In re Wells

• Decision Date: 19 June 2009
• Docket Number: No. 08-17639.,08-17639.
• Citation: 407 B.R. 873
• Parties: In re Kenneth WELLS and Michelle Wells aka Michelle Kidd, Debtors.
• Court: U.S. Bankruptcy Court — Northern District of Ohio

407 B.R. 873

In re Kenneth WELLS and Michelle Wells aka Michelle Kidd, Debtors.

No. 08-17639.

United States Bankruptcy Court, N.D. Ohio, Eastern Division.

June 19, 2009.

COPYRIGHT MATERIAL OMITTED

Lee R. Kravitz, Cleveland, OH, for Debtor.

Christian E. Niklas, Shapiro, Van Ess, Phillips & Barragate, Norwood, OH, for Creditor.

PAT E. MORGENSTERN-CLARREN, Bankruptcy Judge.

Chapter 13 debtors Kenneth and Michelle Wells move to disallow claim 1 filed by U.S. Bank National Association, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass-Through Certificates, Series 2005-4 (U.S.Bank), alleging that the claimant did not have standing to pursue the claim and, alternatively, that the claimant failed to itemize fees, costs, and other expenses included in the claim. The claimant asserts that the chapter 13 trustee may properly pay the claim as filed. For the reasons stated below, the debtors' objection is sustained, and claim 1 is disallowed in its entirety.

I. JURISDICTION

Jurisdiction exists under 28 U.S.C. § 1334 and General Order No. 84 entered by the United States District Court for the Northern District of Ohio. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), and (O).

II. INTRODUCTION

Many, if not most, debtors file a chapter 13 reorganization case after falling behind in payments due under a note secured by a mortgage on their homes; their goal is to save their home by paying amounts required under the bankruptcy code. Among other obligations, these debtors commit under a chapter 13 plan to (a) pay the prepetition arrearages due under the note through the plan; and (b) make each postpetition payment under the note as it becomes due. If a secured creditor who is owed such prepetition debt wishes to participate in any funds paid through the plan, the creditor must file a proof of claim that substantially conforms to Official Form 10. Absent objection, the chapter 13 trustee distributes funds based on these proofs of claim. The case filed by Kenneth and Michelle Wells falls within this general description.

The particular question posed in this case is: what entity is entitled to receive the prepetition arrearage payments? As discussed further below, the court finds that at the time claim 1 was filed, U.S. Bank did not attach documents showing that it is a secured creditor of the debtors, as alleged in its claim. Additionally, Ocwen Loan Servicing LLC (Ocwen), the entity that filed the proof of claim, did so using an undisclosed limited power of attorney, which did not grant it the right to file claim 1 on behalf of U.S. Bank. Moreover, U.S. Bank did not come forward with documentation as of the hearing date to cure these deficiencies. U.S. Bank has not, therefore, established that it is entitled to payment under claim 1.

III. FACTS

When the debtors Kenneth and Michelle Wells filed their bankruptcy case, they listed Aegis Mortgage Corp. as a creditor having a $96,000 claim secured by their residence at 20671 Naumann Avenue, Euclid, Ohio, and they identified "Ocwen" as an additional party to receive notice.¹ The debtors' plan, confirmed on May 22, 2009, provides that "AEGIS" will be paid $3,500.00 in arrearages.²

Claim 1 was filed on October 15, 2008 as a secured claim in the amount of $113,479.42. Official Form 10, the proof of claim form, requires the filer to state the "Name of Creditor (the person or other entity to whom the debtor owes money or property)." Claim 1 lists the creditor as "U.S. Bank National Association, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass-Through Certificates, Series 2005-4." The form also calls for the creditor to state a name, address, and telephone number for providing notices. In response, claim 1 identifies "OCWEN, ATTN: Bankruptcy Department, 12650 Ingenuity Drive, Orlando, Fl 32826." No telephone number is listed. Claim 1 also states that (1) the creditor's claim is secured by the debtors' residence, which has a value of $60,000.00; and (2) of the $113,479.42 claimed as due, $16,669.82 represents payment arrears.

This instruction appears at the bottom of the form:

The person filing this claim must sign it. Sign and print name and title, if any, of the creditor or other person authorized to file this claim and state name and telephone number if different from the notice address above. Attach copy of power of attorney, if any.

The signature that follows reads: "Jacqueline Bailey, Quality Control, Bankruptcy Department," without identifying an employer. There is no statement that Jacqueline Bailey signed claim 1 under a power of attorney granted by a creditor, and no power of attorney is attached.

For secured claims, Official Form 10 also instructs the filer to attach copies of documents that support the claim, such as promissory notes and documents evidencing that the security interest is perfected. These five exhibits are attached to claim 1:

1. Exhibit A: Itemization of Claim. This document lists a total arrearage of $16,669.82, made up of:

a. Monthly Payments: $9,471.67;

b. Late Charges: $425.98;

c. Non Sufficient Fund Charges: $50.00;

d. Escrow Advances: $4,661.14;

e. Fees, Costs & Property Preservation Expenses: $2,087.03; less

f. Pre-Pet Suspense: $26.00.

2. Exhibit B: Payoff Information. This document contains the same figures as exhibit A, with the addition of:

a. Unpaid Principal Balance: $97,276.47;

b. Interest from 01/01/2008 to 10/31/2008: $9,004.08;

c. Payoff as of: 10/08/2008: $113,479.42; and

d. Per Diem Amount: $29.20

3. Exhibit C: Prepetition Fee, Costs & Property Preservation Expenses Breakdown. This document lists $2,087.03 in costs that include, among other things, property inspections, foreclosure costs, certified mail fees, and "prior servicer fees."

4. A mortgage dated June 25, 2005 signed by Michelle Wells and Kenneth Wells. The mortgage names Aegis Lending Corporation as the lender, and Mortgage Electronic Registration Systems, Inc. as the mortgagee as nominee for the lender. The first page of the mortgage bears a recording stamp of the Cuyahoga County Recorder dated July 1, 2005. No assignment of the mortgage is attached.

5. An Adjustable Rate Note dated June 25, 2005 signed only by Michelle Williams. The note is in the amount of $99,700.00 and names Aegis Lending Corporation as the lender.

On April 3, 2009, the debtors objected to claim 1, arguing that the claim fails to show that Ocwen had standing to file it, and that the expenses breakdown is insufficient to allow the debtors to determine whether the amount claimed is correct³ U.S. Bank responded that the claim is "correct in all respects," and attached four additional exhibits to support that statement:

1. An assignment of mortgage dated December 6, 2007 and recorded December 19, 2007 from Mortgage Electronic Registration Systems, Inc. as nominee for Aegis Lending Corporation to U.S. Bank National Association, Successor-in-Interest to Wachovia Bank, National Association, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass-Through Certificates, Series 2005-4. The assignment says that it is with respect to property described on exhibit A attached, but no exhibit is attached;

2. An assignment of mortgage dated March 24, 2009 and recorded April 3, 2009 from U.S. Bank National Association, Successor-in-Interest to Wachovia Bank, National Association, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass-Through Certificates, Series 2005-4 to U.S. Bank National Association, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass-Through Certificates, Series 2005-4;

3. A limited power of attorney purportedly given by U.S. Bank to Ocwen Loan Servicing LLC, recorded in Broward County, Florida on April 1, 2008; and

4. Three pages of "Escrow Advances Breakdown," "Prior Servicer Fee Breakdown," and "Late Charges Breakdown."

The response further states that "Creditor's attorney is in the process of obtaining an allonge, once received will provide same."⁴

The court held a hearing attended by counsel for the debtors and for U.S. Bank. At that time, U.S. Bank's counsel reiterated that an allonge was not attached to the original note, and that his law firm was attempting to obtain an allonge from the client so that the proof of claim could be amended to include it. The court then took the matter under submission.

IV. DISCUSSION

A. Notice

On May 2, May 16, June 12, June 19, June 26, July 10, July 16, July 18, and September 3, 2008, the court held special dockets addressing issues similar to those raised by U.S. Bank's proof of claim in this case; i.e., the legal standards governing an entity's right to enforce a promissory note secured by a mortgage on the debtor's residence. See, e.g., In re Cartier, case no. 04-15754, docket 105. On February 12, 2008, the court issued a memorandum to all attorneys who file motions for relief from stay, entitled "Tips for How a Motion for Relief from Stay Can Proceed Smoothly Through the Court," which provided specific examples of the common deficiencies in such motions. In addition, the court supplemented that memorandum on July 9, 2008 with another entitled "Additional Guidance on Motions for Relief from Stay." The July memorandum specifically addressed the applicable Ohio law based on the Uniform Commercial Code regarding endorsements and transfers of negotiable instruments and the assignment of mortgages, again including examples of deficient filings. Finally, on February 12, 2009, the court issued a third memorandum entitled "Motions for Relief from Stay Update: Endorsement of Note by alleged Attorney-in-Fact," alerting parties that powers of attorney should be carefully reviewed if relied upon to establish a creditor's right to relief from stay. All three memoranda were placed on the court's website, at www.ohnb.uscourts.gov, and...