Unioil, Inc., In re

• Decision Date: 24 April 1992
• Docket Number: Nos. 91-1106,91-1118,s. 91-1106
• Citation: 962 F.2d 988
• Parties: 27 Collier Bankr.Cas.2d 83, 22 Bankr.Ct.Dec. 1446, Bankr. L. Rep. P 74,555 In re UNIOIL, INC., Debtor. UNIOIL, Plaintiff-Appellee/Cross-Appellant, v. H.E. ELLEDGE; 270 CORPORATION, Defendants-Appellants/Cross-Appellees, and Suzanne M. Hudson; John E. Hudson, Defendants-Cross-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 988

962 F.2d 988

27 Collier Bankr.Cas.2d 83, 22 Bankr.Ct.Dec. 1446,

Bankr. L. Rep. P 74,555

In re UNIOIL, INC., Debtor UNIOIL, Plaintiff-Appellee/Cross-Appellant, v. H.E. ELLEDGE; 270 CORPORATION, Defendants-Appellants/Cross-Appellees and Suzanne M. Hudson; John E. Hudson, Defendants-Cross-Appellees.

Nos. 91-1106, 91-1118.

United States Court of Appeals Tenth Circuit.

April 24, 1992.

Jack M. Merritts and Thomas C. Deline, of Montgomery Little Young Campbell & McGrew, P.C., Englewood, Colo., for plaintiff-appellee/cross-appellant.

Steven E. Abelman and Taryn M. Sandri, of Berryhill, Cage & North, P.C., Denver, Colo., for defendants-appellants/cross-appellees H.E. Elledge and 270 Corp. and defendants-cross-appellees Suzanne M. Hudson and John E. Hudson.

Before SEYMOUR, ANDERSON, Circuit Judges, and SAM, ^* District Judge.

SEYMOUR, Circuit Judge.

Debtor Unioil, Inc. brought an adversary proceeding in the Bankruptcy Court to determine the validity of the claims of John and Suzanne Hudson and of H.E. Elledge, as trustee of the 270 Corporation Profit Sharing Plan and Trust (the Trust), to certain disputed fractional working interests in two oil and gas wells in Wyoming. Unioil asserted that the signing of erroneous division orders by Elledge and the Hudsons constituted an accord and satisfaction of their claims. Unioil also asserted that the Trust had not filed a timely proof of claim, having filed in the name of H.E. Elledge without disclosing the existence of the trust. ¹

The bankruptcy court held that the Trust's claim could be asserted by Elledge, and that the execution of the erroneous division orders did not constitute an accord and satisfaction. The district court reversed on the first point, barring the Trust's claim because Elledge did not correctly identify the Trust as his principal until some nine months after the claim was filed. However, the district court affirmed the bankruptcy court's disposition of Unioil's accord and satisfaction defense to the working interest claims.

The bankruptcy court's determinations are subject to review under the same standards that ordinarily govern appellate scrutiny of bench rulings, i.e., de novo for legal conclusions and clear error for factual findings. Davidovich v. Welton (In re Davidovich), 901 F.2d 1533, 1536 (10th Cir.1990). As a general matter, therefore, we consider de novo the proper interpretation of the Bankruptcy Rules governing the viability of the Trust's claim against Unioil, see Jenkins v. Whittaker Corp., 785 F.2d 720, 736 (9th Cir.) (proper interpretation of civil procedural rules is pure question of law, reviewable de novo), cert. denied, 479 U.S. 918, 107 S.Ct. 324, 93 L.Ed.2d 296 (1986); cf. Underwood v. Servicemen's Group Ins., 893 F.2d 242, 243 (10th Cir.1989) (same standard for interpretation of statutory provisions), cert. denied Y495 U.S. 957, 110 S.Ct. 2562, 109 L.Ed.2d 745 (1990), and review the rejection of Unioil's accord and satisfaction defense under the clearly erroneous standard, see Hogg v. Norwest Bank (In re Hogg), 877 F.2d 691, 692 (8th Cir.1989); see also Transpower Constructors v. Grand River Dam Auth., 905 F.2d 1413, 1419 (10th Cir.1990) (defense of accord and satisfaction turns on questions of fact). Applying these standards, we reverse in part and affirm in part.

I.

On April 19, 1985, Defendant Elledge filed a proof of claim in his own name. Shortly thereafter, he joined in an objection to Unioil's reorganization plan, this time also identifying himself, in a/k/a fashion, with "270 Corporation," a Florida corporation he evidently owns. Elledge's proof of claim was untimely, but the parties subsequently executed a stipulation, approved by the bankruptcy court, whereby Unioil waived this defect in return for Elledge's withdrawal of his objection to its reorganization plan.

Elledge continued to attribute his claim to 270 Corporation until January 29, 1986, when he sought by motion to amend his proof of claim to designate the Trust as the proper principal on whose behalf he was pursuing the claim. The bankruptcy court first granted and then, on reconsideration, denied the amendment. Following a trial on the merits of all claims, however, the bankruptcy court returned to its original position on the matter, relying on Fed.R.Civ.P. 17 (Bankr.R. 7017) ² and reasoning that:

"even though the Motion sought to change the name of the claimant from Elledge (individually) to the Trust, the Court should have allowed the amendment.... Rule 17 ... allows the trustee of an express trust to sue in his own name without joining the trust itself as a party. Allowing that type of amendment to the proof of claim in this case causes no harm to Debtor, or undue surprise. There is no risk of multiple liability to both Elledge and the Trust, and the Debtor knew that Elledge was prosecuting the claim on behalf of another entity (although not fully named) ... just slightly over two months after the original proof of claim was filed. Therefore, the Court finds that Elledge is the proper party to prosecute this claim as Trustee for the Trust."

Bankruptcy Court Memorandum Opinion and Order of October 2, 1987 (Bankr.Op.), at 5.

On appeal, the district court disagreed with the bankruptcy court's analysis. The court drew a decisive distinction between litigating an existing claim on behalf of an express trust and filing the proof of claim necessary to establish the trust's claim in the first place. In its view, "[t]hat Elledge ... may sue in his own name on behalf of the Trust does not mean that Elledge may amend his original claim to include the interests of a separate entity, the 270 Trust.... Rule 17(a) does not eliminate the need for a trustee to identify the existence of a trust filing a proof of claim in bankruptcy court and of his capacity as trustee." District Court Order of February 19, 1991, at 6-7. The district court then concluded that the bankruptcy court erred in allowing the Trust's claim. Id. at 7.

We agree with the basic distinction drawn by the district court, which properly differentiates between claims procedures (outlined in Part III of the Bankruptcy Rules) and adversary litigation procedures (set out in Part VII). See Sheftelman v. Standard Metals Corp. (In re Standard Metals Corp.), 817 F.2d 625, 631-32 and n. 10 (10th Cir.1987) (while class action procedure is available in adversary proceedings under Bankr.R. 7023, lack of comparable provision in rules governing claims procedures precludes use of class proof of claim); Accord In re Elec. Theatre Restaurants Corp., 57 B.R. 147, 148-49 (Bankr.N.D. Ohio 1986) (filing of proof of claim does not constitute adversary proceeding and, thus, Rule 7023 does not authorize class proof of claim). The proper filing and permissible amendment of a proof of claim are not governed by Rule 7017. These matters are addressed in Bankr.R. 3001 and its interpretive case law, which, for the reasons discussed below, lead us to conclude that the bankruptcy court acted properly in allowing the Trust claim prosecuted by Elledge.

Rule 3001(b) provides that a creditor's proof of claim "shall be executed by the creditor or the creditor's authorized agent." (Emphasis added.) Furthermore, Rule 3001(a) specifies that the proof of claim "shall conform substantially to the appropriate Official Form," which, like its predecessor, requires the names of both the person authorized to file the claim and the creditor-principal on whose behalf it is filed. See Bankr.Off. Form 10 (Proof of Claim); see, e.g., Gulf States Exploration Co. v. Manville Forest Prods. Corp., (In re Manville Forest Prods. Corp.), 89 B.R. 358, 376-77 (Bankr.S.D.N.Y.1988) (pursuant to Rule 3001 and the Official Form (then, Form 19), agent must disclose name of creditor-principal on whose behalf proof of claim is filed), aff'd, 896 F.2d 1384 (2d Cir.1990).

Clearly, then, the proof of claim initially filed by Elledge, which did not even indicate his representational capacity much less disclose the identity of the true creditor, was defective. The dispositive question is whether amendment was properly permitted. This question has two components, each with its own standard of review: we consider de novo the threshold issue whether the original proof of claim was amendable at all; and, if it was, we assess the decision to allow amendment under the particular circumstances solely for an abuse of discretion. See, e.g., United States v. Kolstad (In re Kolstad), 928 F.2d 171, 173 (5th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 419, 116 L.Ed.2d 439 (1991); Sambo's Restaurants, Inc. v. Wheeler (In re Sambo's Restaurants, Inc.), 754 F.2d 811, 815, 816-17 (9th Cir.1985).

Ordinarily, amendment of a proof of claim is freely permitted so long as the claim initially provided adequate notice of the existence, nature, and amount of the claim as well as the creditor's intent to hold the estate liable. The court should not allow truly new claims to proceed under the guise of amendment. United States v. Int'l Horizons, Inc. (In re Int'l Horizons, Inc.), 751 F.2d 1213, 1216-17 (11th Cir.1985); see Wright v. Holm (In re Holm), 931 F.2d 620, 622-23 (9th Cir.1991). There is no dispute here that the original proof of claim was adequate in these respects and that its content was unaltered by the requested amendment. The only change was in the replacement of Elledge by the Trust, to whom he had assigned the interest asserted in the proof of claim some time before the latter was filed. We have held that:

"[w]here there is a substitution as party plaintiff or claimant of one having the legal right to sue instead of one improperly named as plaintiff or claimant and the party substituted bears some relation of interest to the original party, there is no change in the cause of action and the substitution relates back to the ... filing of the claim."

Fidelity & Deposit Co. v. Fitzgerald (In re Midyett & May Constr. Co.), 272 F.2d 121, 129 (10th Cir.1959)...