In re Lapointe, Bankruptcy No. 3840053.
| Decision Date | 11 May 1984 |
| Docket Number | Bankruptcy No. 3840053. |
| Citation | 39 BR 80 |
| Parties | In re Joseph E.R. LAPOINTE, Leona Ann Lapointe f/d/b/a Smyrna Inn, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Kentucky |
Dan E. Siebert, Louisville, Ky., for debtor.
Mark H. Shultz, Louisville, Ky., for creditor.
The question before us, according to the briefs in a vigorously contested motion, is whether the validity of a properly recorded and perfected real estate mortgage is impaired by a judgment on the related mortgage note, when the judgment makes no reference at all to the mortgage. The answer is probably no, but we need not reach it. For the question presented, according to our research, is the wrong question. A brief explanation is necessary.
Finance America Corporation filed a secured proof of claim in this proceeding, accompanied by the supporting documentation of a copy of the mortgage and proof of recording. The proof of claim is facially valid.
The debtor objects to the proof of claim on the ground that the mortgage had not been properly proven in the prior action on the note; that since the issue should have been, but was not raised, it now stands adjudicated adversely to the mortgagee; and that the doctrine of res judicata precludes our now addressing the question. The parties briefed the substantive point of law without addressing the right of the debtor to raise it.
Now we come to the question. Does a debtor in a no-asset liquidation case have standing to object to the validity of a proof of claim? We hold that he does not.
A long line of cases under the old Bankruptcy Act supports our view. The reason for the rule is explained by the distinguished co-editors of Collier's Bankruptcy Practice Guide:
Under the Bankruptcy Act, it was held that a debtor in a liquidating bankruptcy did not have standing to file objections to claims unless there was a real possibility of a surplus, and therefore that the objection, if sustained, would redound to the benefit of the debtor. There is no reason to believe that this rule will not be the same under the Bankruptcy Code. Herzog & King, 3 Collier on Bankruptcy Practice Guide ¶ 51.04 (citations omitted).
The predictions of Herzog and King have proven correct; see, for example, Matter of Silverman, 10 B.R. 734 (Bkrtcy.N.Y.1981). This point of "hornbook law", as the Silverman court called it, has been departed from in only one reported case, In re Brager, 28 B.R. 966 (Bkrtcy.E.D.Pa.1983). In ...
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