In re Turnage

• Decision Date: 20 July 2022
• Docket Number: C/A No. 22-00205-HB
• Parties: IN RE, Samantha Christine TURNAGE, Debtor.
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina

642 B.R. 435

IN RE, Samantha Christine TURNAGE, Debtor.

C/A No. 22-00205-HB

United States Bankruptcy Court, D. South Carolina.

Signed July 20, 2022

Alecia Tate Compton, Alecia Compton Law Office, LLC, Greenwood, SC, for Debtor.

ORDER ON OBJECTIONS TO CLAIMS

Helen E. Burris, Chief US Bankruptcy Judge

THIS MATTER is before the Court on the objections to claims filed by Debtor Samantha Christine Turnage.¹ Four objections concern proofs of claim filed by Resurgent Capital Services as the servicer for LVNV Funding LLC (collectively, "LVNV") and one concerns the proof of claim filed by Pink Dogwood 13, LLC ("Dogwood"). LVNV and Dogwood retained the same counsel to respond to the claim objections and appear on their behalf at the hearing.² The objections primarily allege LVNV and Dogwood failed to comply with the requirements of Fed. R. Bankr. P. 3001(c)(1) and 3001(c)(2)(A) and Turnage is entitled to relief pursuant to Fed. R. Bankr. P. 3001(c)(2)(D).

FACTS

Turnage filed a petition for Chapter 13 relief on January 28, 2022, and the deadline for non-governmental units to file proofs of claim was April 28, 2022. In her initial Chapter 13 plan, Turnage proposed to pay 100% of all nonpriority unsecured claims. However, the plan is not yet confirmed.³

LVNV and Dogwood filed timely proofs of claim for nonpriority unsecured obligations owed by Turnage. The debts for these claims were transferred to LVNV and Dogwood post-petition. LVNV and Dogwood initially filed their claims as follows without a copy of the loan agreement with Turnage:

• LVNV Claim No. 5: $6,530.85, Acct. No. 3198 (filed 03/07/2022)

• LVNV Clam No. 7: $3,378.04, Acct. No. 9447 (filed 03/09/2022)

• LVNV Claim No. 8: $1,180.88, Acct. No. 5582 (filed 03/09/2022)

• Dogwood Claim No. 13: $12,996.41, Acct. No. 0104 (filed 03/28/2022)

• LVNV Claim No. 17: $11,348.78, Acct. No. 2469 (filed 04/04/2022)

(collectively, the "Claims"). The only materials LVNV and Dogwood appended to their respective Claims are documents that show LVNV and Dogwood obtained the Claims through post-petition transfers that occurred after Turnage filed her petition and schedules.

In their Claims, LVNV and Dogwood checked "Yes" in response to box no. 7 of the official form, which asks for the amount of the claim and whether that amount includes "interest or other charges" as follows:

7. How much is the $ __________ claim? Does this amount include interest or other charges?? No? Yes. Attach statement itemizing interest, fees, expenses, or other charges required by Bankruptcy Rule 3001(c)(2)(A).

Despite this disclosure, neither LVNV nor Dogwood appended to their respective proofs of claim an account summary itemizing interest, fees, expenses or other charges. Instead of providing a copy of the loan agreement or an itemized statement, LVNV appended only documents detailing its acquisition of its Claims from the original lender and its successors along with a statement disclosing the charge-off date and the principal amount owed plus a "Finance Balance," which "may include interest, fees, or other charges to the account prior to acquisition by LVNV...." Similarly, Dogwood appended transfer documents to its proof of claim, but its statement only disclosed the charge-off date and the outstanding principal balance owed. The materials appended to LVNV and Dogwood's Claims identify the original lender or the initial servicer designated to collect Turnage's loan obligations after origination.

Turnage's schedules and a pre-petition credit report obtained by her counsel reflect the name of the original lender or servicer with the same account numbers that LVNV and Dogwood used for their proofs of claim, but neither LVNV nor Dogwood appear on either. Although Turnage's schedules and credit report identify the same initial original lenders and servicers that are named in the Claims, none of the balances listed on the schedules or credit report matched amounts appearing in LVNV or Dogwood's Claims.

Not recognizing the creditor LVNV or Dogwood, and questioning claim amounts, Turnage filed objections to LVNV's Claims on May 3, 2022, and an objection to Dogwood's Claim on May 13, 2022. In each of the objections, Turnage confirms the loan transactions identified in the Claims are consumer loans.⁴ Turnage objected to all Claims asserting the following defects:

• the Claims lacked copies of the original loan documents, notes, credit application, account statements or account number with the original lender;

• neither LVNV nor Dogwood provided an itemized statement of interest, fees, expenses or other charges despite confirming the inclusion of such items in the claim balance by checking "Yes" to box no. 7 on the official claim form;

• the post-petition transfer of the Claims coupled with LVNV and Dogwood's non-compliance with the filing requirements of Rule 3001 constituted a violation of the Fair Debt Collection Practices Act ("FDCPA"); and

• the Claims are duplicate claims of the original lender and are unenforceable pursuant to 11 U.S.C. § 502(b)(1).

As a remedy, in each objection Turnage requests disallowance of the Claim without leave to amend and demands $1,200 in attorney's fees and costs plus an additional $1,000 in statutory penalties for alleged violations of the FDCPA arising from each improperly filed Claim.

During the hearing on the objections, which were heard jointly, LVNV and Dogwood's counsel mentioned that Turnage's counsel requested documentation concerning Claim Nos. 5, 7, 8, and 17 but did not provide any additional details.

Prior to the hearing but after the objections were filed, LVNV amended its Claims. In amended Claim Nos. 5, 7, and 8,⁵ LVNV appended a copy of the monthly account statements the prior lender sent to Turnage. The monthly statements identify the original account holder and account numbers that are described in Turnage's schedules and her credit report. Further, the statements provide account balances as of November 2021 that are similar to the balances disclosed in the Credit Report for the Claims. The statements show LVNV's Claim Nos. 5, 7, and 8 arise from open-end charge or revolving consumer credit accounts (e.g. , credit card accounts).

LVNV, however, did not include a copy of the credit card agreements with Turnage for amended Claim Nos. 5, 7, or 8. During the hearing on the objections, LVNV's counsel noted that LVNV does not have copies of the credit card agreements associated with the Claim Nos. 5, 7, and 8. LVNV's amended claims do not include an itemized statement for any of the interest accruals and charges appearing in the monthly statements appended to those claims.

With respect to Claim No. 17, LVNV's amended claim appended a copy of the original lender's loan agreement with Turnage.⁶ The agreement bears the same loan number that Turnage used to identify a corresponding debt on her schedules, and it includes the same monthly payment appearing on the credit report. The amended claim, however, also does not include an itemized statement of the interest, fees, and other charges assessed to the balance.

Dogwood has not filed an amended claim. At the hearing, its counsel submitted a copy of the loan agreement Turnage executed to originate the loan associated with Claim No. 13.⁷ Dogwood's loan agreement sets forth the same servicer and monthly payment included on the credit report. During the hearing on the objections, Dogwood's counsel advised that it sought leave from the Court to file an amended claim that complies with the requirements of Rule 3001.

These loan agreements reflect Dogwood's Claim No. 13 and LVNV's Claim No. 17 and concern loan transactions in which the original lender advanced the full amount of the funds borrowed by Turnage upon loan origination. Under Claim Nos. 13 and 17, Turnage would repay the advanced funds over a set term at a fixed interest rate through regularly scheduled monthly payments.

The weight of the evidence that LVNV and Dogwood's counsel submitted at the hearing shows that LVNV and Dogwood are assignees of the creditors who originated the relevant loan obligations appearing on Turnage's schedules, credit report, and LVNV and Dogwood's Claims as obligations that Turnage owes.

Turnage's counsel submitted a handwritten timesheet that lists the time she and her paralegal expended to identify, evaluate and dispute the Claims filed in the name of LVNV and Dogwood. Although she requests $1,200 in attorney's fees and costs for each of the five objections, a review of the timesheet indicates approximately 20 hours of attorney and paralegal time totaling $3,316.67 in fees and costs incurred to litigate the merits of all objections. The timesheet does not differentiate the time spent or costs incurred per objection other than entries for "Review obj. to POC #5 final revision" and "Review obj. to POC #7, #8 final revisions" for a total of 20 minutes, and a 10-minute entry for "Review obj. to POC Pink Dogwood for final revisions." Additionally, some entries appear to include time spent for counsel's assessment of claims other than those at issue here (e.g., 2 hours to "print and review 22 POC's"), non-billable clerical work (e.g., printing documents), and duplicate work in which counsel and her paralegal appear to have billed for the same tasks (e.g., revising the joint statement of dispute). Further, some of the time reflected would have been necessary to review the claims had they not proven objectionable.

APPLICABLE LAW

JURISDICTION

"The allowance or disallowance of a claim in bankruptcy is a matter of federal law that is left to the bankruptcy court's exclusive exercise of its equitable powers." In re Travers , 635 B.R. 273, 278 (Bankr. D.S.C. 2021). "To this end, a creditor who offers his proof of claim, and demands its allowance, subjects himself to the dominion of the court and must abide the consequences." Id. (citations omitted). This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 157 and 1334(b). This matter is a core proceeding...