Aron L Lasky and Joene R Lasky

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PB 1:05-bk-19550-MI_ Doc 34_ Filed 02/22/07 Entered 02/22/07 15:06:10 Desc
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. CLERK ELS. BANRRUPTEY C
GENiRaL DistalcT GF Catton

Deputy Clerk

i. uty Clerk

UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
SAN FERNANDO VALLEY DIVISION

Inre
ARON A. LASKY AND JOENE R. LASKY, | Case No. SV 05-19550 MT
Debtors. Chapter 7

MEMORANDUM OF DECISION AND
ORDER SUSTAINING OBJECTION TO
CLAIM NO. 2, AND OVERRULING IN
PART AND SUSTAINING IN PART
OBJECTIONS TO CLAIM NOS. 1 5, 6
AND 7

Date: February 21, 2007
Time: 10:00 a.m.
Place: Courtroom 302

On December 20, 2006, Debtors’ filed their Objections to Certain Claims Filed by
General Unsecured Creditors (“Objection”). A preliminary hearing was held on the
Objection on January 17, 2007 at 10:00 a.m. A continued hearing was held on
February 21, 2007 at 10:00 a.m. Louis J. Esbin appeared on behaif of the Debtors at
both hearings. Having considered the Objection, oral argument at the hearings, the
court record, and the Debtors’ supplemental brief filed on February 5, 2007,

IT IS HEREBY ORDERED that the Objection is SUSTAINED as to Claim No. 2.

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Claim No. 2 is a duplicate of Claim No. 1 and, therefore, shall be disallowed.

IT IS FURTHER ORDERED that the Objection to Claim Nos. 1, 5, 6 and 7 are
OVERRULED IN PART and SUSTAINED IN PART. With respect to Debtors’ objection
that Joene Lasky is not liable on these claims, this objection is sustained.’ With respect
to Debtors’ objection that Aron Lasky is not liable on these claims, this objection is
sustained in part and overruled in part. Inasmuch as the claimants have failed to
provide evidence demonstrating why the amount owed to them in excess of the amount
listed in Debtors’ schedules should be allowed, their claims shall be reduced to the
amounts listed in Debtors’ schedules, but shall not be disallowed completely.

A proof of claim not executed and filed in accordance with FRBP 3001 does not
constitute prima facie validity as to the amount of the claim. See FRBP 3001(f). On the
other hand, under In re Heath, 214 B.R. 424 (9th Cir. B.A.P. 2005), noncompliance with
the technical requirements FRBP 3001 is not in and of itself a ground for disallowance
of a proof of claim. Here, Claim Nos. 1, 5, 6 and 7 are all not entitled to prima facie
validity. FRBP 3001(c) requires, in pertinent part, that “[w]hen a claim . . . is based ona
writing, the original or a duplicate shall be filed with the proof of claim.” While case law
has generally held that summaries are sufficient to meet the requirement of FRBP
3001(c), at minimum a summary must include “some breakdown of interest and other
charges" under Heath. See id. at 432-33. The summaries to Claim Nos. 1, 5, 6 and 7
all lack such a detailed breakdown and are insufficient under FRBP 3001(c).

When a claim is not entitled to prima facie validity, Debtors must demonstrate

Technically, this objection could be denied as moot inasmuch as there is no
case or controversy with respect to the objection to Claim Nos. 5, 6 and 7. Having
reviewed the proofs of claims and attachments thereto, it does not appear that Claim Nos.
5, 6 or 7 assert that Joene Lasky is liable on those respective claims. However, in order
to dispose of any future contention that these claims nonetheless constitute community
debt, ! will sustain this objection rather than overrule the objection as moot.

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that the claim should not be allowed based on one of the grounds listed in 11 U.S.C. §
502(b). Debtors rely on 11 U.S.C. § 502(b)(1), which provides that a clam shall not be
allowed if it “is unenforceable against the debtor and property of the debtor, under any
agreement or applicable law for a reason other than because such claim is contingent
or unmatured.” Debtors rely on Cal. Code. Civ. Proc. § 454 and the Fair Debt
Collections Practices Act (“FDCPA”) (15 U.S.C. §§ 1692, 1692a-1692p (2006).

Cal. Code. Civ. Proc. § 454 provides that a party suing on an account "must
deliver to the adverse party, within ten days after a demand thereof in writing, a copy of
the account, or be precluded from giving evidence thereof.” This procedural
requirement will not render a claim unenforceable under 11 U.S.C. § 502(b)(1) for two
reasons. First, this provision does not render a claim unenforceable. It merely sets up
the likelihood that a subsequent trial on the merits will not result in a judgment in favor
of the claimant. Second, state law procedural requirements relating to state law
enforcement of debts in state court are not incorporated into the proof of claim process
in bankruptcy court. State law procedural requirements do not determine whether a
claim exists for purposes of nonbankruptcy law under Grogan v. Garner, 498 U.S. 279,
283-84 (1991). Rather, they determine how claims may be asserted in state courts.
Congress has established different procedures for claims in the bankruptcy court.

The FDCPA, similarly, does not render a claim unenforceable under 11 U.S.C. §
502(b)(1). Although the FDCPA argument might be disposed of based on any number
of reasons, it is most easily disposed of by virtue of the fact that the FDCPA nowhere
renders a claim unenforceable. Debtors rely primarily on 15 U.S.C. § 16929, which can
be summarized as follows: A debt collector makes an initial communication to a debtor
regarding a debt that is owed. In this communication, or within five days thereafter, the

debt collector is required to disclose the name of the creditor and the amount owed,

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and to inform the debtor of his or her right to a “verification of the debt” upon request
within the next thirty days. If the debtor disputes the debt within the thirty day period in
writing, the debt collector is required to obtain a “verification of the debt” and mail it to
the debtor before further attempts to collect. Note that the singular consequence of
failure to comply with this section is that a debt collector is prohibited from further
attempts to collect on the debt, 15 U.S.C. § 1692g(b), much in the same way that the
automatic stay prohibits claimants from such attempts. See 1 1 U.S.C. § 362(a)(6).
Just as the automatic stay does not invalidate a claim, arguably a temporary stay under
the FDCPA does not invalidate a claim.2. Debtors have not cited any authority to the
contrary. Notwithstanding the stay, bankruptcy law specifically provides for a procedure
to collect on a debt. Thus, the FDCPA does not render the debt unenforceable, and
cannot be relied upon as “applicable law’ for purposes of 14 U.S.C. § 502(b)(1).
Moreover, there is a serious question whether the standards of the FDCPA can
be imported into the claims objection process. “The holding and reasoning of Kokoszka
[v. Belford, 417 U.S. 642 (1974)] impel a finding that an FDCPA claim may not be
premised on proofs of claim filed as part of a bankruptcy proceeding.” Baldwin v.
McCalla, Raymer, Padrick, Cobb, Nichols & Clark, L.L.C., 1999 WL 284788, at *4, 42
Collier Bankr. Cas. 2d 170 (N.D. Ill. 1999); see also Rice-Etherly v. Bank One, N.A. (in
re Rice-Etherly), 336 B.R. 308, 311-13 (Bankr. E.D. Mich. 2006); Gray-Mapp v.
Sherman, 100 F.Supp.2d 810, 814 (N.D. Ill. 1999) (“[NJothing in the FDCPA suggests

that it is intended as an overlay to the protections already in place in the bankruptcy

2 As noted recently in a letter by various consumer protection organizations,
“the FDCPA does nothing to prevent the collection of a valid debt. It only prohibits debt
collectors from inappropriate activities in the collection of those debts.” Letter to Senators
Orrin G. Hatch and Robert G. Torricelli, dated June 22, 2000, objecting to proposed
changes to the FDCPA signed by the Consumer Federation of America, Consumers Union,
National Consumer Law Center, Inc., Public Citizen, U.S. Public Interest Research Group,
United Automotive, Aerospace and Agricultural Implement Workers.

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proceedings.”) “A mere browse through the complex, detailed, and comprehensive
provisions of the lengthy Bankruptcy Code .. . demonstrates Congress’s intent to
create a whole system under federal control which is designed to bring together and
adjust all the rights and duties of creditors and embarrassed debtors alike. . . . Nothing
in either Act persuades us that Congress intended to allow debtors to bypass the
Code’s remedial scheme when it enacted the FDCPA. While the FDCPA’s purpose is
to avoid bankruptcy, if bankruptcy nevertheless occurs, the debtor's protection and
remedy remain under the Bankruptcy Code.” Walls v. Wells Fargo Bank, N.A., 276
F.3d 502, 510 (9th Cir. 2002) (citing Kokoszka v. Belford, 417 U.S. 642, 651 (1974)).
None of this is to say that debtors are without any remedy when presented with a
proof of claim that is supported by scant to no evidence. In order to successfully
contest a claim under Heath, debtors can file an objection to claim supported by a
declaration stating to what extent they believe they are liable (or not liable) on the claim
and why. This may provide an evidentiary basis to object to the unsupported aspects of
a proof of claim. “[A] creditor who files a proof of claim that lacks sufficient support
under Rule 3001(c) and (f) does so at its own risk. That proof of claim will lack prima
facie validity, so any objection that raises a legal or factual ground to disallow the claim
will likely prevail absent an adequate response by the creditor. Moreover, a creditor's
lack of adequate response to a debtor's formal or informal inquiries ‘in itself may raise
an evidentiary basis to object to the unsupported aspects of the claim, or even a basis
for evidentiary sanctions, thereby coming within Section 502(b)'s grounds to disallow

the claim.” in re Campbell, 336 B.R. 430, 436 (9th Cir. B.A.P. 2005).

3 Although the formal or informal requests for information that may raise an
evidentiary basis to object to the unsupported aspects of a claim could come in the form
of aclaims objection itself, if sufficiently specific about the information required, see Heath,
331 BR. at 436, the better approach is to, at minimum, send a separate written request
to the claimant requesting more information. Id, at437. (“We would be faced with a very

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However, a claim objection must, at minimum, actuaily contest the debtor's
liability or the amount of the debt for the Court to be abie to disallow a proof of claim,
even if the proof of claim lacks the documentation required by Rule 3001{c). Id. at 432.
This is why the objection that Claim Nos. 1, 5, 6 and 7 should be disallowed as to Aron
Lasky must be sustained in part and overruled in part. Debtors listed Claim Nos. 1, 5, 6
and 7 under their schedules, which were signed under penalty of perjury. None of
these claims were scheduled as contingent, unliquidated or disputed. It goes without
saying that Debtors’ schedules can constitute admissions.* Heath, 331 B.R. at 431,
see also Larson v. Groos Bank, N.A., 204 B.R. 500, 502 (W.D. Tex. 1996) (citing
cases); Heath, 331 B.R. at 437 n.6 (“[A]n objection should not be inconsistent with
sworn schedules that concede all or some portion of the debt.’).

Moreover, it is not clear from Aron Lasky’s declaration, also made under penalty
of perjury, that he is contesting the full amount of Claim Nos. 1, 5, 6 and 7 as opposed
to the incremental amount in of these claims excess of the amount listed in Debtors’
schedules. See, e.g., Aron Lasky Decl., 73 (“in the case of Clam Nos. 1 and 2, | do not
know who Recovery Management Systems Corporation is, and | do not owe a debt to

them. | had a Lowes Retail Account, but | cannot attest to the interest rate charged,

whether any increases in the interest rate or charges to the account were disclosed to

different case if, for example, Debtors’ objections stated that they had written to a Creditor
explaining that they questioned specific charges, or that during the slide into bankruptcy
they had not reviewed or retained their monthly statements, and therefore they wanted the
past twelve months’ credit card statements to verify the Creditor's calculation of principal,
interest, and other charges.”) An excellent example of a motion utilizing the failure to
respond to prior written requests for information as the basis for a claims objection is the
Objection of Diane C. Weil, Chapter 7 Trustee to Proofs of Claim Nos. 2 and 3, filed on
January 22, 2007, In re Michael Rommell Cropper, SV 05-50043 MT.

4 It is worth noting that Claim Nos. 1, 5, 6 and 7 are all listed as exclusively
Aron Lasky's debts in the schedules. As there is no judicial admission in the schedules of
her liability on Claim No. 1, the objection as to Joene Lasky can be sustained.

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me prior to my being charged for them, or how the account was maintained or

payments were credited over the years. Therefore, | cannot admit owing the amount

stated in Claim Nos. 1 and 2, and cannot admit liability for the amount stated.”). The

language of Aron Lasky’s declaration is a far cry from merely saying “I don't owe any
amount of this debt whatsoever,” which is what Heath and Campbell require.
In short, Claim Nos. 1, 2, 5, 6, and 7 shall be partially disallowed as follows:

Claim Amount Treatment

Claim No. 1 $5,648.27 Reduced to $5,472.00

(Recovery Mgmt. Systems Corp.) Allowed as to Aron Lasky only

Claim No. 2 $5,648.27 Disallowed in entirety as to all Debtors

(Recovery Mgmt. Systems Corp.)

Claim No. 5 $3,754.23 | Reduced to $3,512.00

(Chase Bank USA, NA) Allowed as to Aron Lasky only

Claim No. 6 $4,381.12 | Reduced to $4,100.00

(Chase Bank USA, NA) Allowed as to Aron Lasky only

Claim No. 7 $2,302.02 Reduced to $2,100.00

(Chase Bank USA, NA) Allowed as to Aron Lasky only

IT IS SO ORDERED.

DATED: February,22, 2007

Vt T/L

MAUREEN A. TIGHE
United States Bankruptcy Judge

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CERTIFICATE OF SERVICE BY MAIL

| certify that a true copy of this ORDER was served on Ep 3
to the parties listed below: fay 2 2
07
Louis J. Esbin American Express Bank FSB
Law Offices of Louis J. Esbin c/o Becket & Lee LLP
27201 Tourney Road, Suite 122 P.O. Box 3001
Valencia, CA 91355-1804 Malvern, PA 19355-0701
Peter A. Davidson Recovery Management Systems Corp.
Moldo Davidson Fraioli Seror & Sestanovich for GE Money Bank
1925 Century Park East, Ste. 1600 25 SE 2™ Ave., Ste. 1120
Los Angeles, CA 90067 Miami, FL 33131
United States Trustee Chase Bank USA, N.A.
21051 Warner Center Lane, Ste. 115 cio Weinstein & Riley, P.S.
Woodland Hills, CA 91367 2101 4" Ave., Ste. 900
. Seattle, WA 98121
Diane C. Weil
Chapter 7 Trustee

1925 Century Park East, #1600
Los Angeles, CA 90067

Dated:

FEB 22.2007

CLERK