FIORELLA et al v. AMERICAN INFOSOURCE, LP
OPINION FILED. Signed by Chief Judge Jerome B. Simandle on 11/26/14. (js)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
HONORABLE JEROME B. SIMANDLE
No. 14-3255 (JBS)
ON APPEAL FROM AN ORDER OF THE
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
[Case No. 13-22318 (JHW)]
AMERICAN INFOSOURCE, LP,
Nicholas S. Herron, Esq.
Wasserstrum & Herron, LLP
205 W. Landis Avenue
Vineland, NJ 08360
Attorney for Appellant Bonnie Fiorella
SIMANDLE, Chief Judge:
This action comes before the Court on Bonnie Fiorella’s
(“Debtor” or “Appellant”) unopposed appeal from Bankruptcy Case
No. 13-22318, in which the Bankruptcy Court issued an order on
April 24, 2014 denying Debtor’s motion to expunge a proof of
claim filed by American InfoSource, LP (“AIS”), as an agent on
behalf of Midland Funding LLC (“Midland”), an assignee of one of
Debtor’s past due credit card accounts originally held by
Citibank USA N.A. (“Citibank”). In the Order, Bankruptcy Judge
Judith Wizmur rejected Debtor’s argument that AIS lacked
standing to file a proof of claim because the assignment of
Debtor’s credit card debt from Citibank to Midland is
unenforceable under New Jersey law. For the following reasons,
the Bankruptcy Court’s order is affirmed.
On June 3, 2013, Debtor filed a petition under Chapter 13
of the Bankruptcy Code. Prior to filing, Debtor incurred debts
on various credits cards. Debtor’s Plan contemplated a one
hundred percent distribution to unsecured creditors. On October
15, 2013, Debtor challenged three specific claims and filed
motions to expunge. Only Debtor’s motion to expunge the claim of
AIS as agent for Midland (Claim # 5-1) is subject to the instant
appeal. The Bankruptcy Court permitted discovery regarding the
contested claims. Debtor received responses to her requests for
production of documents and interrogatories. On December 30,
2013, Debtor testified under oath that she has never had any
contact with or received any notification from Midland. AIS did
not oppose Debtor’s motion to expunge.
Debtor never contested the validity of the underlying debt.
On April 16, 2014, the Bankruptcy Court issued a letter opinion
denying Debtor’s motion to expunge AIS’s claim. On April 24,
2014, Judge Wizmur entered an Order consistent with the earlier
letter opinion, which Debtor timely appealed. AIS has not
entered an appearance in the instant appeal, nor filed
opposition.1 This Court has jurisdiction to hear this appeal
pursuant to 28 U.S.C. § 158(a)(1) and will proceed to the
III. STANDARD OF REVIEW
Bankruptcy Rule 8013 provides that a district court “may
affirm, modify, or reverse a bankruptcy judge’s judgment, order,
or decree or remand with instructions for further proceedings.”
Fed. R. Bankr. P. 8013. The Rule further provides that
“[f]indings of fact, whether based on oral or documentary
evidence, shall not be set aside unless clearly erroneous, and
due regard shall be given to the opportunity of the bankruptcy
court to judge the credibility of the witnesses.” Fed. R. Bankr.
Noting that AIS had not entered an appearance, by letter order
dated September 17, 2014 and addressed to Debtor’s counsel, the
Chapter 13 Standing Trustee, and Lovetta Walls of AIS, the Court
directed AIS to enter an appearance and inform the Court within
ten days whether it opposes Debtor’s appeal. [Docket Item 7.]
AIS failed to respond in any manner. As such, the Court deems
this appeal unopposed.
Many courts in this District have considered the merits of
unopposed bankruptcy appeals. See, e.g., Prowse v. Nwankwo, Civ.
14-1270 (SDW), 2014 WL 1767590, at *1 n.1, *3 (D.N.J. May 2,
2014) (denying appellant’s unopposed bankruptcy appeal); Cho v.
Han-Hsien Tuan, Civ. 13-3267 (WJM), 2013 WL 6231348, at *1
(D.N.J. Dec. 2, 2013) (granting appellant’s unopposed bankruptcy
appeal); In re Dimogerodakis, Civ. 10-0004 (KSH), 2011 WL
1362342, at *1 (D.N.J. Apr. 11, 2011) (denying appellant’s
unopposed bankruptcy appeal).
P. 8013. Essentially, the district court must “review the
bankruptcy court’s legal determinations de novo, its factual
findings for clear error and its exercise of discretion for
abuse thereof.” In re Am. Pad & Paper Co., 478 F.3d 546, 551 (3d
Cir. 2007) (quotation omitted).
Appellant argues that the Bankruptcy Court failed to apply
the appropriate legal standards of assignment under New Jersey
law and erred by relying on documents inadmissible under the
rules of evidence. The crux of Appellant’s argument is that
Citibank’s assignment of her credit card debt to Midland is
invalid and unenforceable under New Jersey law, and thus AIS, as
an agent of Midland, lacked standing to file a proof of claim in
Appellant’s bankruptcy proceedings. The Court will uphold the
Bankruptcy Court’s factual and legal findings because there is
sufficient information in the record to verify AIS’s proof of
claim, and Appellant has failed to identify any legal authority
that contradicts Judge Wizmur’s determination that New Jersey
law does not require notice to the cardholder for an assignment
of credit card debt to be enforceable.
The Court first considers Appellant’s contention that the
Bankruptcy Court erred by adopting a lesser evidentiary standard
than applied by New Jersey courts.
A creditor’s proof of claim is deemed allowed upon filing,
unless a party in interest objects. 11 U.S.C. § 502(a). “A proof
of claim executed and filed in accordance with [Fed. R. Bankr.
P. 3001] shall constitute prima facie evidence of the validity
and amount of the claim.” Fed. R. Bankr. P. 3001(f). “[A] proof
of claim that alleges sufficient facts to support liability
satisfies the claimant’s initial obligation to proceed, after
which the burden shifts to the objector to produce sufficient
evidence to negate the prima facie validity of the filed claim.”
In re Lampe, 665 F.3d 506, 514 (3d Cir. 2011) (citing In re
Allegheny Int’l, Inc., 954 F.2d 167, 173-74 (3d Cir. 1992)).
“Nevertheless, the claimant always has the burden of persuasion
in a contested proceeding.” Id. 11 U.S.C. § 502(b) provides
statutory grounds for disallowance of a claim, including that
“such claim 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.” 11
U.S.C. § 502(b)(1).
Effective December 1, 2012, an amendment to Rule 3001(c)
explicitly identified the filing requirements for open-ended or
revolving consumer credit agreements. “After the 2012 amendment,
the focus of the claimant’s obligation under [Rule 3001] has
shifted from the attachment of documents to the disclosure of
particular information regarding the credit card account that
the drafters of the Rule deemed most pertinent in the assessment
by the debtor (or trustee) of the validity or proper amount of
the claim.” In re Umstead, 490 B.R. 186, 195 (Bankr. E.D. Pa.
2013). As amended, Rule 3001(c)(3) provides as follows:
(3) Claim based on an open-end or revolving consumer credit
(A) When a claim is based on an open-end or revolving
consumer credit agreement--except one for which a security
interest is claimed in the debtor’s real property--a
statement shall be filed with the proof of claim, including
all of the following information that applies to the
(i) the name of the entity from whom the creditor purchased
(ii) the name of the entity to whom the debt was owed at
the time of an account holder’s last transaction on the
(iii) the date of an account holder’s last transaction;
(iv) the date of the last payment on the account; and
(v) the date on which the account was charged to profit and
(B) On written request by a party in interest, the holder
of a claim based on an open-end or revolving consumer
credit agreement shall, within 30 days after the request is
sent, provide the requesting party a copy of the writing
specified in paragraph (1) of this subdivision.
Fed. R. Bankr. P. 3001(c)(3). As such, Rule 3001 now “requires
only disclosure of the identities of the original creditor and
the entity that transferred the account to the claimant.” In re
Umstead, 490 B.R. at 196. The rule does not require exhaustive
disclosure of the intermediate transferors and transferees. Id.
“In short, under the amended rule, a proof of claim without a
complete description of the chain of title may be entitled to
prima facie evidentiary effect, if the disclosure[s] satisfy
Rule 3001(c)(3)(A)(i)–(v).” Id.
In the present action, as noted by the Bankruptcy Court,
AIS properly disclosed the following: (1) Citibank is the entity
from whom Midland purchased Debtor’s account and AIS serves as
an agent for Midland; (2) Citibank is the entity to whom the
debt was owed at the time of Debtor’s last transaction on the
account; (3) April 2, 2009 was the date of Debtor’s transaction
on the account; (4) April 2, 2009 was the date of the last
payment on the account; and (5) November 24, 2009 was the date
on which the account was charged to loss. AIS also provided a
statement of the principal, interest, fees, and costs related to
the account pursuant to Rule 3001(c)(2)(A). AIS further
identified the last four digits of the account number, Debtor’s
name and the last four digits of her social security number, and
the opening date on the account. Accordingly, the Court finds
that AIS satisfied the disclosure requirements under Rule 3001.
Appellant does not dispute that the above information was
disclosed or challenge its accuracy. Instead, Appellant contends
that the amendments to Rule 3001 resulted in a lesser
evidentiary burden than applicable under New Jersey law without
citation to any persuasive authority.
The Court finds meritless Appellant’s argument that AIS
failed to submit competent evidence demonstrating the full chain
of the assignment as required by New Jersey Court Rule 6:6-3(a)
pertaining to default judgment. Rule 6:6-3(a) is a procedural
rule inapplicable to the instant bankruptcy proceeding. As
discussed above, Fed. R. Bankr. P. 3001, as amended, provides
the relevant procedures for filing a proof of claim and
specifically delineates the requirements for claims involving
open-ended or revolving consumer credit agreements, which AIS
satisfied in this case. To the extent Appellant argues that
AIS’s claim is unenforceable under substantive New Jersey law,
the Court considers this argument below in addressing the
validity of an assignment of credit card debt without notice to
Appellant contends that Midland’s claim is invalid and
unenforceable under New Jersey law because the assignment of her
credit card debt was not clear on its face and she never
received notice of the assignment.
“The ‘basic federal rule’ in bankruptcy is that state law
governs the substance of claims.” Raleigh v. Illinois Dept. of
Revenue, 530 U.S. 15, 20 (2000). Under New Jersey law, “[a]
valid assignment must contain clear evidence of the intent to
transfer the person’s rights and ‘the subject matter of the
assignment must be described sufficiently to make it capable of
being readily identified.’” Berkowitz v. Haigood, 256 N.J.
Super. 342, 346 (Law Div. 1992). Moreover, “the obligor must be
properly notified of the existence of the assignment” before he
or she is obligated to pay the assignee. Id.; Russell v. Fred G.
Pohl Co., 7 N.J. 32, 40 (1951); Spilka v. S. Am. Managers, Inc.,
54 N.J. 452, 462 (1969); Main St. Acquisition Corp. v. NeMeth,
A-1608-12T4, 2014 WL 1326592, at *2 (N.J. Super. Ct. App. Div.
Apr. 4, 2014).
However, courts in New Jersey have held that a lack of
notice will not invalidate an assignment.3 Moorestown Trust Co.
v. Buzby, 109 N.J. Eq. 409, 411 (Ch. 1932) (finding that a
creditor has the right to assign a debt without the assent of
the debtor and “[n]otice of the assignment to the debtor adds
nothing to the right or title transferred”). It is clear simply
that, upon receiving notice of the assignment, payment to the
The cases identified by Appellant do not support a contrary
conclusion because none addressed situations where notice was
lacking. See Washington Mut. Bank, F.A. v. Teodorescu, A-177804T2, 2005 WL 3108231, at *4 (N.J. Super. Ct. App. Div. Nov. 22,
2005) (finding no legal deficiency in assignment of mortgage
where the assignment was clear and unequivocal and defendant
received notice); Berkowitz v. Haigood, 256 N.J. Super. 342, 347
(Law Div. 1992) (noting that obligor was properly notified of
the assignment and therefore had the duty to pay the assignee);
Tirgan v. Mega Life & Health Ins., 304 N.J. Super. 385, 391 (Law
Div. 1997) (finding that notice was “not an issue” where
assignee directly received payments from obligor). As noted,
infra, these cases only stand for the proposition that notice
establishes the duty of the obligor to pay the assignee. Notice
does not affect the validity of the assignment itself. Moreover,
the Court is unpersuaded by Appellant’s attempt to distinguish
In re Rosen, 66 F. Supp. 174 (D.N.J. 1946), aff’d, 157 F.2d 997
(3d Cir. 1946) and Hirsch v. Phily, 4 N.J. 408 (1950). Both
considered the validity of an assignment without notice to the
debtor, which is precisely the question presented here.
assignor will not relieve the debtor of her obligations to the
assignee. Canger v. Dorine Indus. Park P’ship, A-4743-02T2, 2005
WL 309928, at *7 (N.J. Super. Ct. App. Div. Jan. 14, 2005)
(“‘[O]nce the obligor is on notice of the assignment, a duty of
payment to the assignee’ arises and ‘payment to any other will
not relieve him or her of liability to the assignee.’”) (quoting
Spilka v. South Am. Managers, Inc., 54 N.J. 452, 462 (1969)).
Accordingly, notice to the debtor is not required for a valid
assignment of accounts receivable such as Debtor’s past due
credit card account. New Century Fin. Servs., Inc. v. Oughla, A6078-11T4, 2014 WL 4290328, at *8 (N.J. Super. Ct. App. Div.
Mar. 5, 2014) (rejecting defendants’ argument that lack of
notice of the assignments to the account holders is fatal to
plaintiffs’ claims); In re Rosen, 66 F. Supp. 174, 178 (D.N.J.
1946), aff’d, 157 F.2d 997 (3d Cir. 1946) (“[A]n assignment [of
an account receivable] is valid without notice.”); Hirsch v.
Phily, 4 N.J. 408, 414 (1950) (“The validity of these
assignments . . . is in no way affected by the fact that . . .
no notice of the assignment was given to the customers
Debtor’s argument that she was unaware of the assignment of
her credit card debt does not invalidate the assignment from
Citibank to Midland, nor does it provide a basis to expunge
AIS’s claim. Importantly, Debtor does not dispute the validity
of the underlying debt and, as discussed above, there is
sufficient information in the record to link AIS’s proof of
claim with the debt indicated in Debtor’s schedules. As properly
noted by the Bankruptcy Court, Debtor acknowledged the assignor,
Citibank, as a debt on her schedules, and she listed Midland as
an assignee of Citibank. The amount identified by Debtor,
$2,214, appears consistent with the amount on AIS’s proof of
claim, $1,854.97, plus 6% interest. Therefore, the Court will
affirm the Bankruptcy Court’s denial of Debtor’s motion to
expunge the proof of claim filed by AIS on behalf of Midland.
For the foregoing reasons, the Court will affirm the
Bankruptcy Court’s April 24, 2014 Order. An accompanying Order
will be entered.
November 26, 2014
s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge
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