In re Parsley
| Decision Date | 05 March 2008 |
| Docket Number | No. 05-90374.,05-90374. |
| Citation | 384 B.R. 138 |
| Parties | In re William Allen PARSLEY, Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
The matter before this Court began with a routine motion to lift stay, but has spiraled into a lengthy ordeal which has cost the parties substantial time, attorneys' fees, and costs. Over one year ago, on February 6, 2007, the Court sought a simple answer to a simple question — why was a motion to lift stay being withdrawn? The movant's attorney, rather than answer the question truthfully by admitting that the motion was based upon an incorrect payment history, attempted to conceal the truth from the Court — that the motion should have never been filed. This rather proceeding. During several hearings over the past year, the Court received evidence on a wide range of misconduct beyond this initial misrepresentation.
The parties are a mortgage loan servicer and its two law firms: (1) Countrywide Home Loans, Inc. (Countrywide), the loan servicer for Fannie Mae, the mortgagee of the Debtor's home loan; (2) McCalla, Raymer, Patrick, Cobb, Nichols & Clark (McCalla Raymer), the national law firm to which Countrywide referred the file after deciding to seek relief from the automatic stay; and (3) Barrett, Burke, Wilson, Castle Daffin & Frappier, L.L.P. (Barrett Burke), the Texas law firm which McCalla Raymer chose to draft, file, and prosecute the motion to lift stay. Their collective conduct caused this Court to issue two Show Cause Orders. This Memorandum Opinion discusses how their actions in the case at bar have shown a disregard for the professional and ethical obligations of the legal profession and judicial system.1
A. The importance of homesteads in Texas
In Texas, homesteads are sacrosanct. In re McDaniel, 70 F.3d 841, 843 (5th Cir.1995). Indeed, when it first took effect, the Texas State Constitution expressly forbade forced foreclosure sales on homesteads except for those creditors who held purchase money liens, mechanics' liens, or tax liens. Magallanez v. Magallanez, 911 S.W.2d 91, 94 (Tex.App.-El Paso 1995) (citing Tex. Const. art. XVI, § 50; TEX. PROP.CODE ANN. § 41.002 (Vernon 2006)).2 The public policy of Texas' liberal protection of homesteads is "to protect citizens and their families from the miseries and dangers of destitution." In re Bradley, 960 F.2d 502, 505 (5th Cir.1992) (quoting Franklin v. Coffee, 18 Tex. 413, 415-16 (1857)); In re Sorrell, 292 B.R. 276, 280 (Bankr.E.D.Tex.2002).
B. The Court's concern over withdrawn motions to lift stay on homesteads of debtors
Given this important, long-standing policy protecting homesteads in Texas, this Court makes every effort to ensure that motions to lift stay seeking to foreclose on homesteads contain accurate information regarding payments made by the debtor. When a debtor's homestead is the subject of a withdrawn motion to lift stay, this Court typically inquires why the movant wants to withdraw the motion. In some cases, there is an entirely reasonable explanation. For example, if, between the date of the filing of the motion and the date of the hearing on the motion, the debtor has cured the defaults that were the basis of the motion, it makes sense for the movant to withdraw the motion. Conversely, the reason for withdrawal is suspect if, after the date of the filing of the motion, the movant discovers that the motion contains inaccurate factual allegations about the debtor's default. It is also reasonable to withdraw the motion under these circumstances, but it is neither fair nor equitable for the movant to charge the debtor for the attorney's fees and costs incurred in connection a motion that was deficient when filed.
Unfortunately, such fee and cost shifting sometimes occurs without the movant informing the Court or the debtor. See Sanchez v. Ameriquest Mortgage Co. (In re Sanchez), 372 B.R. 289 (Bankr.S.D.Tex. 2007); Katherine Porter, Misbehavior and Mistake in Bankruptcy Mortgage Claims, U. of Iowa Legal Studies Research Paper No. 07-29, Nov. 6, 2007, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1027961. The debtor only discovers the additional obligation months or years later when, believing he has paid all of the monthly payments on the note, he learns that the debt is not entirely retired because these unfamiliar fees and costs, plus interest that has accrued thereon, remain unpaid. It is just such a scenario which this Court seeks to prevent by inquiring why a movant is withdrawing its motion to lift stay on a debtor's homestead.
If counsel for the movant concedes that the motion should not have been filed because it contained inaccurate allegations about payments and further represents that the movant will not shift the fees and costs to the debtor, this Court will typically sign the order allowing withdrawal of the motion and take no further action. However, if counsel for the movant does not concede that the motion contained inaccurate factual allegations, then this Court will inquire about the original basis for filing the motion to lift stay and why the movant is seeking to withdraw the motion.
C. The January 23, 2007 preliminary hearing on Countrywide's motion to lift stay
In the case at bar, the Court was faced with a motion to lift stay which the Debtor claimed contained factually inaccurate allegations about his payment history. Countrywide, the servicer of the Debtor's mortgage, retained McCalla Raymer, whose offices are in Roswell, Georgia. McCalla Raymer then sent the Debtor's file to Barrett Burke's Houston office with a request that Barrett Burke file a motion to lift stay, which Barrett Burke did on December 29, 2006 (the Motion). [Docket No. 26.]
At the preliminary hearing on January 23, 2007, Warren Lee (Lee) appeared on behalf of the Debtor and announced that, based upon payment information provided by the Debtor on the previous day, the Debtor's counsel of record, Christopher Morrison (Morrison), had filed a response opposing the Motion (the Response). [Docket No. 27.] According to Lee, the Response was based on information which the Debtor himself had received from Countrywide the previous day. The Response states:
One of Barrett Burke's attorneys, Yvonne Knesek (Knesek), also appeared at the preliminary hearing and informed this Court that she had just seen the Response a few minutes prior to the hearing. She stated that she would need to verify the payment history provided by the Debtor, but despite the misapplication of the Debtor's monthly payments, he was "still delinquent." [January 23, 2007 Hr'g Tr. 2:4-10.] Lee and Knesek represented that the parties wanted more time to ascertain the exact amount of the Debtor's arrearage; accordingly, they requested that the preliminary hearing be passed to a final hearing. The Court granted this request and set a final hearing for February 6, 2007.
D. The February 6, 2007 final hearing
At the final hearing on February 6, 2007, a different Barrett Burke attorney, Walter Thurmond (Thurmond), appeared for Countrywide and announced that Countrywide wished to withdraw the Motion.3 This Court, mindful that the Debtor's response set forth that the payment history was inaccurate, inquired whether the Motion contained allegations about the Debtor's payment history that were "just flat-out wrong." [Feb. 6, 2007 Hr'g Tr. 4:2-7.] Thurmond responded by saying that, "From what I have read in our system this morning and what I could tell from this, the answer is it was a good motion." [Feb. 6, 2007 Hr'g Tr. 4:8-10 (emphasis, added).] When this Court informed Thurmond that it had concerns that the Motion contained factual inaccuracies, Thurmond then represented to the Court that he would "check when I go back and see what the deal was with it." [Feb. 6, 2007 Hr'g Tr. 4:20-21.] Thurmond never informed the Court of the results of his research on the Motion. The Court was therefore left with two distinct impressions: (1) the Motion contained inaccurate allegations about the Debtor's payment history; and (2) Thurmond did not want to own up to these false allegations, and hoped that this Court would forget the whole matter.
Based upon the suspect comments made by Thurmond, this Court issued a show cause order on February 12, 2007 requiring Countrywide and its counsel to appear and show cause why they should not be sanctioned for their conduct relating to the Motion (the First Show Cause Order). [Docket No. 29.] Specifically, the First Show Cause Order stated:
This Court is concerned that Countrywide and/or its counsel have caused the Debtor to incur unnecessary legal fees and expenses by filing the [Motion] and then withdrawing it at the eleventh hour because it contained factual inaccuracies that Countrywide and its counsel should have discovered prior to the filing of the Motion if proper attention [had] been given to the Debtor's mortgage payment history and appropriate procedures.
The hearing on the First Show Cause Order...
To continue reading
Request your trial
-
In re Krause
... ... 23 See e.g. Nosek v. Ameriquest Mortgage Company (In re Nosek), 386 B.R. 374 (Bankr. D.Mass.2008), Aff'd in part, vac'd in part sub. nom 406 B.R. 434 (D.Mass.2009) and In re Parsley, 384 B.R. 138 (Bankr. S.D.Tex.2008). See also In re Cassell, 254 B.R. 687, 691 (6th Cir. BAP 2000) (holding that BR 9011 applies to proofs of claim). The Plaintiff has not sought sanctions against Wells Fargo either under BR 9011 or Code § 105(a) ... Moreover, even if the ... ...
-
Trevino v. HSBC Mortg. Servs., Inc. (In re Trevino)
... ... 69 Defs.' Ex. 53. 70 Defs.' Ex. 33 at 346. 71 Defs.' Ex. 32 at 330. 72 Defs.' Ex. 21. 73 Defs.' Ex. 39 at 708. 74 Defs.' Ex. 41 at 797. 75 ECF No. 313 at 26, ¶ 68. 76 Id. at 26, ¶ 70. 77 Id. at 27, ¶ 71. 78 See In re Parsley , 384 B.R. 138, 142 (Bankr. S.D. Tex. 2008). 79 See In re Lyon & Reboli, Inc. , 24 B.R. 152, 154 (Bankr. E.D.N.Y. 1982) (noting obligation of court under § 105 to pass upon propriety of salaries of insiders where there is potential for, and the prima facie appearance of, abuse); In re Panem ... ...
-
In re Padilla
... ... For a disturbing description of the state of mortgage servicing in chapter 13 cases, see In re Parsley, 384 B.R. 138 (Bankr.S.D.Tex.2008) ... 51. Under section 506(b), postpetition legal expenses may be allowed as part of a secured creditor's bankruptcy claim if three elements are satisfied: (1) the claim is an oversecured, allowed secured claim; (2) the fees are reasonable; and (3) the fees are ... ...
-
In re Countrywide Home Loans, Inc., 07-00204 TPA.
... ... 103, 107 (Bankr.E.D.N.Y.2007), In re South Beach Securities, Inc., 376 B.R. 881, 892-93 (Bankr.N.D.Ill.2007). See also In re Parsley, 384 B.R. 138, ___ (Bankr. S.D.Tex.2008). Assuming for the moment that the UST has at least averred sufficient allegations of fact to raise the possibility of Countrywide's abuse of the bankruptcy system, the UST certainly has an interest in looking further into this possibility for no other ... ...