These cases came for consideration of the Court’s Orders to Show Cause directing Green Tree Servicing, Inc. (“Green Tree”) to appear and show cause why the Court should not impose sanctions against Green Tree under Rule 9011, Federal Rules of Bankruptcy Procedure, for submitting Reaffirmation Agreements (the “Agreements”) that state the current market value of the collateral securing the Debtors’ debts to Green Tree as the same amount, to the penny, as the Debtors’ loan balances.
The Court started its analysis by reviewing Federal Rule of Bankruptcy 9011.
Under Rule 9011(b)(3), by presenting a bankruptcy court with a petition, pleading, motion, or other paper, the attorney or unrepresented party is certifying, among other things, that the allegations and other factual contentions have evidentiary support. Rule 9011 incorporates an objective standard, the application of which involves the following two-step analysis: “whether the party’s claims are objectively frivolous in view of the facts or law and then, if they are, whether the person who signed the pleadings should have been aware that they were frivolous; that is, would he have been aware had he made a reasonable inquiry.” A court must look beyond the party’s subjective intent to determine whether, under the circumstances, a reasonable person would have taken the same actions. Factually groundless allegations where the presenter offers no cognizable evidence to support his or her allegations merit Rule 9011 sanctions. And, significant to the facts at issue here, Rule 9011 does not exclude non-lawyers from its operation.
In of the cases at issue, Green Tree submitted a reaffirmation agreement showing the current fair market value of the Debtors’ house as $151,801.13. The Debtors’ bankruptcy schedules state the value of the property as $95,617. In addition, the Court takes judicial notice that on the initial hearing date of July 20, 2015, the Polk County Property Appraiser reflected the just market value of this property as $95,617. In another of these cases, Green Tree submitted a reaffirmation agreement showing the current fair market value of the Debtors’ house as $157,142.66. The Debtors’ bankruptcy schedules state the value of the property as $67,236. In addition, the Court takes judicial notice that on July 20, 2015, the Polk County Property Appraiser reflected the just market value of this property as $67,236. Thus, the Court finds that the stated values of the Debtors’ homes as set forth in their respective reaffirmation agreements with Green Tree are objectively frivolous in view of the values provided on the Debtors’ schedules and the Polk County Property Appraiser’s website.
At the hearing, Green Tree made no proffer of having made any inquiry (reasonable or otherwise) as to the accuracy of the amounts stated in the Agreements. Instead, counsel for Green Tree advised the Court that when Green Tree’s records reflect that a loan is not in default, Green Tree populates the field for “Current Market Value” as it appears in the reaffirmation agreement using the amount of the loan balance. When a loan is current, counsel explained, Green Tree needs no re-appraisal and, therefore, no re-appraisal is performed. Adherence to a company policy, however, does not excuse the failure to verify the accuracy of information provided to a court. A similar defense was rejected by the court in In re Schuessler. In that case, the court considered the imposition of sanctions against a creditor for filing a meritless motion for relief from stay based on lack of adequate protection, where the creditor followed the creditor’s or its servicing agent’s own policy of not allowing bank branches to accept direct, in-person payments from any mortgagor in bankruptcy. “Before moving for relief from stay, a secured creditor’s analysts and supervisors should do more than simply forward data to the next station or entity involved in the process. Someone must consider the specific facts of each individual case and conclude that relief from stay is actually necessary and warranted.”6 So too must someone at Green Tree be responsible for reviewing the market value information provided in each reaffirmation agreement for accuracy.
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