In re John S. Pursley & Kathryn L. Pursley

451 B.R. 213

In re John S. PURSLEY & Kathryn L. Pursley, Debtors.John S. Pursley & Kathryn L. Pursley, Movants

v.eCAST Settlement Corporation, Respondent.In re Elana S. Crane, Debtor.Elana S. Crane, Movant,

v.eCAST Settlement Corporation, Respondent.In re Garry D. Hamby, Debtor.Garry D. Hamby, Movant,

v.eCAST Settlement Corporation, Respondent.

Nos. 10–40882–JTL

10–40958–JTL

09–40967–JTL.

United States Bankruptcy Court, M.D. Georgia, Columbus Division.

June 20, 2011.

Fife M. Whiteside, Fife M. Whiteside, PC, Columbus, GA, for Debtors.Ron S. Iddins, Ron S. Iddins, Attorney at Law, Columbus, GA, for Debtor.

Memorandum OpinionJOHN T. LANEY, III, Chief Judge.

These matters come before the Court on three objections to claim filed in three separate cases. John and Kathryn Pursley filed their objection on December 20, 2010; Elana Crane filed her objection on January 21, 2011; and Garry Hamby filed his objection on November 8, 2010. The objections share a common claimant in eCAST Settlement Corporation, and the matters share the same issues. The Court heard joint oral arguments on the objections on March 8, 2011. At the conclusion of the hearing, the Court took the matter under advisement and allowed the parties to file briefs. For the reasons set forth below, the Court sustains all three of the debtors' objections to claim.

Background

The proofs of claim at issue were filed by eCAST Settlement Corporation as the putative assignee of three debts. For the Pursley and Crane matters, the putative assignor is Citibank (South Dakota), N.A., and for the Hamby matter, the putative assignor is Chase Bank USA, N.A. All three debtors have these putative assignors listed in their schedules. At the hearing, eCAST's attorney said that all debts at issue were purchased postpetition.

The three proofs of claim at issue include similar information and attachments. Each identifies eCAST as assignee of the original creditor, and each claimed amount substantially matches the amounts scheduled (and in the Pursleys' case, the amount matches exactly). Attached to each proof of claim are copies of written blanket assignments of accounts.¹ In the cases of Crane and the Pursleys, the assignment identifies the assignor and assignee and states that Citibank (South Dakota), N.A., assigns to eCAST all “right, title and interest in and to the Accounts described in Exhibit 1 and the final electronic file.” No exhibit or printout from the electronic files was attached. Each of the documents is signed by a representative of Citibank.

In the Hamby case, the assignment identifies the assignor and assignee and states that Chase Bank USA, N.A., assigns to eCAST “all right, title and interest in and to (i) certain unsecured consumer line of credit accounts and consumer credit card accounts ... which are described on computer files furnished by the Seller to the Buyer on a monthly basis....” No printout of the computer file was attached. The document is signed by a Chase Bank USA, N.A., representative.

Also attached to the original proofs of claim are identical sheets labeled “Explanation Of Unavailable or Voluminous Documentation Not Attached,” which in relevant part states, “This claim arises from the use of a credit card debt. Documentation related to the account is voluminous and/or may no longer be available. A summary of the account information is provided.” The summaries of account include much of the same information which is on the claim itself but also include the open dates and charge-off dates of the accounts. At the bottom of each of these summaries is a paragraph stating, “Pursuant to paragraph 7 Official Bankruptcy Form 10, Proof of Claim, in lieu of attaching voluminous account documents, a summary of the account, compiled from the information contained in the account databases of [the assignor] and their agents, if any, is provided.”

During the period between the objections and this opinion, eCAST amended each of the proofs of claim. On December 16, 2010, eCAST amended its Hamby claim to add an Affidavit of Sale prepared by an authorized representative of Chase Bankcard Services, Inc., which states that based upon a review of Chase's records kept in the ordinary course of Chase's business, Gary Hamby had a credit card account with Chase that was sold to eCAST on or about October 15, 2009. The account is identified by the last four digits of the account number, and the affidavit identifies the account balance and date of last payment. Also attached to the amended claim are five consecutive account statements covering the period between February 22, 2009, and July 21, 2009, which saw the account balance go from $20,561.88 to $20,064.14 and evidenced no purchases. The statements show finance charges for that particular period and also show the daily period interest rates and annual percentage rates for that period.

On March 4, 2011, eCAST amended its Crane claim to include the affidavit of an authorized representative of Citibank (who is also a custodian of business records), which states that to the best of the representative's knowledge, “based on either personal knowledge or review of the business records” of Citibank, Citibank transferred Elana Crane's account to eCAST on or about September 28, 2010. The account is further identified by the last four digits of the account number, the last four digits of the debtor's social security number, the account opening date, the account's final balance, and the last payment date. On April 11, 2011, eCAST again amended this claim to include eight consecutive account statements covering the period between December 18, 2009, and August 17, 2010, which saw the balance go from $1,664.05 to $1,618.00 and which evidenced no purchases. The statements include information for that month's finance charges, periodic interest rate, and annual percentage rate. The account statements are from an entity called AT & T Universal Card, and there is otherwise no explanation of a connection between the statements and Citibank; the bottom right corner of the statements, however, do indicate that AT & T licensed its logo to Citigroup, Inc.

On March 4, 2011, eCAST amended its Pursley claim with an affidavit identical to the affidavit described above for the Crane proof of claim amendment, the only difference being Pursley's account information instead of Crane's. Also included are thirteen consecutive account statements covering June 2009 through June 2010, which saw the balance go from $4,035.32 to $4,510.47 and which evidences no purchases other than late fees and finance charges, which are labeled as purchases. The account statements include information on that month's finance charges, periodic rate of interest, and annual percentage rate. On April 1, 2011, eCAST again amended its claim to include a half-page Citi CashReturns Pre–Approved Application Form filled out by Kathryn Pursley. This half-page form states only background information about the debtor, such as name, social security number, date of birth, phone number, and date; the top of the form indicates that the back of the form (not included in the proof of claim) contains “[d]isclosures, which include rates, fees and other cost information.”

The debtors' original objections are identical in substance: all three parties objected to the sufficiency of the documentation attached to eCAST's proof of claim showing that eCAST is who the debtors owe money to. At the hearing on the objections and in the debtors' response brief,² it was clear that there were two separate issues: the sufficiency of the documentation and the identity of the real party in interest. Each of the debtors was present and willing to testify to the existence and validity of the underlying debt, to the identity of the original creditor, and to their never having heard of eCAST before filing their cases. The parties stipulated to the same. The attorney for the Pursleys stated at the hearing that he requested of eCast certain of the underlying documents evidencing the assignment and that he was willing to agree to a continuance so that eCAST could have time to comply. ECAST declined. ECAST was adamant that it had sufficiently complied with the Bankruptcy Rules, and case law interpreting the Rules, and thus did not have to supply any extra documentation. ECAST did not offer any evidence at the hearing.

In its brief and at the hearing, eCAST asked the Court to reconsider its reasoning and decision in In re Stephens, 443 B.R. 225 (Bankr.M.D.Ga.2010).

Conclusions of Law

The objections and briefs raise several issues: (I) Should In re Stephens be rejected? (II) Do the proofs of claim comply with the requirements of Federal Rule of Bankruptcy Procedure 3001 and Official Form 10 such that they are afforded prima facie validity? (III) If not, are they disallowable on the basis of noncompliance alone? (IV) Whether or not the proofs of claim comply with Rule 3001 and Official Form 10, what evidence, if any, is required upon objection to the claims such that the burden of persuasion to prove the claim shifts to the claimant?

I. In re Stephens

The Court in In re Stephens faced similar objections to proofs of claim, the main issue being in that case multiple assignments of single debts. The ultimate assignee acknowledged fatal defects in the chain of assignment. The Court wanted to call attention to a point of law many creditors and assignees were either unaware of or were ignoring:

“The ‘basic federal rule’ in bankruptcy is that state law governs the substance of claims.” Raleigh v. Illinois Dept. of Revenue, 530 U.S. 15, 20, 120 S.Ct. 1951, 147 L.Ed.2d 13 (2000) (quoting Butner v. U.S., 440 U.S. 48, 57, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979)). Thus, “[c]reditors' entitlements in bankruptcy arise in the first instance from the underlying substantive law creating the debtor's obligation, subject to any qualifying or contrary provisions in the Bankruptcy Code.” Id. (citing Butner, 440 U.S. at...