Spokane Lefcu v. Marcella BarkerSpokane Lefcu v. Marcella Barker
Robert Drummond (argued), Great Falls, Montana; Kraig C. Kazda, Kazda Law Firm P.C., Great Falls, Montana; for Apрellees.
Before: WILLIAM A. FLETCHER, RONALD M. GOULD, and N. RANDY SMITH, Circuit Judges.
OPINION
N.R. SMITH, Circuit Judge:
If a creditor wishes to participate in the distribution of a debtor‘s assets under a Chapter 13 plan, it must file a timely proof of claim. The debtor‘s acknowledgment of debt owed to the creditor in a bankruptcy
BACKGROUND FACTS
On September 6, 2012, debtor Marcella Lee Barker filed a Chapter 13 bankruptcy petition in the United Statеs Bankruptcy Court for the District of Montana. Later that day, in response to the filed petition, the bankruptcy court issued an Official Form B9I, titled “Notice of Chapter 13 Bankruptcy Case, Meeting of Creditors, & Deadlines” (“Notice“). The Notice stated that the deadline for creditors1 to file a proof of claim was January 8, 2013. On September 8, 2012, the Bankruptcy Noticing Center sent the Notice to the Appellee, Spokane Law Enforcement Federal Credit Union (“Credit Union“), by first class mail.
On September 19, 2012, Barker timely filed her Chapter 13 plan with the bankruptcy court.2 According to her attached certificate of mailing filed with the court, the plan was also sent to the Credit Union that day via first class mail.
On September 19, 2012, Barker also properly filed schedules of her assets and liabilities.3 In these schedules, Barker listed the Credit Union as a secured creditor holding a $6,646.00 purchase money security interest in a 2004 Ford F-150. Barker also listed the Credit Union as an unsecured creditor holding a $47,402.00 claim that had previously been secured by an unidentified automobile, which Barker‘s ex-husband had sold.
Barker moved to amend and modify the Chapter 13 plan several times over the next few months. Each time such a motion was filed, Barker sent a notice to the Credit Union. In addition, each time the bankruptcy court entered an order confirming the amended plan, the Bankruptcy Noticing Center notified the Credit Union.
On May 30, 2013, more than four months after the deadline to file a proof of claim expired, the Credit Union filed three claims with the bankruptcy court: a secured claim for $5,490.78 and unsecured claims for $28,293.94 and $24,587.47.4 In accordance with the Local Bankruptcy Rules for the United States Bankruptcy Court for the District of Montana, the Trustee sent a “Notice of Late Filed Claims” to the Credit Union on June 7, 2013.5 On June 10, 2013, the Credit Union
On August 12, 2013, the Credit Union filed a notice of appeal with the bankruptcy court, and the appeal was taken to the Ninth Circuit Bankruptcy Appellate Panel (“BAP“). On March 28, 2014, the BAP affirmed the bankruptcy court‘s decision to disallow the late filed claims. On April 24, 2014, the Credit Union filed a timеly notice of appeal to this court.
STANDARD OF REVIEW
“Whether a claim may be disallowed in a bankruptcy proceeding on the ground that the proof of claim was not timely filed pursuant to
DISCUSSION
In order to fully understand the intricacies of the legal questions presented in this case, a short summary of Chapter 13 bankruptcy proceedings is helpful.
A petition filed under Chapter 13 helps overextended debtors reorganize their debt—while allowing them to keep their assets—by using “current and future income to repay creditors in part, or in whole, over the course of a three-to five-year period.” HSBC Bank USA, Nat‘l Ass‘n v. Blendheim (In re Blendheim), 803 F.3d 477, 485 (9th Cir. 2015). A Chapter 13 case begins, like all other bankruptcy cases, “with the filing of a petition and the creation of an estate, which comprises the debtors’ legal and equitable interests in property.” Id. at 484 (citing
In order to collect a debt from a debtor filing a Chapter 13 bankruptcy petition, an unsecured creditor must file a valid “proof of claim,” which has gone through the “allowance process set forth in
A bankruptcy court may disallow a claim for many reasons, including if the proof of claim wаs untimely.
The Credit Union admits that it filed its proofs of claims late. Thus, the bankruptcy court properly rejеcted the claims. However, it argues that the bankruptcy court still should have allowed it to participate in the Chapter 13 plan, because Barker listed the debt she owed the Credit Union in her bankruptcy schedules. We disagree.
The Federal Rules of Bankruptcy Procedure clearly provide that, in the Chapter 13 context, “[a]n unsecured creditor or an equity security holder must file a proof of claim or interest for the claim or interest to be allowed.”
There is other evidence, besides the plain language of the statute, that indicates Congress intended to place such a burden on the creditor. Specifically, a creditor in the Chapter 11 context is not always required to file a proof of claim. Varela v. Dynamic Brokers, Inc. (In re Dynamic Brokers, Inc.), 293 B.R. 489, 495 (9th Cir. BAP 2003). Both the Federal Rules of Bankruptcy Procedure and the federal statutes governing Chapter 11 bankruptcy make clear that “in chapter 11 cases ‘it shall not be necessary for a creditor’ to file a proof of claim unless the claim is either not schеduled or is scheduled as disputed, contingent or unliquidated.” Id.;
A variety of courts have disallowed creditors’ late filed claims despite the fact that they were listed on the debtor‘s bankruptcy schedules. See, e.g., Bowden v. Structured Invs. Co. (In re Bowden), 315 B.R. 903, 907 (Bankr. W.D. Wash. 2004); In re Greenig, 152 F.3d 631, 632-34 (7th Cir. 1998) (disallowing late filed claim even though debtor listed the debt in a bankruptcy schedule and the bankruptcy court confirmed the debtor‘s reorganization plan, which included the debt at issue). We agree with these courts. In a Chapter 13 case, a creditor must file a timely proof of claim in order to participate in the distribution of the debtor‘s assets, even if the debt was listed in the debtor‘s bankruptcy schedules.
I. Whether or not Barker‘s listing of debt owed to the Credit Union was a judicial admission, it is not sufficient to meet the Credit Union‘s burden of affirmatively filing a timely proof of claim.
The Credit Union argues first that, under the doctrine of judicial admissions, Barker must pay all the debts she listed in her bankruptcy schedules. The Ninth Circuit has acknowledged the doctrine of judicial admissions. See Am. Title Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988). “Judicial admissions are formal admissions in the pleadings which have the effect of withdrawing a fact from issue and dispensing wholly with the need for proof of the fact.” Id. (quoting Dery v. Gen. Motors Corp. (In re Fordson Eng‘g Corp.), 25 B.R. 506, 509 (Bankr. E.D. Mich. 1982)). Judicial admissions are “conclusively binding on the party who made them.” Id.
Although we have acknowledged this doctrine, we have never declared that a
II. Barker‘s listing of debt owed to the Credit Union in her bankruptcy schedules does not constitute an informal proof of claim.
Creditors, failing to file a timely formal proof of claim, often assert that an informal proof of claim can function to establish the creditor‘s claims. See Cty. of Napa v. Franсiscan Vineyards, Inc. (In re Franciscan Vineyards, Inc.), 597 F.2d 181, 183 (9th Cir. 1979). The Ninth Circuit has two requirements for a document to qualify as an informal proof of claim: (1) the document “must state an explicit demand showing the nature and amount of the claim against the estate,” and (2) the document must “evidence an intent to hold the debtor liable.” Sambo‘s Restaurants, Inc. v. Wheeler (In re Sambo‘s Rests., Inc.), 754 F.2d 811, 815 (9th Cir. 1985). Examples of an informal proof of claim are “demands against the estate” or “correspondence between a creditor and the trustee or debtor-in-possession which demonstrate an intent on the part of the creditor to assert a claim against the bankruptcy estate.” Sullivan v. Town & Country Home Nursing Servs., Inc. (In re Town & Country Home Nursing Servs., Inc.), 963 F.2d 1146, 1153 (9th Cir. 1991).
The Credit Union argues that Barker‘s listing of debt she owed the Credit Union in her bankruptcy schedules constitutes an informal proof of claim, which is sufficient to preserve its claims. More specifically, the Credit Union asserts that there is no requirement that the writing establishing the informal proof of claim must come from the creditor.
The Credit Union‘s argument ignores the explicit requirement that the creditor must somehow demonstrate its intent to hold the debtor liable. As explained above, the filing of a proof of claim (which evidences the creditor‘s decision to hold the debtor liable) plays аn important role in Chapter 13 bankruptcy proceedings. This function applies equally to an informal proof of claim. In order to establish an informal proof of claim, a creditor must have taken some affirmative action to assert its claim within the statutorily prescribed time frame. In re Bowden, 315 B.R. at 907 (rejecting argument that debtor‘s schedules alone suffice to establish an informal proof of claim). The Credit Union has failed to cite any legal authority that has held that a debtor‘s bankruptcy schedules alone qualify as an informal proof of claim. Moreover, in all of the cases the Credit Union cites in support of its position, the creditors took some sort of affirmative action to demonstrate their intent to enforce their claims prior to the filing deadline. See, e.g., Fyne v. Atlas Supply Co., 245 F.2d 107, 108 (4th Cir. 1957) (“We agree that mere knowledge on the рart of the trustee or of the referee in bankruptcy as to the existence of a claim is not sufficient basis for allowing the filing of an amended claim nor is the listing of the claim in the bankrupt‘s schedules sufficient. Here, however, there is much more than this.“); Scottsville Nat‘l Bank v. Gilmer (In re Pitts), 37 F.2d 227, 229 (4th Cir. 1930) (allowing late filed claim where “the trustee conferred with the officers and the attorney for the bank frequently with regard to matters connected with the estate“); Clapp v. Norwest Bank Hastings, N.A. (In re Clapp), 57 B.R. 921, 924 (Bankr. D. Minn. 1986) (allowing late filed claim where creditor “clearly and frequently asserted its intention to pursue its claim” in letters to the debtor‘s attorney and in interactions with the court).
Barker‘s bankruptcy schedules simply do not meet either of the prongs required to establish an informal proof of claim. The Barker-drafted documents are not an explicit demand and do not demonstrate the Credit Union‘s intent to hold Barker liable for thе listed debt. Accordingly, we affirm the bankruptcy court‘s conclusion that the informal proof of claim doctrine does not apply in this case.
III. Barker‘s listing of debt owed to the Credit Union in her bankruptcy schedules does not constitute a debtor‘s proof of claim.
Federal Rule of Bankruptcy Procedure 3004 and
The Credit Union argues that Barker‘s bankruptcy schedules constitute a debtor‘s proof of claim. This argument is not persuasive. First, the bankruptcy schedules (acknowledging the debt at issue) were not filed within the applicable thirty-day time frame. Thus, just considering the issue of timing, Barker‘s bankruptcy schedules do not meet the requirements of
Timing aside, Barker‘s bankruptcy schedules do not qualify as a debtor‘s proof of claim. Congress adopted
IV. The principles of equity do not permit the bankruptcy court to retroactively extend the deadline for the Credit Union to file its proofs of claims.
Finally, the Credit Union argues that equity favors allowing its claims. Specifically, the Credit Union argues that, if its claims are not allowed, it will suffer a severe loss while the other creditors receive an undeserved windfall. While this may be true, the Ninth Circuit has repeatеdly held that the deadline to file a proof of claim in a Chapter 13 proceeding is “rigid,” and the bankruptcy court lacks equitable power to extend this deadline after the fact. In re Gardenhire, 209 F.3d at 1148 (“Our precedents support the conclusion that a bankruptcy court lacks equitable discretion to enlarge the time to file proofs of claim; rather, it may only enlarge the filing time pursuant to the exceptions set forth in the Bankruptcy Code and Rules.“); In re Osborne, 76 F.3d at 308; Zidell, Inc. v. Forsch (In re Coastal Alas-ka Lines, Inc.), 920 F.2d 1428, 1431-33 (9th Cir. 1990); Ledlin v. United States (In re Tomlan), 102 B.R. 790, 792, 796 (E.D. Wash. 1989), aff‘d, 907 F.2d 114 (9th Cir. 1990).
Further, allowing the bankruptcy court to retroactively extend the deadline in this case would thwart the purpose of Chapter 13:
The purpose of Chapter 13 is “to serve as a flexible vehicle for the repayment of part or all of the allowed claims of the debtor.” (Emphasis added.) Sen. Rept. No. 95-989, Pub.L. 95-598, 92 Stat. 2549, 95th Cong., 2d Sess. (1978), p. 141, reprinted in U.S. Code Cong. & Admin. News 1978 at 5787, 5927. In order to effectuate this purpose, it is essential that all unsecured creditors seeking payment under the plan file a proof of claim. A date certain for such filings is crucial to the ability to determine the full extent of the debts and evaluate the efficacy of the plan in light of the debtor‘s assets and foreseeable future earnings.
In re Tomlan, 102 B.R. at 792 (alteration in original). Barker‘s Chapter 13 plan will only be successful if she and the Trustee “know, early on, what claims must be рaid.” Id. at 794 (quoting In re Goodwin, 58 B.R. 75, 77 (Bankr. D. Me. 1986)). Barker will not get the “fresh start” she seeks if creditors are continually allowed to add additional claims far after the deadline to file has expired. Id. (quoting In re Goodwin, 58 B.R. at 77).
CONCLUSION
In order to participate in distributions of Barker‘s assets under her Chapter 13 plan, the Credit Union was required to file a proof of claim by the prescribed deadline. Because the Credit Union‘s proof of claims were untimely, the bankruptcy court proрerly rejected them.
AFFIRMED.
Notes
Late filed proofs of claim in Chapter 12 or 13 cases shall be deemed disallowed, without need for formal objection by the trustee or a hearing, if the trustee sends a notice to the late filing creditor using Mont. LBF 21. If a creditor files a response and requests a hearing within thirty (30) days of the date of the notice, then the creditor shаll notice the contested matter for hearing pursuant to Mont. LBR 9013-1. . . . If the creditor fails to file a written response to the objection to the late filed claim within thirty (30)
days of the date of the notice provided by Mont. LBF 21, the failure to respond shall be deemed an admission that the objection should be sustained by the Court without further notice or hearing.