In re Garner, BAP No. CC-99-1432-KBMa
| Decision Date | 22 March 2000 |
| Docket Number | BAP No. CC-99-1432-KBMa,Bankruptcy No. SA 98-19445 LR.,CC-99-1540-KBMa |
| Citation | 246 BR 617 |
| Parties | In re Carol Faye GARNER, Debtor. Carol Faye Garner, Appellant, v. Mark Shier, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
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L. Eugene Hallsted, Fountain Valley, CA, for Carol Faye Garner, appellant.
W. Rod Stern, Irvine, CA, for Mark Shier, appellee.
Before KLEIN, BRANDT, and MARLAR, Bankruptcy Judges.
In this exercise of sibling rivalry, the debtor, Carol Garner ("Garner"), appeals orders overruling her objections to two claims filed by her brother, appellee Mark Shier ("Shier").
We conclude that the proofs of claim constituted prima facie evidence as to validity and amount and conclude that appellant did not rebut the evidentiary presumption despite having had an appropriate opportunity to do so. Accordingly, we AFFIRM.
Federal subject matter jurisdiction is founded upon 28 U.S.C. § 1334(b). An objection to claim is a core proceeding that a bankruptcy judge has the power to hear and determine. 28 U.S.C. § 157(b)(2)(B). We have appellate jurisdiction over the final order determining an objection to claim. 28 U.S.C. § 158.
1. Whether appellee's proofs of claim were "executed and filed in accordance with" the Federal Rules of Bankruptcy Procedure and 11 U.S.C. § 501 so that they were entitled to Rule 3001(f) status as prima facie evidence of validity and amount.
2. Whether appellant rebutted the Rule 3001(f) evidentiary presumption of prima facie validity and amount that results from compliance with the rules governing the filing of claims.
3. Whether appellant was deprived of the opportunity to present evidence to rebut the Rule 3001(f) evidentiary presumption of prima facie validity and amount.
Whether a proof of claim is executed and filed in accordance with the Federal Rules of Bankruptcy Procedure is a question of fact that is reviewed for clear error. Ashford v. Consolidated Pioneer Mortg. (In re Consolidated Pioneer Mortg.), 178 B.R. 222, 225 (9th Cir. BAP 1995).
Whether evidence is sufficient to rebut an evidentiary presumption is a question of fact reviewed for clear error. Sierra Steel, Inc. v. Totten Tubes, Inc. (In re Sierra Steel, Inc.), 96 B.R. 275, 277 (9th Cir. BAP 1989).
Whether a particular procedure comports with basic requirements of due process is a question of law that we review de novo. GMAC Mortg. Corp. v. Salisbury (In re Loloee), 241 B.R. 655, 659 (9th Cir. BAP 1999).
Garner and Shier inherited property from their father. Shier is executor of the father's estate.
Shier filed timely proofs of claim in Garner's chapter 13 case, two of which are involved in this appeal. They were executed on Shier's behalf by his attorney.
The first contested proof of claim, filed in Shier's individual capacity, was an unsecured claim for $2,250, based on rent that Garner collected from a property owned in co-tenancy with Shier and not remitted to Shier.
The form of the $2,250 proof of claim had attached to it an explanatory page together with discovery materials from state court litigation between the parties, including Garner's sworn responses to interrogatories and her deposition testimony. Those materials included Garner's statements that she had collected rent on the property for the months of January through September 1997 and that she had retained the proceeds for her own expenses.
The other contested Shier proof of claim, filed as executor of his father's estate, was an unsecured claim for $30,375, the unpaid balance owed on an alleged $40,500 loan.
The form of the $30,375 proof of claim had attached to it an explanatory statement including an account and its terms, together with the father's bank books and copies of canceled checks payable to Garner.
Garner filed an objection to Shier's claims as follows:
The basis for the Debtor\'s objections are that there is no valid obligation to pay and or all sic of said claims, the Statute of Limitations has run on any valid obligation to pay any such claims, and there are no written documents or other competent evidence of any valid obligations owed to said creditor.
The objection was not accompanied either by evidentiary support for the assertions in the objection or by authenticated copies of the proofs of claim with all attachments. Such evidence and copies are, by local rule, required to accompany all objections to claims. Local Bankr.R. 3007-1(1), C.D.Cal.
Shier responded with a declaration, accompanied by financial records relating to the $2,250 and the $30,375 claims.
At the hearing on the objections to claims, Garner proffered no evidence in support of her objection. Rather, her counsel merely argued that the proofs of claim were not accompanied by sufficient evidence to prove the existence of the debts.
The court ruled that the proofs of claim had been executed and filed in accordance with applicable rules and constituted prima facie evidence of the validity and amount of the claims. Fed.R.Bankr.P. 3001(f).
Since Garner presented no evidence to support her objections, the court ruled that she did not fulfill her burden of production to rebut the presumption. Hence, the court ignored Shier's additional evidence responding to the claim objections.
The objections were overruled, and the court denied a motion for reconsideration. These appeals ensued.
The issues relate to intertwined concepts of evidentiary presumptions, procedure, local rules relating to the claims process, and admissible hearsay.
Appellant contends that Shier's proofs of claim do not constitute prima facie evidence of validity and amount because they were not supported by competent evidence in admissible form.
There is an evidentiary presumption that a correctly prepared proof of claim is valid as to liability and amount. The sources of this presumption lie both in the Bankruptcy Code and in the Federal Rules of Bankruptcy Procedure.
The statute provides that a creditor may file a proof of claim. 11 U.S.C. § 501(a). Moreover, a claim, proof of which is filed under § 501, is deemed allowed unless a party in interest objects. 11 U.S.C. § 502(a); Irvine-Pacific Commercial Ins. Brokers, Inc. v. Adams (In re Irvine-Pacific Commercial Ins. Brokers, Inc.), 228 B.R. 245, 246 (9th Cir. BAP 1998).
The rules add that a proof of claim executed and filed in accordance with the Federal Rules of Bankruptcy Procedure constitutes prima facie evidence of the validity and amount of the claim. Fed. R.Bankr.P. 3001(f);1Diamant v. Kasparian (In re Southern Cal. Plastics, Inc.), 165 F.3d 1243, 1247-48 (9th Cir.1999); Consolidated Pioneer Mortg., 178 B.R. at 225; BARRY RUSSELL, BANKRUPTCY EVIDENCE MANUAL § 301.13 (1999).
It was this Rule 3001(f) evidentiary presumption that the trial court implemented when it overruled appellant's objections.
Whether the Rule 3001(f) evidentiary presumption arose depends on whether the proofs of claim were executed and filed in accordance with the Federal Rules of Bankruptcy Procedure.
Those rules provide that a proof of claim be in writing and substantially conform to the appropriate Official Form. Fed. R.Bankr.P. 3001(a).2 The form may be executed by the creditor or the creditor's authorized agent. Fed.R.Bankr.P. 3001(b).3 Shier's proofs of claim were in writing, on Official Form 10 ("Proof of Claim"), and executed by his attorney.
When the claim is based on a writing, there must be attached either the writing or an explanation of why or how the writing has been lost or destroyed. Fed. R.Bankr.P. 3001(c).4 Except for evidence of proof of perfection of a security interest, Fed.R.Bankr.P. 3001(d),5 the rules do not require that evidence be attached to the proof of claim.
Shier's $2,250 proof of claim did not purport to be based on a writing.
The claim form was accompanied by an attachment that explained the basis for the debt, including the status of Shier and appellant as tenants in common, supplemented by fifteen additional pages consisting of appellant's sworn responses to interrogatories and appellant's deposition testimony.
Appellant contended that her interrogatory answers and deposition testimony did not show a legal obligation and indicated that she had a right of set-off. The court's adverse ruling indicates that it reached different conclusions.
In the interrogatory responses attached to the proof of claim, appellant admitted that she collected $3,500 in rent from the property in issue, spent $1,000 to paint the building, and paid an unspecified sum for property taxes.
In her deposition testimony, appellant merely said that she used the balance of the rent money for her personal expenses and that she thought it was fair because Shier (the executor of the estate) was collecting rent on a house. No details about the ownership of the other property were established.
The court viewed the explanatory statement, coupled with the discovery materials, as complying with the minimal requirements of the rules governing proofs of claims. This was not error.
As Shier's $30,375 proof of claim also did not purport to be based on a writing, appellant's focus upon the absence of specific loan documents similarly misses the point.
The claim is based on the assertion that $40,500 was transferred to appellant by her father on or about January 27, 1993, under terms that called for her to repay $40,500 over ten years, in equal monthly installments of $337.50, and that thirty such installments were actually paid, thereby reducing the unpaid principal to $30,375.
The claim form had attached to it an explanatory statement, including an account and its terms, together with copies of bank records showing a withdrawal of $25,686.07 from a savings account and of two contemporaneous checks drawn in favor of appellant in the...
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