In re Powe

Decision Date01 June 2001
Docket NumberAdversary No. 99-1121.,Bankruptcy No. 98-13377-WSS-13.,Bankruptcy No. 98-10935-MAM-13.
Citation281 B.R. 336
PartiesIn re Michael F. POWE Debtor. Michael F. Powe, Plaintiff, Theresa Moore Ballard, Intervenor, v. Chrysler Financial Corp., L.L.C., Defendant.
CourtU.S. Bankruptcy Court — Southern District of Alabama

Steve Olen, Mobile, AL, Steven L. Nicholas, Mobile, AL, Donald J. Stewart, Mobile, AL, for Plaintiff.

C. Lee Reeves, Birmingham, AL, Rhonda L. Nelson, San Francisco, CA, E. Barry Johnson, Birmingham, AL, for Chrysler Financial Corp., LLC.

ORDER DENYING DEBTOR'S MOTION TO STRIKE CHRYSLER'S AMENDED MOTION TO STRIKE. DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEBTOR'S MOTION FOR CLASS CERTIFICATION

MARGARET A. MAHONEY, Chief Judge.

This case is before the Court on four motions: (1) the Debtor's Motion to Strike Exhibits; (2) the Defendants Amended Motion to Strike Exhibits; (3) the Defendant's Motion for Summary Judgment; and (4) the Debtor's Motion for Class Certification. The Court has jurisdiction to hear these matters pursuant to 28 U.S.C. §§ 157 and 1334 and the Order of Reference of the District Court. These matters are core proceedings pursuant to 28 U.S.C. § 157(b)(2) and the Court has the authority to enter a final order. For the reasons indicated below, the Court is denying the debtor's motion to strike the defendant's amended motion to strike, and the defendant's motion for summary judgment. The Court is granting the debtor's motion for class certification.

FACTS

There are two plaintiffs in the case, Michael F. Powe and Theresa M. Moore Ballard. They both filed chapter 13 bankruptcy cases in the Southern District of Alabama and seek to be the class representatives for a nationwide class of debtors. They state that the class would include:

All individuals who have filed a bankruptcy petition and against whom Defendant has claimed as part of the amount due it pursuant to a consumer loan a bankruptcy fee, bankruptcy attorneys fee, attorneys fee, or any other fee or charge, whether collected or not, which increases the amount claimed by Defendant to be due from an individual, which is assessed, directly or indirectly, after the filing of a bankruptcy petition, including those from which Defendant has filed a proof of claim, and which would not have been claimed absent the bankruptcy, including but not limited to any fee or charge for preparing or filing a proof of claim. The terms "bankruptcy fee," "bankruptcy attorneys fee," "attorneys fee" and "any other fee or charge" do not include any attorneys fee or reimbursement of costs for which Defendant has made specific application and/or motion (not a proof of claim or reaffirmation agreement) to the United States Bankruptcy Court and for which a specific order of the United States Bankruptcy Court approving or denying said fees has been entered.

For purposes of the summary judgment and class certification motions, the relevant facts of each case need to be stated.

Michael Powe

Michael Powe filed his chapter 13 case on March 12, 1998. He filed schedules and a plan with his petition. The schedules listed a debt to Chrysler Financial Corporation ("Chrysler") in the amount of $14,000 secured by a first lien on a 1994 Plymouth Grand Voyager. Powe's plan proposed to pay Chrysler's claim at $250 per month until $14,000 was paid. On April 14, 1998, Chrysler filed a proof of claim in the case which had an attachment. The proof of claim stated that Chrysler's claim was $11, 787. 13 and that the claim was secured by a lien on a motor vehicle. The proof of claim form stated, in the box in which the creditor is to list the entire claim-$11,787.13 secured and "includes $225.00 atty. fee (handwritten)." In a spot designated for court use only, Chrysler included a statement, "Plus interest at contract rate of 11.25%." The form was signed by a paralegal in the Draper & Marquer law firm from New Orleans, Louisiana. The computer printout attachment showed a balance due of $11,562.13. The form also included other information in a coded format.

On April 14, 1998, Chrysler also filed an objection to plan confirmation. Attached to the objection was a copy of the parties' contract and the proof of claim. The objection stated that the net amount due was $10,885.91.1 The objection stated:

As an oversecured creditor, Chrysler's proof of claim includes $ 225.00 in reasonable attorney fees to which Chrysler is entitled under both the terms of the Loan Documents and the Bankruptcy Code.

The objection also noted that the Powe vehicle was uninsured. The objection was served on Powe, his attorney and the trustee.

At confirmation, Powe and Chrysler settled the objection issue by changing the plan to pay Chrysler $14,580 over the life of the plan (or nearly that) at $250 per month. Powe's attorney and Chrysler's attorney signed a statement of value which stated that the parties agreed "the fair and reasonable retail value of the property (the van) ... is $14580, which includes interest at the contract rate." With this statement, Chrysler withdrew its objection to the plan. The order confirming the plan dated September 9, 1998 reflects the agreement.

Chrysler has been paid monthly payments of $250 for some (not all) of the months of this case. The case remains open.

Chrysler does not add attorneys fees to Powe's account based upon the proof of claim or confirmation order. When it receives payments it credits them first to principal and interest. If payments to Chrysler exceed the principal and interest due on a loan, the payments are credited to a general fund called the "interest income account." Chrysler accepts whatever sums it is ordered to accept according to confirmed plans. It does not change its records to reflect bankruptcy actions. Payoff figures are determined from the chapter 13 trustee's records only.

In July 2000, Powe defaulted in payments under his plan and Chrysler filed a motion to lift the stay. At the hearing, the parties resolved the matter and the Court indicated a willingness to award attorneys fees to Chrysler for having to bring the motion. The Court ordered the parties to determine such a fee and put it in the order. The order submitted to the Court, after Mr. Grodsky's review, allowed fees of $225. The order stated that "Chrysler is hereby awarded its reasonable attorney's fee in the amount of $225.00, which is included in the Collateral Value set forth in Debtor's Amended Chapter 13 Plan, dated August 20, 1998."

Chrysler has paid the Draper & Marquer firm $275 for all of its services in this case (from "cradle to grave.")

Theresa Moore Ballard2

Moore filed her chapter 13 case on September 18, 1998. She filed schedules in which she listed her debt to Chrysler as $7,600 secured by a first lien on a 1994 Plymouth van. Her plan proposed to pay Chrysler $160 per month for 60 months.

Chrysler filed a proof of claim on October 19, 1998, which stated that Chrysler was owed $8,220 on its secured claim. The proof of claim indicated that it "includes attorney's fees of $225 and precomputed interest of 8.75." The claim form was filed by a paralegal in the office of Dreher, Langer & Tomkies of New Orleans, Louisiana.

No objection to Moore's plan was filed and it was confirmed on November 17, 1998. On March 22, 1999, Chrysler filed a motion for relief from stay based on Moore's failure to provide information about insurance coverage on her vehicle. The motion was denied based upon Moore maintaining insurance.

Moore got behind in her plan payments and Chrysler filed a second motion for relief from stay. It was denied when Moore caught up the entire arrearage. On January 18, 2001, Moore paid off her entire case and received a discharge. This pay off occurred after a meeting on that same day with her bankruptcy counsel and class action counsel about the possibility of Moore joining this suit. At pay off she was aware she was paying an attorney's fee included in Chrysler's proof of claim. On January 19, 2001, she moved to intervene in this suit. Chrysler paid the Dreher firm a flat fee of $275 for all of its services in this case. Local counsel was paid $300 for two appearances at relief from stay hearings. The Dreher firm, not Chrysler, paid those fees.

ADDITIONAL FACTS

Chrysler employs various law firms across the country to act as its attorneys in bankruptcy cases. The attorneys charge different flat fees for their work on the cases, but the procedures followed by Chrysler are the same in all cases.

Chrysler does not change its records on any bankruptcy debtors' accounts except to note how the debt is to be paid in the plan and to note that the debtor is in bankruptcy. There is no recomputation of the debt or reamortization. In fact, Chrysler does not know if its attorneys are charging an attorneys fee in any case. If such a fee is collected, Chrysler's records never show it as an attorneys fee. It is credited to interest. Chrysler keeps track of payments received and credits them first to interest and then principal. Any chapter 13 debtor who wants to know the amount necessary to pay off Chrysler's loan in the chapter 13 case must get that information from the chapter 13 trustee. Chrysler does not have that figure. It relies totally on the chapter 13 trustee's accounting.

Chrysler's attorneys do not all follow the same procedures in completing proof of claim forms. Some, like in the Powe and Moore cases, list an "attorneys fee" on the form itself Others do not reflect a fee at all. It is unclear at present whether a fee is added in the cases which do not indicate a fee.

PROCEDURAL HISTORY

After the filing of the motion for summary judgment and the motion for class certification, each party filed a motion to strike certain documents submitted as bases for the motions.

The plaintiffs seek to have the supplemental affidavits of various witnesses excluded as having been filed after...

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