In re Dietz

• Citation: 136 BR 459
• Decision Date: 10 January 1992
• Docket Number: Bankruptcy No. 90-12399.
• Parties: In re Constance I. DIETZ d/b/a Con-Co Ceramic Tile f/d/b/a Avon Tile & Marble, Debtor.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan

136 B.R. 459 (1992)

In re Constance I. DIETZ d/b/a Con-Co Ceramic Tile f/d/b/a Avon Tile & Marble, Debtor.

Bankruptcy No. 90-12399.

United States Bankruptcy Court, E.D. Michigan, S.D., at Flint.

January 10, 1992.

COPYRIGHT MATERIAL OMITTED

James L. Rowe, Flint, Mich., for debtor.

Andrew C. Pringle, Jr., Farmington Hills, Mich., for Beaver Distributors, Inc.

Carl L. Bekofske, Chapter 13 Trustee.

MEMORANDUM OPINION ON MOTION TO ALLOW INFORMAL PROOF OF CLAIM AS TIMELY FILED

ARTHUR J. SPECTOR, Bankruptcy Judge.

FACTS

In this case, a creditor with a nonpriority unsecured claim requests that I deem its late-filed proof of claim to be an amendment to its timely "informal" claim so that it may be paid on a par with those creditors who filed their proofs of claim within the time permitted by law. For the reasons which follow, I hold that the "informal proof of claim" doctrine provides some relief to this creditor.

On November 7, 1990, Beaver Distributors, Inc. commenced a lawsuit in state court against Constance I. Dietz, now the Debtor, seeking judgment in the amount of $22,074.27. Shortly thereafter, on December 3, 1990, the Debtor filed a petition for relief under chapter 13 of the Bankruptcy Code, and scheduled Beaver as a creditor holding an unsecured claim for the amount mentioned. Both Beaver and the attorney representing it in the state-court action were listed on the mailing matrix filed with the Debtor's petition. On December 4, 1990, all parties listed on the matrix were served with a notice of the bankruptcy filing, which advised that the meeting of creditors required by 11 U.S.C. § 341 would be held on January 10, 1991, and that the last date for filing a proof of claim was April 10, 1991.

On January 21, 1991, eleven days after attending the creditors' meeting, Beaver's credit manager mailed a letter to the chapter 13 trustee in which she expressed misgivings about the Debtor's proposed plan. The letter also displayed Beaver's irritation "that the Debtor owed Beaver over $20,000.00 yet was buying expensive jewelry." A copy of this letter was received by the bankruptcy court clerk on February 1, 1991. However, Beaver did not file a proof of claim, as such, until April 16, 1991, six days after the bar date established by F.R.Bankr.P. 3002(c). The Debtor's plan was confirmed on April 17, 1991.

On May 14, 1991, Beaver filed a motion in which it argued that its letter and/or other actions it took prior to the bar date constituted an "informal" proof of claim, the defects of which were cured by its "amending" proof of claim filed after the bar date. Because its informal claim was made prior to expiration of the bar date, Beaver urged the Court to allow its claim as timely filed.

The Debtor and the trustee opposed this motion, arguing that the facts of this case do not warrant application of the informal proof of claim doctrine, and stressing that the payment of Beaver's claim as though it were timely filed would be "prejudicial" to other creditors with unsecured claims. This assertion is undoubtedly correct from a strictly financial standpoint, inasmuch as the allowance of Beaver's claim as timely filed would reduce the dividend to creditors holding timely unsecured claims from 77% to approximately 38.6%, resulting in an aggregate loss to them of about $8,640. After a hearing, I now issue the following findings of fact and conclusions of law pursuant to F.R.Bankr.P. 7052.

DISCUSSION

The trustee does not oppose the allowance, per se, of Beaver's claim. Indeed, there is no provision in the Bankruptcy Code which explicitly requires the "disallowance" of late claims. Section 502 of the Bankruptcy Code, which deals with allowance and disallowance of claims, does not specify that late-filing is a basis for disallowance. And the rule stating that, with exceptions not relevant here, "a proof of claim shall be filed within 90 days after the first date set for the meeting of creditors called pursuant to § 341(a) of the Code," F.R.Bankr.P. 3002(c), does not provide for the disallowance of claims which are filed after the bar date.

The trustee instead argues that Beaver's claim should be treated as tardily filed, and thus paid only after "timely filed claims are paid in full." Page 3 of Trustee's Response to Beaver's Brief (emphasis in original).¹ Since the Debtor does not take exception to the allowance of Beaver's claim under such terms, I do not believe that the issue here is whether Beaver's claim should be "disallowed" pursuant to § 502. Rather, the primary issue is whether Beaver's claim should be deemed to have been timely filed or if it should be subordinated as untimely.

A proof of claim is defined as "a written statement setting forth a creditor's claim," F.R.Bankr.P. 3001(a), and must "conform substantially to the appropriate official form." Id. I must therefore first determine whether Beaver's letter substantially complies with the official form.

A properly completed proof of claim is denominated as such and includes the following:

1. Name and address of creditor;

2. Basis for claim;

3. Date that the debt was incurred;

4. Classification of claim;

5. Amount of claim; and

6. Copies of any documents supporting the claim.

Official Form 10; cf. In re Harper, 138 B.R. 229 (Bankr.N.D.Ind.1991) (1991 Bankr. LEXIS 1291). Beaver's name and address are explicitly set forth in its letter, and the amount of the claim is stated, albeit imprecisely, as being "over $20,000.00." But the letter contains only a hint as to the basis and classification of the claim,² and there is no indication as to the date the debt was incurred. Moreover, the letter does not contain the heading "proof of claim," and there are no supporting documents attached to it. In light of these deficiencies, I conclude that the letter does not "conform substantially to" the official form.

Notwithstanding the "substantial conformity" requirement of Rule 3001(a), many courts have stated or implied that a document which does not substantially conform to the official form may, if certain minimal criteria are met, constitute an "informal" proof of claim. See, e.g., In re Holm, 931 F.2d 620, 622 (9th Cir.1991); In re Charter Co., 876 F.2d 861, 863 (11th Cir.1989); Liakas v. Creditors' Committee of Deja Vu, Inc., 780 F.2d 176, 178 (1st Cir.1986); Wilkens v. Simon Bros, Inc., 731 F.2d 462, 464-65 (7th Cir.1984); In re Butterworth, 50 B.R. 320, 322-23 (W.D.Mich.1984); In re National Entertainment Centers, Inc., 103 B.R. 879, 881, 19 B.C.D. 1309, 21 C.B.C.2d 844 (Bankr. N.D.Ohio 1989); In re Key, 64 B.R. 786, 789 (Bankr.M.D.Tenn.1986); In re McCoy Mgmt. Servs, Inc., 44 B.R. 215, 217, 12 B.C.D. 531 (Bankr.W.D.Ky.1984).³ Under the appropriate circumstances, such a "claim" may then be amended after the filing deadline has passed to bring the document into compliance with Rule 3001(a). Holm, 931 F.2d at 622; Wilkens, 731 F.2d at 464.

The soundness of the informal proof of claim doctrine is suspect because it seemingly does an end-run around Rule 3001(a). And although the doctrine is designed to achieve substantial equity, it is a legitimate question whether that objective is served when the net result is to permit a creditor who has ignored the procedural requirements to share equally with those creditors who have taken the trouble to abide by them.

On the other hand, the concept of an informal proof of claim has been consistently endorsed and applied by the courts since at least 1903,⁴ and there is nothing in the Code nor the Bankruptcy Rules which explicitly rejects it. Moreover, the seeming inequity resulting from application of the "equitable" informal proof of claim doctrine — i.e., the non-discrimination, for purposes of distribution, between conforming and non-conforming claims — can be mitigated in various ways.⁵ I therefore accept that a document which falls short of F.R.Bankr.P. 3001(a)'s definition of a proof of claim may nonetheless constitute an informal proof of claim. The next issue, then, is whether Beaver's letter satisfies the criteria of an informal proof of claim.

In addressing what constitutes an informal proof of claim, a bankruptcy court in this circuit identified the following elements:

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.

McCoy Mgmt., 44 B.R. at 217. This five-part test has gained fairly widespread acceptance. See, e.g., In re Davis, 108 B.R. 95, 99-100, 22 C.B.C.2d 6 (Bankr.D.Md. 1989), aff'd, 936 F.2d 771 (4th Cir.1991); In re Bowers, 104 B.R. 362, 363-64 (Bankr. D.Colo.1989); In re Loffland Bros. Co., 102 B.R. 79, 80-81 (Bankr.N.D.Tex.1988); In re Scholz, 57 B.R. 259, 261 (Bankr. N.D.Ohio 1986); In re Fred Dent, Inc., 57 B.R. 219, 221 (Bankr.M.D.La.1986). But McCoy Mgmt.'s fifth element actually goes to the question of whether a creditor should be allowed to amend an informal claim, rather than whether an informal claim has in fact been made. And since a document which "contains a demand by the creditor on the debtor's estate" implies "an intent to hold the debtor liable for the debt" (and vice versa), I believe that McCoy Mgmt.'s second and third elements should be stated in the alternative.

Thus, the formulation could be restated as follows: A written document filed with the bankruptcy court which contains a demand on the estate or otherwise expresses an intent to hold the debtor liable for an alleged debt will serve as an informal proof of claim.⁶ Cf. Charter Co., 876 F.2d at 863 ("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."); Holm, 931 F.2d at 622 ("The document ....