In re Heath
| Decision Date | 29 September 2005 |
| Docket Number | Bankruptcy No. ND 03-10028-RR.,BAP No. CC-04-1324-MoBMa. |
| Citation | 331 B.R. 424 |
| Parties | In re Philip HEATH and Marlene Heath, Debtors. Philip Heath; Marlene Heath, Appellants, v. American Express Travel Related Services Company, Inc.; American Express Centurion Bank; MBNA America Bank N.A.; David Y. Farmer, Chapter 7 Trustee, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Appeal from the United States Bankruptcy Court for the Central District of California, Robin L. Riblet, J.
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Janet A. Lawson, Oxnard, CA, for Appellants.
Dennis C. Winters, Winters Law Firm, Santa Ana, CA, for Appellees.
Edwin J. Rambuski, San Luis Obispo, CA, for David Y. Farmer.
Before MONTALI, BRANDT and MARLAR, Bankruptcy Judges.
Debtors Philip and Marlene Heath ("Debtors") object that several holders of their credit card debt ("Creditors") did not attach sufficient documentation to their proofs of claim to comply with Rule 3001(c).1 Debtors argue that the claims must be disallowed as a matter of law. We join numerous other courts which have discouraged this form of objection and disagree.
When a creditor files a proof of claim, that claim is deemed allowed under Sections 501 and 502(a). A proof of claim that lacks the documentation required by Rule 3001(c) does not qualify for the evidentiary benefit of Rule 3001(f) — it is not prima facie evidence of the validity and amount of the claim — but that by itself is not a basis to disallow the claim. Section 502(b) sets forth the exclusive grounds for disallowance of claims, and Debtors have introduced no evidence or arguments to establish any of those grounds. Accordingly, the bankruptcy court's order allowing Creditors' claims is AFFIRMED.
Debtors filed their voluntary Chapter 7 petition on February 10, 2003. Debtors' bankruptcy Schedule F (general unsecured claims) lists twelve credit card debts, without designating any of them as disputed unliquidated or contingent. Several holders of these credit card debts filed proofs of claim, all in slightly higher amounts than what Debtors listed in their Schedule F. Debtors filed objections to eight proofs of claim. A representative objection states:
Debtor[s] object to the Proof of Claim of AMERICAN EXPRESS TRAVEL RELATED SERVICES CO. INC. ["Amex"] [in the amount of $242.49] on the grounds that no supporting writing is attached to it as required by the Federal Rules of Bankruptcy Procedure, Rule 3001(c). Under the terms of the rule the original writing or a copy of it must be attached to the proof of claim. If the writing is unavailable, an explanation to that effect must be attached. Under Rule 3001(f) a proof of claim that conforms to the rules is "prima facie evidence of the validity and amount of the claim". It follows then, that a claim not filed in conformity with the rules is NOT entitled to the evidentiary presumptions of validity and amount.
* * * * * *
The initial burden is on the creditor to file a proper claim. The debtor then has an opportunity to look at it and determine if it is the correct amount or not. Are late fees and interest correctly calculated? Are all of the charges proper?
Unless the claim is properly amended, this objection should be sustained.
Debtors included an additional objection to this particular proof of claim and to one filed by American Express Centurion Bank ("Amex Centurion") for $6,250.90, because these Creditors altered the official proof of claim form ("Form 10"):
There is nothing in the Bankruptcy Code or Rules which authorize this creditor to alter the Proof of Claim form to excuse compliance with the Rules. In paragraph 4 of the [proof of] claim the creditor claims it is too "unduly time consuming and burdensome" to produce the writing. Neither the Code or the Rules authorize it to require [D]ebtors to call [the attorneys for Amex and Amex Centurion] to get copies of the writing(s).
Amex and Amex Centurion filed a joint response and, after a reply by Debtors, a supplement with additional documentation (the "Amex Supplement"). Another Creditor, MBNA America Bank, N.A. ("MBNA"), mailed a letter to the bankruptcy court which was accepted for filing and docketed as a response to Debtors' objection.
No other Creditors responded. At a hearing on April 20, 2004, the bankruptcy court noted that Debtors had acknowledged the approximate amounts of their debts to Creditors on their bankruptcy schedules. It stated that "[a]dmissions on the schedules are evidence," "[i]t's more trouble [for most Creditors] to respond than the claim is worth," and Debtors were making "a blatant attempt to just get whatever monies there are" in what is projected to be, at least if Creditors' claims were disallowed, a "surplus" case. Transcript, April 20, 2004, pp. 2:9-17, 3:10-12, 5:4. It concluded that it would overrule one objection because the Creditor was served at the wrong address and would allow the remaining seven claims, reducing the amount of each to what was listed in the schedule. Id. p. 3:13-14. It entered a written order allowing those seven claims in the reduced amounts and, on Debtors' timely motion, it entered an order (the "Reconsideration Order") stating:
1. The claim of Citibank/Choice is subordinated per 11 USC § 726(a)(3) as it was filed late.
2. The Court declines to reconsider its order with respect to any other objection for the reasons set forth on the record at the original hearing on April 20, 2004. The debtors are estopped to file objections inconsistent with their own schedules in order to prevent the sale of their [house].2
The bankruptcy court's rulings can be summarized as follows:
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Allowed Amount
Creditor Proof of Claim (Schedule F Amount)
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Bank of America, N.A. (USA) $ 8,930.74 $ 8,737.00
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Amex $ 242.49 $ 107.00
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Amex Centurion $ 6,250.90 $ 6,250.00
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Direct Merchants Credit $ 3,729.29 $ 3,729.00
Card Bank
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Discover Bank $ 8,290.55 $ 8,290.00
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MBNA $14,721.36 $13,887.00
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Citibank, N.A. $10,778.37 $10,592.00
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(Claim of Citibank, N.A. held to be untimely and subordinated per 11 U.S.C. § 726(a)(3).)
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Debtors filed a timely Notice of Appeal from the Reconsideration Order, later amended to include more parties. Included as parties are the Chapter 7 Trustee David Farmer ("Trustee"), his attorney, and the United States Trustee (the "UST").
Of the seven Creditors, only Amex and Amex Centurion have participated in this appeal, and they have not cross-appealed from the reduction in their claims to the amounts listed on Debtors' Schedule F. Trustee has filed an "Amicus Curiae Brief" to which Debtors objected in their reply brief on the grounds that Trustee did not participate in the proceedings before the bankruptcy court and is not an agent of the UST. Trustee then filed a "Motion for Relief to File Brief of Amicus Curiae" (the "Amicus Motion") arguing that he is a party in Debtors' Chapter 7 case and represents the interests of all the unsecured creditors.
1. May Trustee participate in this appeal?
2. Do Debtors' bankruptcy schedules estop them from objecting to the lack of support for Creditors' proofs of claim?
3. Did the bankruptcy court properly overrule Debtors' objections and allow Creditors' claims?
The proper interpretations of statutes and rules are legal questions that we review de novo. Kir Temecula v. LPM Corp. (In re LPM Corp.), 300 F.3d 1134, 1136 (9th Cir.2002). Whether compliance with a given statute or rule has been established is generally a question of fact, which we review for clear error. Ashford v. Consol. Pioneer Mortgage (In re Consol. Pioneer Mortgage), 178 B.R. 222, 225 (9th Cir. BAP 1995) (), aff'd, 91 F.3d 151 (9th Cir.1996) (table).
"A bankruptcy court's denial of a motion for reconsideration of an allowance or disallowance of a claim under Section 502(j) and Rule 3008 is reviewed for an abuse of discretion." Consol. Pioneer Mortgage, 178 B.R. at 225 (citations omitted). Application of judicial or equitable estoppel is also reviewed for abuse of discretion. U.S. ex rel Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1147 (9th Cir.1998) (judicial estoppel); Hoefler v. Babbitt, 139 F.3d 726, 727 (9th Cir.1998) (equitable estoppel). We review the bankruptcy court's evidentiary rulings for abuse of discretion. Latman v. Burdette, 366 F.3d 774, 786 (9th Cir.2004).
A bankruptcy court necessarily abuses its discretion if it bases its ruling upon an erroneous...
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