In re Richter

478 B.R. 30

In re Curtis Wayne RICHTER, Debtor.

No. 11–36558 MER.

United States Bankruptcy Court, D. Colorado.

Aug. 29, 2012.

Timothy R. Franklin, Aurora, CO, for Debtor.

U.S. Trustee, Denver, CO.

Douglas B. Kiel, Denver, CO, Trustee.

ORDER

MICHAEL E. ROMERO, Bankruptcy Judge.

THIS MATTER comes before the Court on the following:

• Verified Motion to Disallow Proof of Claim 3–1 (Docket No. 39) and Verified Motion to Disallow Proof of Claim 9–1 (Docket No. 47) (collectively,the “Verified Motions”) filed by debtor Curtis Wayne Richter (“Debtor”) on April 18, 2012; ¹

• Trustee's Response to Verified Motion to Disallow Proof of Claim No. 3–1 (Docket No. 50) and Trustee's Response to Verified Motion to Disallow Proof of Claim No. 9–1 (Docket No. 54) (collectively, the “Responses”) filed by Douglas B. Kiel, the standing Chapter 13 trustee (“Trustee”) on May 11, 2012;

• Reply to Trustee's Response to Verified Motions to Disallow Proof of Claim Nos. 3–1 and 9–1 (Docket No. 56) (“Reply”) filed by the Debtor on May 14, 2012; ²

• Trustee's Supplemental Response to Verified Motion to Disallow Proof of Claim No. 3–1 and Request for Hearing (Docket No. 84) (“Claim 3–1 Supplemental Response”) filed by the Trustee on August 2, 2012;

• Trustee's Supplemental Response to Verified Motion to Disallow Proof of Claim No. 9–1 and Request for Hearing (Docket No. 83) (“Claim 9–1 Supplemental Response”) filed by the Trustee on August 2, 2012; and

• Debtor's Motion to Strike (Docket No. 85) filed by the Debtor on August 2, 2012.

The Court has reviewed the pleadings and the pertinent statutory and case law, and finds and concludes as follows.

PROCEDURAL HISTORY

On November 11, 2011, the Debtor filed for relief under Chapter 13 of Title 11 of the United States Code (the “Bankruptcy Code”). The first date set for the meeting of creditors pursuant to 11 U.S.C. § 362(a)³ was December 27, 2011, and the meeting was held and concluded on that date. In accordance with Fed. R. Bankr.P. 3002(c), the deadline for non-governmental units to file proofs of claim in this case was March 26, 2012 (“Claims Bar Date”), or ninety days after the first date set for the meeting of creditors. On May 30, 2012, the Court entered its Order confirming the Debtor's Amended Chapter 13 Plan.⁴

The Debtor's Schedule F lists an undisputed debt to “Citi” in the amount of $6,764.00 for a “credit card account opened 7/95” for an account ending in “3013.” ⁵ On January 3, 2012, Oak Harbor Capital III, LLC (“Oak Harbor”) timely filed Proof of Claim No. 3–1 for an unsecured claim in the amount of $6,938.73 in connection with a credit card ending in “3013.” ⁶ Oak Harbor attached a one page “Account Summary” to Proof of Claim No. 3–1 identifying “CitiBank” as the card issuer and Oak Harbor as the creditor.⁷ Proof of Claim No. 3–1 is silent as to any transfer or assignment of the debt to Oak Harbor, and no other documentation was attached to the proof of claim.

The Debtor's Schedule F also lists an undisputed debt to “Bb And B/cbna” in the amount of $1,764.00 for a “Credit card account opened 6/07” for an account ending in “2243.” ⁸ On March 5, 2012, Portfolio Recovery Associates, LLC, successor in interest to Citibank, N.A. (Bailey, Banks & Biddle) by PRA Receivables Management, LLC, agent” (“Portfolio Recovery”) timely filed Proof of Claim 9–1 for an unsecured claim in the amount of $1,845.03 in connection with a credit card ending in “2243.” ⁹ Portfolio Recovery attached a one page “Account Summary” to Proof of Claim 9–1, asserting the original creditor was Bailey, Banks & Biddle, the account was purchased from CitiBank, N.A. on January 5, 2012, and the current account owner is Portfolio Recovery. ¹⁰ Also attached to Proof of Claim No. 9–1 is a one page Limited Power of Attorney between Portfolio Recovery and its designated attorney-in-fact, PRA Receivables Management, LLC. No other documentation was attached to the proof of claim.

The Debtor's Verified Motions seek disallowance of the two proofs of claim on two grounds: 1) the claims should be disallowed under In re Kirkland¹¹ because each claim is based upon a writing (a credit card agreement), but the entity filing the claim failed to provide an original or duplicate of the writing and failed to provide a statement of circumstances surrounding loss or destruction of the writing supporting its debt; and 2) the claims should be disallowed because the claimants failed to attach copies of an assignment and lack standing to file the claims, as required under Fed.R.Civ.P. 17.¹² The Debtor asserts the entities filing the claims only provided an account summary “created by the entity that filed the claim, not the original creditor in violation of Fed.R.Bankr.P. 3001(c).” ¹³

In the Responses, the Trustee argues after In re Reynolds,¹⁴ objections to claims based on lack of documentation should not be upheld and the Debtor's reliance on Kirkland is misguided.¹⁵ The Trustee contends under “ Reynolds the remedy for non-compliance with F.R.B.P. 3001(c)(2)(D) is not disallowance of the claim. The claim objected to ... should be allowed.” ¹⁶ The Trustee's Responses point to the similarity of the proofs of claim to the claims listed on the Debtor's Schedule F. In the Responses, the Trustee did not address issues of standing for Oak Harbor or Portfolio Recovery.

The Debtor's Reply argues the Trustee does not have standing to object to the Debtor's Verified Motions because such an objection to disallowance of unsecured claims falls outside the scope of § 1302(b). The Debtor also argues Reynolds is not binding precedent on this Court because it was entered in a different division.

On May 21, 2012, the Court entered its Order to Show Cause, finding “the [Verified Motions], on their faces, are improper under the rationale set forth in Reynolds. ... The Court agrees with and hereby adopts the analysis and holding in Reynolds.” ¹⁷ The Court ordered the Debtor to respond showing why the Verified Motions should not be dismissed in light of Reynolds.¹⁸ The Debtor timely filed his Response to the Order to Show Cause, in satisfaction of that Order, arguing the Debtor did object to the lack of documentation under Kirkland, but also made a substantive objection under § 502(b) by challenging the standing of Oak Harbor and Portfolio Recovery as the real parties in interest.¹⁹

On July 12, 2012, the Court held a preliminary hearing on the Verified Motions and the Responses. Under the plain language of § 1302(b)(3), the Court determined a Chapter 13 trustee has standing to oppose a debtor's objections to proofs of claim when appropriate, pursuant to Fed. R. Bankr.P. 3007 and Local Bankruptcy Rule 3007–1(a).²⁰ Based on the representations and arguments of counsel on the record, the Court found, on the facts of this case, the Trustee has standing to file the Responses to the Verified Motions. ²¹However, the Court noted the instant dispute is unusual because the Trustee, rather than the actual claimants, objected to the Debtor's Verified Motions and is asserting a defense on behalf of the claimants.

During the hearing, counsel for the Trustee, recognizing the difficult task of producing evidence that Oak Harbor and Portfolio Recovery are the real parties in interest, proposed to file motions for orders to show cause forcing the claimants to join this contested matter and provide documentation evidencing the standing of each claimant. Counsel for the Trustee advised the Court the Trustee would either file a motion requesting orders to show cause with authority, or if the Trustee concluded there is no authority the Trustee would withdraw the Responses. The Court ordered “prior to the Court scheduling an evidentiary hearing on the remaining issues between the parties, the Court determines the Trustee shall have up to and including August 2, 2012 to file either a motion requesting orders to show cause with supporting legal authority, or notices of withdrawal of the Trustee's respective responses to the Debtor's Verified Motions.” ²²

The Trustee did not file either of these pleadings. Rather, on August 2, 2012, the Trustee filed the Claim 3–1 Supplemental Response and the Claim 9–1 Supplemental Response. With respect to Proof of Claim No. 3–1, the Trustee reiterated the arguments in his original Response regarding Reynolds, and added Fed. R. Bankr.P. 3001 controls the determination on the validity of a claim and the rule does not require proof of assignment of the claim. ²³ In addition, the Trustee requested “an evidentiary hearing to ascertain whether substantive grounds exist to disallow creditor, [Oak Harbor's] claim, and to allow the creditor a last opportunity to appear to defend its claim.” ²⁴ Although not directly stated in the Claim 3–1 Supplemental Response, the Trustee essentially seeks a hearing to determine whether the Debtor's challenge to Oak Harbor's standing constitutes “substantive grounds” under § 502(b).²⁵ In response to this pleading, the Debtor filed his Motion to Strike.

With respect to Proof of Claim No. 9–1, the Trustee repeated the arguments in his original Response regarding Reynolds, and further asserted Portfolio Recovery had amended Claim No. 9–1 and attached certain documentation evidencing the ownership of the debt and post-petition assignment from Citibank, N.A. to Portfolio Recovery.²⁶ Upon review of claims register in this case, the Court takes judicial notice Portfolio Recovery filed Amended Proof of Claim 9–2 on August 1, 2012 with, additional documentation attached. The Trusteeargues “[t]he amendments made to the proof of claim render all of the debtor's objections to the claim moot.” ²⁷ The Trustee also requested this Court set “an evidentiary hearing to ascertain whether substantive grounds exist to disallow creditor, Oak Harbor Capitol III, LLC's [sic] claim, and to allow the creditor a last opportunity to appear to defend its claim.” ²⁸ The Debtor did not respond to this pleading.

DISCUSSION

When an...