Commonwealth Corp., Matter of
| Decision Date | 19 May 1980 |
| Docket Number | No. 78-2690,78-2690 |
| Citation | 6 B.C.D. 812,617 F.2d 415 |
| Parties | In the Matter of COMMONWEALTH CORPORATION, Bankrupt. The FIRST NATIONAL BANK OF MOBILE, Appellant, v. Lee A. EVERHART, Trustee of the Commonwealth Corporation, Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Ulmer, Murchison, Ashby & Ball, Douglas H. Morford, Jacksonville, Fla., for appellant.
Pennington & Wilkinson, Davisson F. Dunlap, Jr., Tallahassee, Fla., for appellee.
Appeal from the United States District Court for the Northern District of Florida.
Before MORGAN, ANDERSON and RANDALL, Circuit Judges.
The First National Bank of Mobile (hereinafter referred to as the Mobile bank) appeals from the decision of the district court denying the motion of the Mobile bank for leave to file an amended claim in a Chapter X proceeding 1 approximately three years and four months after the bar date fixed by the district court pursuant to Bankruptcy Rule 10-401(b)(1). 2 We reverse.
On June 24, 1974, Commonwealth Corporation (hereinafter referred to as Commonwealth) filed a petition pursuant to Chapter X of the Bankruptcy Act of 1898. On September 9, 1974, the district court entered an order pursuant to Rule 10-401(b)(1) providing that all claims must be filed within thirty days from the date of the mailing of an appropriate notice by the Trustee appointed by the district court in the proceedings. Pursuant to such order, notice was mailed to the Mobile bank requiring the filing of a claim within 30 days from September 18, 1974. On October 18, 1974, the Mobile bank filed a proof of claim 3 which provided, in relevant part, as follows:
2. That (Commonwealth) was at the time of the filing of its petition for a reorganization on June 25, 1974, and still is, justly and truly indebted or liable to (the Mobile bank) for the following sums:
(b) On August 29, 1973, (the Mobile bank), at the request of (Commonwealth), loaned C. K. Marshall & Company (hereinafter referred to as Marshall) the sum of $465,000.00 to allow Marshall to make improvements to real property (hereinafter referred to as the Florida property) located in Okaloosa County, Florida. To evidence said loan Marshall executed and delivered to (the Mobile bank) a note in the amount of $465,000.00, and secured the same by executing and delivering to (the Mobile bank) a mortgage (hereinafter referred to as the Mobile bank mortgage) on (the Florida property), said mortgage having been recorded in the official records of Okaloosa County. Said note was not paid when due. On June 14, 1974 (Commonwealth) delivered to (the Mobile bank) its check in the amount of $465,000.00 and thereby induced (the Mobile bank) to execute a cancellation of (the Mobile bank mortgage). Thereafter (Commonwealth) caused Marshall to execute a new mortgage (hereinafter referred to as the Commonwealth mortgage) to (Commonwealth), apparently without adequate consideration, and immediately thereafter sold said note and (the Commonwealth mortgage) to Greenwich Savings Bank of New York (hereinafter referred to as Greenwich). (Commonwealth's) check for $465,000.00 payable to (the Mobile bank) was subsequently dishonored because of insufficient funds, and (the Mobile bank) has commenced an action against Marshall, Greenwich and The Lewis State Bank (hereinafter referred to as Lewis bank) in The United States District Court for the Northern District of Florida, Tallahassee Division, requesting that the court set aside (the Mobile bank's) cancellation of (the Mobile bank mortgage), reinstate (the Mobile bank mortgage) from Marshall to (the Mobile bank), and declare that (the Commonwealth mortgage) from Marshall now held by Greenwich is subordinate to (the Mobile bank mortgage). Attached is a copy of the complaint filed in said proceedings.
In the event (the Mobile bank) is unsuccessful in such litigation, (the Mobile bank) shall have the right to assert a claim against (Commonwealth) for the amount of (Commonwealth's) check refused because of insufficient funds in the amount of $465,000.00. A copy of said check is attached hereto and made a part hereof.
3. No part of the above named liabilities have been paid.
4. There are no set-off or counterclaims to said debts or liabilities.
5. To the extent that (the Mobile bank) has security for the debts described above, this claim is filed as a secured claim; to the extent that any portion of said debt is unsecured, this claim is filed as a priority claim; and to the extent that this claim is neither a secured or priority claim, it is filed as an unsecured claim.
The Mobile bank attached to its proof of claim a copy of the complaint 4 against Marshall, Greenwich and Lewis bank referred to in such proof of claim.
The Trustee proceeded to dispose of the other claims in the Chapter X proceeding (approximately 1,920 claims were originally filed therein) while the litigation by the Mobile bank against Marshall, Greenwich and Lewis bank proceeded to judgment. On July 29, 1977, the court in which such litigation was pending entered an order rescinding and expunging from the public record the satisfaction of the Mobile bank mortgage and reinstating the Mobile bank mortgage, declaring that Marshall owed the Mobile bank on the note secured by the Mobile bank mortgage $465,000, plus interest, and cancelling the Commonwealth mortgage. On January 3, 1978, the appeal which was taken from the entry by the court of such order was voluntarily dismissed. Shortly thereafter, on February 14, 1978, the Trustee filed objections to Commonwealth's proof of claim and requested that such claim be disallowed in full. As a basis for the disallowance, the Trustee alleged that (i) there were no amounts due and owing by Commonwealth to the Mobile bank arising out of the transaction referred to in the proof of claim, (ii) the Mobile bank failed to "conform with all of the conditions precedent which would give rise to further obligation on the part of Commonwealth . . . to make a loan to (the Mobile bank)" and (iii) the Mobile bank, having prevailed in the litigation and having thereby secured the Florida property, was not entitled to a deficiency against Commonwealth.
On February 27, 1978, the Mobile bank filed the motion for leave to file an amended claim which is the subject of this appeal. As grounds therefor, the Mobile bank asserted that the original claim does not accurately set forth the precise factual situation and that the Mobile bank had ascertained additional facts in the discovery which had taken place in its suit against Marshall, Greenwich and Lewis bank. The proposed amended claim is for the same amount as the original claim and contains the same basic factual allegations as the original claim, together with the additional factual allegation that the loan from Commonwealth to Marshall was made The proposed amended claim stated that the Mobile bank had instituted proceedings to foreclose the Mobile bank mortgage on the Florida property, but that the collateral was believed to be insufficient adequately to secure repayment of the indebtedness owed by Marshall to the Mobile bank. In addition, the proposed amended claim stated that Marshall had been dissolved and at the time of the dissolution was insolvent. The Mobile bank, in the proposed amended claim, described its claim against Commonwealth as a claim "based upon (Commonwealth's) breach of its take-out commitment to (the Mobile bank)." A hearing was held before a special master on the Mobile bank's motion for leave to file an amended claim during which counsel for the Mobile bank indicated that no written take-out commitment was known to exist and that the Mobile bank would rely on a verbal take-out commitment.
On April 13, 1978, the district court entered an order denying the Mobile bank's motion, citing In re G. L. Miller & Co., 45 F.2d 115 (2d Cir. 1930), and In re Keck, 23 F.Supp. 121 (W.D.Pa.), aff'd sub nom. C.I.T. Corp. v. Himes (In re Keck ), 98 F.2d 589 (3d Cir.), cert. denied, 305 U.S. 646, 59 S.Ct. 148, 83 L.Ed. 417 (1938). The district court held that the proposed amendment sought to establish a new cause of action based upon the breach of an oral take-out commitment, as distinguished from the original cause of action for the dishonored check. The district court denied the amendment on several additional grounds. The first was that the original claim contained an election on the part of the Mobile bank not to proceed against Commonwealth if it were successful in its litigation against Marshall, Greenwich and Lewis bank. The court stated that the Mobile bank had received all the relief that it was seeking in that litigation. The second additional ground for the district court's decision was that there was nothing in the original claim to place the Trustee on notice that the Mobile bank would assert any other basis for a claim in the proceedings. The information with respect to the alleged verbal take-out commitment was exclusively in the possession of the Mobile bank for three years and four months since the filing of the original claim. Finally, the third additional ground for the decision was that prejudice to the creditors of Commonwealth might occur if full scale litigation ensued between the Trustee and the Mobile bank over the alleged take-out commitment.
On appeal, the Mobile bank asserts that the district court abused its discretion in failing to permit the Mobile bank to amend its claim. The Mobile bank argues that the essential facts relating to the involvement of Commonwealth in the transaction in question were specified in the original claim, except that the original claim did not explain with...
To continue reading
Request your trial
-
In re Friesenhahn
... ... matter pursuant to 28 U.S.C. § 1334(b), and the District Court's general order of reference in bankruptcy ... at 175 ( citing In re Commonwealth Corp., 617 F.2d 415, 420 (5th Cir.1980)) ... The principal concern in the ... ...
-
In re Depugh
... ... Miller, United States District Judge for the Southern District of Texas, in eCast Settlement Corp. v. Tran (In re Tran), 369 B.R. 312 (S.D.Tex.2007), which affirmed a ruling by Bankruptcy Judge ... 06-3556, 2006 WL 3805670, at *19 (Bankr.S.D.Tex. Dec.22, 2006) (holding that a matter may constitute a core proceeding under 28 U.S.C. § 157(b)(2) "even though the laundry list of core ... See, e.g., First Nat'l Bank of Mobile v. Everhart (In re Commonwealth Corp.), 617 F.2d 415, 422 n. 12 (5th Cir.1980) (noting that "amendment of claims in bankruptcy is ... ...
-
In re Hudson Oil Co., Inc.
... ... BENJAMIN E. FRANKLIN, Chief Judge ... This matter came for hearing on November 4 & 5, 1987, upon the trustee's second amended motion to resolve the ... See In re Commonwealth Corp., 617 F.2d 415, 420 (5th Cir.1980). As such, Courts permit amendments only where the original ... ...
-
In re Devey
... ... ORDER SUSTAINING DEBTOR'S OBJECTION TO CLAIM John E. Waites, US Bankruptcy Judge This matter comes before the Court for a hearing on the debtor Randy Lee Devey's ("Debtor") objection to the ... " (internal citation omitted) ); Canal Corp. v. Finnman , 960 F.2d 396, 404 (4th Cir. 1992) (The existence of a claim is controlled by state ... 1985) ; In re Commonwealth Corp. , 617 F.2d 415 (5th Cir. 1980). 31 See Fed. R. Bankr. P. 9014(c) (Discovery is available ... ...