Court Opinion

ID: 4448559
Source: CourtListenerOpinion
Date Created: 2019-10-21 20:00:17.881055+00
Date Added: 2024-06-11T14:45:07.289705
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ___________

                                       No. 18-2239
                                       ___________

                     In re: ENERGY FUTURE HOLDINGS CORP.
              a/k/a TXU Corp. a/k/a TXU Corp a/k/a Texas Utilities, et al.,
                                                Debtors

                                      WAYNE ENGLISH,
                                              Appellant

                       ____________________________________

                     On Appeal from the United States District Court
                                for the District of Delaware
                         (D.C. Civil Action No. 1-16-cv-01331)
                     District Judge: Honorable Richard G. Andrews
                      ____________________________________

                   Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                                 September 24, 2019

             Before: KRAUSE, SCIRICA and NYGAARD, Circuit Judges

                            (Opinion filed: October 21, 2019)
                                       ___________

                                        OPINION *
                                       ___________

PER CURIAM

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
       Pro se appellant Wayne English has appealed the District Court’s order affirming

the Bankruptcy Court’s disallowance of his proof of claim. For the reasons detailed

below, we will affirm.

       In 2010, English purchased $100,000 in aggregate principal amount of 6.55%

bonds issued by TXU Corporation, a predecessor of Energy Future Holdings

Corporation. In 2014, Energy Future filed a voluntary petition for Chapter 11

bankruptcy. English then sold his bonds for $75,420, and filed a proof of claim against

Energy Future for $24,580—the difference between the face amount of the bonds and

price for which he sold them. He alleged that by selling his bonds, he had mitigated his

damages, and was entitled to be made whole for his loss.

       Energy Future objected to the proof of claim, arguing that any claim that English

might have had traveled with the bonds to the buyer. After a hearing, the Bankruptcy

Court disallowed the claim. 1 English appealed, and the District Court affirmed. English

then filed a motion for reconsideration, which the District Court denied, and a timely

notice of appeal to this Court. In this Court, First Energy has filed a motion to file a

supplemental appendix and to supplement the record.

       The District Court had jurisdiction under 28 U.S.C. § 158(a), and we have

jurisdiction under 28 U.S.C. § 158(d). Chrysler Motors Corp. v. Schneiderman, 940 F.2d

1
  The Bankruptcy Court explained that once English sold the bonds, he ceased being a
creditor of the debtors; that English had not shown fraud or any type of securities
violation; and that English did “extremely well” by selling the bonds when he did,
because the remaining bondholders would be paid about ten cents on the dollar. See D.A.
at 254–56.

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911, 912 (3d Cir. 1991). We exercise plenary review of the District Court’s order and,

like the District Court, review the Bankruptcy Court’s factual findings for clear error and

its legal conclusions de novo. In re Lampe, 665 F.3d 506, 513 (3d Cir. 2011).

       We agree with the District Court’s analysis. Chapter 11 defines “claim” to mean,

simply, a “right to payment.” 11 U.S.C. § 101(5)(a). A “right to payment,” in turn, “is

nothing more nor less than an enforceable obligation.” Cohen v. de la Cruz, 523 U.S.

213, 218 (1998) (quoting Pa. Dept. of Public Welfare v. Davenport, 495 U.S. 552, 559

(1990)). The burden was on English to prove that he had a right to payment. See In re

Lampe, 665 F.3d at 514. 2

       English has not made the necessary showing. As he acknowledges, he sold the

bonds to a third party before he filed his proof of claim. Once the sale was completed,

the buyer—not English—became entitled to payment of the bonds’ principal and interest.

See Tex. Bus. & Com. Code. Ann. § 8.302; N.Y. U.C.C. Law § 8-302; Read v. Lehigh

Valley R. Co., 31 N.E.2d 891, 894 (N.Y. 1940); In re W. T. Grant Co., 4 B.R. 53, 77

(Bankr. S.D.N.Y. 1980) (“[P]ost-bankruptcy purchasers of debt securities of an entity in

bankruptcy obtain allowable claims equal to the face amount of such securities[.]”). 3

2
  More specifically, a proof of claim that alleges sufficient facts to support liability
satisfies the claimant’s initial obligation to proceed, after which the burden shifts to the
objector to produce sufficient evidence to negate the prima facie validity of the filed
claim. In re Lampe, 665 F.3d at 514. If the objector produces sufficient evidence, “the
burden reverts to the claimant to prove the validity of the claim by a preponderance of the
evidence.” In re Allegheny Int’l, Inc., 954 F.2d 167, 174 (3d Cir. 1992). In a contested
proceeding like this one, the burden of persuasion is always on the claimant. Id.
3
 The parties cite Texas and New York law, but we find it unnecessary to select the
governing law both because it does not appear that the law of the respective states differs
                                             3
English therefore has no enforceable right to payment for the bonds themselves.

       Instead, he argues at some length that legal causes of action do not necessarily

travel with the bonds upon a sale, cf. N.Y. Gen. Oblig. Law § 13-107 (“[u]nless expressly

reserved in writing, a transfer of any bond shall vest in the transferee all claims or

demands of the transferrer”), and that he properly mitigated his damages. But at no point

before the Bankruptcy Court or the District Court did English identify any cause of action

that he possessed against Energy Future. Instead, he alleged only that his bonds lost

value, which, standing alone, does not state a viable cause of action. See generally Dura

Pharm., Inc. v. Broudo, 544 U.S. 336, 345 (2005) (explaining that the security statutes do

not “provide investors with broad insurance against market losses”). We therefore agree

with the Bankruptcy Court and the District Court that English failed to carry his burden

of establishing that he possesses a valid claim. 4

       Accordingly, we will affirm the District Court’s judgment. Appellee’s motion to

file a supplemental appendix and to supplement the record is granted to the extent that it

seeks to file a supplemental appendix and denied to the extent that it seeks to supplement

on this issue and because we do not understand English to challenge the notion that his
sale of the bonds transferred these interests. We note also that First Energy has filed a
copy of the bond indenture, which further confirms that principal and interest will be paid
to the holder of the bonds, see Indenture §§ 308, 808, but because this document was not
part of the record before either the Bankruptcy Court or the District Court, we do not rely
on it here. See generally Burton v. Teleflex Inc., 707 F.3d 417, 435 (3d Cir. 2013) (a
party may supplement the record on appeal in only “exceptional circumstances”).
4
  To the extent that English appeals the District Court’s order denying his motion for
reconsideration, we will likewise affirm, as English failed to present a valid basis for
reconsideration. See, e.g., Max’s Seafood Cafe ex rel. Lou-Ann, Inc. v. Quinteros, 176
F.3d 669, 677 (3d Cir. 1999).
                                              4
the record with the bond indenture (exhibit 1), which was not part of the record before the

District Court. Appellant’s motion to take judicial notice is denied as presented. The

document, which is more in the nature of a letter under Fed. R. App. P. 28(j) that we may

consider without relying on judicial notice, does not help appellant’s cause.

                                             5