In re Masterson, 556 B.R. 391

Background

Shammah Investments filed an initial claim for $8,621.31 against the debtor; the court sustained the debtor’s objection and allowed a reduced claim of $2,992.59 by order dated February 16, 2016.
Shammah then filed an amended claim for $4,532.28 without formally moving to reopen or reconsider the prior order.
The debtor objected to the amended claim and asked the court to either enforce the earlier allowance ($2,992.59) or reduce the claim further to $2,707.28.
The parties stipulated the court may consider, for expediency, Shammah’s oral request at the pretrial to reconsider the prior order under 11 U.S.C. § 502(j), but Shammah’s brief did not cite or argue the § 502(j) standard.
Dispute centers on allowable attorney fees and title costs under Indiana tax-sale statutes and a Wells Circuit Court fee schedule that capped attorney fees at $750 and title costs at $500.
Court framed the proceeding as a § 502(j) reconsideration inquiry (not a restart via an amended claim) and evaluated whether Shammah proved cause and equitable grounds to alter the prior order.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether filing an amended claim moots or restarts an objection and reopens the allowance process	Shammah effectively replaced the original claim with an amended claim, so objection should be treated as to the amended amount	Debtor: prior final order stands; amended claim does not restart process; must seek reconsideration under § 502(j)	Amended claim does not moot or restart the prior order; § 502(j)/Rule 3008 is the proper vehicle to seek reconsideration
Whether the prior order has res judicata effect and is subject to reconsideration only under § 502(j)	Shammah implied court should reconsider because original order was wrong	Debtor: prior order is final; change requires § 502(j) motion showing cause and equitable grounds	Prior order is final and res judicata as to issues presented or could have been presented; only § 502(j) motion can properly reopen it
Allocation of burdens (prima facie claim vs. § 502(j) motion)	Shammah treated the dispute as a new objection process where its claim is prima facie valid	Debtor: allowing an amended claim would improperly shift burdens; § 502(j) places burden on movant to prove cause	Court emphasized different burdens: a filed claim is prima facie valid for objections, but a § 502(j) motion requires the movant to prove cause to reconsider
Whether Shammah proved cause/equities to reopen and whether claimed fees are required under Indiana law	Shammah: county court established a fee schedule and claimed amounts fall within that schedule, so fees/costs must be allowed	Debtor: claimed fees/costs are unreasonable in this case; Indiana appellate decision rejects the "must be paid" argument	Shammah failed to prove cause or equitable grounds under § 502(j); creditor’s statutory argument was rejected by prior appellate authority; court denied reconsideration and sustained debtor’s objection to the amended claim

Key Cases Cited

In re Bryant, 397 B.R. 903 (Bankr. N.D. Ind. 2008) (amending a claim in response to an objection does not moot objection and can create endless procedural circularity)
Siegel v. Fed. Home Loan Mortg. Corp., 143 F.3d 525 (9th Cir. 1998) (final orders have res judicata effect as to matters presented or that could have been presented)
Cash v. Illinois Div. of Mental Health, 209 F.3d 695 (7th Cir. 2000) (Rule 60 is not a vehicle to correct mere legal error)
Talano v. Northwestern Medical Faculty Foundation, Inc., 273 F.3d 757 (7th Cir. 2001) (standards for reconsideration are narrow; cannot be used to relitigate lost issues)
In re Morningstar, 433 B.R. 714 (Bankr. N.D. Ind. 2010) (movant must show cause under § 502(j) before court will reconsider a claim allowance/disallowance)
Law Offices of Wayne Greeson v. Steuben County Auditor, 936 N.E.2d 368 (Ind. Ct. App. 2010) (rejecting the argument that an auditor-established fee schedule compels payment of claimed fees without further scrutiny)