Opinion
Case No. 99-40381-7.
November 24, 2008
MEMORANDUM OF DECISION
At Butte in said District this 24th day of November, 2008.
In this Chapter 7 case a hearing was held at Great Falls after due notice on November 21, 2008, on the Debtor's objection, filed October 2, 2008, (Docket No. 48) to Proof of Claim No. 3 filed by Debtor's former mother-in-law Barb Kemaghan ("Barb"), and on the Trustee's Notice of Final Report and Proposed Distribution (Docket No. 52) and Debtor's objection thereto. Barb filed a response to Debtor's objection to Claim No. 3 and appeared and testified at the hearing pro se. The Debtor Darlene F. Hall ("Debtor") also appeared and testified pro se. No exhibits were admitted. At the conclusion of the parties' cases-in-chief the Court took the matter under advisement.
After review of the record and the parties' testimony, and based upon Barb's admission that her claim should be allowed in the reduced amount of $1,850.00 plus $530.00 for a total of $2,380.00, the Court sustains the Debtor's objection in part and overrules it in part and allows Barb's Proof of Claim No. 3 in the reduced amount of $2,380.00.
The Debtor filed her bankruptcy petition, and she testified that she listed Barb in her Schedules as a creditor on advice of counsel Joseph W. Duffy. Barb filed Proof of Claim No. 3 on April 23, 2008, asserting an unsecured nonpriority claim in the amount of $5,500.00. Barb testified that she aided the Debtor at Debtor's request in 1997, when a collection agency threatened to garnish Debtor's wages, and Barb negotiated the bill down to $1,850 and paid it, and the Debtor promised to repay her. Barb testified that she gave the Debtor an additional amount to pay a debt which Debtor owed to Credit Associates, and that the Debtor verbally offered to repay her $530 but never made any payments, and Barb wrote off that debt in her 1999 federal tax return as uncollectible. The Debtor testified that she has "no recollection" of the $530 debt "at all", which the Court takes to mean that Barb's testimony regarding the $530 debt is uncontroverted.
The law on objections and allowance of claims is well settled in the Ninth Circuit and this Court. This Court discussed the applicable law governing the burden of proof for allowance of claims in In re Eiesland, 19 Mont. B.R. 194, 208-09 (Bankr. D. Mont. 2001):
A validly filed proof of claim constitutes prima facie evidence of the claim's validity and amount. F.R.B.P. 3001(f). The Ninth Circuit recently explained the general procedure for allocating burdens of proof and persuasion in determining whether a filed claim is allowable in Lundell v. Anchor Const. Specialists, Inc., 223 F.3d 1035, 1039 (9th Cir. 2000):
A proof of claim is deemed allowed unless a party in interest objects under 11 U.S.C. § 502(a) and constitutes "prima facie evidence of the validity and amount of the claim" pursuant to Bankruptcy Rule 3001(f). See also Fed.R.Bankr.P. 3007. The filing of an objection to a proof of claim "creates a dispute which is a contested matter" within the meaning of Bankruptcy Rule 9014 and must be resolved after notice and opportunity for hearing upon a motion for relief. See Adv. Comm. Notes to Fed.R.Bankr.P. 9014.
Upon objection, the proof of claim provides "some evidence as to its validity and amount" and is "strong enough to carry over a mere formal objection without more." Wright v. Holm (In re Holm), 931 F.2d 620, 623 (9th Cir. 1991) (quoting 3 L. King, Collier on Bankruptcy § 502.02, at 502-22 (15th ed. 1991)); see also Ashford v. Consolidated Pioneer Mort. (In re Consol. Pioneer Mort.), 178 B.R. 222, 226 (9th Cir. BAP 1995), aff'd, 91 F.3d 151, 1996 WL 393533 (9th Cir. 1996). To defeat the claim, the objector must come forward with sufficient evidence and "show facts tending to defeat the claim by probative force equal to that of the allegations of the proofs of claim themselves." In re Holm, 931 F.2d at 623.
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"If the objector produces sufficient evidence to negate one or more of the sworn facts in the proof of claim, the burden reverts to the claimant to prove the validity of the claim by a preponderance of the evidence." In re Consol. Pioneer, 178 B.R. at 226 (quoting In re Allegheny Int'l, Inc., 954 F.2d 167, 173-74 (3d Cir. 1992)). The ultimate burden of persuasion remains at all times upon the claimant. See In re Holm, 931 F.2d at 623.
See also Knize, 210 B.R. at 778; Matter of Missionary Baptist Foundation of America, 818 F.2d 1135, 1143 (5th Cir. 1987); In re Stoecker, 143 B.R. 879, 883 (N.D.Ill. 1992), aff'd in part, vacated in part, 5 F.3d 1022 (7th Cir.), reh'g denied (1993).
Thus, the Bank's Proof of Claim No. 2 is prima facie evidence of the validity and amount of its claim under Rule 3001(f), and the Debtor has the burden of showing sufficient evidence and to "show facts tending to defeat the claim by probative force equal to that of the allegations of the proofs of claim themselves." Lundell, 223 F.3d at 1039 (quoting Holm). This Court finds that Eric, as the objecting party, has not produced sufficient evidence to cause the burden to revert to the Bank to prove the validity and amount of its claim. Lundell, 223 F.3d at 1039 (quoting In re Consol. Pioneer, 178 B.R. at 226).
The analysis under Lundell v. Anchor Const. Specialists was reiterated by the Ninth Circuit in In re Los Gatos Lodge, Inc., 278 F.3d 890, 894 (9th Cir. 2002).
Applying this analysis to the instant contested matter, the Debtor has the initial burden to overcome the prima facie effect of the validity and amount of Barb's Proof of Claim No. 3. Based on Debtor's testimony and Barb's admission that her claim was overstated, the Court finds that the Debtor overcame her initial burden and the burden reverted to Barb to prove the validity and amount of her claim. Based on Barb's testimony, and the fact that the Debtor listed Barb as a creditor in her Schedules, the Court finds that Barb proved the validity and reduced amount — $2,380.00, of Proof of Claim No. 3. It will be necessary for the Trustee to submit an amended Notice of Proposed Distribution.
IT IS ORDERED a separate Order shall be entered in conformity with the above sustaining in part and overruling in part Debtor's objection, filed October 2, 2008 (Docket No. 48), to Proof of Claim No. 3 filed by Barb Kernaghan, and allowing Proof of Claim No. 3 filed by Barb Kernaghan on April 23, 2008, in the total amount of $2,380.00 as an unsecured, nonpriority claim; and directing the Trustee to file a revised Notice of Final Report and Proposed Distribution within ten (10) days.