In re Viencek

• Decision Date: 15 February 2002
• Docket Number: No. 99-64711.,99-64711.
• Citation: 273 B.R. 354
• Parties: In re Mark F. VIENCEK, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of New York

273 B.R. 354

In re Mark F. VIENCEK, Debtor.

No. 99-64711.

United States Bankruptcy Court, N.D. New York.

February 15, 2002.

James F. Selbach, Esq., Syracuse, NY, for Debtor.

Phillips, Lytle, Hitchcock, Blaine & Huber, LLP, for Aurora Loan Services, Inc., Buffalo, NY, William J. Brown, Of Counsel.

Lynn Harper Wilson, Esq., Syracuse, NY, for Chapter 13 Trustee.

MEMORANDUM-DECISION, FINDINGS OF FACT CONCLUSIONS OF LAW AND ORDER

STEPHEN D. GERLING, Chief Judge.

Presently under consideration by the Court are two motions filed by Mark F. Viencek ("Debtor"). The first motion was filed on January 4, 2001, asking the Court to expunge the claim of Aurora Loan Services, Inc. ("Aurora") because "[t]here is simply no debt between this debtor and Aurora." On March 15, 2001, Aurora filed a response, asserting that it had authority to file and defend the proof of claim it filed on October 25, 1999, and amended November 4, 1999.

On May 2, 2001, the Debtor filed a motion asking that the Court strike Aurora's response, alleging that Aurora, by arguing the position of the owner of the mortgage on the Debtor's residence, is engaging in the unauthorized practice of law. It is the Debtor's position that Aurora is a servicing agent and has no interest in the mortgage.

Both motions were heard on May 15, 2001, at the Court's regular motion term in Syracuse, New York. The Court adjourned the motions to June 26, 2001, to consider the arguments. The motions were consensually adjourned until July 24, 2001, at which time the Court granted the parties an opportunity to file additional memoranda of law. The motions were submitted for decision on August 7, 2001.¹

JURISDICTIONAL STATEMENT

The Court has jurisdiction over the parties and subject matter of this contested matter pursuant to 28 U.S.C. §§ 1334, 157(a), (b)(1) and (b)(2)(A) and (B).

FACTS

The Debtor filed a voluntary petition pursuant to chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 101-1330 ("Code") on August 26, 1999. On December 21, 1999, the Debtor filed his schedules and Statement of Financial Affairs, as well as his chapter 13 plan ("Plan"). Debtor lists Aurora as holding a claim in the amount of $92,276.56, secured by a mortgage on the Debtor's residence, valued by the Debtor at $80,000. The claim is not identified as being contingent, unliquidated or disputed. See Schedule D.

Aurora filed a proof of claim on October 29, 1999, in which it asserted a secured claim of $92,084.16, and $15,988.85 in arrears. Aurora is identified on the proof of claim as "Creditor" or "the person or entity to whom the Debtor owes money or property." Attached to the proof of claim is a copy of a note and mortgage, dated May 21, 1997, naming Commonfund Mortgage Corporation ("Commonfund") as the "Lender." Also attached is a document, dated May 21, 1997, assigning Commonfund's interest in the mortgage to Source One Mortgage Services Corp. ("Source One"). According to another document attached to the proof of claim, on May 28, 1997, the same mortgage appears to have been assigned to Government National Mortgage Association ("GNMA") by Source One. Aurora indicates that Lehman Capital, a Division of Lehman Brothers Holding, Inc. ("Lehman")², acquired the loan from Source One pursuant to a Mortgage Servicing Purchase and Sale Agreement dated August 31, 1998, "as a group of approximately $1.65 billion of GNMA Mortgage Servicing Rights." See Exhibit B attached to Aurora's Response to Debtor's Request for Production of Documents and Things, filed August 7, 2001.³

On November 9, 1999, Aurora filed an amended proof of claim listing a secured claim of $92,276.56 and arrears totaling $16,181.25. According to the terms of the Plan, the amount of arrears owing to Aurora, based on its proof of claim, totaled $17,306.92, and was to be paid through the Plan.

ARGUMENTS

The Debtor contends that the proof of claim filed by Aurora should be expunged because Aurora does not own the mortgage on the Debtor's residence and is not a creditor. The Debtor does not dispute Aurora's right, as a servicing agent, to file a proof of claim on behalf of the mortgagee, but contends that the proof of claim is not valid because it fails to identify the actual owner of the claim. At the hearing on May 15, 2001, Debtor's counsel acknowledged that there is a mortgage lien on the Debtor's residence and someone has a claim but that entity is not Aurora.

According to a letter addressed to Aurora and dated March 14, 2001, Lehman is the owner of the mortgage debt. See Exhibit F of Aurora's Response, filed March 15, 2001; see Declaration of Krista Gingrich, Vice President of Aurora, filed August 7, 2001. The letter states that pursuant to a Flow Servicing Agreement between Lehman and Aurora, dated February 15, 2000, Aurora was authorized to file the proof of claim. It appears that Aurora was also given authority to pursue the debt identified in the proof of claim. See Exhibits A, B and C attached to Aurora's Response, filed March 15, 2001.

It is Aurora's position that it was not necessary that Aurora own the mortgage in order for it to file the proof of claim and to defend it. Aurora argues that it just needs to have a tangible interest, which it does by virtue of its servicing activities for which it receives compensation. Aurora also contends that it can file a proof of claim which does not identify the actual creditor. Aurora points out that the "Official Forms" are prescribed by the Judicial Conference of the United States. Aurora takes the position that the current official form used in filing proofs of claim, "Form 10", was revised to delete the prior requirement for disclosure of agency.

In response, Debtor's counsel has submitted to the Court a copy of a letter dated August 3, 2001, from Patricia S. Ketchum, Senior Attorney, Bankruptcy Judges Division of the Administrative Office of the U.S. Courts, who also served as staff counsel to the Advisory Committee on Bankruptcy Rules.⁴ See Exhibit F, attached to Debtor's Attorney's Affirmation, filed August 7, 2001. In the letter, Ms. Ketchum suggests that the Advisory Committee, in discussing proposed amendments to the official forms, "intended to maintain the long-standing requirement that any agent disclose that capacity when filing a claim." See id.

Aurora asserts that if the Court were to determine that the proof of claim must disclose the agency relationship and the identity of the actual creditor, then it should be permitted to amend the proof of claim, which has provided the Debtor with notice of the existence, nature and amount of the claim.

With respect to the Debtor's second motion seeking to have Aurora's response in defense of the proof of claim stricken, the Debtor argues that Aurora is advancing arguments that are not its to make. It is the Debtor's position that the mere fact that Aurora has a contract to service the Debtor's mortgage does not authorize it to practice law and represent the interest and position of the actual party-in-interest. The Debtor asserts that Aurora's counsel is advancing arguments on behalf of an entity that is not the true party-in-interest.

In response, Aurora's counsel contends that it does not constitute the practice of law for Aurora to respond to a motion regarding its activities. Aurora argues that the proof of claim was filed by it as a duly authorized agent. Aurora points out that the Debtor is not objecting to the validity or amount of the claim; its only objection is based on the fact that Aurora filed the proof of claim.

DISCUSSION

Debtor relies on two decisions in support of his motions. See In re Morgan, 225 B.R. 290 (Bankr.E.D.N.Y.1998) and In re O'Dell, 251 B.R. 602 (Bankr.N.D.Ala.2000). Unfortunately for the Debtor, neither case is good law. The Morgan decision was vacated by the U.S. District Court of the Eastern District of New York, which found that the bankruptcy court's decision was an improper advisory opinion because, inter alia, the controversies at issue had been rendered moot, divesting the bankruptcy court of any authority to issue a decision. See In re Nunez, 2000 WL 655983 (E.D.N.Y. March 17, 2000). More recently, the O'Dell decision was reversed by the U.S. District Court of the Northern District of Alabama. See In re O'Dell, 268 B.R. 607 (N.D.Ala.2001).

In O'Dell, the Debtors listed Max Flow Corporation as an unsecured non-priority creditor with a claim for unpaid prepetition charges on a credit card account. Max Flow filed a proof of claim "On Behalf of MBNA America Bank, N.A. and Its Assigns." The debtors...