Perry v. First Citizens Federal Credit Union
| Decision Date | 21 January 2004 |
| Docket Number | No. CIV.A.03-10602-WGY.,CIV.A.03-10602-WGY. |
| Parties | Curtis M. PERRY, Plaintiff, v. FIRST CITIZENS FEDERAL CREDIT UNION, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Cara Daniels, Rackemann, Sawyer & Brewster, Boston, MA, Charles R. Bennett, Jr., Hanify & King, P.C., Boston, MA, for First Citizens Federal Credit Union, Debra Casey, Appellees.
Gary W. Cruickshank, Boston, MA, for Curtis Perry, Debtor.
Curtis M. Perry ("Perry"), the Debtor, filed a voluntary Chapter 11 petition which was shortly thereafter converted into a Chapter 7 case.
Deborah Casey (the "Trustee") commenced litigation against Perry and his wife, Isabel Perry ("Isabel") (collectively the "Perrys"), alleging certain fraudulent conveyances. First Citizens Credit Union ("Citizens"), a creditor of Perry, learned of the Chapter 7 case when it received a subpoena from the Trustee's counsel, as a result of the Trustee's pursuit of her fraudulent conveyance claims (the "Adversary Proceedings"). Citizens then filed a proof of claim in the Chapter 7 case, based on a mortgage foreclosure deficiency. Perry objected to the filing of this proof of claim on timeliness and statute of limitation grounds.
On January 15, 2003, the Bankruptcy Court for the District of Massachusetts (the "Bankruptcy Court") allowed Citizens' proof of claim. Perry has appealed that Order to this Court.
Citizens made a mortgage loan to Perry in April, 1990. Citizens' Br. [Doc. No. 6] at 1. Perry defaulted on this loan and Citizens conducted a foreclosure sale on May 4, 1996. Id. at 2. This foreclosure sale resulted in a deficiency in the sum of $62,393.05. Id. On October 1, 1997, Citizens obtained judgment and execution against Perry in the New Bedford District Court for that amount. Id. The judgment remains unsatisfied. Id.
In an effort to collect on the judgment, Citizens hired attorney Thomas Williams ("Williams"). Id. Williams informed Citizens that Perry had filed a Chapter 11 petition. Id. Neither Williams nor Citizens took further action to recover the judgment. Id. Williams's representation ended prior to the February 18, 1999 conversion of Perry's case to Chapter 7. Id. Upon conversion, Deborah Casey was appointed Chapter 7 Trustee. Id. Citizens was never informed that Perry's case was converted to Chapter 7 because Perry did not list Citizens as a creditor. Perry listed an unaffiliated bank, First Federal Savings Bank, located at 278 Union Street, New Bedford, Massachusetts as the creditor. Citizens was located at 271 Union Street, New Bedford, Massachusetts. Memorandum, In re Curtis Perry, No. 98-21708-JNF, at 2 (Bankr.D.Mass. Jan. 15, 2003) ("Bankr.Dec.").
On April 19, 1999, the Bankruptcy Court issued a Notice of Assets and established a July 19, 1999 deadline for creditors to file proofs of claim. Id. The Bankruptcy Court concluded that due to Perry's inclusion of the incorrect bank name and address on the list of creditors, Citizens did not receive notice of the proof of claim deadline. Id.
Citizens ultimately learned of the conversion of Perry's bankruptcy case to Chapter 7 on April 3, 2001, when it received a subpoena issued by the Trustee's counsel with respect to the Adversary Proceedings. Citizens' Br. at 3. After learning of the conversion, a Citizens employee, Michelle Duval King, prepared and submitted a proof of claim in April, 2001.1 Id.
On November 7, 2002, the Trustee and the Perrys resolved the Adversary Proceeding by means of a Settlement Agreement.2 Id. The Settlement Agreement represented the following:
The Trustee has recently discovered an undocketed proof of claim in the amount of $62,393.05 filed by First Citizens Federal Credit Union (the "Late Claim"). The claim was filed on April 24, 2001, a date which was beyond the proof of claim bar date established by the Bankruptcy Court.... A review of the Schedules and the matrix list of creditors files in this case by prior counsel to [Perry] indicate that a creditor by the name of First Federal Savings Bank with an address of 278 Union Street, New Bedford, Massachusetts was listed thereon. The Late Claim indicates an address of 271 Union Street, New Bedford, Massachusetts for this claimant.
Citizens' Br., Ex. G ¶ 19. The Settlement Agreement authorized Perry to file an objection to Citizens' claim and included the following provision:
The Trustee has authorized, for this claim ... [Perry] to file an objection to the Late Claim.... This right to object to the Late Claim ... extends to no other proof of claim filed in this case. If the Late Claim is allowed by this Court, Isabel agrees to pay the same within thirty (30) days of the allowance of the final Order of this Court approving the Settlement Agreement or allowing the late claim, whichever is later.
Id. The Trustee and Perrys agreed that upon payment of the settlement amount and the resolution of the Late Claim, the Trustee would not pursue the fraudulent conveyance claims. Id. ¶ 11.
On November 8, 2002, Perry filed an objection to Citizens' proof of claim (the "Objection") with the Bankruptcy Court. The Objection contended that Citizens' proof of claim should be disallowed because the claim was untimely filed and, furthermore, that the applicable state law statute of limitations had expired.3 On December 11, 2002, Citizens filed its response to Perry's Objection. The Bankruptcy Court heard Perry's Objection on January 7, 2003. By Memorandum and Order dated January 15, 2003, the Bankruptcy Court overruled the Objection, allowing the late filing of Citizens' proof of claim. A notice of appeal of that order was filed in this Court by Perry.
In reviewing the Bankruptcy Court's decision, this Court applies the "clearly erroneous" standard to findings of fact and a de novo standard of review to conclusions of law. Fed. R. Bankr.P. 8013; Jeffrey v. Desmond, 70 F.3d 183, 185 (1st Cir.1995); In re Winthrop Old Farm Nurseries, Inc., 50 F.3d 72, 73 (1st Cir.1995). Here, the Bankruptcy Court exercised its discretion4 to allow Citizens' late filed claim over Perry's objection. This aspect of the Bankruptcy Court's Order is reviewed simply for abuse of that discretion. Neal Mitchell Assoc. v. Braunstein (In re Lambeth Corp.), 227 B.R. 1, 6 (1st Cir. BAP 1998). The Bankruptcy Court's interpretations of Sections 501, 502, and 726, however, present questions of law subject to de novo review.
This Court is free to affirm the Bankruptcy Court's decision on any ground supported by the record, even if the issue was not pleaded, tried, or otherwise referred to in the proceedings below. See In re Parque Forestal, Inc., 949 F.2d 504, 510-11 (1st Cir.1991) (). See also In re Boston Regional Med. Ctr., Inc., 291 F.3d 111, 125 (1st Cir.2002).
The Bankruptcy Court held that: (1) Citizens' proof of claim was allowed because Perry failed to present a valid objection thereto; and (2) Perry failed to demonstrate that the state statute of limitations had expired,5 because he failed to submit any evidence that the execution obtained by Citizens did not pertain to the mortgage deficiency resulting from the May, 1996 foreclosure. For the reasons that follow, this Court affirms the decision of the Bankruptcy Court.
The main thrust of Perry's argument is that he had a valid objection to Citizens' tardily filed claim. Before addressing the merits of this argument and the findings of the Bankruptcy Court, this Court must address the relationship between the Bankruptcy Code and the Federal Rules of Bankruptcy, which together lay the foundation for the payment of late filed claims in Chapter 7 cases.
To determine whether a tardily filed claim can be allowed, the Court must address the substantive requirements of Sections 501, 502, and 726 of the Bankruptcy Code and the procedural requirements of the Federal Rules of Bankruptcy. Initially, this analysis is a two-step process. In re John R. Chavis & Betty Chavis, 47 F.3d 818, 820 (6th Cir.1995). First, the court must determine whether the claim was properly filed under Section 501. Id. Section 501, "Filing of proofs of claims or interests," identifies the parties who have a substantive right to file a claim. 11 U.S.C. § 501; In re Raymond M. Zimmerman, 156 B.R. 192, 195 (Bankr.W.D.Mich.1993). Section 501 also discusses the timeliness of filing: "If a creditor does not timely file a proof of such creditor's claim, an entity that is liable to such creditor with the debtor, ... may file a proof of such claim." 11 U.S.C. § 501(b) (emphasis added). "If a creditor does not timely file a proof of such creditor's claim, the debtor or the trustee may file proof of such claim." 11 U.S.C. § 501(c) (emphasis added). Federal Rule of Bankruptcy Procedure 3002(c) provides the procedural framework to decide whether a claim was timely filed: "In a chapter 7 liquidation ... a proof of claim is timely filed if it is filed not later than 90 days after the first date set for the meeting of creditors." Fed. R. Bankr.P. 3002(c).
Once it has been determined that the claim meets the requirements of Section 501, the court must then turn to Section 502. Section 502, "Allowance of claims or interests," provides for an analysis of the merits of the claim. 11 U.S.C. § 502; In re Tucker, 174 B.R. 732, 739 (Bankr.N.D.Ill.1994). Section 502(a) states that "[a] claim or interest, proof of which is filed under section 501 of this title is deemed allowed unless a party in interest objects." 11 U.S.C. § 502(a). Specifically, the court must look to Section 502(b)...
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