Opinion ID: 602805
Heading Depth: 3
Heading Rank: 2

Heading: The Claims-Allowance Process

Text: 10 Resolution of the Trustee's action is not required in order to determine whether to allow CNB's claim as a creditor in the bankruptcy proceeding. The Trustee asks for money damages to compensate the estate for the destruction of the debtor's business. If he wins, the estate is enlarged, and this may affect the amount the Bank and its fellow creditors ultimately recover on their claims, but it has no effect whatever on the allowance of the Bank's claims. Thus, a court could allow the Bank's claim before hearing argument on the Trustee's complaint, and this chronology would be both logical and consistent with the Bankruptcy Code. 11 This situation differs from those treated in some leading Supreme Court cases relied on by the Bank. In both Katchen v. Landy, 382 U.S. 323, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966), and Langenkamp v. Culp, 498 U.S. 42, 111 S.Ct. 330, 112 L.Ed.2d 343 (1990) (per curiam), reh'g denied, 498 U.S. 1043, 111 S.Ct. 721, 112 L.Ed.2d 709 (1991), the issue was whether the trustee may void a preferential transfer without a jury trial. Under the Bankruptcy Code a court must disallow any claim of any entity from which property is recoverable because of a preferential transfer or fraudulent conveyance. 11 U.S.C. § 502(d). 5 Thus, before a claim may be allowed, a court must resolve any preference issues that the trustee might raise. 12 In denying each respective creditor a jury trial both the Langenkamp and Katchen Courts referred to the process of allowing and disallowing claims. See 498 U.S. at 43, 111 S.Ct. at 331; 382 U.S. at 336, 86 S.Ct. at 476. The Bank argues that this process is triggered as soon as a proof of claim is filed. We agree that the filing of a proof of claim is a necessary condition--the claims-allowance process can hardly begin before a claim is made--however, it is not a sufficient condition. For instance, 28 U.S.C. § 157(b)(5) requires bankruptcy litigants to try any personal injury or wrongful death action in the district court. This strongly suggests that these litigants are entitled to a jury trial in such an action even after a proof of claim has been filed in bankruptcy court. The very phrase claims-allowance process suggests that the resolution of the dispute in which a jury trial is sought must affect the allowance of the creditor's claim in order to be part of that process. A preference action does so; lender liability actions generally do not. Therefore suits like the Trustee's action in this case which would augment the estate but which have no effect on the allowance of a creditor's claim simply cannot be part of the claims-allowance process. 6