In re: Regional Care Services Corp.
AZ-16-1213-JuLB
| 9th Cir. BAP | Jul 5, 2017Background
- Debtors (Regional Care Services Corp. and affiliates, including Casa Grande) filed chapter 11; a bar date for proofs of claim was set for April 15, 2014, and Epiq was appointed as claims agent.
- Epiq filed an affidavit of service (2/17/14 Affidavit) mailing bar-date notice on February 14, 2014; the publicly filed service list redacted patient names/addresses to comply with HIPAA.
- Belloc, who had earlier sued treating physicians (2013) but not Casa Grande, filed a new malpractice complaint naming Casa Grande in July 2014, then filed a late proof of claim and a stay-relief motion on August 1, 2014.
- Creditor Trustee (Davis) objected, contending Belloc received bar-date notice; at the November 18, 2014 hearing Trustee submitted a declaration attaching a service list, but acknowledged his office had heavily redacted the list the night before filing, undermining its credibility.
- Bankruptcy court found Trustee failed to prove mailing to Belloc (so mailbox presumption did not arise), deemed Belloc’s claim timely, and granted relief from stay; Trustee’s Rule 59(e) reconsideration was denied because the unredacted affidavit was not newly discovered and Trustee had not sought an evidentiary hearing.
- The BAP affirmed: trial court’s factual findings on notice were not clearly erroneous, denial of reconsideration and refusal to hold evidentiary hearing were not an abuse of discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court erred in allowing late proof of claim and granting stay relief based on record evidence of service | Belloc: he did not receive notice of bar date; Trustee failed to prove mailing so mailbox presumption never arose | Trustee: Epiq mailed notice to Belloc (unredacted affidavit would show service); Belloc offered no evidence to rebut | Held: No error. Trustee failed to establish mailing; mailbox presumption did not apply; claim deemed timely and stay relief granted |
| Whether denial of Trustee’s Rule 59(e) motion for reconsideration was erroneous | Trustee: newly discovered evidence (unredacted affidavit, prior 2013 lawsuit) and need for evidentiary record justify reconsideration | Belloc: evidence was available earlier; Trustee could have obtained it pre-hearing; Rule 59(e) is not for presenting evidence that could have been earlier | Held: No error. Motion denied—unredacted affidavit not "newly discovered" and Trustee showed no manifest error or intervening law |
| Whether bankruptcy court abused discretion by not holding an evidentiary hearing | Trustee: live testimony from Epiq was available and necessary to prove service; court improperly weighed affidavits without live evidence | Belloc: Trustee never followed local rule procedure to request live testimony and waived hearing by not timely requesting it | Held: No abuse of discretion. Court properly exercised discretion under Rule 43 and local rules; Trustee waived right to evidentiary hearing |
Key Cases Cited
- City of New York v. New York, N.H. & H.R. Co., 344 U.S. 293 (Sup. Ct. 1953) (known creditors are entitled to actual/formal notice of bar date before claim extinguished)
- Hagner v. United States, 285 U.S. 427 (Sup. Ct. 1932) (mail properly posted gives presumption of receipt)
- Rosenthal v. Walker, 111 U.S. 185 (Sup. Ct. 1884) (principles supporting presumption that mailed letters are received)
- Moody v. Bucknum (In re Bucknum), 951 F.2d 204 (9th Cir. 1991) (mailbox presumption applied in bankruptcy context)
- Levin v. Maya Constr. Co. (In re Maya Constr. Co.), 78 F.3d 1395 (9th Cir. 1996) (known creditors entitled to official notice of bankruptcy filing and bar date)
- Retz v. Samson (In re Retz), 606 F.3d 1189 (9th Cir. 2010) (clear-error standard for factual findings)