ralph the homeowner fights back at new century mortgage--re ineffective bar date notice to all...

8/2/2019 RALPH THE HOMEOWNER FIGHTS BACK AT NEW CENTURY MORTGAGE--RE INEFFECTIVE BAR DATE NOTICE TO ALL C

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IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELEWAREINRE: Chapter 11NEW CENTURY TRS HOLDINGS,INC., et aI., a Delaware Corporation Case No. 07-10416 (KJC)(Jointly Administered)

Debtors,MOLLY S. WHITE AND RALPH N. WHITE Adversary .ProceedingNo. 10-55357 (KJC)Plaintiffsv. Re: Docket Nos. 10824,1173NEW CENTURY TRS HOLDINGS, INC,et a!., a Delaware Corporation

Defendant

RESPONSE OF MOLLY S. WHITE AND RALPH N. WHITE IN OBJECTIONTO THE NEW CENTURY LIQUIDATING TRUST MOTION REQUESTINGAN ORDER THAT THE DEBTORS HAVE COMPLIED WITH THE BAR DATEORDER FOR FILING PROOFS OF CLAIM AND APPROVING FORM,MANNER AND SUFFICIENCY OF NOTICECOMES NOW Molly S. White and Ralph N. White (the "Whites") files this,

response in objection to the New Century Liquidating Trust (the "Trust") Motion for entryof an Order determining that the Debtors have complied with the Order establishing bardates for filing proof of claim and approving form, Manner and Sufficiency of Notice, andthat such Order be deemed applicable to all creditors. In support of the Whitesopposition to the motion, the Whites submit, a true and audited copy of the entire pageon which the Notice appeared in the Wall Street Journal (the "WSJ") with an enlargedand legible copy for benefit of the court which is attached hereto as Exhibit "A" andincorporated herein by reference, and further incorporated by Evidentiary Hearing,Transcript attached hereto as Exhibit "8", and respectfully submits as follows.


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PRELIMINARY STATEMENT1. On June 8,2007, the Debtors and Debtors in possession motioned the court for

entry of an Order establishing bar dates for filing Proofs of Claim and approving Form,Manner and Sufficiency of Notice thereof (the "Motion") [0.1. 1173]. The court enteredan Order on June 28,2007, (the "Bar Date Order") [0.1. 1721] establishing the GeneralBar Date of August 31,2007 at 5:00pm as the last date for filing proofs of claim by non-governmental entities. Further, the Bar Date Order established that "the General BarDate shall be fixed as a date no earlier than 60 days after the service date" of theNotice ... Bar Date Order, 1{5. On December 13, 2011, the Trust and homeownerclaimant, Helen Galope (the "Galope Claimant") engaged in an Evidentiary Hearing (the

"December 13, Evidentiary Hearing") upon which the Trust presented the testimony offormer lead counsel for the Debtor, Suzzanne Uhland, Esq. for the publication notice ofthe bar date. Pursuant to the Trust's forty-second Omnibus Objection to claims, theTrust noticed and sought to disallow the claims of Karan Russell, Tiphanie Goines andHelen Galope [0.1, 10562]. On February 7,2012, the court entered its Order andMemorandum (collectively the "Galope Decision") [0.1. 10726] setting its basisfor disallowance of the Galope claim. The court reasoned that Notice by publication inthe WSJ and supplemental Notice by the Orange County Register satisfied therequirements of due process pertaining to the Bar Date Order for unknown creditors.The court further cited the extreme delay in filing and bringing forth the Galope claim.The Trust now seeks a blanket Order applicable to all unknown creditorsnotwithstanding the fact that the other potentially unknown creditors, of which theWhites do not concede as applicable, should be denied to the extent it relies on theform, Manner and Sufficiency of the Notice and for lack of compliance with the Bar DateOrder.

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BACKGROUND

2. On April 2, 2007, the Debtor (with the exception of New Century WarehouseCorporation) filed voluntary petitions for relief under Chapter 11 of Title 11 of the UnitedStates Bankruptcy Code (the "Code") with the United States Bankruptcy Court for theDistrict of Delaware (the "Court).

3. On June 8,2007. the Debtor and Debtors in possession filed a motion for entryof an Order establishing bar dates for filing Proofs of Claim and approving Form,Manner and Sufficiency of Notice. [0.1. 1173].

4. On June 28,2007, the court entered an Order establishing the bar dates for filingproofs of claims and approving form, Manner and Sufficiency of Notice thereof.

5. On July 23,2007. the Debtors court approved claims and noticing agent, XRoadsCase Management Services, LLC ("XRoads") published one (1) entry of the bar dateNotice in the National Edition of the WSJ and the Orange County Register.

6. On August 1, 200S, (the "Original Effective Date") the original plan becameeffective and pursuant to the original plan, the New Century Liquidating TrustAgreement was executed whereby a Trust was created appointing Alan M. Jacobs asTrustee and sole officer and placing all assets of the Debtors excluding access lendingassets but including access lending interests into the Trust.

7. On June 16, 2009, the United States District Court for the District of Delawareissued a Memorandum Opinion reversing the Original Confirmation Order.

S. On November 20,2009, the Court entered an Order Confirming the ModifiedPlan (the "Modified Confirmation Order").

9. On December 1, 2009, the Modified Plan became effective.

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ARGUMENTSA. The Debtor's Publication of the Bar Date Notice in its Noticed Form,Manner and Insufficiency does not satisfy the requirements of DueProcess for all unknown creditors, more specifically not the potentialborrower claimants.

10.While this court concluded that Notice by Publication in the Wall Street Journaland Supplemental Notice in the Orange County Register of the Bar Date complied withthe requirements of due process in the Galope Decision, the Court did not specificallycondone the Form, Manner of Sufficiency of the Debtor's particular publication Notice ofthe Bar Date Order. The general rule is that due process requires Notice reasonablycalculated, under all the Circumstances, to apprise interested parties of the pendencyof the action and afford them an opportunity to present their objections. Mullane v.Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).

I. The Form and Manner of the Notice of the Bar Date as publicized in the WallStreet Journal does not satisfy Due Process or comply with Bar Date Order.11. The court in granting the Bar Date Order [0.1. 1721] presumably granted such

under the good faith belief that the Debtors would truly seek to apprise all interestedparties of pendency of the action.

12.The Debtor Publication Notice of the Bar Date in the Wall Street Journal (ExhibitA) was merely a gesture with no intentions of informing or alerting any potential

claimants of their rights as demonstrated herein.a. The Notice was published in the smallest print (6 point)permitted to be advertised in the Wall Street Journal andthe Debtor's had the option of requesting much larger printand elected not to do it.b. The Debtors were required to convey pertinent informationthat would inform any potential claimant of their rights morespecifically, the Debtor's Notice does not provide such basicinformation as the Definition of a Claim.

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--_ __ ._ _ _ _ . _ _ .. _ _ ._-_ .. _ .


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c. The Debtors were obligated to utilize conspicuous language{bold, italic or underline text to draw attention to such keydefinitions and other milestones as indicated in paragraph12. b above.d. All information supplied is clumped together further limitingthe Notice's ability to attract the attention of those personsits Ordered to give Notice to.e. The Notice was located in section B on page 4. Upon informedand belief, that's 22 pages into the Wall Street Journal Publication.

13.When Notice is a person's due, process which is a mere gesture is not dueprocess. Mullane (Citations omitted).

II. SuffiCiency of Publication Notice advertised only in the Wall Street Journaland Orange County Register falls far short of the Bar Date Order.

14.The Bar Date Order specifically provided the Debtor with a meaningfulopportunity to advertise "in such local newspapers as the Debtors determinedappropriate" ... Bar Date Order 1 1 4.

15.The Debtors at the time of filing their bankruptcy petitions had approximately 62million in cash in their operating accounts. See Opinion on Confirmation at 1 1 19.

16.A review and discussion with three of the major local newspapers servicing

Florida; the Tampa Tribune, the Miami Herald and the Orlando Sentinel revealed that attodays current advertising rates, the rates for legal notices are charged by the lineand ranges from $3.75 to $6.00 per line per day with no limit on the text size.

17. The Debtor's operating cash flow increased substantially after the servicingassets and platform, as well as the mortgage assets were sold between the periods of05/13/07 and 06129/07.

18.Advertising in any of those publications listed in paragraph 16 above was costeffective.

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19.The touchstone of due process Notice is reasonableness. See generally Mullane,339 U.S. at 315-17. Reasonableness is determined from the totality of thecircumstance. Tulsa, 485 U.S. 478, 484 (1988).// I The Debtors did not comply with the provisions of the Bar Date Order.

20. The Bar Date Order specifies the General Bar Date shall be fixed as a date noearlier than 60 days after the service date ... Bar Date Order 115; Local Rules for the U.S.Bankruptcy Court for the District of Delaware, Rule 2002-1 (e).

21. The Notice of Publication of the General Bar Date occurred on July 23, 2007.22. The General Bar Date for all non-governmental entities was set for August 31,

2007.23. The Debtors did not comply with the Court's Bar Date order as written.

B. Permitting the testimony of Debtor's lead counsel, Suzzanne Uhlandfrom the December 12, 2011Evidentiary Hearing, which was specificallyNoticed to the claimants, Karan Russell, Tiphanie Goines and HelenGalope does not afford Due Process to other creditors.

24. The Trust proposes that the testimony of lead counsel, Suzzanne Uhland as wellas the court's findings pertaining to the Galope Claim be blanketed for all potentialunknown creditors.

25. The Whites have not been afforded Due Process by denying them theopportunity to conduct cross examination of Ms. Uhland or present evidence contrary toMs. Uhland's contentions.

26. The Whites were not provided Ms. Uhland's name through discovery nor was Ms.Uhland's name contained on the Trust's witness list pursuant to the court's SchedulingOrder dated, December 13, 2010. See Adv. Proc. No. 10-55357 [D.I. 7].

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27. For that reason the Trust should not be allowed to utilize the testimony of Ms.Uhland in this proceeding with any applicability to the Whites.

C. The Declaration of Ms. Suzzanne Uhland does not support the Trust'scontention or the Method in which publication Notice was given.28. The Declaration of Ms. Suzzanne Uhland (the "Uhland Declaration") declares

that the Debtors sought and somewhat believe that by publishing the Bar Date Notice inthe Wall Street Journal, it would have the effect of providing blanket notice as broadlyas possible through the country. See Uhland Declaration 1J5.b.

29. The Uhland Declaration at 1J5.e, indicates that the Debtors believed it the mostprudent to provide notice in the Wall Street Journal where parties might expect a find aBar Date Notice or might look for a Bar Date Notice ....

30. And that "the Debtors generally viewed the borrowers as account-debtors whoowed money to the Debtors. Since borrowers were generally viewed as account-debtors, the borrowers were not considered to be creditors of the Debtors. UhlandDeclaration 1J5.c.; See also Exhibit B, Transcript from December 13, 2011 EvidentiaryHearing [Tr. 22:22, 30:15 and 32:2].

31. In effect, the Debtors never wanted or intended to reach the borrowers, andsuch certainly runs afoul of Due Process as the Debtors were required to provide thePublication notice of the Bar Dates to apprise any potential claimant, not simply thosethat had filed complaints, of the dates in which their claims could potentially be barred.

32. The Debtors certainly were aware of at least the five (5) class action lawsuitsthat were underway against New Century Mortgage Corporation and/or Home 123Corporation. See In re New Century Mortgage Corp., Prescreening Litig., 473 F.Supp.2d 1383, 1383 (Jud. Pan. Multi. Lit. 2007). See also, Bonner et el. v. Home 123 et ai,

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Case No. 2:05-cv-146; Jeppesen et al. v. New Century Mortgage Corporation. Et al.,Case No. 2:05-cv-00372-RL-PRC filed in the US District Court for the Northern Districtof Indiana. This of course is in addition to the hundreds of cases filed by borrowers instate and federal court all across the country prior to and after the publication of the BarDate.

33.ln a similar action, In re FirstPlus Financial, Inc., the committee and the Debtorsrecognized the potential for claims by borrowers as a result of a punitive class action inKahler, et a/. v. FirstPlus Financial Group, Inc., et a/., Central District of California, CivilAction No. SACV98-733GL T (EEx). As a result of such knowledge and intent to adhereto noticing requirements, the FirstPlus Debtors willingly provided actual notice by mail toapproximately 330,000 individual consumer/borrowers at a cost of just over $159,000.

34. Compare also the level of intent displayed in the case of Wright v. OwensComing, No. 09-1567, 2011 WL 1085673 0 / V . D. Pa., March 21,2011) whereby theDebtors advertised in the New York Times, the Wall Street Journal, USA Today, 250regional or local newspapers where the Debtors had significant business operations and35 trade publications.

35. Based on the insufficiencies of the Debtors listed above in Paragraph 12, itshould be difficult if not impossible to conclude that the Debtors publication noticewasn't anything more than a mere gesture.

36.Whether borrower claimants were considered account-debtors of the Debtor ornot, they deserved to be provided adequate notice. Due Process required (among otherthings) adequate notice before rights can be extinguished. Reliable Elec. Co., v. OlsonConstr. Co., 726 F. 2d 620, 623 (10thCir. 1984).

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37. Notably, the Trust has previously claimed that per the Debtor's books andrecords, the Debtors had no such interest in mortgage loans as of the petition date.

38. Accordingly, a small print notice of the Claims Bar Dates in the back pages (page22 overall) of the wall street journal does not afford Due Process to any unknowncreditors that never received or viewed the notice. Mullane, 339 U.S. at 315.

WHEREFORE, the Whites respectfully ask that the Trust Motion be Denied andthe Court grant any other relief to the Whites it deems just and proper.

Respectfully submitted,

On this 18th day of April, 2012

Molly S. hite5948 Doraville DrivePort Orange, FI32127Ph: (386) 290-0563Email: [email protected]

5948 Doraville DrivePort Orange, FI32127Ph: (386) 290-0563Email: [email protected]

CERTIFICATE OF SERVICEI CERTIFY THAT a true and correct copy of the foregoing Response has been-sent byby electronic means to: eschnitzer@hahnhessen, nrigano@hahnhessen. and _, -t:Carickhoff@BlankRome, Root@BlankRome. and by U.S. Mail to: Hahn & Hesseri-l ..LP, U'1" .". [-..:JCounsel for the Trust, Attn: Edward Schnitzer, Esq., Attn: Nicholas Rigano, Esq., 488Madison Avenue, 15th Floor, NewYork,NewYork 10022 and Blank Rome LLP, Co-Counsel for the Trust, Attn: David W. Carickhoff, Esq., Attn: Alan M. Root, Esq., 1201Market Street, Suite 800, Wilmington, Delaware 19801On this 18th day of April, 2012

Molly S. hite

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mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Exhibit ATrue and Aetul copy of the Publication of the Bar Date Notice Ad in the Wall Street Journal on 7/23/2007

and Enlarged COID'for the Courts' Preview


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ExhibitBPeTtinet copies of the Transcript from the December 13,2011 Evidentiary Hearing


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NEW CENTU RY TR S HOW ING S , IN C., E T AL .Pag.26

1 CountyRegister wouldbe likely t:oreach those indiviclualswho2 might a1sobe reading the Register t:okeep track of whatwas3 goingon in the bankruptcyca.e.4 lUso, the OrangeCountyRegister is a rather cost-S efficient wayof providingnotice, given that it's a smaller6 paper and gi:vanthe foousOnOrangeCounty,it madesans. to us7 to pub1ish there at the time.8 Q. At the tille of the publieation notice, is it fair to .ay9 that the debt:orshad1iai.ted resources?10 A. . 4 1 . . re -- certainly had li.mi.ed resources. 1: mean,i.t11 waaa ti.ght liquidating cas.12 Q. Andat the time, were the debtora also -- .ere there any13 conc.rn. with rpect to increa.ed administrative costs?

A. Yes. ~ere had beenquite a bit of attention paid to the15 incred.ibl.eadainistrative .&pense.with respect to noticing the16 case and .ith respect to the preparation of the .chedules. So17 .ere concerned.hich -- weretrying to addres. the18 administrative cost of the case.19 Q. Thankyou. Prior to fi1ing the bar date notice, did the20 debtors consider providing individualized notice to any21 borrower. of He. Cen~?22 A. Thedebtors considered the borrors of NewCenturyto be23 account debtors of He. Century, not cr.cl:i.tora. So.. didoIt24 consider thea as, like J: .aid, as creditors, unl and until25 those creditors filed a comp1aintor commenceditigation, at

IL.._ .. ._ ..... ..__ .

212~267_686 8V ER lTE XT R EP OR TIN G CO M PA NY

www.veri text.com 516-608-2400
http://www.veritext.com/http://www.veritext.com/


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NEW CEN fU RY JR S HO LD ING S, INC., ET A L.-; ---------------------,------------"--------,--,,-,,

Page 301 THECOURT:Thank you.2 Ms. Galop., would you l.ike to cro.s-examine lis.3 Uhl.and?

5 BY MS. tDLOPB:6 o . GoodmorningI lis. Uhl.and.7 A. Goodmorrnng.8 o Yes. Youknow, X',.. baen waiting for you to say something9 about howyou addressed the borrowers, oonsidered th_ as

10 crad.!tors on this bankruptcy, when you "ere -- "hen all the.e11 consicierations were being _de of ho" you "ould put out the.e12 ads. Could you gi.ve us some -- an idea of what the thoughts13! "ere at that time, ho" -- "hat considerations were _de about14 borrowers?

15 A. So a. Xstated before, the borrowers -- since the16 borrowers owedmoney to Hewcentury, the borrowers w.ren't17 factored into the calculus until the borrowers raised a18 complaint of .0.. kind. And once borro_rs raised a complaint19 or filed litigation, then HewCentury hael an extensive legal20 department, and they would track the borrower complaints and21 borrower li.ti.gation, and we voul.d -- what we di.d was we22 provided a list of those, all of the litigation, and we

23 I included thea in the achedul.es that were filed, and so tho24 borrowers that had raised complaints or filed litigation at

25 that time vera provided actual notice.--- ,------"_-.",,---,------------------,-""--------212 -267 -6868 V ER lTEX T R EPO R TIN G CO M PA NYwww.ver i t ex t .com 516-608-2400


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.......--.-~.---------."-----,----.---

NEW CENTU RY TR S HO LD ING S, INC., ET A L.Page32

1 did not vi." that the borrower. wouldbecome creditor. by2 virtue of the bankruptcyfiling. Our position wasthat the3 borrowerswereaccount debtors; the borrowersowedmoneyunciar.. their loans. . 'rbeywarent areditors.5 Q. How,is that the reason whyyouaboseWa11street Jouxnal6 as your newspaperto put the postLogon?7 A. Ho, that'. not the reason.8 Ho? Zf youwantedto -- wasthere really an intention.9 1'.rying to get to the effort at reaabing borrowershere.

10 WhyWa11Street Journal.? Wall Street Journal for that matter?11 A. As :t prev.iouslystated, 'rbeWallStreet Journal. is a12 nationwide paper, and so could be -- pubU.shingin TheWall13 Str.. t Journal proviciasnationwicianotice, it'. got broad1 . aircu1ation. At the time their aatual oreditors, whiahare the15 partie. that we engaged-- that He. Century engagedin16 transaations with, wereexpected to be financial institutions17 and likely to read TheWallStreet Journal. Also, publishing18 in TheWall Street Journal. in large debtor cases is a custOlllAry19 place to publish bar date notices. Andba.ed on prior20 experience o~large debtor aase., it'. an. appropriate place to21 file bar date notice.22 Q. Bow l: think J: sbou1dgive youmy binder of my -- bold on,23 pl.as .

25 TBBC01:JU: Doyouhave two binders? All right, thank

212-267-6868V ER ITE XT R EP OR TIN G C OM PA NY

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ralph the homeowner fights back at new century mortgage--re ineffective bar date notice to all...

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