In Re Fagan Decision Granting Sanction 24 Sep 2007

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This is the decision in the case In Re Fagan, Case No. 04 B 23460, a case before the U.S. Bankruptcy Court for the Southern District of New York. In this case, Fidelity employee Dory GOEBEL presented herself as a Bankruptcy Representative of Homecomings Financial, LLC .
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  UNITED STATES BANKRUPTCY COURT FOR PUBLICATION SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xIn re: :Chapter 13EILEEN FAGAN, :Case No. 04 B 23460 (ASH)Debtor. :- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x A P P E A R A N C E S :LAW OFFICE OF SHMUEL KLEIN, P.C.Attorneys for DebtorBy: Shmuel Klein, Esq.268 Route 59Spring Valley, NY 10977STEVEN J. BAUM, P.C.Attorneys for Secured CreditorBy: Dennis Jose, Esq.220 Northpointe Parkway, Suite GAmherst, NY 14228ADLAI S. HARDIN, JR.UNITED STATES BANKRUPTCY JUDGEDECISION GRANTING SANCTIONSFOR MOTION TO LIFT STAY BASED ON FALSE CERTIFICATION In  In re Gorshstein , 285 B.R. 118 (Bankr. S.D.N.Y. 2002) I granted sanctions againstsecured creditors in three separate cases where the secured creditors moved to vacate the automatic stayon the basis of false certifications of post-petition defaults. The Gorshstein decision was “provoked by anapparently increasing number of motions in this Court to vacate the automatic stay filed by securedcreditors often based on attorney affidavits certifying material post-petition defaults where, in fact, therewere no material defaults by the debtors.” 285 B.R. at 120.The Secured Creditor’s motion to lift the stay in this case is, in the vernacular, a “poster child” for the type of abuse condemned in the Gorshstein decision. It is one of several such motions tocome before me in recent months. This decision granting substantial sanctions in favor of the debtor and  - 2 - her attorney is published to reiterate and reinforce my strongly-held view that debtors must not be sub- jected to the risk of foreclosure and loss of their homes on the basis of false certifications of post-petitiondefaults. Jurisdiction This Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and157(a) and the standing order of reference in this District dated July 10, 1984 (Acting Chief Judge Ward).This is a core proceeding under 28 U.S.C. § 157(b). The Facts By Notice of Motion and Application both dated June 1, 2007 Deutsche Bank TrustCompany of America’s f/k/a Bankers Trust Company, as Trustee c/o Homecomings Financial, LLC (the“Secured Creditor”) moved to terminate the automatic stay with respect to the debtor’s residential real property in Stony Point, New York (the “Property”). The Secured Creditor holds by assignment a notedated October 9, 2001 in the amount of $284,750.00 secured by a mortgage on the Property. TheApplication recited that as of May 30, 2007 there was an unpaid principal balance on the loan of $278,043.61 with interest thereon in the amount of $20,553.51 plus late charges in the amount of $946.28, aggregating $299,543.40.The debtor filed her petition under Chapter 13 on September 21, 2004. Thus, thedebtor’s first post-petition mortgage payment was due for October 2004.Paragraph 3 of the Application states as follows:As of the 30 th day of May, 2007, the Debtor has failed to make 4 post-petition paymentsin the amount of $4,020.03 which represents the payments due the 1 st day of February,2007 through May, 2007 and has not cured said default.As amplified below, this statement was false.Annexed to the Application was an affidavit sworn to by John Cody, an Assistant VicePresident of Homecomings Financial Network, sworn to April 3, 2006 in which Mr. Cody swore in paragraph 5:  - 3 - As of the 31 st day of March, 2006, the Debtor has failed to make 2 post-petition paymentsin the amount of $3,709.17 which represents the payments due the 1 st day of February,2006 through March, 2006 and has not cured said default.The Cody affidavit was submitted in support of a motion filed by the Secured Creditor in 2006 and waserroneously annexed to the instant motion. The quoted statement from the Cody affidavit was false whenmade in 2006.Belatedly recognizing that the Cody affidavit applied to the Secured Creditor’s baseless2006 motion to lift the stay, on June 8, 2007 counsel for the Secured Creditor filed an affidavit sworn to by Dory Goebel, a Bankruptcy Representative of Homecomings Financial, LLC, sworn to June 1, 2007.In paragraph 5 of his affidavit, Mr. Goebel swore as follows:As of the 30 th day of May, 2007, the Debtor has failed to make 4 post-petition paymentsin the amount of $4,020.03 which represents the payments due the 1 st day of February,2007 through May, 2007 and has not cured said default.Mr. Goebel’s sworn statement quoted above was false.The instant motion was noticed for presentment on June 14 with a hearing date of June 20, 2007 if objections were timely served and filed. On June 6 counsel for the debtor filed thedebtor’s affirmation in opposition noting that since the filing of her case she had made all post-petition payments required under the mortgage, and all such payments were cashed by the Secured Creditor.Copies of the debtor’s payment checks were attached to the opposing affirmation. The debtor sought punitive sanctions for the “frivolous motion,” the Secured Creditor’s second such motion. The SecuredCreditor’s attorney responded with a “Reply Affirtmation [sic] in Support of Secured Creditor’s Motionto Terminate the Automatic Stay” dated June 13, 2007 (the “Reply Affirmation”). The Reply Affirma-tion noted that the initial Application incorrectly annexed the 2006 Cody affidavit and substituted theJune 1, 2007 Goebel affidavit quoted above as Exhibit B. The Reply Affirmation also annexed asExhibit C a document entitled “Post Petition Payment History for: Eileen Fagan BK Case No. 04-23460”with a notation at the bottom “ledger prepared on 06/13/07.” This “Post Petition Payment History” isone of several such documents submitted by the Secured Creditor, all of which are of central importanceon this contested matter because, as explained below, they all demonstrate that the debtor was substan-  - 4 - tially current at all times post-petition. Despite Exhibit C, the Reply Affirmation concludes “that as of theDate of the Motion, the Debtor was due for the Months of February 2007 through May 2007 and theMonth of June 2007 had become due.” As amplified below, Exhibit C demonstrates that this statementwas false.The debtor responded by submitting a July 10, 2007 “Sur-Reply Affirmation in Opposi-tion and Request for Attorney Fees” signed by Linda Fagan, the debtor’s mother. The Sur-Reply Affirm-ation stated in relevant part as follows:3. My daughter had a nervous breakdown aggravated by this bank about two years ago.Since then, I made each of the monthly mortgage payments to Homecomings which is theservicer for Deutsche Bank Trust Company and they have CASHED thy [sic] payments.4. The latest submission is an outright lie, deceptive and deliberately out of order. . . .5. Homecomings said they did not get the March 2007 payment and I immediately wentto Western Union and sent them payment — which they accepted –- the day I found outabout it.6. Homecomings deliberately holds the mortgage payment checks for several weeks andthen cashes them to create late fees and penalties. They also hold the checks for months,and then put two or three checks all in at once to create a bounce check situation.7. I sent the May 2007 mortgage on or about May 14, 2007. When the check did notclear, I immediately called Homecomings when our May bank statement was receivedand inquired if they received the check. After being on hold for 45 minutes, theyacknowledged that they received the check, but the account servicing agent did not knowwhy it was not cashed. I called again two weeks later and they now said they never gotthe check. I called my attorney and he advised me to stop the check and then overnightanother check on June 13, 2007. Even though they received it by OVERNIGHT courier on June 14, 2007, it was not cashed until June 27, 2007. See Exhibit “A”.8. Incredulously [sic], they then tried to cash the May 2007 “lost check” which I stopped(they first said they received and then said they never received) and then sent me noticeto me [sic] in July that the check was “returned unpaid”. See Exhibit “B”.7. [sic] I AM CURRENT. I have not missed a payment and am paying more than I haveto. . . .It is significant that no affidavit contesting Linda Fagan’s statements was submitted by the SecuredCreditor.A hearing on the motion was held on July 17, 2007 attended by the attorneys for bothsides. At the hearing the Secured Creditor submitted a revised but undated “Post Petition Payment
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