OPINION & ORDER SUSTAINING DEBTOR’S OBJECTION TO PROOF OF CLAIM #2 PURSUANT TO FRBP 3001 WITHOUT PREJUDICE
Before the Court is debtor Kerman J. Minbatiwalla’s (“Debtor”) Objection to Proof of Claim (“Claim”) # 2, filed by J.P. Morgan Chase Bank, N.A. (“Chase”) (the “Objection”). (ECF # 15.) Debtor objects to the claim, alleging that Chase did not attach any writing to the Claim demonstrating its interest in the property in violation of Fed. R. Bankr.P. 3001(c) and (d), and failed to include information required by Official Bankruptcy Form B 10. The Debtor seeks to expunge Claim #2, and to require Chase to pay all reasonable legal fees and expenses incurred by his attorney. For the reasons explained below, the Court sustains the Debtor’s Objection to Claim #2 without prejudice. The proper creditor may file an amended proof of claim pursuant to 11 U.S.C. § 502(j) within 21 days of the entry of this order. If Chase holds the note and mortgage, it must affix documents to the proof of claim establishing that relationship. Alternatively, if Chase is not the holder, it must give the holder notice of this 21-day deadline and file a declaration with the Court that such notice has been given. The Debtor has 14 days after any amended proof of claim is filed to object. The Court denies Debtor’s request for legal fees and expenses.
BACKGROUND
The Debtor filed a voluntary chapter 13 petition on September 22, 2009. (“Peti
According to the Debtor’s Schedule D, the Property is subject to two liens, held by “Chase Mortgage” ($832,319.13) and “Chase Home Equity Line of Credit” ($177,932.94), linked to account numbers 1704021981 and 00429228620649, respectively. The original Schedule D did not indicate whether these loans were “unliqui-dated,” “contingent” or “disputed,” but on November 13, 2009, Debtor amended his Schedule D to list the Chase Mortgage and the Chase Home Equity Line of Credit claims as “disputed.” (ECF # 13.) Debt- or’s Amended Plan, filed on the same day, lists “Chase Line of Credit” and “Chase Mortgage” as the Secured Creditors to whom arrearages, “as per loss mitigation,” are owed. The Debtor’s original proposed Plan listed the same secured creditors holding claims against the Property, with no arrearages owed and amounts to be paid “per contract.” (ECF ##5, 12.) Debtor’s Form 22C, Chapter 13 Statement of Current Monthly and Disposable Income, listed creditors holding secured claims against the Property as “Chase” and “Chase Mortgage.” (ECF # 2.)
On December 3, 2009, Chase Home Finance, LLC, as servicer for U.S. Bank National Association, as Trustee, successor in interest to Wachovia Bank National Association, as Trustee for GSR Mortgage Loan Trust 2005-6F (“Chase Home Finance, LLC”), filed a proof of claim in the amount of $842,098.03, including prepetition arrears, secured by the Property (Claim # 8). Claim # 8 includes: (1) two pages of a Recording and Endorsement Cover Page (between Debtor, the joint owner of the Property, and JP Morgan Chase Bank); and (2) a Consolidation, Extension, and Modification Agreement between Debtor, the joint owner, and JP Morgan Chase Bank, with various exhibits, including (i) the consolidated Note and
JP Morgan Chase Bank N.A. filed Claim #2 on October 19, 2009, asserting a secured claim in the amount of $178,257.72, including prepetition arrears of $123.45, against the Property. Claim # 2 consists of two documents: Official Form 10, and a two-page itemized statement entitled “Exhibit A.” Official Form 10, signed by Gary D. Crockett, indicates that the claim is for a loan secured by real estate in the amount of $178,257.72, including $123.45 in arrears, plus interest or other charges. Exhibit A lists the case number, the name of the Debtor, the last three digits of the “Loan Number,” and a summary list of the principal, interest, and late charges. The summary breaks down the claim into $177,432.94 owed on the principal, $701.33 in interest, and a $123.45 arrearage claim. The addresses for disbursements and correspondence shown on Claim # 2 are different from the addresses listed on the Debtor’s (original and amended) Schedule D. The “Loan Number” listed on Exhibit A to Claim # 2, “XXXXXXXX 649,” corresponds to the last three digits and the number of characters in the “Account Number” on the Debtor’s (original and amended) Schedule D (00429228620649), removing the two leading zeros.
On October 22, 2009, Debtor’s counsel requested documentation from Chase supporting Claim # 2. (See ECF # 15.) In the letter, counsel indicated that Chase only attached “Exhibit A” to the claim, showing a summary, arrearage and post-petition chart. (Id.) In addition, Debtor’s counsel requested that (a) Chase forward any missing pages from the Claim, and (b) advise which entity currently holds the note and mortgage and whether or not there have been any assignments. (Id.) According to the Debtor, Chase has not responded to the request. On November 24, 2009, Debtor objected to Claim #2. (ECF # 15.) Chase has not responded to the Objection. On January 14, 2010, the Court held a hearing on Debtor’s Objection to Claim # 2. No attorney for Chase appeared at the hearing.
DISCUSSION
A. Standing to File a Proof of Claim
To file a proof of claim, a claimant must be a “creditor or the creditor’s authorized agent.” Fed. R. BaNKR.P. 3001(b). A “creditor” is “an entity that has a claim
“[The] Bankruptcy Code and Fed.R.Civ.P. 17 each have liberal standing provisions, designed to allow a party to appear as long as it has a direct stake in the litigation under the particular circumstances.”
In re Conde-Dedonato,
An assignee of a note and mortgage also has standing to file a proof of claim.
Id.
at 251. In New York State, assignments can be effected solely by the transfer of the relevant note and mortgage.
See
N.Y. Real PropeRTY Law § 244 (“A grant takes effect, so as to vest the estate or interest intended to be conveyed, only from its delivery; and all the rules of law, now in force, in respect to the delivery of deeds, apply to grants hereafter executed.”);
see also Deutsche Bank Nat’l Trust Co. v. McRae,
No. 36701(TJW),
Courts require an Affidavit from someone with personal knowledge establishing facts supporting standing, or possession of the original note and mortgage to establish standing in a state court foreclosure action and in a motion to lift the automatic stay in bankruptcy court under 11 U.S.C. § 362(d).
See Mortgage Elec. Registration Sys., Inc. v. Coakley,
Similarly, in
In re Hayes,
the court found that an alleged trustee of an entity apparently related to an alleged assignee of a note and mortgage had no standing to lift the automatic stay.
Hayes,
These principles apply with equal force here. Chase has the burden of establishing its standing. Claim #2 does not attach evidence establishing Chase’s standing as loan servicer or as the holder of the note and mortgage. Whatever its reasons, Chase ignored the written requests from Debtor’s counsel for evidence of its standing, and did not respond to the Debtor’s Objection to Claim #2. Therefore, Chase has failed to present evidence necessary to demonstrate that it is either the servicer, note and mortgage holder, or assignee such that it has standing to bring Claim # 2.
B. Evidence Required to Support Proofs of Claim
Nor has Chase has met its eviden-tiary burden under the Bankruptcy Code and Rules to substantiate its proof of claim. Unless a proof of claim is properly executed and filed in accordance with the rules, the proof of claim does not constitute prima facie evidence of the validity and amount of the claim. See Fed. R. BankrP. 3001(f).
1. Burden of Proof for Claims
“To overcome this prima facie evidence, the objecting party must come forth with evidence which, if believed, would refute at least one of the allegations essential to the claim.”
Sherman v. No-vak (In re Reilly),
Rule 3001 requires a claimant to attach supporting documentation to a proof of claim. Rule 3001(c) provides that “[w]hen a claim, or an interest in property of the debtor securing the claim, is based on a writing, the original or a duplicate shall be filed with the proof of claim. If the writing has been lost or destroyed, a statement of the circumstances of the loss or destruction shall be filed with the claim.” Fed. R. BankrP. 3001(c). Rule 3001(d) provides that “[i]f a security interest in property of the debtor is claimed, the proof of claim shall be accompanied by evidence that the security interest has been perfected.” Fed. R. BankrP. 3001(d). In addition, Item 7 on Official Bankruptcy Form B 10, sets forth the content and format for proofs of claim, and instructs creditors as follows:
Attach redacted copies of any documents that support the claim, such as promissory notes, purchase orders, invoices, itemized statements of running accounts, contracts, judgments, mortgages, and security agreements. You may also attach a summary. Attach redacted copies of documents providing evidence ofperfection of a security interest. You may also attach a summary.
Failure to attach the documentation required by Rule 3001 will result in the loss of the
prima facie
validity of the claim.
In re Lundberg,
No. 02-34542(LMW),
2. Level of Documentation Required of Creditor for Prima Facie Validity of a Claim
The level of documentation required to establish the
prima facie
validity of a claim which purportedly has been assigned is the subject of much jurisprudence. State law principles and the Uniform Commercial Code (“UCC”) govern what is required to effectuate an assignment.
4
Significantly more cases interpret the requirements for claims associated with credit card receivables and promissory notes as opposed to secured mortgage claims. While courts have typically imposed more stringent requirements for documentation to support mortgage claims than for unsecured claims, the jurisprudence involving non-mortgage claims is il
а. Level of Documentation Required to Support Prima Facie Validity of a Mortgagee’s Claim Where There Has Been an Assignment or A Servicing Arrangement
Courts are divided about documentation required to be attached to a proof of claim for a secured claim based on a mortgage to establish a
prima facie
case. Bankruptcy courts generally require (in accordance with Fed. R. BanKR.P. 3001(d)) evidence that the security interest has been perfected, but do not specify what that evidence should be.
See, e.g., In re Parrish,
Where there is an assignment, some courts additionally require the claimant to attach all writings on which the alleged assignment is based, including any modification agreements and assignments.
Long,
“The relationships between and among these entities may be understood internally by [alleged assignee], but it is the claimant’s burden to bring that information to the court. If the claimant is the original lender, the claimant can meet its burden by introducing evidence as to the original loan. If the claimant acquired the note and mortgage from the original lender or from another party who acquired it from the original lender, the claimant can meet its burden through evidence that traces the loan from the original lender to the claimant. A claimant who is a servicer must, in addition to establishing the rights of the holder, identify itself as an authorized agent for the holder. Here, [alleged assignee] might be the current holder of the debt- or’s note and/or mortgage or it might be the servicer for whoever the holder is, but it failed to prove either relationship.”
Id. at 720-21.
b. Level of Documentation Required for Prima Facie Validity of Credit Card Receivables
In the context of objections to claims based on credit card receivables, bankruptcy courts are split on the documentation required of an assignee to establish a
pri-ma facie
case where the claimant is not the original holder of a debt.
6
While, as
The range of documentation required by courts to be attached to proofs of claim to support the assignment of a credit card debt varies from summaries of the amount of debt owed (with the requirement that the creditor make available to the debtor additional documentation), to a signed copy of a written assignment specifically referring to the debtor’s account from the original holder of the debt to the purported assignee.
E.g., In re Kendall,
Courts taking a stricter approach require the claimant to attach a signed copy of an assignment to the proof of claim in order to constitute evidence of the validity and the amount of the claim.
See, e.g. In re Hughes,
On the other hand, in
In re Relford,
Judge Weil in
In re Porter,
However, if the creditor wishes its claim to survive an objection, the
Porter
court found that its obligations do not end at providing an account summary.
Id.
at 482-83. The court found that before an objector could object to a proof of claim accompanied by an “account summary sufficient to raise [the presumption, of
prima facie
validity as an initial matter],” “an objector must request a documentation review” to “test” the adequacy of the documentation behind the summary.
Id.
Failure of the creditor to respond to requests for documentation within two weeks after dispatch or communication of such request could strip any presumption of
prima facie
validity from the proof of claim and the objection could be sustained after a hearing on notice.
Id.
at 483. I have applied this standard in considering objections to
3. Role of Debtor’s Schedules
Even where the creditor fails to attach sufficient documentation to its proof of claim, where the debtor schedules a claim that is substantially similar to the claim at issue by the purported assignee, courts diverge on the effect on the validity of the claim. Most of the jurisprudence on this point is in the credit card context. Some courts find that where the debtor schedules the claim as undisputed, but then objects to the claim, the court will take judicial notice of the debtor’s schedules, and the burden of proof shifts to the debt- or to refute the claim even if the claim otherwise lacks
prima facie
validity for lack of sufficient documentation.
See In re Jorczak,
For example, the court in
In re Kincaid
indicated that while a creditor is required to provide documentation, it ultimately allowed the claim in reliance on the debtor’s schedules, holding that judicial notice of the schedules as evidence of a claim is sufficient proof where the schedules “are consistent with the amount set forth in the deficient claim and do not indicate that the debt is ‘disputed,’ ‘unliquidated’ or ‘contingent.’ ”
Kincaid,
Using another approach, the
In re Parrish
court sustained a debtor’s objection to the proof of claim based on lack of sufficient documentation, but because the debt- or acknowledged the debt was owed to some entity, and presumed there was still a lien on the real estate at issue, it gave the entity that filed a proof of claim “or whoever actually holds or services the claim against the debtor,” 20 days from the date of the order sustaining the objection “to file a proof of claim calculated in accordance with the factual findings made above.”
Parrish,
In not relying on the debtor’s schedules where the debtor initially scheduled a claim as undisputed, and then changed the designation to disputed, the
In re Heath
court acknowledged that bankruptcy schedules can constitute admissions under Fed.R.Evid. 801(d)(2), but “amendments to bankruptcy schedules are permitted ‘as a matter of course’ any time before a case is closed.”
In re Heath,
4. This Court’s Approach to Mortgage Claims
The Court concludes that in the mortgage context, the creditor may initially attach only a summary of its claim, containing the debtor’s name, account number, the prepetition account balance, interest rate, and a breakdown of the interest charges, finance charges and other fees that make up the balance of the debt. If the creditor is an assignee, it must also provide an affidavit attesting to the assignment of the note and mortgage. Upon request of the debtor, the creditor has an obligation to provide additional documentation underlying its summary and affidavit (such as the original note and mortgage, or a written assignment), within two weeks after dispatch or communication of such a request, or the debtor can file an objection based on a lack of adequate documentation.
With respect to the effect of the debtor’s initially scheduling the claim
C. Effect of a Claim Lacking Prima Facie Validity
For the reasons explained below, the Court finds that Chase’s failure to attach documentation to its Claim #2 and respond to the Debtor’s information requests is fatal to Claim # 2.
Courts, also mostly in the credit card context, disagree whether, and under what circumstances, the failure to attach sufficient documentation to a proof of claim can result in disallowance of a claim on procedural grounds. Bankruptcy Code § 502(b) prescribes nine categories of claims which will be disallowed, including that “(1) such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.” 11 U.S.C. § 502(b). Section 502(b) does not identify “insufficient documentation” as a basis to disallow a claim. Courts in this Circuit have sus
On the other hand, at least one court has found that an objection based on insufficient documentation is a valid basis for disallowing a claim as “unenforceable against the debtor under applicable law” under 11 U.S.C. § 502(b)(1) because of a lack of compliance with Rule 3001.
In re DePugh,
This Court agrees with the rationale of Judge Weil in
Porter,
D. The Creditor Has Failed to Meet Its Prima Facie Burden Here, and the Claim Objection is Sustained, Without Prejudice, Upon the Filing of An Amended Proof of Claim by the Proper Party
Here it is not clear whether the claim was assigned to Chase, or whether Chase was the original party on the mortgage and the note; the creditor merely attached a summary signed by a representative of an entity .that has slightly different name than the creditor listed on the Debtor’s schedules.
See Parrish,
At the same time, it appears a lien exists on the Property, and the Debtor has scheduled some debt with a similar account number as that listed on the creditor’s summary attached to the Claim. Accordingly, like the courts in In re Parrish and In re Hayes, the Court sustains the Objection, without prejudice to reconsideration under 11 U.S.C. § 502(j) upon the filing of an amended proof of claim by the proper party within 21 days of the date of the entry of this Order. If Chase holds the note and mortgage, it must affix documents to the proof of claim establishing that relationship. Alternatively, if Chase is not the holder, it must give the holder notice of this 21-day deadline and file a declaration with the Court that such notice has been given. The Debtor has 14 days after any amended proof of claim is filed to object.
E. Debtor’s Counsel is Not Entitled to Attorney’s Fees
The Debtor’s attorney has only perfunctorily argued that he is entitled to recover attorney’s fees for his successful objection to the claim. While other courts have awarded attorney’s fees to the debt- or’s counsel as sanctions, under 28 U.S.C. § 1927, Fed. R. Banke.P. 9011, Fed. R. BaNKrP. 7054 and the inherent power of the court, where the debtor successfully objects to a proof of claim for insufficient documentation under Fed. R. Bankr.P. 3001, the conduct of the creditors in those situations has been particularly egregious.
See In re DePugh,
In order to merit the award of sanctions under 28 U.S.C. § 1927 and the inherent power of the court, the court must find bad faith.
See In re Green,
Where a debtor is forced to incur attorneys’ fees objecting to deficient proofs of claim and attending hearings for which the creditor’s counsel is woefully unprepared, it is not only the debtor that bears these costs but also every other unsecured creditor, as every penny used to pay a debtor’s attorney’s priority claim for fees necessarily reduces the amount available to pay other creditors. Additionally, the practice of filing skeletal proofs of claim and requiring the debtor to object before producing documents that should have been producedto begin with could, in the aggregate, cost Chapter 13 debtors substantial sums that could be put to better use proposing and maintaining payments on a feasible plan of reorganization.
In
re
DePugh,
Still, the DePugh court awarded sanctions because of “many compounded instances of misconduct,” including that the creditor “did not bother to attach the exhibits attached to its Response to its original proofs of claim; it neglected to review this Court’s or the District Court’s recently published opinions that were precisely on point with respect to the issues being addressed herein; it neglected to review this Court’s Notice and Order before amending Proof of Claim 6; and it filed a Response to the Debtor’s Objections that not only confuses the facts, but also ignores the applicable law in this District.” Id. at 144. The creditor also, “in violation of Local Rule 11.2, sent an attorney with virtually no knowledge of the Debtor’s case or [creditorj’s file to the hearing on the Objections.” Id. Debtor’s counsel does not allege similar conduct on the part of the creditor here.
Similarly, in
In re Roco Corp.,
the court noted that a request for attorney’s fees, while in its discretion, and while possible under Fed. R. BaNKR.R. 7054 as costs in a claim objection situation, required “a showing of bad faith,” and the power to award attorney’s fees was “reserved for exceptional situations.”
In re Roco Corp.,
Here, the Debtor has not demonstrated equally egregious conduct on behalf of the creditor, or its attorneys (none have appeared), nor can the court find that the creditor’s claims were entirely meritless and the party acted for improper purposes; the creditor has merely refused to come forward with evidence to meet its evidentiary burden under Fed. R. BANKR.P. 3001 and demonstrate its standing to bring the claim. Accordingly, Debtor’s request for attorney’s fees is denied.
CONCLUSION
For the reasons explained above, the Debtor’s objection to Claim #2 is SUSTAINED and the claim is EXPUNGED, without prejudice. The Debtor’s request for attorney’s fees is DENIED.
IT IS SO ORDERED.
Notes
. The U.S. Bankruptcy Court for the Southern District of New York adopted a Loss Mitigation Program "to function as a forum for debtors and lenders to reach consensual resolution whenever a debtor's residential property is at risk of foreclosure. The Loss Mitigation Program aims to facilitate resolution by opening lines of communication between the debtors' and lenders' decision-makers.” See Loss Mitigation Program Procedures ("Procedures”), Section I, Purpose, at 1; Instructions for Commencement of Loss Mitigation, at 1. (The Procedures, Commencement Instructions, and related documents can be found on the Court’s website at www.nysb.uscourts.gov in the section for Forms, Loss Mitigation.) In this case, Loss Mitigation was requested by checking the included box in the Model Chapter 13 Plan, which can also be found in the Forms section of the Court website.
. Chase had twenty-one (21) days to object to Loss Mitigation, but it did not do so. The Instructions for Commencement of Loss Mitigation provide that "[i]f no objection is filed, the debtor shall submit an order as soon as possible." The order, when entered by the Court, then formally commences the Loss Mitigation Period, imposing a time table and obligations on both a debtor and lender. Because no proposed order was submitted by Debtor's counsel in this case, the Loss Mitigation Period never commenced.
. Chase Home Finance, LLC is not listed as the Lender in any of the documents attached to Claim # 8. Except where Washington Mutual is identified as the Lender, the Lender is consistently listed as "J.P. Morgan Chase Bank, N.A." On November 30, 2009, Chase Home Finance, LLC filed an objection to confirmation of Debtor’s Amended Plan, contending that the Debtor’s Amended Plan fails to provide for prepetition arrears due to Chase Home Finance, LLC; it fails to provide for payment of post-petition mortgage payments, and it improperly subjects the lien of Chase Home Finance, LLC to valuation under 11 U.S.C. § 506(a). (ECF # 16.) On December 1, 2009, Debtor responded by letter, contending that "[a]n inspection of the claims register fails to reveal any proof of claim filed on behalf of Chase Home Loan, LLC,” and requests documentation concerning standing to object to the Amended Plan. (ECF # 17.) As noted supra, Claim # 8 was filed two days later, on December 3, 2009. As Debtor has not filed an objection to Claim # 8, the Court will not address the validity of Claim # 8 in this Opinion and Order.
. State law differs for perfecting interests in real and personal property. In the assignment context, courts have applied Article 3 of the UCC with respect to the assignment of promissory notes associated with mortgages. Courts appear to differ whether possession of the note is sufficient under UCC Article 3 for the holder to enforce a mortgage note. For example, in
In re Wells,
the court applied UCC § 3-204 and § 3-201 and found that a claimant did not have standing because “possession alone does not establish that the party [in possession of a mortgage note] is entitled to receive payments under it.”
In re Wells,
. As at least one court has noted, “[n]o doubt, the historical recovery experienced by unsecured creditors in consumer bankruptcy cases is so minimal that the expense of employing counsel to defend objections to their claims is not practical.”
In re Pritchett,
06-40077-JJR-13,
. A proposed amendment to Rule 3001 would require additional documentation to support a claim based on credit card receivables: "When a claim is based on an open-end or revolving consumer credit agreement, the last account statement sent to the debtor prior to the filing of the petition shall also be filed with the proof of claim.” Fed. R. Bankr.P. 3001(c)(1) (proposed August 2009). The Advisory Committee Note explains: "Subdivision (c). Subdivision (c) is amended to prescribe with greater specificity the supporting
See http://www.uscourts.gov/rules/proposed 0809/B K_Rules_Forms_Amendments.pdf.
. The Court respectfully disagrees with the courts that find the creditor’s signature sufficient alone to establish
prima facie
validity of a claim for the same reasons given by the court in
In re DePugh,
. The Objection to Claim # 2 was filed after the Debtor’s request for Loss Mitigation was seemingly being ignored by Chase. The Debt- or appears to acknowledge that there are two liens recorded against the Property, and even if Claim # 2 is expunged, the mortgagee’s lien will ride-through the bankruptcy, as a secured creditor is not required to file a proof of claim.
E.g., In r& Hogan,