572 B.R. 802
Bankr. E.D. Va.2017Background
- Debtor Kyeung Guk Min filed Chapter 11 on Sept. 14, 2014; listed creditor Sang Wook Kim with a disputed $900,000 investment claim.
- Bar date for nongovernmental claims was Jan. 13, 2015; Kim filed a proof of claim (No. 30-1) on Jan. 14, 2016 (late).
- Kim sought leave to file late; court denied the motion for excusable neglect under Fed. R. Bankr. P. 9006(b)/Pioneer after Kim failed to appear at the hearing; no appeal followed.
- Case converted to Chapter 7 Oct. 24, 2016; trustee requested notice to file claims and the clerk set a new claims bar date.
- Kim filed an identical second proof of claim (No. 31-1) on Jan. 28, 2017; Debtor moved to disallow the claim.
- Court found Debtor had standing (joint-claim risk to tenancy by the entireties assets) and held the second claim barred by res judicata based on the prior disallowance.
Issues
| Issue | Kim's Argument | Debtor's Argument | Held |
|---|---|---|---|
| Whether Debtor has standing to object to Kim's Chapter 7 claim | Debtor lacks pecuniary interest; therefore no standing | Debtor faces pecuniary harm because Kim's claim appears joint and could expose tenants-by-the-entireties property to sale | Debtor has standing (joint claim could jeopardize exempt TBE property) |
| Whether Bankruptcy Rule 1019(2)(A) permits refiling identical claim after conversion | Rule 1019 creates a new filing period after conversion; thus refiling is allowed | Prior disallowance in Chapter 11 was a final judgment; claim is barred by res judicata despite Rule 1019 | Res judicata bars the refiling; prior disallowance was final on the merits |
| Whether denial for untimeliness/excusable neglect is "on the merits" for res judicata | Denial for untimeliness is not an adjudication on the merits | Dismissals on statute-of-limitations/untimeliness grounds operate as decisions on the merits for res judicata | Ruling that untimely claim lacked excusable neglect is treated as a decision on the merits for res judicata purposes |
| Whether Rule 1019 was intended to override res judicata principles | Rule 1019 provides fresh deadlines but does not abrogate final-judgment effect of earlier claim orders | Rule 1019 should not be read to wholesale abrogate res judicata; the Rules cannot modify substantive rights | Court rejects reading of Rule 1019 that would nullify res judicata; prior disallowance controls |
Key Cases Cited
- Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380 (addressing excusable neglect standard for late filings)
- Willemain v. Kivitz, 764 F.2d 1019 (4th Cir. 1985) (general rule that Chapter 7 debtors typically lack standing to object to proofs of claim)
- McGuirl v. White, 86 F.3d 1232 (D.C. Cir. 1996) (debtor may have standing when allowance of a claim would reduce recovery on debtor’s non-dischargeable debts)
- LVNV Funding, LLC v. Harling, 852 F.3d 367 (4th Cir. 2017) (res judicata elements described)
- Grausz v. Englander, 321 F.3d 467 (4th Cir. 2003) (final allowance/disallowance of claim has preclusive effect)
- EDP Med. Comput. Sys., Inc. v. United States, 480 F.3d 621 (2d Cir. 2007) (order allowing/disallowing claim is final for res judicata)
- Marino (In re Marino), 181 F.3d 1142 (9th Cir. 1999) (distinguishes when earlier dismissal is not given preclusive effect where judge treated the prior ruling as not final)
- County Fuel Co., Inc. v. Equitable Bank Corp., 832 F.2d 290 (4th Cir. 1987) (discussion of res judicata and deemed allowance doctrine)