Opinion ID: 2971947
Heading Depth: 3
Heading Rank: 2

Heading: Lack of merit of the underlying argument

Text: Moreover, even if the issue had been preserved for appeal, the Oakses would have not been able to defeat the validity of Bank One’s proof of claim. This court has adopted the long-standing common law doctrine of informal proofs of claim, which “permits a bankruptcy court to treat the pre-bar date filings of a creditor as an informal proof of claim which can be amended after the bar date so that it is in conformity with the requirements of [Rule 3001].” In re M. J. Waterman & Assocs., Inc., 227 F.3d 604, 608 (6th Cir. 2000). Although “[t]he standards used by courts varies throughout the country, . . . this jurisdiction has settled on a four element test. . . .” Id. at 609. The --5- 5- No. 04-5116 Oaks v. Bank One Corp. four elements are as follows: “(1) The proof of claim must be in writing; (2) The writing must contain a demand by the creditor on the debtor’s estate; (3) The writing must express an intent to hold the debtor liable for the debt; and (4) The proof of claim must be filed with the bankruptcy court.” Id. (citing In re Vaughn Chevrolet, 160 B.R. 316, 319 (Bankr. E.D. Tenn. 1993)). If all four of these conditions are met, “the court may examine a fifth factor—whether it would be equitable to allow the amendment of the informal proof.” Id. The second proof of claim filed by Bank One easily meets the first four prongs. It is (1) in writing, it (2) contains a demand on the debtor’s estate for $6,027.87, and its very existence indicates (3) an intent to hold the Oakses liable for the debt. Finally, the proof of claim was (4) filed with the bankruptcy court. Before the bankruptcy court’s judicial notice of the lease agreement can be considered as an amendment to the second proof of claim, an informal proof-of-claim analysis would require us to address the fifth factor. Like the first four, it cuts strongly in Bank One’s favor. The Oakses do not dispute that they signed a contract agreeing to lease a 1999 Nissan Sentra for five years, and they do not dispute the validity of Bank One’s initial proof of claim. Although the Oakses have provided evidence that the auction sale price of $5,400 was far below the Bluebook retail value of the car, they provided no evidence of what the wholesale value was, and no evidence about the condition of the particular car they leased at the time they turned it in. As discussed below, the Oakses have also failed to prove that the sale of the vehicle was commercially unreasonable. Allowing the Oakses to evade Bank One’s claim based on a transparent filing error would therefore not be an equitable result. In sum, even if the Oakses had preserved the objection for appeal, the document --6- 6- No. 04-5116 Oaks v. Bank One Corp. filed by Bank One, combined with the bankruptcy court’s judicial notice of the lease, would have been sufficient under the informal-proof-of-claim doctrine to make Bank One’s proof of claim valid. We therefore hold that Bank One’s claim is prima facie evidence of the amount owed by the Oakses. C. The Oakses’ attempt to negate the validity of the proof of claim As the district court correctly stated, a valid proof of claim is prima facie evidence of the amount owed. See Fed. R. Bankr. P. 3001(f); Whitney v. Dresser, 200 U.S. 532, 534-35 (1906) (holding that “a sworn proof of claim” should be treated “as some evidence, even when it is denied”). Faced with this evidence, the Oakses had the burden of producing sufficient evidence to negate the amount claimed by Bank One. The evidence presented by the Oakses to the bankruptcy court purported to show that Bank One had sold the car in a manner that violated the lease contract’s requirement that the car be sold in a commercially reasonable manner. Specifically, the Oakses alleged that (1) they were given no notice of the sale, and (2) the car was sold for just 53% of its Bluebook retail value. 1. Lack of notice The section of the contract providing for early termination of the lease states that the value of the vehicle may be determined by “the net amount received by [Bank One] upon the sale of the [v]ehicle in a commercially reasonable manner.” What is “commercially reasonable” is not defined by the lease. As noted by the bankruptcy judge, however, Tennessee statutes providing for the rights of sellers and lessors to dispose of goods in the event of default shed some light on whether a commercially reasonable sale of leased merchandise requires notice to the defaulting lessee. --7- 7- No. 04-5116 Oaks v. Bank One Corp. Compare Tenn. Code Ann. § 47-2-706 (delineating a seller’s right to dispose of goods) with Tenn. Code Ann. § 47-2A-527(1) (providing for a lessor’s right to dispose of goods). The seller’s statute imposes a direct-notice requirement on sellers seeking to resell goods at private sales, and a list of requirements for public sales that serve the same purpose. §47-2-706(3)- (4). In contrast, the lessor’s statute provides that, after default by a lessee, “the lessor may dispose of the goods concerned . . . by lease, sale, or otherwise.” § 47-2A-527(1). Neither the bankruptcy judge nor the Oakses’ attorney was able to cite any Tennessee caselaw that equates a commercially reasonable sale with notice to the lessee, and we have found none. And at least one unpublished Tennessee case holds to the contrary. See Advantage Leasing Co. v. Shepperd, No. 88-236-II, 1988 WL 136667, at  (Tenn. Ct. App. 1988) (unpublished) (declining to hold that the sale of a leased car without notice to the lessees was commercially unreasonable). The Oakses rely primarily on a bankruptcy case that interprets a Florida statute defining commercially reasonable sales. See In re Convention Press, Inc., 84 B.R. 232 (Bankr. M.D. Fla. 1988) (holding that Fla. Stat. Ann. § 679.504(3), which has since been repealed, made notice to the lessee a condition of a commercially reasonable sale of a leased car). But even if the underlying statute had not been repealed, this case would not be on point. The Florida statute provided for the rights of sellers to dispose of the collateral in a secured transaction, but made no distinction between the rights of sellers and the rights of lessors. This lack of differentiation makes the Florida law inapposite, because Tennessee has a separate statute concerning the right of lessors to dispose of property. See Tenn. Code Ann. § 47-2A-527(1) (providing for a lessor’s right to dispose of goods). --8- 8- No. 04-5116 Oaks v. Bank One Corp. The Oakses also cite a Tennessee statute, incorporating part of the Uniform Commercial Code, that requires notification in the context of secured transactions. See Tenn. Code Ann. § 47-9-611 (delineating notification for the sale of merchandise held as collateral in secured transactions). This statute, however, does not mention leases. Although the statute was last amended in 2002, fourteen years after Sheppard was decided, it contains no repudiation of the Sheppard court’s holding that lessees “are not entitled to the same protections the Uniform Commercial Code reserves for buyers of consumer goods [but are] . . . entitled only to insist that [the lessor] abide strictly by the terms of its lease agreement.” Shepperd, 1988 WL 136667, at . We therefore find no error in the district court’s holding that “[t]he statutory right to prior notice applies to retail installment purchases of vehicles and not to leases.” For this reason, the Oakses’ claim of lack of notice is not sufficient to rebut the validity of the amount claimed by Bank One. 2. Sale price of the car As the bankruptcy judge correctly noted, the evidence proffered by the Oakses related to the retail price of the car rather than its wholesale price, and the price quoted was from a source dated almost a year after the car was sold. The Oakses’ attorney claimed that “the retail value in April of 2003 is not going to be a whole lot different from the wholesale value in 2002 in July,” but no evidence to this effect was presented. Nor was any proof presented as to the condition of the particular car in question. Because of this lack of evidence, the claim that Bank One sold the car for an unreasonably low price falls short of the proof needed to negate the validity of the amount claimed by Bank One. --9- 9- No. 04-5116 Oaks v. Bank One Corp.