In re see

• Decision Date: 16 June 2011
• Docket Number: No. 09–22468–JNF.,09–22468–JNF.
• Parties: In re Kelvin YOUK–SEE, Debtor.
• Court: United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts

450 B.R. 312

In re Kelvin YOUK–SEE, Debtor.

No. 09–22468–JNF.

United States Bankruptcy Court, D. Massachusetts.

June 16, 2011.

Geraldine Kluska, Law Offices of Geraldine Kluska, Cambridge, MA, for Debtor.Jennifer L. Hertz, U.S. Department of Justice, Office of the U.S. Trustee, Boston, MA, for Assistant U.S. Trustee.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge.I. INTRODUCTION

The matter before the Court is “BAC Home Loans Servicing, L.P.'s Motion for Reconsideration of Order Granting United States Trustee's Motion for Entry of Order Authorizing the Examination of and Requiring the Production of Documents by BAC Home Loans Servicing, L.P. f/k/a Countrywide Home Loans pursuant to Fed. R. Bankr.P. 2004 and Motion to Quash Subpoena” (the “Motion for Reconsideration”). BAC Home Loans Servicing, L.P. (“BAC”) filed its Motion for Reconsideration in response to the allowance of the United States trustee's “Motion for Entry of Order Authorizing the Examination of and Requiring the Production of Documents by BAC Home Loans Servicing LP f/k/a Countrywide Home Loans pursuant to Fed. R. Bankr.P. 2004” (the “Motion”). The United States trustee (the “UST”) filed the Motion on February 10, 2011, seeking: 1) authority to issue a subpoena duces tecum compelling BAC to produce and to permit inspection and copying of documents identified in an attached exhibit; ¹ and 2) an order compelling BAC to appear for an examination, to be recorded verbatim by stenographic means, through one or more duly authorized representatives most familiar with the documents identified in the attached exhibit and the averments made by the UST with respect to the Chapter 13 case of Kelvin Youk–See (the “Debtor”). The Court granted the UST's Motion on February 14, 2011.

The UST responded to BAC's Motion for Reconsideration by filing a Response and Supporting Memorandum of Law in Opposition to the Motion for Reconsideration, and the parties have filed extensive briefs. The Court heard the matter on April 14, 2011, and the parties filed additional memoranda following the hearing.

II. BACKGROUND

On December 28, 2009, the Debtor filed a voluntary petition for relief under Chapter 13. On the same date, the Debtor filed, inter alia, his Schedules, Statements of Financial Affairs and Form 22C with the Court. The Debtor, on Schedule D–Creditors Holding Secured Claims, indicated that BAC held an undersecured first mortgage against property located at 395 Washington Street, Somerville, Massachusetts (the “Property”) in the amount of $342,804.00 with an unsecured portion of $31,944.00. On January 9, 2010, the Debtor filed a Chapter 13 plan through which he provided for payment of arrearages owed to BAC in the amount of $9,000 with respect to its mortgage on the Property. Approximately, three months later, on April 29, 2010, the Debtor filed an Amended Plan which provided for payment of arrearages owed to BAC in the amount of $13,501.60. The Debtor's Amended Plan included language in Section V, captioned “Other Provisions,” providing that the Debtor would “file a Motion for Determination of Value and to Declare the First Mortgage Undersecured as It Pertains to the Property at 395 Washington Street, Somerville, MA 02143” and would seek an order “reducing the amount of the principal balance due to BAC Home Loans Servicing, LP to $250,000.”

On June 1, 2010, BAC filed an Objection to Confirmation of Plan, referencing the language in Section V that pertained to its mortgage claim and stating that “the pre-petition arrearage under the Mortgage ... [was] ... $13,501.60 and that the total amount due under the Mortgage as of the date of the filing was $356,305.80.” On June 16, 2010, the Court sustained BAC's Objection to Confirmation of Plan because the Debtor had failed to file a response to the Objection. The Court ordered the Debtor to file a further amended Chapter 13 plan.

On July 12, 2010, the Debtor filed a “Motion to Reconsider Court's Order of 6/16/10,” as well as a “Motion for Determination of Value and [to] Declare the First Mortgage Undersecured and the Second Mortgage Wholly Unsecured as They Pertain to the Property at 395 Washington Street, Somerville, MA” (the “Motion to Determine Value”). BAC filed a Response to the Debtor's Motion to Reconsider, and the Court scheduled the Debtor's Motion to Reconsider for August 12, 2010. The Court subsequently continued the hearing to October 7, 2010.

Prior to the October 7, 2010 hearing, on September 29, 2010, the Debtor filed an Emergency Motion for Order Approving Loan Modification Agreement. In the Motion, the Debtor, referring to the his spouse's bankruptcy case (Case No. 09–20873–JNF), stated: “The Debtors have been approved for a loan modification of their first mortgage with Lender. (See Attached Loan Modification Agreement.). The Lender requires that this Court approve the Modification Agreement.” The Court approved the Emergency Motion for Order Approving Loan Modification on October 7, 2010 and ordered the Debtor to file an Amended Plan and Schedule J–Current Expenditures of Individual Debtor(s) within 30 days. Following the allowance of the Emergency Motion, the Debtor withdrew his Motion to Reconsider and his Motion to Determine Value.

Approximately one month after the October 7, 2010 hearing, on November 5, 2010, the Debtor filed, on an emergency basis, a Motion to Extend Time, seeking an additional 45 days to file an amended plan and an amended Schedule J. In his Motion to Extend Time, the Debtor stated that he had not received an executed loan modification and proof of recording and did not wish to amend his plan and remove the provision providing for the payment of mortgage arrears until he received the duly processed loan modification. On November 10, 2010, the Court granted the Motion to Extend Time and extended the time for the filing of an amended plan and an amended Schedule J to December 28, 2010.

On December 28, 2010, the Debtor filed his Amended Plan and Amended Schedule J. Subsequently, on January 21, 2011, over three months after the Court granted the Emergency Motion for Order Approving Loan Modification Agreement, the Debtor filed a “Motion for Order Requiring BAC Home Loan Servicing to Provide Him with a Copy of Loan Modification Signed by BAC Home Loan Servicing” (the “Motion for Order”). In his Motion, the Debtor alleged that he had been unable to obtain a signed copy of the loan modification despite repeated requests coupled with copies of the Court's order approving the loan modification, even though he sent his requests “to several different departments at BAC as well as to BAC's attorney.” The Debtor also alleged that BAC was sending statements reflecting the pre-modification monthly mortgage payment amount notwithstanding the approval of the loan modification. He also averred in his Motion for Order that “[w]ithout a copy of the Loan Modification signed by BAC, the Debtor is afraid that BAC will cancel the modification and attempt to foreclose on his property.”

According to the UST, upon information and belief, the Debtor finally was provided a copy of the signed loan modification on or about January 26, 2011.²

III. POSITIONS OF THE PARTIESA. The United States Trustee

1. The UST's Motion

The UST, citing 28 U.S.C. § 586(a), represented that he is an official of the United States Department of Justice charged by statute with the duty to oversee and supervise the administration of bankruptcy cases and that Congress expressly gave the UST standing under 11 U.S.C. § 307 to raise and be heard on any issue under Title 11.³ The UST also represented that 28 U.S.C. § 586 contains additional authority for the UST, among other things, to (a) supervise the administration of cases under Title 11 and take such actions as the UST deems necessary to prevent undue delay; and (b) perform such other duties consistent with Titles 11 and 28 as the Attorney General may prescribe, see 28 U.S.C. §§ 586(a)(3)(G) and 586(a)(5). Citing A–1 Trash Pickup, Inc. v. United States Trustee (In re A–1 Trash Pickup, Inc.), 802 F.2d 774, 776 (4th Cir.1986), the UST stated that “[e]ven absent the congressional grant of standing to the U.S. Trustee under Section 307 of the Bankruptcy Code, the U.S. Trustee has standing to act where its actions advance the U.S. Trustee's interest in the administration of bankruptcy proceedings.” Based upon the authorities cited, the UST concluded that he had standing to employ a Rule 2004 examination as it is, in his words, “the traditional means of discovery in bankruptcy.”

The UST stated that, notwithstanding the approval of the loan modification, upon information and belief, BAC continued to send the Debtor mortgage statements reflecting the pre-modified amount of the mortgage loan and that it was unclear why the Debtor continued to receive mortgage statements reflecting a pre-modified amount after his loan modification was approved by the Court. The UST represented that investigations were underway in the Western Division of Texas where BAC has consistently tried to collect pre-modification mortgage payments and in the Central District of California where there also are investigations by the UST into cases where BAC entered into loan modifications, but failed to honor them by failing to reflect the modified figures in their proofs of claim. According to the UST, such issues directly relate to administration of this bankruptcy estate and the integrity of the bankruptcy system. Thus, the UST sought to ascertain whether the conduct of BAC in the Debtor's case deviated from the standards established by the Bankruptcy Code, and whether its particular actions constitute an abuse of the bankruptcy system or its procedures, citing 28 U.S.C. § 528(3)(G); 11 U.S.C. § 307; and In re A–1 Trash Pickup, Inc., 802 F.2d at 775 (Congress intended the United States trustee to be an enforcer of bankruptcy laws).

B. BAC Home Loans Servicing, L.P.

In its Motion for Reconsideration, BAC...