In re Evanston Motor Co., Inc.
| Decision Date | 03 June 1982 |
| Docket Number | Bankruptcy No. 80 B 3500. |
| Citation | 20 BR 550 |
| Parties | In re EVANSTON MOTOR CO., INC., d/b/a Evanston Toyota and d/b/a Evanston Dodge, Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Nicholas Dozoryst, II, Chicago, Ill., for movant.
Maurice Levine, Chicago, Ill., for respondent.
This cause comes to be heard on the First National Bank of Lincolnwood's (hereinafter FNBL) motion to amend proof of claim. The trustee in this case, Maurice Levine, has objected to any amendment alleging that movant failed to file a timely proof of claim in the first instance. The facts are not in dispute and are set forth below.
On March 25, 1980 the debtor filed a voluntary application for relief under Chapter 11 of the Bankruptcy Code. On July 16 of that year Mr. Levine was appointed trustee and began settlement negotiations with the various creditors in this case. The movants, FNBL, mailed the following letter to Mr. Levine as trustee on August 18, 1980:
Yours very truly ZAIDENBERG, HOFFMAN & SCHOENFELD HARRY ZAIDENBERG" HZ/sf enclosures
The letter was accompanied by copies of the promissory note and assignments. Subsequently, the debtor amended its schedule A-3 to include FNBL as an unsecured creditor with a claim of $153,333.38.
This case was converted from a Chapter 11 reorganization to a Chapter 7 liquidation on November 6, 1980. Mr. Levine continued as trustee and filed an adversary complaint against movant, FNBL, on December 30, 1980 alleging inter alia preferential payments by the debtor to FNBL on the promissory note of the debtor. Thereafter, FNBL moved to amend its proof of claim and the trustee objected to any amendment.
Two issues are raised by trustee's objection to FNBL's motion to amend. First, whether movant's letter of August 18, 1980 constitutes a "proof of claim". Second, whether such a claim has been "filed" within the dictates of Rules 302 and 509 of the Federal Rules of Bankruptcy Procedure.
A creditor must file a proof of claim within 6 months after the first date set for the first meeting of creditors. Fed.R.Bankruptcy P. 302(e). The sixth month filing period limitation is mandatory and may not be extended by this court. Fed.R.Bankruptcy P. 906(b). See In re Ebeling, 123 F. 2d 520, 521 (7th Cir. 1941); Matter of Paul R. Dean Co., Inc., 460 F.Supp. 447 (W.D.N.Y.1978) (). See also In the Matter of Brown, 14 B.R. 233 (Bkrtcy., N.D.Ill., 1981) ().
Movant has not alleged any written correspondence between itself and either the trustee or this court within the statutory period other than the letter reproduced supra. The issue of whether movant's letter is a proof of claim capable of amendment is resolved upon the reasonable interpretation of the letter's message.
The trustee argues that movant's letter is reasonably interpreted as being merely informative and not indicative of any intention to hold the estate liable for the amount remaining on the note. This court finds such an interpretation is not consistent with the actions and representations of the parties. The movant's debt, as scheduled by the trustee, represents more than 50% of the total scheduled unsecured debts. The suggested exclusion of FNBL's claim from the scheduled debts under consideration by the trustee would seemingly have favored a workout rather than a liquidation in this court's opinion. Further, both the trustee and the movant participated in negotiations to sell the debtor's franchise to a third party. If the trustee had not believed that the movant intended to hold the estate liable upon receipt of the letter, discussions between him and the movant regarding the proposed sales would have been meaningless.
Despite the abhorrence equity courts have of a forfeiture, the trustee urges a strict construction of the term "claim" citing as precedent several decisions. This court finds no case cited by trustee which compels it to disallow the movant's letter as an amendable proof of claim. The letter was brought to the attention of, and accepted by, an officer of this court and speaks for itself, however inartistically, as a claim against the estate.
The letter was sent in response to the trustee's inquiry as to the amount of any indebtedness of the debtor to FNBL and what collateral, if any, secured the debt. In response movant's letter sets forth the amount of the principal balance due on the note and assignments of beneficial interests in property, presumably representing some security on the note. The letter further indicates that the firm of Zaidenberg, Hoffman and Schoenfeld was then representing FNBL with respect to the proceedings in bankruptcy. The letter directed all further inquiries to the law firm.
The purpose of requiring proofs of claim is to finalize, in advance of distribution, the amount of debts to be satisfied by the estate. It allows the parties to determine whether a workable reorganization can be proposed and if not, what percentage of satisfaction of claims the creditors can expect. The initial form of this notice to a debtor is flexible, and Bankruptcy Courts, as courts of equity, have been liberal in permitting amendments to previously filed proofs of claim, to conform them more closely to official form No. 15. See In re Gibraltor Amusements, Ltd., 315 F.2d 210 (2d Cir. 1963); In re Lipman, 65 F.2d 366 (2d Cir. 1933); In re Kessler, 184 F. 51 (2d Cir. 1910). The essence of a proof of claim is merely evidence of the existence, nature and amount of debt due and owing to a creditor. If the letter at issue can fairly be said to do so, this court will allow the creditor to amend it in order to share proportionately with other creditors similarly situated in the proceeds. Interpreting the movant's letter in context, this court finds it to be a demand against the estate.
The trustee, however, relies upon In re Hoos & Co. Dynamics Corp. of America, 570 F.2d 433 (2d Cir. 1978) and In re Hotel St. James Co., 65 F.2d 82 (9th Cir. 1933) to support the proposition that an arguably ambiguous communication from a creditor such as this should not be interpreted as a claim.
In Hoos the Bankruptcy Court denied an application to allow a claim based on a creditor's letter to the secretary of an unofficial creditor's committee. The court in Hoos found that the letter was not an explicit demand against the estate and that even if the letter was a proper proof of claim the creditor's committee was not the agent of the court or the debtor. On appeal, the District Court held that while it might have been inclined to hold the letter a proper proof of claim, filing with the secretary of the creditor's committee was not proper within Rule 509(c). The Court of Appeals affirmed the judgment below holding that the letter was not a valid proof of claim. The court stated:
Mr. Lipp\'s letter cannot by any stretch of the imagination be interpreted as asserting Hoos\' claim. It unambiguously indicates that Lipp thought he had no authority to file a claim for this debt. . . . he hardly could have intended to "set forth" a claim as "authorized agent" of anyone and the letter so states.
This court's reading of Hoos indicates that the Court of Appeals found the authorization issue dispositive; the comments regarding the efficacy of the language in the letter, relied upon here by the trustee, are mere obiter dicta and do not persuade this court that a similar conclusion is compelled.
The court in In re Hotel St. James refused to interpret a petition for leave to sell mortgaged premises under a trust indenture, which was granted by the court, as a claim for deficiency on bonds remaining after the sale. The court held:
Unlike the letter in re Patterson-MacDonald Shipbuilding Co. cite omitted, there is not the slightest indication that the petition was intended as a...
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