In re Morton

• Court: U.S. Bankruptcy Appellate Panel, Sixth Circuit
• Writing for the Court: Aug
• Citation: In re Morton, 298 B.R. 301 (B.A.P. 6th Cir. 2003)
• Decision Date: 12 September 2003
• Docket Number: No. 02-8061.,02-8061.
• Parties: In re Kerri Elizabeth MORTON, Debtor. Richard Wayne Morton, Plaintiff-Appellee, v. Kerri Elizabeth Morton, Defendant-Appellant.

298 B.R. 301

In re Kerri Elizabeth MORTON, Debtor Richard Wayne Morton, Plaintiff-Appellee, v. Kerri Elizabeth Morton, Defendant-Appellant.

No. 02-8061.

United States Bankruptcy Appellate Panel of the Sixth Circuit.

Argued: August 6, 2003.

Decided and Filed: September 12, 2003.

COPYRIGHT MATERIAL OMITTED

Morris H. Laatsch, Akron, OH, argued and on brief, for Appellant.

Jeffrey H. Weltman, Weltman, Regas & Haag, Canton, OH, argued and on brief, for Appellee.

Before: AUG, HOWARD, and LATTA, Bankruptcy Appellate Panel Judges.

OPINION

AUG, Bankruptcy Judge.

Debtor, Kerri Elizabeth Morton, appeals the bankruptcy court's order overruling her objection to several proofs of claim ("Objection") filed in a chapter 13 case originally filed on behalf of Debtor and her then husband, Richard Wayne Morton ("Morton"). The bankruptcy court overruled Debtor's Objection on the basis of a response filed by Morton who was at the time estranged from Debtor and had been dismissed from the case. The Debtor asserts that Morton did not have standing to file a response and that the bankruptcy court failed to provide her with an opportunity to present evidence prior to ruling on her Objection.

I. ISSUES ON APPEAL

1. Whether the bankruptcy court erred in finding that Morton has standing so as to be entitled to notice and an opportunity to respond to Debtor's Objection.

2. Whether the bankruptcy court erred when it failed to provide Debtor with an opportunity to present evidence prior to ruling on her Objection.

3. Whether the bankruptcy court erred in overruling Debtor's Objection to Claims No. 2, 4, 6, 8 and 9.

II. JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Northern District of Ohio has authorized appeals to the BAP. A "final" order of a bankruptcy court may be appealed by right under 28 U.S.C. § 158(a)(1). For purposes of appeal, an order is final if it "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midland Asphalt Corp. v. United States, 489 U.S. 794, 797, 109 S.Ct. 1494, 1497 (1989) (internal quotations and citations omitted). The bankruptcy court's order overruling Debtor's objections to claims is a final order. Siegel v. Federal Home Loan Mortg. Corp., 143 F.3d 525, 529 (9th Cir.1998); White v. United States (In re White), 183 B.R. 356 (D.Conn.1995).

This Panel reviews the bankruptcy court's findings of fact for clear error. Fed. R. Bankr.P. 8013; Rosinski v. Boyd (In re Rosinski), 759 F.2d 539, 540 (6th Cir.1985). "[A] finding is `clearly erroneous' `when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (citation omitted). The Panel reviews the bankruptcy court's conclusions of law de novo. See, e.g., Corzin v. Fordu (In re Fordu), 209 B.R. 854, 857 (6th Cir. BAP 1997), aff'd, 201 F.3d 693, 696 n. 1 (6th Cir.1999).

III. FACTS

On April 18, 2000, a joint chapter 13 petition was filed in Case No. 00-61226 on behalf of Kerri Elizabeth Morton and her then husband, Richard Wayne Morton. The plan was approved on August 9, 2000.

In September 2001, the chapter 13 trustee filed a motion to convert the case to one under chapter 7. The basis of the motion was that the Debtor had forged her husband's name to the petition and that Morton was unaware that a bankruptcy petition had been filed on his behalf.

In light of the conflicts, bankruptcy counsel moved to withdraw and the motion was granted. Thereafter, separate appearances were entered for the Debtor and Morton and on motion by Morton, the cases were severed. Morton further moved for dismissal of his case which was granted by order entered October 15, 2001. The docket further reflects that by order entered October 17, 2001, the bankruptcy court granted the trustee's motion to convert the Debtor's remaining case to one under chapter 7. Debtor's case was given a new case number of 01-64345.

On October 26, 2001, the bankruptcy court vacated its order converting Debtor's case to one under chapter 7 and the Debtor entered into a Stipulated Order settling the chapter 13 trustee's motion to dismiss or convert her case. The parties to the Stipulated Order were the Debtor, the chapter 13 trustee and the Office of the U.S. Trustee. Pursuant to the Stipulated Order, the parties agreed that the Debtor could continue her chapter 13 case provided she paid allowed unsecured creditors a 100 percent dividend and that she waive discharge in her case. The Stipulated Order was approved by the bankruptcy court on December 20, 2001.

Prior to entry of the Stipulated Order, on October 24, 2001, Debtor filed her Objection relating to the nine proofs of claim that had been filed in the joint Case No. 00-61226. Debtor served notice of the Objection on the nine affected creditors and on the chapter 13 trustee. The basis of her objection to all of the claims was that the Debtor was not contractually obligated to pay any of the debts but that Morton was the party contractually obligated to pay all of the debts.

The bankruptcy court noticed that the Debtor had not served Morton with a copy of the Objection. Therefore, on January 15, 2002, the court forwarded a copy of the Objection to Morton and his counsel along with a notice providing Morton with an opportunity to file a response. A copy of the court's notice was also served on Debtor's counsel, the chapter 13 trustee and on the Office of the U.S. Trustee. On January 31, 2002, Morton filed a response objecting to the relief sought by the Debtor. A hearing on the Objection and Morton's response was scheduled for February 20, 2002. On February 19, 2002, the Debtor filed a motion to strike Morton's response on the basis that he did not have standing.

The hearing was held as scheduled on February 20, 2002. However, since the Debtor's motion to strike was filed only one day before the hearing, neither counsel for Morton nor the bankruptcy court had an opportunity to review or be prepared for the standing issue raised in Debtor's motion to strike. No evidence was adduced at the hearing. Counsel for Morton indicated on the record that he had been advised that the hearing would most likely be treated as a pretrial and not as an evidentiary hearing. Counsel for the Debtor indicated that evidence might not be necessary if the bankruptcy court ruled favorably on the Debtor's motion to strike. Counsel for Debtor stated "[s]o I ask the Court to take it under advisement [referring to the issue of standing] and if we do need evidence, then we can come back." Seeming to agree with this suggestion, the bankruptcy court stated "Okay. Yeah, I understand your point on that, too" and took the matter of Morton's standing under advisement. (J.A. at 118.)

By a Memorandum of Decision entered August 7, 2002, the bankruptcy court determined that Morton did have standing to respond to Debtor's Objection. The bankruptcy court's decision further granted Debtor's Objection to Claims No. 1, 3, 5 and 7 on the basis that Morton is the only responsible party identified in the documentation supporting those claims. The bankruptcy court's decision further overruled Debtor's Objection to Claims No. 2, 4, 6 and 9 on the basis that the Debtor appeared as a responsible party identified in the documentation supporting those claims and the Debtor did not present evidence to overcome the facial validity of those claims. The bankruptcy court also denied Debtor's Objection to secured Claim No. 8 on the basis that the Debtor's confirmed chapter 13 plan provided for payment of the secured claim; and therefore, the objection to Claim No. 8 was filed too late.

Debtor appeals the decision of the bankruptcy court finding that Morton had standing to respond to Debtor's Objection. She further asserts that the bankruptcy court erred in denying Debtor the opportunity to present evidence prior to making its decision overruling her Objection to Claims No. 2, 4, 6, 8 and 9.

Morton did not appeal the bankruptcy court's decision granting the Debtor's Objection to Claims No. 1, 3, 5 and 7. Therefore, review of the decision regarding those claims is not before the Panel.

IV. DISCUSSION

A. Standing. Bankruptcy Code § 502(a) provides that "a claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest, ... objects." Federal Rule of Bankruptcy Procedure 3007 provides that an objection to claim along with a notice of the hearing shall be served on "the claimant, the debtor ... and the trustee."

A "claim" is a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." 11 U.S.C. § 101(5)(A).

Finally, a "creditor" is "an entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor." 11 U.S.C. § 101(10)(A). An ex-spouse with contingent liability on marital debts is clearly a creditor within the meaning of 11 U.S.C. § 101(10). See Hunn v. Hunn (In re Hunn), 49 B.R. 430, 430 (Bankr.M.D.Fla.1985).

The Debtor moved to strike Morton's response to Debtor's Objection on the basis that Morton did not have standing because he was not a "party in interest." Further, Debtor argues that pursuant to Bankruptcy Rule 3007, Morton was not a claimant or creditor and Debtor was not required to serve a copy of her Objection or notice of hearing on Morton. Debtor argues that since there were no other responses to her Objection, the bankruptcy court should have granted her request. We find, however, that the Debtor is incorrect in her assertion that Morton is not a party in...