Opinion ID: 856771
Heading Depth: 2
Heading Rank: 1

Heading: The Claim Order

Text: ECMC insists that the Claim Order did not determine that Hann had repaid her student loans, but merely ruled that ECMC could not collect anything from the bankruptcy estate -- that is, it disallowed the claim, and nothing more. As ECMC sees it, there is a crucial difference between a claim disallowance order saying Hann owes nothing or ECMC is owed nothing and one saying (as the Claim Order actually does) that ECMC's claim is allowed in the 3 When we review a bankruptcy court decision, whether it reaches us via the BAP or a district court, we typically concentrate on the bankruptcy court's decision. Stornawaye Fin. Corp. v. Hill (In re Hill), 562 F.3d 29, 32 (1st Cir. 2009). But here, where the bankruptcy court did not issue a written opinion but the BAP did, we think it makes sense to focus on the BAP's analysis. Nevertheless, we afford no special deference to the BAP's decision. See id. Nor do we defer to the bankruptcy court's interpretation of the Claim Order, because it was issued by a different judge. See Monarch Life Ins., 65 F.3d at 983 & n.12; cf. Martha's Vineyard Scuba Headquarters, Inc. v. Unidentified, Wrecked & Abandoned Steam Vessel, 833 F.2d 1059, 1066-67 (1st Cir. 1987). -8- amount of $0.00. The latter, ECMC says, does not purport to adjudicate the amount of the underlying debt. Thus, ECMC contends that the Claim Order means only that its claim was disallowed, which should not prevent ECMC from pursuing an outstanding nondischargeable student loan debt. ECMC also warns that requiring courts to interpret unelaborated claim disallowance orders like this one in order to determine whether they ruled that the underlying debt was satisfied would thrust those courts into a subjective analytical quagmire. Hann's response is the same as it was below: that she objected to ECMC's claim on the ground that she had paid off her loans, and then presented evidence to that effect, prompting the bankruptcy court to rule (albeit in oblique language) that she had indeed satisfied her debts. In response to ECMC's argument about the pitfalls of deciphering an unexplained claim disallowance order, Hann posits that the task is fairly straightforward where, as here, the debtor provided the ordering judge with substantial -- and unrebutted -- evidence that the debt has been paid.4 4 Hann's proposed substantial evidence standard is drawn from our cases discussing the shifting burden of persuasion on a proof of claim. See Juniper Dev. Grp. v. Kahn (In re Hemingway Transp., Inc.), 993 F.2d 915, 925 (1st Cir. 1993) (a proof of claim is presumptively valid unless countered by an objection supported by substantial evidence, in which case the risk of nonpersuasion returns to the claimant). Here, we do not rely on this standard because our task is to determine why the claim was disallowed, not whether it should have been. -9- At the outset, we can agree with ECMC that it is far better for bankruptcy courts that disallow claims on the ground that the underlying debt is satisfied to say so in clear language. We think this case would not be before us if the Claim Order simply said ECMC's claim is disallowed because the underlying loans have been repaid. But the onus of avoiding ambiguity in these situations does not rest solely with bankruptcy judges. The Claim Order was submitted by Hann's counsel as a proposed order; had Hann's counsel proposed clearer language, this entire second proceeding most likely would have been unnecessary. Nevertheless, we do not agree with ECMC that an inquiry into the reasoning behind the Claim Order is unworkable. We have said before that when a court order's phraseology is imprecise, there may be some play in the joints. For example, a reviewing court can comb relevant parts of the record to discern the authoring court's intention. Negrón-Almeda v. Santiago, 528 F.3d 15, 23 (1st Cir. 2008); accord R & G Mortg. Corp. v. Fed. Home Loan Mortg. Corp., 584 F.3d 1, 12 (1st Cir. 2009); see Subsalve USA Corp. v. Watson Mfg., Inc., 462 F.3d 41, 45 (1st Cir. 2006) (construing an unclear order in light of the record of the proceedings below). These cases dealt with orders that came to us on direct appeal, but there are also times when we look to the record in a prior proceeding, as when we must determine what issues were actually decided for preclusion purposes. E.g., Miller v. -10- Nichols, 586 F.3d 53, 61 (1st Cir. 2009); Hoult v. Hoult, 157 F.3d 29, 32 (1st Cir. 1998); see 18 Charles Alan Wright et al., Federal Practice & Procedure: Jurisdiction § 4420, at 520 (2d ed. 2002) (the first step in identifying issues decided in a prior case is a painstaking examination of the record of the prior action). To be sure, when the option is available, the wisest course will often be to vacate the [ambiguous] order and return the case to the authoring court for clarification. Subsalve USA, 462 F.3d at 45. Here, though, we cannot take that route because the Claim Order was not appealed from, and clarification would be unavailable anyway because the ordering judge has retired. Indeed, that fact prevented the bankruptcy court itself from simply clarifying the Claim Order; had the ordering judge been available to preside over the adversary proceeding, he could have made the order's scope clear. Under these circumstances, we deem it appropriate to comb relevant parts of the record to discern the authoring court’s intention. Negrón-Almeda, 528 F.3d at 23. Our scrutiny establishes that the Claim Order was indeed based on the conclusion that Hann had repaid her loans. This situation is not unlike one where we must determine whether a factual issue was a necessary component of an unexplained judgment or a general jury verdict in an earlier case. For example, in Hoult, we concluded, on the basis of the arguments made and the evidence presented, that the jury had necessarily decided a -11- particular question that was the centerpiece, the central and pivotal issue, in the initial trial. 157 F.3d at 32-33. Here, Hann's claim that she had repaid her loans in full had at least that status, given that it was her central -- if not sole -- argument against ECMC's claim.5 And there is no dispute that the bankruptcy court had jurisdiction to determine that the debt underlying the claim had been repaid. See Langenkamp v. Culp, 498 U.S. 42, 44 (1990) ([B]y filing a claim against a bankruptcy estate the creditor triggers the process of 'allowance and disallowance of claims,' thereby subjecting himself to the bankruptcy court's equitable power. (citation omitted)). Hann explained, during her testimony and in her subsequent affidavit, that she believe[d] the student loan claims were paid in full prior to the commencement of the Chapter 13 proceeding. She submitted materials appearing to support that belief. Her arguments and documentation went unrebutted. The bankruptcy court questioned Hann in person, reviewed her supplemental materials, and sustained her objection. As in Hoult, it may be [t]heoretically possible that the Claim Order is based on some conclusion other than pre-petition repayment, but it is not 5 ECMC observes that Hann's written objection to its claim says only that ECMC had failed to file adequate documentation supporting its claim, and that Hann's records indicate payments in excess of original loan amounts; it does not say that Hann had repaid her loans in full, with interest. But that was clearly her position at the hearing and in her subsequent submissions to the court. -12- plausible. Id. at 33. Perhaps matters would be different if ECMC had disputed the issue, or simply appeared at the hearing to offer a basis for its claim. But, given what actually happened during the claim objection process, it is clear that, as the BAP put it, the bankruptcy court . . . in disallowing the Claim, necessarily determined that it had, in fact, been paid in full. 476 B.R. at 357. The fact that Hann squarely raised the issue of whether she had repaid her loans distinguishes this case from State of Florida Department of Revenue v. Diaz (In re Diaz), 647 F.3d 1073 (11th Cir. 2011), on which ECMC relies. In Diaz, the debtor objected to a proof of claim for unpaid child support on the basis that the documentation offered by the state in support of the claim showed (erroneously, it turned out) that the debt was roughly $20,000 less than the amount stated in the proof of claim itself. Id. at 1080. The state did not respond to the objection, and so the bankruptcy court sustained it, allowing the claim in the lesser amount. When the state later resumed its collection efforts, the bankruptcy court ruled that doing so violated the discharge injunction. The Eleventh Circuit reversed, explaining that the debt was nondischargeable, id. at 1089-90, and that in any event the amount of the debt . . . was never litigated during the underlying bankruptcy proceedings, because the only issue before the bankruptcy court at the time of the claim objection was the -13- amount of the child-support debt that would be paid by the bankruptcy estate through Diaz's Chapter 13 plan, not the total amount of the child-support debt, id. at 1091. Here, although the ultimate issue in the claim objection hearing was the same as in Diaz (i.e., the amount the creditor would get from the estate), that issue was resolved by way of a subsidiary factual issue not raised in Diaz: whether the debt had already been repaid. Cf. Hoult, 157 F.3d at 32. Thus, Diaz addressed a different situation.6