In Re Osborne

375 B.R. 216, 2007 Bankr. LEXIS 3225, 2007 WL 2728814
CourtUnited States Bankruptcy Court, M.D. Louisiana
DecidedSeptember 14, 2007
Docket19-10103
StatusPublished
Cited by10 cases

This text of 375 B.R. 216 (In Re Osborne) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Osborne, 375 B.R. 216, 2007 Bankr. LEXIS 3225, 2007 WL 2728814 (La. 2007).

Opinion

MEMORANDUM OPINION

DOUGLAS D. DODD, Bankruptcy Judge.

Debtor Mary Osborne asks the court to sanction Homeside Lending, Inc. 1 and its counsel, Stacy C. Wheat, for alleged misconduct in connection with a motion for relief from automatic stay. 2 The gist of the debtor’s complaint is that Homeside’s lawyer signed and filed a false affidavit to obtain relief from the automatic stay based on the debtor’s alleged failure to comply with the terms of a consent order.

PROCEDURAL HISTORY

The events leading directly to this dispute began unfolding April 24, 2002, when Homeside’s counsel sought ex parte relief from the automatic stay. 3 The court granted the motion on May 9, 2002, 4 and denied Osborne’s later motion to set aside that order. 5 The Fifth Circuit reversed the district court’s affirmance of the October 30, 2002 order, and remanded the matter for further proceedings. 6

After the Fifth Circuit decision, on remand, the parties engaged in a lengthy period of unsuccessful settlement negotiations and a failed mediation to try to resolve the dispute. Eventually, Osborne moved for sanctions against Homeside and its counsel under 11 U.S.C. §§ 105 and 362(h), 28 U.S.C. § 1927 and Fed. R. *220 Bankr.P. 9011. 7 The motion alleged that Homeside obtained stay relief by filing a false affidavit and repeatedly filing false pleadings. On Homeside’s motion for partial summary judgment 8 the court dismissed the debtor’s claims under Rule 9011 and 11 U.S.C. § 362. The court declined to dismiss Osborne’s claims under 11 U.S.C. § 105 and 28 U.S.C. § 1927, and tried the remaining claims after mediation failed.

FACTS

I. Mortgage Defaults and Stay Relief

Mary Osborne bought a house from her father in March 1997 using mortgage financing from Homeside. Homeside sued to foreclose after Osborne fell behind on her mortgage payments, and Osborne responded by filing a chapter 13 petition on August 30, 1999. Osborne defaulted on her mortgage obligation to Homeside in October 1999, several weeks before the court confirmed her chapter 13 plan on December 2,1999.

The confirmed chapter 13 plan provided that Osborne would retain her house, cure the existing mortgage defaults over the term of the plan and make future mortgage payments directly to Homeside. Homeside referred the Osborne matter to Shapiro & Mentz for the first time' on December 6, 1999, a few days after the order confirming the plan. 9 Stacy Wheat then filed a motion for relief from stay on Homeside’s behalf on February 4, 2000.

Stacy Wheat handled Shapiro & Mentz’s litigation and bankruptcy matters, including mortgage foreclosures. Wheat testified that an average of between 30 and 50 files crossed her desk every day. She relied on two or three employees to prepare the motions for relief from the automatic stay, select a hearing date, then file and serve the motions she had signed. 10 Wheat testified that she had handled thousands of motions for Homeside between 1991 and 1999, but Homeside never asked to review draft pleadings or stay relief motions before she filed them. Instead, the evidence demonstrated that Wheat, as Homeside’s lawyer, assumed that the information Homeside furnished her office was correct, and therefore that the statements in documents she filed on Home-side’s behalf were accurate.

Judge Louis Phillips granted Home-side’s February 2000 stay relief motion in an April 20, 2000 order, but later vacated that order, instead requiring that the debt- or make payments to the trustee and Homeside, and modify her plan. 11 The debtor complied with this order, except that on the trustee’s advice, she sent the September 2000 payment directly to Homeside.

In April 2001, Homeside once again referred Osborne’s file to Shapiro & Mentz *221 for action on an alleged February 2001 default. 12 Wheat filed a second motion for relief from stay on April 24, 2001. Eventually, Osborne and Homeside agreed on the terms of a consent order requiring Osborne to cure the post-petition mortgage defaults over time, while at the same time making her monthly mortgage payments. 13 If Osborne did not perform as agreed, the consent order allowed Home-side to obtain relief from the automatic stay ex parte by filing an affidavit detailing the debtor’s default.

On April 24, 2002, Wheat signed and filed an affidavit 14 stating that the debtor had breached the consent order by failing to make agreed payments, including her February 2002 mortgage installment. Although the affidavit recited that Wheat had personal knowledge of the facts it set forth, Wheat had absolutely no personal knowledge of Osborne’s default. Wheat testified at trial that she relied on her client’s records for all the information relating to Osborne’s account. 15 She testified that her practice was to review her client’s referral, the note and mortgage, and the draft stay relief motion her staff prepared for her review, and to sign the motion if the documents all “matched.” 16

The court granted Homeside stay relief as a direct result of Wheat’s submission of the affidavit. 17 Homeside later filed a petition in state court to foreclose on Osborne’s home. Osborne moved to vacate the order granting stay relief, 18 and apparently also obtained a state court injunction against the foreclosure before the hearing on the motion to vacate. 19

As of September 29, 2006, Osborne had to pay $32,507.15 in principal and accrued interest to reinstate her home mortgage loan. That total excludes late charges and other fees.

II.

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Cite This Page — Counsel Stack

Bluebook (online)
375 B.R. 216, 2007 Bankr. LEXIS 3225, 2007 WL 2728814, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-osborne-lamb-2007.