Residential Capital, LLC

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK NOT FOR PUBLICATION
In re:
Residential Capital, LLC, et. al.
Debtors.
Case No. 12-12020 (MG)
MEMORANDUM OPINION AND ORDER SUSTAINING DEBTORS’ OBJECTION TO
PROOF OF CLAIM NO. 5677 FILED BY GALINA VALEEVA AND EVELINA
OKOUNEVA
A P P E A R A N C E S:
MORRISON & FOERSTER
Counsel for Residential Capital, LLC, et al.
1290 Avenue of the Americas
New York, NY 10104
By: Gary S. Lee, Esq.
Norman S. Rosenbaum, Esq.
Jordan A. Wishnew, Esq.
GALINA VALEEVA
Pro Se
3204 Whitney Court
Bensalem, PA 19020
MARTIN GLENN
UNITED STATED BANKRUPTCY JUDGE:
Pending before the Court is the Debtors’ Objection to Proof of Claim No. 5677 Filed by
Galina Valeeva and Evelina Okouneva (the “Objection”) (ECF Doc. #4688). Residential
Capital, LLC (“ResCap”) and its affiliated debtors in the above captioned chapter 11 cases (the
“Chapter 11 Cases”), as debtors and debtors in possession (collectively, the “Debtors”) seek an
order to disallow and expunge Proof of Claim No. 5677 filed by Galina Valeeva and Evelina
Okouneva (together, the “Claimants”). In support of their objection, the Debtors filed the
Declaration of Lauren Graham Delehey (the “Delehey Decl.,” ECF Doc. #4688 Ex. 3).
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Claimants filed a pro se response (the “Claimants’ Response,” ECF Doc. #4968) and Debtors
filed a reply (the “Debtors’ Reply,” ECF Doc. #5131). A hearing was held on September 24,
2013.
The Claimants, like many other homeowners, found themselves in the unenviable
position of facing a home foreclosure proceeding with respect to a second home in Florida. The
Claimants’ response to their plight has included bizarre pleadings in the Florida foreclosure
action, and perhaps more bizarre pleadings in this case—some apparently copied from the
internet—in opposing the objection to their claim. None of Claimants’ pleadings in this case
present genuine issues of fact or law supporting their claim.
For the reasons explained below, the Court SUSTAINS the Debtors’ Objection.
I. BACKGROUND
The Debtors filed voluntary petitions under chapter 11 of the Bankruptcy Code on May
14, 2012, and the Court authorized joint administration of the cases. The Debtors are managing
and operating their businesses as debtors in possession pursuant to Bankruptcy Code sections
1107(a) and 1108. On March 21, 2013, the Court entered an order approving the procedures for
the filing of objections to proofs of claim filed in these Chapter 11 Cases (the “Procedures
Order,” ECF Doc. #3294). Before filing this Objection, Debtors complied with the Procedures
Order and sent Claimants a letter requesting additional support for their claim. See Obj. at 5;
Delehey Decl. ¶ 18.
Claimants and the Debtors have been involved in on-going foreclosure litigation since
2009. On July 25, 2005, the Claimants obtained a residential mortgage from Builders Affiliated
Mortgage Services in the amount of $217,450.00 (the “Loan”), secured by real property located
at 24387 Portofino Drive, Lutz, FL 33559 (the “Property”). See Delehey Delc. ¶ 4. Ms. Valeeva
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signed all the documents on behalf of herself and her mother (under a power of attorney). The
mortgage contained a second home rider, establishing that the home was not the borrowers’
primary residence. Id. ¶ 5. The loan itself was acquired by Federal National Mortgage
Association (“Fannie Mae”), and the mortgage servicing rights were subsequently assigned to
GMAC Mortgage, LLC (“GMACM”), which began to service the loan in 2006 on behalf of
Fannie Mae. Id.
In 2008, Ms. Valeeva inquired about a modification of the loan and submitted her last
loan payment to GMACM in May 2009. Id. ¶ 6. In August 2008, GMACM commenced a
foreclosure case in The Circuit Court of the Sixth Judicial Circuit In and For Pasco County,
Florida. Id. ¶ 7. Ms. Valeeva filed a pro se response on September 18, 2009 “denying all claims
in lawsuit” and “requesting a hearing to state my case in person.” Id.¶ 8.
The Claimant sent a document to GMACM and the state court in September 2010 titled
“Reply to your demand Notice—1st Notice.” In this document, the Claimant stated she was
accepting GMACM’s offer (there is nothing in the record indicating there was any “offer” from
GMACM) and demanded $724,899 or a power of attorney to sell GMACM’s property. Id. ¶ 9.
The Claimant continued to correspond with GMACM and the state court and on October 1, 2010
sent a letter titled “Reply to Your Demand or Notice—Second Notice.” Delehey Decl., Ex. A.
The Claimant referred to herself and Ms. Okouneva as “an artificial entity, a limited liability
legal fiction trademark.” Id. She then proceeded to inform GMACM that if GMACM failed to
produce proof of the claim, GMACM would have exhausted its remedies and would have no
further claim against her. Id.
On November 4, 2010, the Claimants filed a Motion to Dismiss for failure to state a
claim in the Foreclosure Action, which was denied in December 2010. Delehey Decl. ¶ 10. In
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2011, Claimant filed a power of attorney for “Valeena, debtor and grantor” to “Valeeva, Secured
Party Creditor and Grantee,” which claimed a “possessory lien” against GMACM. Id. ¶ 11. She
also filed an “Intentional Bill of Exchange” that she sent to the United States Treasury Secretary,
Tim Geithner. See Obj. Ex. 1.
On September 16, 2011, the Claimant sent a lengthy document consisting of a “Good
Faith Statement of Account” and a “Notice of Conditional Acceptance” (“NCA”). See Delehey
Decl., Ex. B. The Good Faith Statement of Account claimed that the borrowers’ account was
$0.00 and purported to give GMACM 14 days to rebut that assertion. Id. The NCA stated the
borrowers were willing to pay $219,941.30 to discharge the note, however the rest of the NCA
attached conditions to that “offer.” Id. These conditions included the requirement that GMACM
provide the original “unaltered note” and respond to approximately 70 questions, requests for
production and requests for admission. Id. The last section in the NCA apparently placed
conditions on GMACM if it chose to continue with the foreclosure proceedings. Id. These
conditions were the return of the promissory note and mortgage and the payment by GMACM of
$775,500.00. Id.
On March 16, 2012, Ms. Valeeva filed a ”Notice of Default” stating that because
GMACM did not respond to any of the documents she had filed, the debt was discharged, the
mortgage was satisfied and the lien on the property was released. See Obj., Ex. 1. at 30. In June
2012, GMACM filed a Motion to Strike Valeeva’s pleadings in the foreclosure action, which the
state court has not yet ruled on. See Delehey Decl. ¶ 15. Ms. Valeeva filed a second motion to
dismiss in June 2013, which was denied on July 1, 2013. Id. ¶ 17. That was the last activity in
the state foreclosure action. Id.
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On September 9, 2011, Claimants filed Claim No. 5677 (attached to Objection as Ex. 1),
asserting a secured claim of $241,633.00 (secured by real property with a mortgage note as the
basis for the claim), an unsecured claim in the amount of $3,752,874, and a reclamation claim
pursuant to section 503(b)(9) in the amount of $3,994,507.00.1 Claimants attached numerous
documents to the claim, but it is unclear how these documents support the claim.
One of the documents is a request by the Claimants to record a possessory lien. See Obj.
Ex. 1, at 9. The document states GMACM “committed a tort against [Claimants] by denying
their right to original contract, fraud, predatory lending, dishonor in commerce. Their denial has
caused irreparable harm and financial distress to [Claimants] of which this claim of lien arises.”
Id. The document goes on to claim that GMACM owes Claimants $241,633.00 plus interest “for
the loss of purchase of the property and the rights and benefits enjoined thereof pursuant to the
dishonoring of right to contract for sale perpetrated upon Claimants.” Id.
Claimants also included many of the papers they submitted in the state court foreclosure
proceedings. All of these papers are documents signed by Galina Valeeva notifying the state
court and GMACM that GMACM purportedly defaulted on payments and as a result, the
mortgage was satisfied and the lien released. See Obj. Ex. 1, at 30–37. Also included in the
proof of claim were numerous letters to Timothy F. Geithner and other government officials
demanding satisfaction of supposed debts owed. See id. at 19.
In the Objection, filed on August 15, 2013, the Debtors interpret the Claimants
documents as “intended to demonstrate that the Debtors purportedly released their lien on the
Property and that the [l]oan had been discharged.” Obj. ¶ 27. According to the Debtors, these
documents “are incomprehensible and apparently, in large part, fabricated.” Id. Debtors contend
1 Upon review of the Proof of Claim, it appears that Claimants added their purported unsecured
($3,752,874.00) and secured ($241,633.00) claims and entered the total amount ($3,994,507.00) on the line reserved
for reclamation claims.
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that the Court should expunge the Claim because it fails to attach any or adequate support
documentation to demonstrate the validity of the claims. The Debtors also assert that the claim
should be expunged because they have searched their books and records and have determined
that they have no liability for the Claim. In support of this Objection, Debtors offer the Delehey
Declaration. See Delehey Decl. ¶ 19. Finally, the Debtors also assert that the claim should be
expunged because it fails to state a basis for liability against the Debtors.
Claimants’ response, filed September 5, 2013, is unclear and does not address the issues
raised in the Objection. It appears that Claimants contest GMACM’s purported interest in the
Property and request proof that GMACM has standing to bring an action based on the Property.
See Claimants’ Resp. at 3. Claimants also state that “[Claimants] conditionally accepts the
OBJECTIONS of Counsel upon the proof of claim the party produces the original promissory
note and mortgage deed for inspection for any material alteration of contract and for proper
endorsements . . . .” Id. Nowhere in Claimants’ response do they argue that they have a security
interest that would allow their Claim against the Debtors.
Debtors filed a reply in which they make many of the same arguments raised in the
Objection. Debtors state that “Claimant’s largely incoherent response . . . does not rebut the
evidence set forth in the Objection.” See Debtors’ Reply¶ 1. Additionally, the Debtors respond
to Claimants’ request for the note and mortgage by attaching those documents as exhibits. The
Debtors also explain that GMACM never owned the loan and that the documents requested had
been filed in the state court foreclosure proceedings. See id. ¶ 11.
A hearing was held on September 24, 2013, in which Ms. Valeeva appeared pro se. The
Debtors reiterated their argument that there was insufficient documentation to support the Claim.
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The Claimants focused on the argument made in their Response, claiming that the Debtors had
not provided the original mortgage and thus did not have standing.
II. DISCUSSION
Section 501(a) of the Bankruptcy Code provides that “[a] creditor . . . may file a proof of
claim.” 11 U.S.C. § 501(a). A filed proof of claim is “deemed allowed, unless a party in
interest . . . objects.” 11 U.S.C. § 502(a). If the claim is properly filed, it is prima facie
evidence that the claim is valid. See FED. R. BANKR.. P. 3001(f). A party in interest may object
to a proof of claim, and once an objection is made, the court must determine whether the
objection is well founded. See 4 COLLIER ON BANKRUPTCY ¶ 502.02[2] (16th ed. 2013).
“Although Rule 3001(f) establishes the initial evidentiary effect of a filed claim, the
burden of proof [r]ests on different parties at different times.” In re Smith, No.12-10142, 2013
WL 665991, at *6 (Bankr. D. Vt. Feb. 22, 2013) (internal quotations omitted)(modification in the
original). The party objecting to the proof of claim bears the burden of “providing evidence to
show that the proof of claim should not be allowed.” In re MF Global Holdings Ltd., Nos. 11-
15059, 11-02790, 2012 WL 5499847, at * 3 (Bankr. S.D.N.Y. Nov. 13, 2012). If the objecting
party satisfies its initial burden and “the presumption of prima facie validity is overcome—e.g.,
the objecting party establishes that the proof of claim lacks a sounds legal basis—the burden
shifts to the claimant to support its proof of claim unless the claimant would not bear that burden
outside of bankruptcy.” Id. (citing In re Oneida Ltd., 500 B.R. 384, 389 (Bankr. S.D.N.Y. 2009)
(“A proof of claim is prima facie evidence of the validity and amount of a claim, and the
objector bears the initial burden of persuasion. The burden then shifts to the claimant if the
objector produces evidence equal in force to the prima facie case . . . which, if believed, would
refute at least one of the allegations that is essential to the claim’s legal sufficiency.”)).
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Bankruptcy Rule 3001 requires a claimant to attach supporting documentation to the
claim. See FED. R. BANKR. P. 3001(C). Rule 3001(c) states “when a claim, or an interest in
property of the debtor securing the claim, is based on a writing, a copy of the writing shall be
filed with the proof of claim. If the writing has been lost or destroyed, a statement of the
circumstances of the loss or destruction shall be filed with the claim.” FED. R. BANKR. P.
3001(c)(1). Rule 3001(d) provides that “[i]f a security interest in property of the debtor is
claimed, the proof of claim shall be accompanied by evidence that the security interest has been
perfected.” FED. R. BANKR. P. 3001(d).
If the claimant fails to comply with the Rule 3001 documentation requirements, the
claimant is not entitled to prima facie validity of the claim. See In re Minbatiwalla, 424 B.R.
104, 112 (Bankr. S.D.N.Y. 2010). “However, failure to attach the required documentation does
not automatically render the claim invalid.” Id. “[I]n certain circumstances, claims can be
disallowed for failure to support the claim with sufficient evidence . . . because absent
documentation, the proof of claim is not sufficient for the objector to concede the validity of a
claim.” Id. at 119. The Claimants are required to conform to these rules regardless of their pro
se status. See Powers v. Runyon, 974 F. Supp. 693, 696 (S.D. Ind. 1997) (“Although the
pleadings of pro se litigants are construed liberally, there is no lower standard when it comes to
rules of evidence and procedure.”); In re Wright, 223 B.R. 886, 893 (Bankr. E.D.Pa. 1998).
Claimants have not submitted sufficient documentation to support their proof of claim,
and therefore have not met their prima facie burden. Indeed, Claimants have provided no
evidence that can substantiate their claims against the Debtors, which total over $8 million. The
documents submitted by Claimants—all signed by the Claimants and purporting to grant a
security interest against the Debtors—are insufficient. These documents seem to have been
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submitted in an attempt to defend the ongoing state court foreclosure action against the
Claimants, and have no bearing on a chapter 11 case.
At the hearing, Claimants continued to argue that the Debtors lack standing to bring a
foreclosure action. This argument, however, is irrelevant to the determination of whether
Claimants hold a valid claim against any property of the Debtors.
CONCLUSION
For the reasons explained above, the Debtor’s objection is SUSTAINED and the claim is
EXPUNGED.
IT IS SO ORDERED.
Dated: October 4, 2013
New York, New York
____/S/_Martin Glenn____________
MARTIN GLENN
United States Bankruptcy Judge
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