Summary
explaining right to file a proof claim for § 550 recovery within the extended period of 30 days after final judgment under Bankruptcy Rule 3002(c)
Summary of this case from Think3 Litig. Trust v. Zuccarello (In re Think3, Inc.)Opinion
CASE NO: 03-41264.
November 5, 2007
MEMORANDUM OPINION CONCERNING ALLOWANCE OF PROOF OF CLAIM AS TIMELY
The chapter 7 trustee ("Trustee") filed an adversary proceeding against C G Boats, Inc. ("C G") to utilize bankruptcy avoiding powers to recover a transfer of funds to C G. C G repaid the transfer to the chapter 7 trustee, and C G then attempted to assert a claim on account of the repayment. But C G failed timely to file a formal proof of claim. Instead of filing a formal claim timely, C G Boats filed a motion to allow the proof of claim and Trustee objected. For reasons stated below, the Court finds that an informal claim was filed timely and the trustee's objection is overruled.
I. FACTUAL BACKGROUND
The chapter 7 trustee filed a preference action against C G Boats, Inc. on April 29, 2005. Final Judgment was signed September 13, 2006, awarding the trustee $75,262.50 plus interest. C G paid the judgment.
On October 6, 2006, C G Boats filed its motion for leave to file a proof of claim in the amount of the judgment. The motion to file a proof of claim was filed in the adversary proceeding. Attached to the motion is C G's Proof of Claim. (Case No. 05-3260, Doc. # 70-2). The Court denied the motion on November 6, 2006, in part because no motion was necessary, and even if necessary, the motion should have been filed in the main case, not in the adversary proceeding.
On December 15, 2006, C G Boats filed a joint motion signed by the chapter 7 trustee to recognize C G Boats' claim in the amount of $75,262.50 as a consequence of payment of the judgment. The motion did not reference the adversary proceeding by case number and lacked a proposed order. (Doc. # 909). The Court ordered a hearing because it could not understand the factual or legal basis for the relief requested. (Doc. # 1147). At hearing on October 29, 2006, the US Trustee and chapter 7 trustee opposed the entry of C G Boats' claim because no proof of claim had been timely filed on the correct docket. The amount of the claim is not disputed, only its timeliness.
II. ANALYSIS
A. Proofs of Claim
A creditor may file a proof of claim. Court permission is not required for a creditor to file a claim, even if a claim is tardy. 11 U.S.C. § 501(a). A claim is deemed allowed unless a party in interest objects. 11 U.S.C. § 502(a). If an objection to claim is made, the court, after notice and hearing, shall determine the amount of such claim as of the date of the filing of the petition, and shall allow such claim in such amount, except to the extent that — proof of such claim is not timely filed. If a claim is tardy, section 726(a) subordinates the claim to claims that were filed timely.
The statute provides for allowance of tardy claims under enumerated exceptions, none of which are relevant here. See paragraphs (1), (2), and (3) of section 726(a). 11 U.S.C. § 502(b)(9).
In a chapter 7 liquidation, a proof of claim is timely filed if it is filed not later than 90 days after the first date set for the meeting of creditors called under § 341(a) of the Bankruptcy Code. FRBP 3002(c). Claims that arise from a recovery of estate property after the petition is filed, such as the claim at issue here, are allowed additional time. A claim arising from the recover of property under section 550 shall be determined, and shall be allowed under subsection (a), (b), or (c) or disallowed under subsection (d) or (e), the same as if such claim had arisen before the date of the filing of the petition. 11 U.S.C. § 502(h). An unsecured claim which arises in favor of any entity or becomes allowable as a result of a judgment may be filed within 30 days after the judgment becomes final if the judgment is for the recovery of money or property from that entity or denies or avoids the entity's interest in property. FRBP 3002(c)(3).
Final Judgment was signed September 13, 2006, making the bar to file a claim October 16, 2006 (the "bar date"). Proofs of claim shall be filed with the clerk in the district where the case under the Bankruptcy Code is pending. FRBP 5005(a). Debtor filed its proof of claim in the adversary proceeding, not in the "main case" or in the claims register. C G Boats attempted to file its formal proof of claim timely, but due to a procedural error did not file it properly or in the right place.
B. Informal Proofs of Claim
The Court of Appeals for the Fifth Circuit recognizes the concept of informal proofs of claim and has adopted the Tenth Circuit test for recognizing an informal proof of claim. In re Nikoloutsos, 199 F.3d 233, 236-37 (5th Cir. 2000). That test has five elements. "The first four elements, writing, filing, stating a claim and evincing intent to hold liable, are important to provide notice, not just to the debtor, but also to the bankruptcy court." Id. The fifth element is that, based upon the facts of the case, allowance of the claim must be equitable under the circumstances.
1. The claim must be in writing
After judgment was rendered in the adversary proceeding for recovery of the preference, C G Boats filed its Unopposed Motion For Leave to File Proof of Claim on October 6, 2006. (Case No. 05-3260, Doc. # 70). Attached to the motion is a completed Proof of Claim form. October 6 was within the deadline for C G Boats to file its proof of claim under FRBP 5005(a).
As explained above, that deadline was October 16, 2006, the "bar date".
2. The writing must contain a demand by the creditor on the debtor's estate
C G Boats' Proof of Claim establishes the amount of the claim against debtor's estate. (Case No. 05-3260, Doc. # 70-2).
3. The writing must evidence an intent to hold the debtor liable for such debt
The purpose of the Proof of Claim was to hold the debtor's estate liable for the debt.
4. The writing must be filed with the bankruptcy court
Although filed in the adversary case instead of the main case, the Proof of Claim was filed with the bankruptcy court. "A court cannot ignore what has been brought to its attention." Nikoloutsos, 199 F.3d at 237 n. 1.
5. Allowance of the claim must be equitable under the circumstances
C G Boats has acted in good faith throughout the proceedings before this Court. No one disputes that Debtor owed C G Boats the sum in question. The chapter 7 trustee was aware of the claim. C G Boats and the chapter 7 trustee had intended to enter into an agreed order allowing the claim in full as an unsecured nonpriority claim. (Doc. # 909). Thus, equity requires the allowance of the informal proof of claim because the sole argument is that the claimant failed to follow a procedural step. Mata v. Schoch, 337 B.R. 138, 142 (S.D. Tex. 2005).
III. CONCLUSION
For the reasons stated above, the claim of C G Boats is allowed by separate order issued this date.