Yelverton v. Homes at Potomac Greens Associates, Limited Partne

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
STEPHEN THOMAS YELVERTON,
Debtor.
____________________________
STEPHEN THOMAS YELVERTON,
Plaintiff,
v.
HOMES AT POTOMAC GREENS
ASSOCIATES, LIMITED
PARTNERSHIP, et al.,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Case No. 09-00414
(Chapter 11)
Adversary Proceeding No.
10-10001
Not for publication in
West’s Bankruptcy Reporter.
MEMORANDUM DECISION AND ORDER DENYING IN PART AND
GRANTING IN PART MOTION TO RECONSIDER RE: WELLS FARGO
The plaintiff Yelverton’s amended complaint included as a
defendant Wells Fargo Bank which held a second mortgage on
Yelverton’s townhouse located at 1804 Potomac Greens Drive,
Alexandria, Virginia. 	Yelverton claimed that Wells Fargo and
others had failed to perform an adequate inspection of the
property before Yelverton took out the mortgage loans to purchase
the townhouse (which he later learned had substandard noise level
The document below is hereby signed.
Signed: August 11, 2010.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
Case 10-10001 Doc 70 Filed 08/12/10 Entered 08/12/10 09:40:00 Desc Main
Document Page 1 of 5

abatement in place to address noise from nearby rail traffic).
Yelverton sought (1) to void a foreclosure sale by the first
mortgagee, and to void Wells Fargo’s second mortgage; (2) to
recover from Wells Fargo as damages the $152,300 amount of the
second mortgage loan made by Wells Fargo; (3) to discharge Wells
Fargo’s deficiency claim; and (4) to void and recover pre-
petition mortgage payments that had been made to Wells Fargo.
Thereafter, all the co-defendants, except Wells Fargo, filed in
response to the complaint.
The court entered orders granting the various co-defendants'
motions to dismiss and motions for summary judgment. 	Thinking
that all claims had been dismissed, the court entered a judgment
dismissing the adversary proceeding as to all defendants,
including Wells Fargo.
On May 2, 2010, Yelverton timely filed a motion under Fed.
R. Civ. P. 59 to reconsider the judgment of dismissal with
regards to Wells Fargo on the basis that Wells Fargo had failed
to both submit a proof of claim in the main case underlying this
adversary proceeding and had failed to file an answer to the
complaint. 	Yelverton asked the court “to DECLARE that, as a
result of no Proof of Claim being filed as to the second
mortgage, the debtor owes no deficiency or any amount to Wells
Fargo, or its assignees, under this mortgage and any related
claims, or in the Alternative that such Dismissal is without
2
Case 10-10001 Doc 70 Filed 08/12/10 Entered 08/12/10 09:40:00 Desc Main
Document Page 2 of 5

Prejudice to Wells Fargo.” 	For the reasons that follow I will
grant in part and deny in part Yelverton's motion.
First, with regards to Yelverton's first request (that he
owes no deficiency), I will deny the motion. 	As stated above,
the first basis for this relief is that Wells Fargo has filed no
proof of claim in his chapter 11 bankruptcy. 	Wells Fargo,
however, was not required to file a proof of claim. 	Under
Federal Rule of Bankruptcy Procedure 3002(a), “An unsecured
creditor . . . must file a proof of claim or interest for the
claim or interest to be allowed, except as provided in Rules
1019(3), 3003, 3004, and 3005.” 	Under Rule 3003(c)(2), though,
the only creditors in a chapter 11 case that must file proofs of
claim are creditors “whose claim or interest is not scheduled or
scheduled as disputed, contingent, or unliquidated.” 	Here,
Yelverton scheduled Wells Fargo's claim without indicating that
the claim was disputed, contingent, or unliquidated.
Accordingly, Wells Fargo was not required to file a proof of
claim in the first instance.
Moreover, because it did not receive sufficient service of
process, Wells Fargo's failure to answer the complaint in this
adversary proceeding is likewise an insufficient basis for
declaring the debtor owes no deficiency. 	Under Rule 7004,
service of process in an adversary proceeding may be made upon a
corporation by mail; provided, however, that a copy of the
3
Case 10-10001 Doc 70 Filed 08/12/10 Entered 08/12/10 09:40:00 Desc Main
Document Page 3 of 5

summons and complaint are mailed “to the attention of an officer,
managing or general agent, or to any other agent authorized by
appointment or by law to receive service of process and, if the
agent is one authorized by statute to receive service and the
statute so requires, by also mailing a copy to the defendant.”
Here, Yelverton mailed the summons and complaint to a Wells Fargo
P.O. Box without directing it to the attention of an officer of
the bank. 	Consequently, service was not effective.
Second, with regards to Yelverton's alternative basis for
relief (that the dismissal be without prejudice), I will grant
the motion. 	As I stated above, Wells Fargo has yet to file in
response to Yelverton's complaint. 	Wells Fargo is similarly
situated to Chase, which held the first mortgage on the property
and against whom Yelverton asserted claims which for all
practical purposes appear to have been identical to those
asserted against Wells Fargo. 	The court’s reasoning in
dismissing the claims against Chase would likely have furnished a
basis for denying Yelverton relief against Wells Fargo if
Yelverton had made proper service on Wells Fargo and had sought a
default judgment against it. 	But the court never ordered
Yelverton to show cause why the claims against Wells Fargo ought
not be dismissed with prejudice, and 	Yelverton has been free to
dismiss the complaint without prejudice as to Wells Fargo in
light of its never having answered or filed a motion for summary
4
Case 10-10001 Doc 70 Filed 08/12/10 Entered 08/12/10 09:40:00 Desc Main
Document Page 4 of 5

judgment. 	Fed. R. Civ. P. 41(a)(1)(A)(i). 	Thus, I will grant
Yelverton's motion to the extent he requests that the dismissal
as to Wells Fargo be made without prejudice. 	Accordingly, it is
ORDERED that Yelverton's Motion to Reconsider RE: Wells
Fargo is DENIED to the extent that it requests the court to find
that Yelverton owes no deficiency on the mortgage to Wells Fargo
and GRANTED to the extent that it requests that the court's April
22, 2010, Judgment be amended to make the dismissal as to Wells
Fargo be without prejudice.
[Signed and dated above.]
Copies to: All counsel of record; Office of United States
Trustee.
5	O:\TEEL\Garrett\Decisions\YelvertonReconsiderWF. v2wpd.wpd
Case 10-10001 Doc 70 Filed 08/12/10 Entered 08/12/10 09:40:00 Desc Main
Document Page 5 of 5