IN RE: MARY ALICE MARGARET HANNON a/k/a MARY HANNON a/k/a MARYALICE HANNON, DEBTOR; MARY ALICE MARGARET HANNON a/k/a MARY HANNON a/k/a MARYALICE HANNON, MOVANT vs. COUNTRYWIDE HOME LOANS, INC., RESPONDENT, 421 B.R. 728

Summary

The debtor sent the creditor a notice of a motion for sanctions for not updating the creditor's claim after a sheriff deposit refund and creditor's amendment of its proof of claim, but the creditor received a second refund without amending the claim until after the debtor moved for sanctions. The bankruptcy court first held that the debtor's motion for sanctions was invalid since the debtor did not provide prior notice of the motion, and the notice previously provided to the creditor applied only to the original proof of claim. However, the creditor had a duty to amend its proof of claim after receiving the second sheriff deposit refund one month after the debtor amended its original proof of claim, and allegations that the creditor failed to reduce claims in other cases indicated a pattern of conduct tantamount to bad faith. Further, the creditor's admitted lack of a procedure to adjust proofs of claim to reflect sheriff deposit refunds indicated that the creditor knowingly allowed ...