Case Information
IN TH E U NITE D STAT ES BA N K R UPTCY C O U R T FO R TH E SO UTHERN DISTRICT OF TEXAS H O U STO N DIV ISIO N ENTERED 07/10/2017 IN ItE: j
j JUAN C.VEGA CA SE N O . 15-34014 M Y RN A A .VEGA j
j j
DEBTORS
M EM O R AN DU M O PINIO N A N D O RD ER O N D EBTO R S' E M ER G EN CY O BJECTIO N TO CLA IM N O . 1-3 O F LIN C O LN A UTO M O TIV E FIN AN C IA L
SER V ICES
Before the Court is Debtors' Emergency Objection to the Proof of Claim No. 1-3 of Lincoln Automotive Financial Services. (Docket No. 79). Debtors assert that by surrendering the vehicle, Lincoln Automotive Financial Services (çûlwincoln AFS'') proof of claim was satisfied in full. Debtors contest the amended proof of claim and request this court to disallow the claim in its entirety; seek to preclude Lincoln AFS from presenting any evidence in support of its am ended claim ; and request the Court to award Debtors' their attom ey's fees.
The Court finds Lincoln AFS'S am ended claim is valid. Lincoln AFS is not precluded from presenting evidence in support of its am ended claim . Lastly, the C ourt grants Debtor's request for attorney's fees.
The Court has jurisdiction over this proceeding pursuant 28 U.S.C. jj 1334 and 157.
This is a core proceeding.
1. Statem ent of Facts On July 30, 20 l 5, Juan C. Vega and Myrna A.Vega CiDebtors'') tiled a Chapter 13 petition. (Docket No. 1).Lincoln AFS filed its original proof of claim on August 6, 2015 in the nmount of $20,936.77 for a leased 2014 Lincoln M KZ. (Claim No. 1-1). Lincoln AFS attached a document titled, itltemized Statement Required by Bankruptcy Rule 3001(c)(2)(A) as of Petition Date'' to its original proof of claim .The document provided'.
D ebtor N am e: Juan C. Vega and/or M yrna Vega A ccount N um ber'. 4030
Rem aining Paym ents'. $ 20,872.35 Late Charges: + $0.00 Fees: + $64.42 Other'. - $0.00 A m ount of Claim : $ 20,936.77 (Claim No. 1-1). Lincoln AFS attached no other documents in support of its calculations, or indicate how the $64.42 fee was incurred. Debtors did not object to this claim.
Thereafter, Debtors surrendered the vehicle to Lincoln AFS on October 16, 2015. (Exhibit No. 15). The vehicle was reconditioned and repaired before it was sold at auction on November 18, 2015. (Exhibit No. 18). On December 1 1, 2015, three days after the bar date for tiling proofs of claim , Lincoln AFS filed an nmended proof of claim for a deficiency balance of $21,682.19. (Claim No. 1-3). Lincoln AFS attached a document titled, ûtltemized Statement Required by Bankruptcy Rule 3001(c)(2)(A) as of Petition Date'' to the nmended proof of claim, which provided;
Debtor N am e: Juan C . V ega and/or M yrna V ega A ccount N um ber'. 4030 $17,671.40 + $0.00
Remaining Paym ents'.
Excess M iles/W ear Tear: + $0.00
lnterest'. Late Charges: + $0.00 Fees: + $4,010.79 O ther'. - $0.00
Am ount of Claim : $21.682.19 Again, Lincoln AFS failed to attach documents explaining the fees in the (Claim No. amended detk iency am ount. On January 3, 2017, January 12, February 3, and Febnzary 15, Debtors' attorney em ailed opposing counsel requesting docum ents to support Lincoln AFS'S calculation of the detkiency claim. (Exhibits 7-10).Lincoln AFS never responded. On March 6, 2015, Debtors fled an emergency Objection to the amended proof of claim. (Docket No. 79).
11. lssues Presented Debtors object to Claim No. 1-3 on four grounds: First, Debtors assert that the claim should be disallowed in its entirety, because no supporting documents w ere attached to the proof of claim in compliance with Bankruptcy Rule 3001(c), and Lincoln AFS should be precluded from presenting evidence in light of its failure to produce docum ents. Second, the claim was satisfied in full by Debtors' surrender of the vehicle. Altem atively, Debtors assert that the sale of the vehicle w as not com m ercially reasonable. Third, the am ended proof of claim does not relate back to the original proof of claim , and thus is not tim ely. Fourth, Lincoln AFS lacks standing to assert the claim, because it cannot establish ownership of the debt. (Docket No. 79). ln addition, Debtors request that the court award attom ey's fees pursuant to Fed. R. Bankr. P. 3001(c)(2)(D)(ii). Lincoln AFS denies all Debtors' objections.
II. Conclusions of Law A. Proof of Claim Does Not Comply W ith Rule 3001(c)(2)(A)
An unsecured creditor m ust file a proof of claim for the claim to be allowed. Fed. R. Bankr. P. 3002(a). Rule 3001(c) requires that an itemized statement identifying the interest, fees, expenses or other charges accrued before the petition was filed shall be included with the claim , in addition to the principal amount. See Fed. R. Bankr. P. j3001(c)(2)(A). A proof of claim executed and filed in accordance with these rules constitutes prima facie evidence of the validity and amount of the claim. Fed. R. Bankr. P. j 3001(9. Failure to attach supporting documents to a proof of claim violates Bankruptcy Rule 3001(c).In re Gilbreath, 409 B.R. 84, 1 15 (S.D. Tex. 2009) (citing In re Hight, 393 B.R. 484 (S.D. Tex. 2008:.
Assuming the proof of claim was proper under Rule 3001, Lincoln AFS would have been entitled to a prima facie evidentiary effect under Rule 300149. Although Lincoln AFS checked the box on the proof of claim indicating their claim included interest or other charges, it failed to include any account statem ents, or to explain the fees and charges listed in its proof of claim . Lincoln AFS completely failed to file a proper claim in accordance with the rules. Therefore, Lincoln AFS has the burden to prove by a preponderance of the evidence the validity and nm ounts of its claim . A m ended Proof of Claim Is V alid
B.
Debtors object to the amended claim on two grotmds: first, Lincoln AFS lacks standing because it cannot establish ownership of the claim , an secon , 1 d d the claim should be disallowed in its entirety because the amended claim was not timely and does not relate back to the original claim. The Court finds Debtors' objections fail.
Am endm ents to tim ely filed proofs of claim are liberally permitted to lûctlre a defect in the daim as originally tlled, 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 Kolstad, 928 F.2d 171, 175 (5 C r. th i 1991) (citing In re International Horizons, fnc., 751 F.2d 121 3 (1 1th Cir. 1985:. Bar dates do not inescapably limit creditors to incorrect claim s. Nevertheless, courts that authorize amendments must ensure that corrections or adjustments do not present wholly new grotm ds of liability. 1d.
Lincoln AFS'S amended proof of claim does not assert a new ground for liability; instead it pleads a new theory of recovery due to changed circum stances based on the same car lease. l Debtors presented no evidence or argument on this issue .
Lincoln AFS'S theory of recovery at the tim e it filed its original claim listed the rem aining paym ents left on the lease plus a fee on the account. Although it did not seek recovery under Provision No. 29 of the lease agreem ent titled, ûçvoluntary Early Term ination and Retum the V ehiclei'' w hen Debtors surrendered the vehicle to Lincoln A FS circum stances changed. Lincoln AFS appropriately fled an am ended proof of claim to reflect this change. Both claim s arise from Debtors lease agreem ent; therefore, Lincoln AFS has ownership and standing of the jl. 4j.--C a m .
C . Lincoln A FS M et Its Burden of Proof
Debtors assert that the sale of the vehicle was not comm ercially reasonable. Debtors further contend that Lincoln AFS'S original claim was satisfied in full upon surrender of the vehicle.
The ktvoltmtary Early Tennination and Return the Vehicle'' provision in the original lease states :
You may terminate this lease early, if You are not in default, by returning the Vehicle to Lessor unless Finance Company designates another place. You must pay the following; (a) the amount by which the Unpaid Adjusted Capitalized Cost exceeds the Vehicle's Fair Market W holesale Value, plus (b) all other amounts then due under the lease (except for excess wear and use and mileagel..a//erncffve/y, You may choloqse to satisfy Your financial obligation under this section upon Vehicle return if You pay the following: (a) the unpaid remaining Monthly Payments, plus (b) any charges for excess wear and use and mileage, plus (c) a11 other amounts then due under the lease. (Exhibit No. 7).
Alan Niemeyer, an employee of Ford M otor Credit Company (dtFord M CC''), testifed the defciency balance was calculated as follows:
Amount ow ed on the Car Original Am ount owed on the Account: $50,857.46 Adj. Depreciation: - 9.486.06 Rem aining A ccount Balance: $41,371.40 Proceeds from Sale of Vehicle: - 23-700.00 $-17,671.40 Adjusted Capital Remaining Cost of Vehicle: Fees dr Other Expenses: Extension Fee: $64.42 Repair & Reconditioning Fees; +237.50 Repair/Reconditioning Fee: $207.50
Labor Fee: $30.00 Sale Fee: +135.00 V ehicle Repossession Fee: +340.00 +425.00 Vehicle Acquisition Fee: Pre-petition Interest'. +2.808.87 Total Fees & O ther Expenses; 4 010.79 Defciency Amount:
Adjusted Capital Remaining Cost of Vehicle: $17,671.40 Total Fees & Other Expenses: + 4.010.79 Total Defciency Amotmt: $ 21- 682.19 Although Debtors assert that the sale of the vehicle was not comm ercially reasonable, Debtors offered no evidence in support of this allegation. The surrender of a vehicle in bankmzptcy does not automatically satisfy a creditor's claim in full. A creditor must offset the am ount of the original claim by the value of the vehicle at the tim e of disposition. The price obtained through an actual sale detennines the amount of a creditor's deficiency claim . See In re Breaux, 410 B.R. 236, 242 (W .D. La. 2009) (Calculating the nmount of the unsecured deficiency claim by subtracting the net proceeds from the sale of the vehicle from the claim). Lincoln AFS'S detailed record of the transactions on Debtors account satisfies its burden. Therefore, this Court finds Lincoln AFS'S claim is valid and enforceable against Debtors.
D . The Court A w ards Debtors' A ttorney's Fees
D ebtors request this Court to preclude Lincoln A FS from presenting any evidence in support of its amended claim. Fed. R. Bankr. P. 3001(c)(2)(D)(i).Furthermore, Debtors request this Court award their reasonable and necessary attorney's fees and costs caused by Lincoln AFS'S failure to provide the required information. Fed. R. Bankr. P. 300 l(c)(2)(D)(ii). The Rule 3001 now states:
(D) lf the holder of a claim fails to provide any information required by this subdivision (c), the court may, after notice and hearing, take either or both of the following actions;
(i) preclude the holder from presenting the omitted information, in any form, as evidence in any contested matter or adversary proceeding in the case, unless the court determines that the failure was substantially justified or is hannless; or (ii) award other appropriate relief, including reasonable expenses and attomey's fees caused by the failure.
Fed. R. Bankr. P. 300 1(c)(2)(D). Courts have discretion to determine whether to bar claimants use of the om itted inform ation in any contested matter or adversary proceeding, or to im pose other appropriate relief after notice and hearing. ln re Harris, 492 B.R. 225, 228 (S.D. Tex. 2013).
Lincoln AFS presented detailed records in support of its amended claim and satisfied its burden of proof. This Court tinds that the om itted inform ation was harm less, and Lincoln AFS is not precluded from using the infonuation under Fed. R. Bankr. P. 3001(c)(2)(D)(i). Debtors' request is denied.
Debtors request an award of attorney's fees tmder Bankruptcy Rule 300 l(c)(2)(D)(ii). That rule has two requirem ents: first, the fees incurred by Debtor were Eûcaused'' by the creditor's failure to provide inform ation; and second, fees and expenses to be awarded m ust be reasonable. In re Dunlap, 2013 Bankr. LEXIS 4165, 3-5, 2013 W L 5497047 tBank.r. D. Colo. 2013).
The Court recognizes that Debtors incurred attomey's fees and expenses objecting to the amended proof of claim caused by Lincoln AFS'S failure to comply with Rule 3001(c). Debtors filed a Notice of Attorney Invoices on April 21, 2017,detailing attorney's fees incurred for drafting the objection to the claim, contacting opposing counsel, and preparing for trial (Docket No. 93). The Court awards Debtors' attorney's fee of $4,890.00.
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Signed at Houston, Texas on this 10 day of , 2017. - [*] H ON RA N K . BRO W N UN ITED S ATES BAN K RU PTCY JUD GE