In re Graham

• Decision Date: 09 January 2003
• Docket Number: No. A01-81336-PWB.,A01-81336-PWB.
• Citation: 290 B.R. 424
• Parties: In the Matter of William Scott GRAHAM, Debtor. William Scott Graham, Movant, v. James and Linda Hudson, Respondents.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

290 B.R. 424

In the Matter of William Scott GRAHAM, Debtor.

William Scott Graham, Movant, v. James and Linda Hudson, Respondents.

No. A01-81336-PWB.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

January 9, 2003.

E.L. Clark, Clark & Washington, P.C. Atlanta, GA, for William Scott Graham, Debtor.

Julie Howard, Weissman, Nowack, Curry & Wilco, Atlanta, GA, for Lee's Crossing Homes Association, Inc., Creditor.

Jonathan H. Petcu, Moore, Ingram, Johnson & Steele, LLP, Marietta, GA, for James Hutson and Linda Hutson, Creditor.

Sean R. Quirk, Shapiro & Swertfeger, Atlanta, GA, for BOK Mortgage, Creditor.

M. Regina Thomas, Atlanta, GA, for Trustee.

MEMORANDUM OPINION WITH REGARD TO OBJECTION TO PROOF OF CLAIM OF JAMES AND LINDA HUDSON

PAUL W. BONAPFEL, Bankruptcy Judge.

William Scott Graham ("Debtor") has objected to the proof of claim of James and Linda Hudson ("Creditors") in this Chapter 13 case on the ground that it was not timely filed. This contested matter is a core proceeding under 28 U.S.C. § 157(b)(2)(B) over which this Court has jurisdiction pursuant to 28 U.S.C. § 157(b)(1) and 28 U.S.C. § 1334. This opinion constitutes the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, applicable to this contested matter pursuant to Rules 7052 and 9014 of the Federal Rules of Bankruptcy Procedure.

Creditors' claim is based on a judgment in the amount of $61,854.74 obtained in January 1999. Debtor filed this case on March 9, 2001, and the deadline for filing proofs of claim pursuant to Rule 3002(c) of the Federal Rules of Bankruptcy Procedure¹ was July 23, 2001. The claim is not disputed on the merits and, if allowed, will be paid in full from an inheritance to be received by Debtor.

Counsel for Creditors mailed a proof of claim on behalf of Creditors to the Clerk of this Court on June 25, 2001, but it was never docketed. After discovering that the proof of claim had not been docketed, counsel filed a proof of claim that was docketed on November 1, 2001.

Debtor objects to Creditors' claim on the ground that they did not file their proof of claim before the July 23 deadline. Debtor relies on Rule 3002(c), which required the filing of a proof of claim in this case prior to the July 23 deadline, and § 502(b)(9) of the Bankruptcy Code,² which requires disallowance of an untimely filed proof of claim. If the claim is disallowed, Debtor will retain $61,857.14 of his inheritance that would otherwise be paid to Creditors.

Creditors contend that the circumstances of this case require allowance of their otherwise undisputed claim. Their counsel filed a notice of appearance in the case and appeared at all material proceedings in the case relating to their claim. Both the Debtor and the Chapter 13 Trustee had full knowledge of the claim and never indicated any opposition to its allowance. Counsel properly mailed a duly executed proof of claim to the Clerk of this Court on June 25, well before the deadline of July 25. After he discovered, at the confirmation hearing on October 25, that the proof of claim mailed on June 25 had not been docketed, counsel promptly filed another proof of claim on November 1. Because distributions to unsecured creditors have not commenced, allowance of the claim will not prejudice the Chapter 13 Trustee or any other creditors. Based on these facts, Creditors contend their claim should be allowed and paid in this case.

The Creditors' contentions raise the following legal issues:

1. Is Creditors' proof of claim docketed on November 1 allowable on the ground that Rule 9006(b) of the Federal Rules of Bankruptcy Procedure permits a bankruptcy court to extend the filing deadline due to Creditors' excusable neglect?

2. Is Creditors' proof of claim mailed on June 25 allowable on the ground that, through application of the evidentiary principle known as the "mailbox presumption," proof of its proper mailing to the Clerk's office well before the deadline establishes, in the absence of contrary evidence, that it was received in the ordinary course and, therefore, was timely filed?

3. Is Creditors' proof of claim mailed on June 25 allowable on the ground that Rule 5005(c) of the Federal Rules of Bankruptcy Procedure permits this Court, "in the interest of justice," to deem the "erroneously delivered" proof of claim to be filed timely?

4. Is Creditors' claim allowable on the ground that the proof of claim docketed on November 1 is an amendment to an earlier, timely filed, "informal" proof of claim?

If the claim is not allowable under one of these four theories, Rule 3002(c) and 11 U.S.C. § 502(b)(9) require disallowance of the claim because of Debtor's objection to it as not being timely filed.

The Court concludes that the mailbox presumption applies in the circumstances of this case. Under this evidentiary principle, there is a rebuttable presumption that the proof of claim that counsel for Creditors properly addressed, stamped, and mailed to the Clerk of this Court on June 25 was received in the ordinary course prior to the July 23 deadline for filing claims. In the absence of evidence that this properly mailed proof of claim was not received, there is an assumption that the Clerk's office received it prior to the deadline. Because the Clerk's receipt of the proof of claim is equivalent to its filing, the proof of claim was timely filed and is allowable.

I. FINDINGS OF FACT

The Court held a hearing on June 12, 2002. At that hearing, the parties agreed that the facts as set forth in the Affidavit of Jonathan H. Petcu, counsel for the Creditors, attached to their "Response to Objection to Proof of Claim," filed on June 7, 2002, were true. Based on that Affidavit, undisputed facts as presented at the hearing, and the record of this Court, the Court finds that the following facts are undisputed.

On January 7, 1999, Creditors obtained a judgment against Debtor in the amount of $61,854.74 in the State Court of Cobb County, Georgia. A writ of fieri facias was issued and recorded on the general execution dockets of Cobb County on January 29, 1999, Fulton County on September 23, 1999, and Forsyth County on September 30, 1999.

On March 9, 2001, over two years after the judgment was entered, Debtor filed a Chapter 13 petition. As required by the Federal Rules of Bankruptcy Procedure, the Clerk of this Court sent notice to creditors of the § 341(a) meeting to be held on April 24, 2001, and of a confirmation hearing to be held on May 17, 2001. In accordance with Rule 3002(c), this notice announced July 23, 2001, as the date by which proofs of claim had to be filed. Debtor listed the debt of $61,854.74 as a liquidated and undisputed debt secured by a judgment lien on Schedule D of his Schedules of Assets and Liabilities.

On April 4, 2001, Mr. Petcu filed a formal "Entry of Appearance and Request for Notices" as counsel for Creditors. Thereafter, on April 24, Mr. Petcu appeared at the § 341(a) meeting and announced his presence on behalf of Creditors. Because Debtor failed to appear, the § 341(a) meeting was rescheduled for May 1, 2001. Mr. Petcu appeared on May 1 to participate on behalf of his clients, but Debtor was again absent. The § 341 meeting was again rescheduled for June 26, 2001.

On June 25, 2001, the day before the third scheduled § 341 meeting, Mr. Petcu prepared a proof of claim for filing on behalf of Creditors in the amount of $61,854.74, based on the State Court judgment. It is undisputed that Mr. Petcu on that same day mailed the proof of claim to the Office of the Clerk of this Court. In this regard, Mr. Petcu has produced a copy of his cover letter to the Clerk, dated June 25, 2001, clearly indicating transmittal of the proof of claim for filing. The letter is properly addressed, and the proof of claim is properly filled out. Had it been docketed in the ordinary course, there would be no issue about its timely filing prior to the bar date of July 23, 2001. The proof of claim has not, however, been docketed. There is no evidence as to whether the absence of docketing of the proof of claim is due to non-delivery of it to the Clerk's office (an error by the U.S. Postal Service) or its being lost or misplaced in the Clerk's office (an error by the Clerk's office).

Debtor attended the third scheduled § 341 meeting on June 26, 2001. Mr. Petcu again appeared on behalf of Creditors and again announced their claim in the amount of $61,854.74. Neither Debtor nor the Chapter 13 Trustee indicated that there was any objection to the claim.

Because Debtor failed to attend the first two § 341 meetings, the confirmation hearing originally scheduled for May 17 had to be rescheduled for August 9, 2001. Mr. Petcu appeared at the August 9 hearing and discussed the claim of Creditors with the Chapter 13 Trustee. However, Debtor did not appear at this hearing, and it was rescheduled for October 25 based on the receipt of information that Debtor would receive an inheritance from his mother's estate, who died after the filing of the Chapter 13 case. There was no indication at the August 9 hearing that the proof of claim mailed on June 25 had not been docketed; apparently, no one checked the Court's docket at this time.

In the meantime, on March 29, 2001, counsel for Debtor filed a motion to avoid the lien of the judgment obtained by Creditors, thus demonstrating full awareness of its existence. In this regard, Debtor's schedules reflected that he had no non-exempt assets to which the judgment lien of Creditors would attach. Creditors had no basis for contesting Debtor's position that the lien should be avoided, and they did not respond to the motion. On May 18, 2001, the Court routinely entered an order avoiding the otherwise valid judgment lien. Avoidance of the lien pursuant to 11 U.S.C. § 522(f), of course, did not affect allowability of the claim in the amount of the judgment as an unsecured claim. Indeed, between the...