend is denied and the Debtor's objections to LVNV's proofs of claim are sustained.

II. FINDINGS OF FACT

1. On November 25, 2008, Donald G. DePugh (the Debtor) filed a voluntary Chapter 13 petition, initiating the above-referenced Chapter 13 case. [Docket No. 1.]

2. The last day for a non-government creditor to file a proof of claim in this Chapter 13 case was April 23, 2009. See [Docket No. 16.]

LVNV's Original Proofs of Claim

3. On March 31, 2009, LVNV filed four proofs of claim—comprising claim numbers 12, 13, 14, and 15—in the Debtor's Chapter 13 case (Proofs of Claim 12, 13, 14, and 15, respectively).

4. Proof of Claim 12 consists of the official proof of claim form along with one attachment. On the form, LVNV lists the amount of the claim as $19,060.36, lists the basis for the claim as "MASTERCARD," and provides the last four digits of an account number—7880—by which the Debtor may be identified.³ Additionally, on the form, LVNV checked the box labeled, "Check this box if claim includes interest or other charges in addition to the principal amount of claim," which instructs the claimant to "[a]ttach itemized statement of interest or charges." No such itemized statement is attached to Proof of Claim 12. Rather, LVNV attached a single document to Proof of Claim 12 prepared by Resurgent Capital Services— LVNV's servicing company⁴—which contains the same information provided on the form with respect to the claim, but which also represents that LVNV purchased the debt from "Citibank."

5. Proof of Claim 13 also consists of the official proof of claim form along with one attachment. On the form, LVNV lists the amount of the claim as $13,278.68, lists the basis for the claim as "MASTERCARD," and provides the last four digits of an account number—4344—by which the Debtor may be identified.⁵ Additionally, on the form, LVNV checked the box labeled, "Check this box if claim includes interest or other charges in addition to the principal amount of claim," which instructs the claimant to "[a]ttach itemized statement of interest or charges." No such itemized statement is attached to Proof of Claim 13. Rather, LVNV attached a single document to Proof of Claim 13 prepared by Resurgent Capital Services, which contains the same information provided on the form with respect to the claim, but which also represents that LVNV purchased the debt from "Citibank."

6. Proof of Claim 14 also consists of the official proof of claim form along with one attachment. On the form, LVNV lists the amount of the claim as $20,756.99, lists the basis for the claim as "MASTERCARD," and provides the last four digits of an account number—0555—by which the Debtor may be identified.⁶ Additionally, on the form, LVNV checked the box labeled, "Check this box if claim includes interest or other charges in addition to the principal amount of claim," which instructs the claimant to "[a]ttach itemized statement of interest or charges." No such itemized statement is attached to Proof of Claim 14. Rather, LVNV attached a single document to Proof of Claim 14 prepared by Resurgent Capital Services, which contains the same information provided on the form with respect to the claim, but which also represents that LVNV purchased the debt from "Citibank."

7. Proof of Claim 15 also consists of the official proof of claim form along with one attachment. On the form, LVNV lists the amount of the claim as $2,807.49, lists the basis for the claim as "UNSECURED CHARGE OFF," and provides the last four digits of an account number—5703— by which the Debtor may be identified.⁷ Additionally, on the form, LVNV checked the box labeled, "Check this box if claim includes interest or other charges in addition to the principal amount of claim," which instructs the claimant to "[a]ttach itemized statement of interest or charges." No such itemized statement is attached to Proof of Claim 15. Rather, LVNV attached a single document to Proof of Claim 15 prepared by Resurgent Capital Services, which contains the same information provided on the form with respect to the claim, but which also represents that LVNV purchased the debt from "Citibank" or "GOODYEAR."

8. On April 7, 2009, the Debtor filed objections to all four of LVNV's original proofs of claim (the Objections). [Docket Nos. 37-40.] The Debtor objects to Claims 12, 13, 14, and 15 on the following grounds: (1) LVNV failed to attach documentation to prove the existence of its purported claims; (2) LVNV failed to comply with Federal Rule of Bankruptcy Procedure 3001 (Bankruptcy Rule 3001); and (3) the Debtor denies that he has any liability to LVNV. In support of this third contention, the Debtor has attached an affidavit to the Objections, in which he swears that he does not owe any money to LVNV and that there is no proof of the debt, the transfer, or the proper amount owed. The Debtor requests that Claims 12, 13, 14, and 15 be disallowed.

9. On April 13, 2009, LVNV filed a Response to the Objections (the Response). [Docket No. 41.] In the Response, LVNV asserts that proofs of claim that fail to comply with Bankruptcy Rule 3001 are not automatically disallowed. LVNV also argues that the Debtor has not raised a "substantive" objection pursuant to 11 U.S.C. § 502(b) and that, as a result, the Objections should be overruled and LVNV's claims should be allowed. In support of its position, LVNV cites the following cases in the Response: In re Taylor, 289 B.R. 379 (Bankr.N.D.Ind.2003) (for the proposition that claim objections must be couched in one of the nine statutory grounds enumerated in § 502(b)); In re Cluff, 313 B.R. 323 (Bankr.D.Utah 2004) (for the proposition that a claim objection based solely on a creditor's failure to comply with Bankruptcy Rule 3001 is invalid); In re Burnett, 306 B.R. 313 (9th Cir. B.A.P. 2004) (for the proposition that a claim should not be disallowed solely based on a creditor's failure to comply with Bankruptcy Rule 3001); In re Kemmer, 315 B.R. 706 (Bankr.E.D.Tenn.2004) (same); Szatkowski v. Meade Tool & Die Co., 164 F.2d 228 (6th Cir.1947) (for the proposition that amendments to proofs of claim should be freely allowed); In re G.L. Miller & Co., 45 F.2d 115 (2d Cir. 1930) (same); In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir.1997) (for the proposition that claims should not be dismissed without giving the claimant an opportunity to amend); and In re Armstrong, 320 B.R. 97 (Bankr.N.D.Tex.2005) (for the proposition that only substantive objections based on § 502(b) provide a basis for disallowance). Notably, LVNV does not cite this Court's published opinion in Gilbreath or the published opinion of the Honorable Gray H. Miller, United States District Judge for the Southern District of Texas, in eCast Settlement Corp. v. Tran (In re Tran), 369 B.R. 312...