Matter of Evanston Motor Co., Inc.

• Decision Date: 14 January 1983
• Docket Number: No. 82 C 4769.,82 C 4769.
• Citation: 26 BR 998
• Parties: In the Matter of EVANSTON MOTOR CO., INC., d/b/a Evanston Toyota, a/d/b/a Evanston Dodge, Debtor, Maurice LEVINE, Trustee and Attorney for Trustee, Appellant, v. FIRST NATIONAL BANK OF LINCOLNWOOD, Appellee.
• Court: U.S. District Court — Northern District of Illinois

26 B.R. 998 (1983)

In the Matter of EVANSTON MOTOR CO., INC., d/b/a Evanston Toyota, a/d/b/a Evanston Dodge, Debtor,

Maurice LEVINE, Trustee and Attorney for Trustee, Appellant, v. FIRST NATIONAL BANK OF LINCOLNWOOD, Appellee.

No. 82 C 4769.

United States District Court, N.D. Illinois, E.D.

January 14, 1983.

Nicholas G. Dozoryst, Dozoryst & Brustein, Cohen & Cohen, Chicago, Ill., for First Nat. Bank of Lincolnwood.

Maurice Levine, Douglas J. Lipke, Phelan Pope & John, Ltd., Chicago, Ill., for trustee Maurice Levine.

MEMORANDUM OPINION

PRENTICE H. MARSHALL, District Judge.

Evanston Motor Co., Inc., doing business as Evanston Toyota and Evanston Dodge, filed a voluntary petition for relief under chapter 11 of the Bankruptcy Reform Act of 1978, 11 U.S.C. §§ 1101-74 (Supp. V 1981) on March 25, 1980. The bankruptcy court authorized the debtor to operate its business as a debtor-in-possession, without appointment of a trustee. The debtor filed schedules and statements of affairs with the court on April 24, 1980, listing appellee First National Bank of Lincolnwood ("FNBL") as a secured creditor. The schedules did not reveal FNBL's collateral.

On July 16, 1980, appellant Maurice Levine was appointed trustee of the debtor's estate. On July 24, the trustee wrote FNBL, stating that his "examination of the books and records of the debtor reveals that the First National Bank of Lincolnwood may be a secured creditor" of the debtor. The letter concluded,

In order to facilitate the orderly administration of the within estate, your cooperation in furnishing the undersigned with documentation evidencing your secured position will be greatly appreciated.

On August 18, 1980, an attorney representing FNBL wrote to the trustee.

Please be advised that we represent the First National Bank of Lincolnwood. We are enclosing for your ready reference, photocopy of the note in the sum of $200,000.00, dated January 5, 1979, showing a principal balance of $140,000.06, photocopy of assignment of beneficial interest in Chicago Title and Trust Company trust number 1073974, covering the property at 9525 Hamlin, Skokie, Illinois, assignment of beneficial interest in Chicago Title and Trust Company, trust number 1073975, covering the property at 1131-35 Chicago Avenue, Evanston, Illinois.

If any further information is required, please advise the undersigned.

The documents enclosed with the FNBL's letter revealed that its security was not an asset of the estate, but rather a beneficial interest in a land trust owned by a third party, which fully secured the outstanding balance on the note.

On November 6, 1980, an order was entered by the bankruptcy court converting the chapter 11 proceeding into a liquidation proceeding under chapter 7, 11 U.S.C. §§ 701-66 (Supp. V 1981). On December 2, the clerk of the bankruptcy court sent notice of the conversion to all creditors, including FNBL. The notice advised creditors that they had until June 16, 1981 to file their claims against the estate.¹

On December 30, 1980, the trustee filed an adversary complaint against FNBL alleging that it had received preferential transfers of property. The action sought recovery of the preferences under 11 U.S.C. § 547 (Supp. V 1981). The pleadings filed in that action indicate that the estate was indebted to FNBL as a result of the note referred to in FNBL's letter to the trustee of August 18, 1980. The preference action has been stayed pending the instant appeal.

On October 9, 1981, FNBL filed a motion for allowance of its claim against the estate. In its motion, FNBL argued that the August 18, 1980 letter constituted an informal proof of claim that had been timely filed. On June 3, 1982, the bankruptcy court ruled that the letter was a timely filed informal proof of claim, and permitted FNBL to amend it so as to comply with the technical requirements for an allowable proof of claim. In re Evanston Motor Co., 20 B.R. 550 (Bkrtcy.N.D.Ill.1982). Thus, the court allowed FNBL to prove its unsecured claim against the estate.² This appeal followed.

I

Bankr.R. 302(a) provides,

In order for his claim to be allowed, every creditor, including the United States, any state, or any subdivision thereof, must file a proof of claim in accordance with this rule. . . .

With exceptions not applicable here, rule 302(e) provides that "a claim must be filed within six months after the first date set for the first meeting of creditors. . . ."³ The question presented in this appeal is whether FNBL's August 18, 1980 letter to the trustee complied with this rule. The nub of the trustee's position is that the letter does not constitute a "claim", and even if it did, it was not "filed within six months." We examine each contention in turn.

II

The parties agree that the August 18 letter does not satisfy the technical requirements for a formal proof of claim. That does not necessarily defeat FNBL, however. What Judge Mack wrote 50 years ago remains a correct statement of the law: "It is well settled that a claim informally made within the statutory period, may be perfected thereafter by amendment." Lacoe v. DeLong, 65 F.2d 82, 83 (2d Cir.1933) (In re Hotel St. James Co.).⁴ The question then becomes, what is a "claim" which, if timely made, may be the basis for later amendment?⁵

The bankruptcy court held that a claim need be no more than some evidence of a debt owed to a creditor of the estate. "The essence of a proof of claim is merely evidence of the existence, nature and amount of debt due and owing to a creditor." 20 Bankr. at 552. However, the authorities indicate that this definition of a claim is incorrect. Courts have universally held, until the ruling of the bankruptcy court in this case, that mere evidence of the existence of a claim in the hands of the trustee or the bankruptcy court is insufficient, there must also be some evidence of the creditor's intent to assert its claim against the estate. See Fyne v. Atlas Supply Co., 245 F.2d 107, 108 (4th Cir.1957); Tarbell v. Crex Carpet Co., 90 F.2d 683 (8th Cir.1937); Lacoe v. DeLong, 65 F.2d 82, 84 (2d Cir.1933) (In re Hotel St. James Co.); In re Vega Baja Lumber Yard, Inc., 285 F.Supp. 143, 147 (D.P.R.1968); In re Moro Supply Co., 229 F.Supp. 129, 130 (E.D.Ark.1963); In re Aero Bulk Manufacturing Co., 221 F.Supp. 627 (W.D.Mo.1963). Similarly, it has been held that the listing of a debt in the debtor's schedules is not a sufficient "claim" to permit later amendment, even though the listing demonstrates that the trustee and the court had knowledge of the estate's debt owed the creditor. See Hoos & Co. v. Dynamics Corp., 570 F.2d 433, 437-38 (2d Cir. 1978); Perry v. Certificate Holders of Thrift Savings, 320 F.2d 584, 589 (9th Cir. 1963); Fyne v. Atlas Supply Co., 245 F.2d 107, 108 (4th Cir.1957); National City Bank v. Brislin, 68 F.2d 718, 719 (2d Cir.1934) (In re Killanna Realty & Construction Co.); In re Moro Supply Co., 229 F.Supp. 129, 130 (E.D.Ark.1963); In re Stylerite, Inc., 120 F.Supp. 485, 488 (D.N.H.1954). In another case demonstrating the insufficiency of mere evidence that a debt exists, it was held that the testimony of the claimant that the bankrupt was indebted to him for past salary was insufficient to constitute a "claim," since the claimant did not go on to state his intention to hold the estate liable. See Avidon v. Halpert, 145 F.2d 884 (2d Cir.1944) (Swan, J.).⁶

In sum, we believe the concept of a "claim" denotes more than merely a debt owed the creditor by the estate, it also denotes the creditor's intention to attempt to pursue the estate's liability on the debt. We think the proper test was stated by the Third Circuit in First Nat. Bank v. West, 227 F. 981 (3d Cir.1915) (In re Thompson). "Whether formal or informal, a claim must show (as the word itself implies) that a demand is made against the estate, and must show the creditor's intention to hold the estate liable." Id. at 983.⁷

Of course, there are a variety of ways in which a creditor may manifest the necessary demand and intent to hold the estate liable. See, e.g., County of Napa v. Franciscan Vineyards, Inc., 597 F.2d 181 (9th Cir.1979) (per curiam) (In re Franciscan Vineyards, Inc.) (claimant sent tax bills to the trustee and requested he pay them), cert. denied, 445 U.S. 915, 100 S.Ct. 1274, 63 L.Ed.2d 598 (1980); Sun Basin Lumber Co. v. United States, 432 F.2d 48 (9th Cir.1970) (per curiam) (claimant filed objections to trustee's petition to sell property containing evidence of claimant's security interest in the property to be sold); Walsh v. Lockhard Associates, 339 F.2d 417 (5th Cir.1964) (trustee and referee knew claimant was a creditor, trustee sued claimant to cancel note, claimant sued debtor to collect on the note), cert. denied, 380 U.S. 953, 85 S.Ct. 1085, 13 L.Ed.2d 970 (1965); Perry v. Certificate Holders of Thrift Savings, 320 F.2d 584 (9th Cir.1963) (claimants filed their passbooks with bankruptcy court to prove they were bank's creditors); Fyne v. Atlas Supply Co., 245 F.2d 107 (4th Cir.1957) (claimant participated in creditors' meetings and wrote and spoke with trustee about his desire to be paid by estate, and claimant's attempts to levy on debtor were alleged in petition in bankruptcy); In re Lipman, 65 F.2d 366 (2d Cir.1933) (claimant filed objections to trustee's petition describing itself as a creditor); Scottsville Nat. Bank v. Gilmer, 37 F.2d 227 (4th Cir.1930) (claimant and trustee exchanged letters and had talks in which trustee treated claimant as seeking payment from estate); Carstens v. McLean, 293 F. 190 (9th Cir.1923) (In re Patterson-McDonald Shipbuilding Co.) (claimant sent letter seeking lessee-debtor's payment of delinquent taxes); In re Kessler, 184 F. 51 (2d Cir.1910) (claimant sent bill for payment by assignee for benefit of creditors); In re Faulkner, 161 F. 900 (8th Cir.1908) (claimant filed document containing all elements of a proof of claim as an application for permission to sell collateral); In...