Opinion
Case No. 04-18556.
May 25, 2005
ORDER RE: OBJECTION TO PROOF OF CLAIM
This matter is before the Court on the Debtors' objection to the proof of claim filed by Wells Fargo Bank Minnesota, N.A. (Doc. 22, 29) and Wells Fargo's response (Doc. 26). A hearing was held on May 17, 2005.
Wells Fargo, a secured creditor, filed a proof of claim for an arrearage which includes $826.36 for fees for title examination work relative to a foreclosure proceeding in state court. It is only this portion of the claim that is in dispute. Specifically, the Debtors contend that any work done by an attorney is not part of an allowed claim. Wells Fargo contends that in order to perform an effective foreclosure, i.e., name all proper defendants, a title examination must be performed before a foreclosure action can be filed. Thus, Wells Fargo contends that a title examination is more akin to a court cost, especially since many title examinations are not done by attorneys, and, even if performed by an attorney, are not charged at the attorney's hourly rate.
Attorney fees are not an appropriate part of a claim for a cure amount under 11 U.S.C. § 1322(e). This is because Ohio law renders void provisions in notes and mortgages for the payment of attorney fees based on the assumption that these provisions were not reached through free and understanding negotiation. In re Lake, 245 B.R. 282, 287 (Bankr. N.D. Ohio 2000). See also In re Petroff, 2001 WL 34041797 (B.A.P. 6th Cir. 2001). However, it has generally been understood that expenses, such as those associated with foreclosure actions, i.e., title report, court costs, and sheriff's fees, are proper. See In re Landrum, 267 B.R. 577, 583 at n. 10 (Bankr. S.D. Ohio 2001); In re Bertsch, 17 B.R. 284 (Bankr. N.D. Ohio 1982).
Some state courts have local rules that require the foreclosing plaintiff to file "evidence of the state of the record title of the premises in question" as a part of the foreclosure procedure. See In re Bertsch, 17 B.R. at 288 ( citing Summit County Rule No. 11.01). We do not believe that a state court local rule, which may necessarily differ from county to county, should determine whether or not a title examination is an attorney fee or an expense. The prudent foreclosing party will cause a title examination to be performed prior to filing any foreclosure action and such practice is to be encouraged. Contrary to the Debtors' contention, we do not believe that the doctrine of lis pendens circumvents the need for a title examination. Further, a foreclosing party should not be penalized for using an attorney to perform a title examination, especially if the attorney is not billing for such work at his hourly attorney rate.
In the case at hand, the parties did not know whether or not the title examination had been performed by an attorney or a non-attorney. Accordingly, Wells Fargo is hereby ORDERED to file a status report within 20 days from the entry date of this order as to 1) whether the title examiner was an attorney or not; and 2) if the title examiner was an attorney, if he or she billed the work at his or her hourly attorney rate or at some other, lower rate.
IT IS SO ORDERED.