In re Egan

• Decision Date: 02 March 2015
• Docket Number: Case No. 14–36831 (CGM)
• Parties: In re: John Merrick Egan and Eileen D Egan, Debtor.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

526 B.R. 111

In re: John Merrick Egan and Eileen D Egan, Debtor.

Case No. 14–36831 (CGM)

United States Bankruptcy Court,

S.D. New York.

Signed March 2, 2015

Clarfield, Okon, Salomone, & Pincus, P.L., 425 RXR Plaza, Uniondale, New York 11556, Attorneys for Ocwen Loan Servicing, LLC, By: Dennis A. Amore, Esq.

Jeffrey L. Sapir, As Chapter 13 and 12 Trustee, 399 Knollwood Road, Suite, White Plains, NY 10603, By: Jeffrey L. Sapir, Esq.

Garvey Tirelli & Cushner, Ltd., Westchester Financial Center, 50 Main Street, Suite 390, White Plains, NY 10606, Attorneys for the Debtors, By: Linda M. Tirelli, Esq.

MEMORANDUM DECISION DENYING MOTION TO ALLOW LATE FILED CLAIM

CECELIA G. MORRIS, CHIEF UNITED STATES BANKRUPTCY JUDGE

Ocwen seeks allowance of its late filed claim. As late claims are not allowed in chapter 13 and Ocwen has not met its burden of establishing that its objection to confirmation should be treated as an informal proof of claim, the Court denies Ocwen's request.

Jurisdiction

This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a) and the Standing Order of Reference signed by Chief Judge Loretta A. Preska dated January 31, 2012. This is a “core proceeding” under 28 U.S.C. § 157(b)(2)(B) (allowance or disallowance of claims against the estate).

Background

Debtor filed for chapter 13 relief on September 8, 2014. Vol. Pet., ECF No. 1. The last date to object to confirmation was November 10, 2014 and the last date to file proofs of claim was December 30, 2014. 341 Ntc., ECF No. 7. On September 29, 2014, Ocwen, as servicer of Deutsche Bank, filed an objection to confirmation. Obj., ECF No. 14. On January 6, 2015, Debtor filed a proof of claim on behalf of Ocwen in the amount of $1. Claim No. 5. On January 12, 2015, Ocwen filed a proof of claim in the amount of $134,416.38. Claim No. 6 (filed by Deutsche Bank National Trust Company c/o Ocwen Loan Servicing, LLC).

On January 26, 2015, Ocwen filed a motion to allow its late filed claim. Mot., ECF No. 25. Ocwen argues that its objection to confirmation should be considered an informal proof of claim and that its claim is not late under an excusable neglect analysis. Id. ¶¶ 7, 10.

The chapter 13 trustee filed opposition to the motion. Opp., ECF No. 30. He argues that the excusable neglect standard does not apply in a chapter 13 case. Id. ¶ 3. He argues that Ocwen cannot modify a proof of claim filed by the Debtor. Id. ¶ 11. He argues that the objection to confirmation should not be considered to be an informal proof of claim because the creditor was aware of the need to file a claim and never intended the objection to be an informal proof of claim. Id. ¶ 17. On February 19, 2015, Debtors filed opposition to the motion, in which they make similar arguments to those made by the chapter 13 trustee. D's Opp., ECF No. 31.

Discussion

In its motion to allow its late filed claim, Ocwen makes two main arguments: 1) that its objection to confirmation should be considered an informal proof of claim; 2) that its late claim be allowed pursuant to the test set forth in Pioneer Investment Services. Co. v.Brunswick Associates Limited Partnership, 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993). The Court will consider whether to permit Ocwen's late filed claim first, since the history of disallowing late claims in chapter 13 bears on whether to allow Ocwen's objection to confirmation as an informal proof of claim.

Late claims are not allowed in chapter 13

Ocwen's argument that its late filed claim should be permitted under the doctrine of excusable neglect as outlined in Pioneer is misplaced. See Aboody v. United States (In re Aboody), 223 B.R. 36, 38 (1st Cir. BAP 1998) (holding that the excusable neglect standard for allowing untimely proofs of claim does not apply in chapter 13 cases). Claims filed in chapter 13 cases are governed by Bankruptcy Rule 3002(c), which states that “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 called under § 341(a) of the Code....” Fed. R. Bankr.P. 3002(c); see alsoIn re Daniels, 466 B.R. 214, 217 (Bankr.S.D.N.Y.2011) (stating that Rule 3002(c) sets the standard for proofs of claim in chapter 13 cases). Rule 3002(c) goes on to provide six exceptions to the 90 day deadline, excusable neglect is not one of them. Id. Bankruptcy Rule 9006(b)(3) states: “[t]he court may enlarge the time for taking action under Rule[ ] ... 3002(c) ... only to the extent and under the conditions stated in th[at] rule[ ].” Fed. R. Bankr.P. 9006(b)(3). There is no excusable neglect basis for enlarging the claims bar date included in Rule 3002(c). Accordingly, the excusable neglect standard found in Rule 9006(b)(1) does not authorize extensions of the claims deadline imposed in chapter 13 cases. In re Oscar, 2005 WL 6522763 (Bankr.E.D.Pa. Apr. 14, 2005).

“[S]ince 1994, the courts have almost uniformly ruled that proofs of claim that are untimely filed in a Chapter 13 case may not be deemed timely filed, and that the claimants thereunder should not take from, or be permitted to recover from, the debtor's estate under the Chapter 13 plan.” Daniels, 466 B.R. at 217 (listing examples). This Court has consistently held that late claims are not permitted in chapter 13 cases. In re Dumain, 492 B.R. 140, 148 (Bankr.S.D.N.Y.2013) (holding that secured creditors must comply with the bar date imposed by Bankruptcy Rule 3002(c)).

As such, the Court will not allow Ocwen's late claim.

The test for allowing informal proofs of claim should take into account the facts of the case

The doctrine of informal proof of claim derives from the Second Circuit's holding that “it is not essential that a document be styled a ‘proof of claim,’ or that it be filed in the form of a claim, if it fulfills the purposes for which the filing of proof is required.” In re Lipman, 65 F.2d 366, 368 (2d Cir.1933); Dumain, 492 B.R. at 149 (citing Lipman ). The party seeking to use the informal proof of claim doctrine bears the burden of proof. Dumain, 492 B.R. at 149. While the Second Circuit has not provided a specific test, bankruptcy courts in this Circuit generally follow the following four-part test: To be an informal proof of claim, a document “must have been 1) timely filed with the bankruptcy court and become part of the judicial record; 2) state the existence and the nature of the debt; 3) state the amount of the claim against the estate; and 4) evidence the creditor's intent to hold the debtor liable with the debt.” Dumain, 492 B.R. at 149; accordIn re St. James Mech., Inc., 434 B.R. 54, 63 (Bankr.E.D.N.Y.2010); In re Enron Creditors Recovery Corp., 370 B.R. 90, 99 (Bankr.S.D.N.Y.2007); Houbigant, Inc. v. ACB Mercantile, Inc. (In re Houbigant, Inc.), 190 B.R. 185, 187 (Bankr.S.D.N.Y.1995).

Ocwen's objection to confirmation was timely filed; states the nature of the debt to be “pre-petition mortgage arrears;” states the total amount of mortgage arrears as $63,806.90; and states that it intends to hold the debtor liable by indicating that a claim will be filed for this amount and objecting to the plan. Obj. ¶¶ 2, 4. Thus, it presumably meets the requirements necessary to be considered an informal proof of claim under the current test used by bankruptcy courts in this Circuit. SeeIn re Benedict, 65 B.R. 95, 96 (Bankr.N.D.N.Y.1986) (“[C]ertainly [Creditor]'s timely filing of the objection to Debtors' Plan sufficiently established ‘the creditor's intention to hold the estate liable’ for a claimed obligation. Once filed, the informal writing is susceptible to amendment after the expiration of the deadline for filing proofs of claim, so as to bring it into conformity with the required formalities of FRBP 3001.”) (internal citations omitted).

However, a number of Courts of Appeals that have considered the informal proof of claim doctrine have added a fifth prong to the test: “[W]hether, given the particular surrounding facts of the case, it would be equitable to treat the document as a proof of claim.” Am. Classic Voyages Co. v. Official Comm. (In re Am. Classic Voyages Co.), 405 F.3d 127, 130–131 (3d Cir.2005); see alsoBarlow v. M.J. Waterman & Assoc's., Inc. (In re M.J. Waterman & Assoc's., Inc.), 227 F.3d 604, 610 (6th Cir.2000) (“[W]e turn next to the fifth and arguably most critical element of the analysis-whether allowance of the informal proof of claim would be equitable under the circumstances.”); Nikoloutsos v. Nikoloutsos (In re Nikoloutsos), 199 F.3d 233, 236 (5th Cir.2000) (“[T]o qualify as an informal proof of claim: (1) the claim must be in writing; (2) the writing must contain a demand by the creditor on the debtor's estate; (3) the writing must evidence an intent to hold the debtor liable for such debt; (4) the writing must be filed with the bankruptcy court; and (5) based upon the facts of the case, allowance of the claim must be equitable under the circumstances.”); Clark v. Valley Fed. Sav. & Loan, Ass'n (In re Reliance Equities, Inc.), 966 F.2d 1338, 1345 (10th Cir.1992) ( “[W]ith respect to informal proofs of claim: 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.).”

When analyzing the facts of a case under the fifth prong, courts consider whether the claimant is sophisticated; whether the claimant had actual notice of the bar date; and whether the claimant was intimately involved in the debtor's case. In re Han–Hsien Tuan, 2013 WL 5719505, at *5 (D.N.J. Oct. 21, 2013). Courts considering this prong are less likely to employ the informal proof of claim doctrine where the creditor is represented by counsel as “[a]ttorneys practicing in bankruptcy court are with a general...