In re Anchor Resources Corp., Civ.A. No. 91-K-326

• Decision Date: 01 May 1992
• Docket Number: Civ.A. No. 91-K-326,Bankruptcy No. 83 B 4337 J.
• Citation: 139 BR 954
• Parties: In re ANCHOR RESOURCES CORPORATION, Debtor. FIRST INTERSTATE BANK OF DENVER, N.A., Appellant, v. Tom H. CONNOLLY, Trustee for the Estate of Anchor Resources Corporation, Appellee.
• Court: U.S. District Court — District of Colorado

139 B.R. 954 (1992)

In re ANCHOR RESOURCES CORPORATION, Debtor.

FIRST INTERSTATE BANK OF DENVER, N.A., Appellant, v. Tom H. CONNOLLY, Trustee for the Estate of Anchor Resources Corporation, Appellee.

Civ.A. No. 91-K-326, Bankruptcy No. 83 B 4337 J.

United States District Court, D. Colorado.

May 1, 1992.

John R. Mallory, Dennis E. Baker, First Interstate Bank, Denver, Colo., for appellant.

Mary Scherschell, Tom H. Connolly, trustee, Denver, Colo., for debtor.

MEMORANDUM OPINION AND ORDER

KANE, Senior District Judge.

First Interstate Bank of Denver, N.A., appeals the bankruptcy court's February 14, 1991 order holding that its motion for relief from stay would not be deemed an informal proof of claim and sustaining the trustee's objection to its formal proof of claim as untimely. The bankruptcy court reasoned that the bank's motion for relief from stay did not make demand on the debtor, Anchor Resources Corporation, for payment or evince an intent to hold the estate liable for the debt, requirements for a document to be considered an informal proof of claim. I affirm.

I. Facts.

Anchor Resources filed its petition under Chapter 11 of the Bankruptcy Code on September 23, 1983. It listed First Interstate Bank as a secured creditor in an unliquidated amount on its schedules. Anchor Resource's debt to the bank arose from its default on a promissory note in the principal amount of $1,925,000. The note was secured by certain equipment owned by Anchor Resources. First Interstate perfected its security interest in the equipment by filing UCC-1 financing statements.

On September 28, 1983, First Interstate filed a motion for relief from the stay and for adequate protection under § 363(e) of the Code. In its motion, the bank described the note and its security interest in the equipment, the debtor's default on the note and the bank's unsatisfied demand for payment and the existing amount of unpaid principal and accrued interest. (R.Doc. 1) It further alleged that the value of the equipment held as collateral, in which Anchor Resources had no equity, was substantially less than Anchor's outstanding debt to it. (Id.) On October 5, 1983, First Interstate and Anchor filed a stipulation to these facts, which was approved by the court. The parties agreed that "the relief requested in the Bank's First Claim under the motion for relief from stay should be granted, and the automatic stay imposed by 11 U.S.C. § 362(a) should be vacated to allow the Bank to repossess its collateral and proceed in accordance with its rights under its security agreement." (Id. Doc. 2 at 2.)

The case was converted from Chapter 11 to Chapter 7 on February 21, 1984. August 1, 1984 was established as the bar date for filing claims against the estate. On August 10, 1984, having disposed of the equipment held as collateral, First Interstate filed a claim for $597,829.67, representing the deficiency from the sale. On December 19, 1990, Tom H. Connolly, the trustee for Anchor Resources' estate, filed a motion to disallow the bank's claim as untimely. First Interstate responded to the motion, arguing that it could not determine the unsecured amount of its claim before the bar date because disposition of the collateral was a complex process. Further, it claimed that its motion for relief from the stay should be deemed an informal proof of claim and its August 10 notice an amendment to that claim.

In an order dated February 14, 1991, the bankruptcy court granted the trustee's motion, holding that First Interstate's motion for relief from the stay could not be considered an informal proof of claim because "the documents relied upon make no demand against the estate nor do they manifest an intent to hold the estate liable. Rather, it would appear from the documents that the Bank, a sophisticated banking institution, intended to rely on only its state court rights and recover from its collateral." (R.Doc. 8 at 2.). First Interstate thereafter commenced this appeal. Review is de novo in determining whether the bankruptcy court erred in holding that the motion for relief from stay and stipulation did not constitute an informal proof of claim. See Sambo's Restaurants, Inc. v. Wheeler (In re Sambo's Restaurants, Inc.), 754 F.2d 811, 815 (9th Cir.1985) (whether documents can be considered an informal proof of claim is a legal issue subject to de novo review).

II. Merits.

Under Bankruptcy Rule 3002, an unsecured or undersecured creditor in a Chapter 7 bankruptcy must timely file a proof of claim to receive a distribution from the estate. Bankr.R. 3002(a); In re Glick, 136 B.R. 654, 656 (Bankr.W.D.Va.1991); In re Padget, 119 B.R. 793, 797 (Bankr.D.Colo. 1990). "The execution and timely filing of a proof of claim creates prima facie evidence as to the validity and amount of the claim." In re Padget, 119 B.R. at 797. The trustee has the duty "to examine proofs of claim and object to the allowance of any claim that is improper." 11 U.S.C. § 704(5); In re Padget, 119 B.R. at 798. His distribution of the assets of the estate is based on allowed unsecured claims. 11 U.S.C. § 726(a)(2); In re Glick, 136 B.R. at 656. The requirement that a creditor timely file a proof of claim to participate in this distribution furthers "the policy favoring quick and effective settlement of bankruptcy estates." In re Pernie Bailey Drilling Co., 105 B.R. 357, 362 (Bankr.W.D.La. 1989); see also In re Glick, 136 B.R. at 656.

In some cases, where the creditor has not timely filed a formal proof of claim, courts have permitted other papers of record to be deemed an informal proof of claim. "Not every document filed in the bankruptcy court will constitute an informal proof of claim, however; the document must apprise the court of the existence, nature and amount of the claim (if ascertainable) and make clear the claimant's intention to hold the debtor liable for the claim." Charter Co. v. Dioxin Claimants (In re Charter Co.), 876 F.2d 861, 863 (11th Cir.1989). Some courts, including the bankruptcy court below, require the informal notice to meet the following five requirements:

1. the proof of claim must be in writing;

2. the writing must contain a demand by the creditor on the debtor\'s estate;

3. the writing must express an intent to hold the debtor liable for the debt;

4. the proof of claim must be filed with the Bankruptcy Court; and

5. based on the facts of the case, it would be equitable to allow the amendment.

In re Bowers, 104 B.R. 362, 364 (Bankr. D.Colo.1989) (applying test of In re McCoy Management Servs., Inc., 44 B.R. 215, 217 (Bankr.W.D.Ky.1984)).

In this appeal, the parties do not contest the bankruptcy court's application of the McCoy test or that the first, fourth and fifth requirements are met. The dispute centers on the second and third elements: whether First Interstate's motion for relief from stay and the parties' stipulation manifested the bank's intent to hold Anchor Resources liable for the entire debt, including the unsecured portion, and its intent to make a claim against the estate for its payment. Several courts have addressed similar situations and have reached the same conclusion as the bankruptcy court.

In an early case under the former Bankruptcy Act, Lacoe v. De Long (In re Hotel St. James Co.), 65 F.2d 82 (9th Cir.1933), the court upheld the trustee's objection to a creditor's amended proof of claim. It reasoned that the creditor's earlier petition for leave to sell mortgaged premises in a Bankruptcy Act case did not constitute informal proof of claim because there was "not the slightest indication that the petition was intended as a claim against the bankruptcy estate." Id. at 83.

Whether formal or informal, a claim must show (as the word itself implies) that a demand is made against the estate, and must show the creditor\'s intention to hold the estate liable. And this is especially the duty of a secured creditor, who has the choice (if his security be not also a preference) of relying upon the security and thereby giving up all or a part of his claim upon the estate. This he will be sure to do, if the security be sufficient to pay the whole debt; and, even if it will only pay the debt in part, he will probably apply the security as far as possible and hold the estate for the remainder only. But his election to pursue the estate must be made in accordance with the act; otherwise, he will be confined to his security.

Id. at 83-84. Compare In re Guardian Mortgage Investors, 15 B.R. 284, 286 (M.D.Fla.1981) (construing as informal proof of claim motion for relief from stay to pursue state court lawsuit because, unlike Hotel St. James, lawsuit was creditor's sole source of relief).

In Code cases since Hotel St. James, courts have continued to adhere to the view that a motion for relief from the stay to foreclose on collateral cannot be deemed an informal proof of claim when the creditor states no intention to hold the debtor or the estate liable for the amount of any deficiency. For example, in In re Glick, 136 B.R. 654 (Bankr.W.D.Va.1991), the debtors filed a Chapter 7 petition and listed the bank as a secured creditor on its schedules. The bank held two demand notes secured by credit line deeds of trust on the debtors' residence....