Court Opinion

ID: 4125729
Source: CourtListenerOpinion
Date Created: 2017-02-14 03:01:14.160121+00
Date Added: 2024-06-11T14:50:04.905346
License: Public Domain

FILED
                                                            FEB 13 2017
 1                         NOT FOR PUBLICATION
                                                        SUSAN M. SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
 2                                                        OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
                              OF THE NINTH CIRCUIT
 4
     In re:                        )      BAP No. CC-16-1118-LNTa
 5                                 )
     JOHN LOUIS AVITABILE,         )      Bk. No. 8:14-bk-14381-ES
 6                                 )
                    Debtor.        )
 7   ______________________________)
                                   )
 8   JOHN LOUIS AVITABILE,         )
                                   )
 9                  Appellant,     )
                                   )
10   v.                            )      MEMORANDUM*
                                   )
11   KATHY ROCHELEAU;              )
     BRUCE ROCHELEAU,              )
12                                 )
                    Appellees.     )
13   ______________________________)
14                  Argued and Submitted on January 19, 2017
                             at Pasadena, California
15
                           Filed - February 13, 2017
16
               Appeal from the United States Bankruptcy Court
17                 for the Central District of California
18        Honorable Erithe A. Smith, Bankruptcy Judge, Presiding
                         _________________________
19
     Appearances:     Michael A. Wallin of Slater Hersey and Lieberman
20                    LLP argued for appellant; Timothy Krantz argued
                      for appellees.
21                         _________________________
22   Before: LAFFERTY, TAYLOR, and NOVACK,** Bankruptcy Judges.
23
24
          *
            This disposition is not appropriate for publication.
25   Although it may be cited for whatever persuasive value it may
26   have (see Fed. R. App. P. 32.1), it has no precedential value.
     See 9th Cir. BAP Rule 8024-1.
27
          **
            Hon. Charles Novack, United States Bankruptcy Judge for
28   the Northern District of California, sitting by designation.
 1                                INTRODUCTION
 2        Judgment Creditors Kathy and Bruce Rocheleau missed the
 3   deadline for filing a formal proof of claim against the estate of
 4   Debtor John Avitabile.   Upon filing a formal proof of claim
 5   almost eight months after the claims bar date, the Rocheleaus
 6   also filed a motion requesting that the bankruptcy court allow
 7   their claim, arguing that (1) their failure to timely file a
 8   proof of claim was due to “excusable neglect,” and the bankruptcy
 9   court should deem it timely pursuant to Rule 9006(b)(1);1 and
10   (2) the formal proof of claim should be deemed timely because,
11   prior to the expiration of the claims bar date, the Rocheleaus
12   sent a letter to the chapter 7 trustee that constituted a timely
13   “informal” proof of claim.    After a hearing at which Debtor
14   opposed the requested relief, the bankruptcy court rejected the
15   Rocheleaus’ excusable neglect argument but agreed that their
16   letter constituted an informal proof of claim.    Debtor appealed.
17   We AFFIRM.
18                                   FACTS
19   A.   The Prepetition Judgment and the Bankruptcy Filing
20        On February 10, 2014, the Orange County Superior Court
21   entered a default judgment against Debtor John Avitabile
22   (“Avitabile”) in favor of Kathy and Bruce Rocheleau
23   (collectively, the “Rocheleaus”) in the amount of $513,976.35.
24   The judgment represented the expenses for repair of construction
25
26        1
            Unless otherwise indicated, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all “Rule” references are to the Federal Rules of Bankruptcy
28   Procedure.

                                      -2-
 1   work that the Rocheleaus stated was not properly performed by
 2   Avitabile.
 3        On July 15, 2014, Avitabile filed a voluntary petition for
 4   relief under chapter 7.   On the front page of the petition,
 5   Avitabile indicated that there were no assets in the estate and
 6   therefore no funds would be available for distribution to
 7   unsecured creditors.   Consistent with that assertion, Avitabile
 8   did not list any interest in real property on Schedule A.
 9   Schedule F listed the debt owed to the Rocheleaus at $600,000 and
10   did not indicate that the debt was disputed or otherwise invalid.
11   The creditor mailing matrix filed along with the petition listed
12   the Rocheleaus at their home address.
13   B.   Letter from Avitabile to the Chapter 7 Trustee
14        On August 17, 2014, Timothy Krantz (“Krantz”), counsel to
15   the Rocheleaus, sent the chapter 7 trustee Thomas H. Casey (the
16   “Trustee”) a one-page letter (the “August 17 Letter”) suggesting
17   that Avitabile held an apparently undisclosed interest in a trust
18   that owned certain real property in Trabuco Canyon, California.
19   In the opening paragraph of the August 17 Letter, Krantz stated:
20        I represent an unsecured creditor, Bruce Rocheleau. My
          client obtained a Judgment of $513,976.35 against the
21        debtor on 2/10/14. My client wanted me to pass on to
          you the following information about possible assets
22        that the debtor may have but is not disclosing. You
          may want to ask him about [it] during the 341a meeting
23        of creditors.
24   C.   The Notice of Dividend and the Claims Bar Date
25        On March 12, 2015, the Trustee filed a Notification of Asset
26   Case (the “Notification”) in which he indicated that assets would
27   be administered in the case; on the same date the Clerk of the
28   Court sent out a Notice of Possible Dividend and Order Fixing

                                     -3-
 1   Time to File Claims (the “Notice”) to all creditors listed in the
 2   mailing matrix, thereby setting the deadline for filing proofs of
 3   claim for June 15, 2015.
 4        The Notice was sent to the Rocheleaus at the address listed
 5   on the mailing matrix; however, the Rocheleaus deny its receipt.
 6   In any event, it is undisputed that the Rocheleaus did not file a
 7   formal proof of claim prior to the June 15, 2015 deadline.
 8   D.   The Filing of the August 17 Letter with the Bankruptcy Court
 9        On March 12, 2015, the same day that the Trustee filed the
10   Notification and the Clerk of the Court sent out the Notice, the
11   Trustee also filed his Motion for Order Extending Time to File
12   11 U.S.C. § 727 Complaint (the “Extension Motion”).   The
13   Extension Motion sought additional time for the Trustee to
14   determine whether filing a complaint for denial of discharge
15   pursuant to Section 727 was warranted.   The Extension Motion
16   stated that the Trustee had recently discovered that Avitabile
17   held an unscheduled beneficial interest in a trust established by
18   Avitabile’s mother prior to the filing of the petition.     The
19   Extension Motion further stated that the Trustee was “only made
20   aware of this asset by a creditor who had obtained a judgment
21   against [Avitabile] in the amount of $513,976.33 prior to the
22   Petition Date.”   Furthermore, a copy of the August 17 Letter was
23   attached to the Extension Motion as an exhibit.
24   E.   The Settlement
25        On January 25, 2016, the Trustee and Avitabile entered into
26   a settlement agreement regarding the estate’s potential interest
27   in the undisclosed family trust.   Pursuant to the settlement
28   agreement, the estate would receive $76,750 in exchange for the

                                     -4-
 1   release of the estate’s interest in the trust.    The settlement
 2   agreement also set forth the proposed distribution of the $76,750
 3   to be received by the estate.   Although the settlement agreement
 4   acknowledged the existence of the Rocheleaus’ judgment against
 5   Avitabile, it did not include the debt owed to the Rocheleaus as
 6   a claim that would be paid from the settlement, presumably
 7   because they had not filed a proof of claim.
 8        A copy of the settlement agreement was filed with the
 9   bankruptcy court and served on all parties, including the
10   Rocheleaus.   The Rocheleaus contended that they first became
11   aware that there would be a dividend in the case when they
12   received a copy of the motion to approve settlement; and they
13   were alarmed to read that they were not listed as unsecured
14   creditors who would receive a distribution from the estate.
15   Nevertheless, the Rocheleaus did not file an opposition to the
16   motion to approve the settlement agreement.    On February 19,
17   2016, the bankruptcy court entered an order approving the
18   settlement agreement.
19   F.   The Rocheleaus’ Proof of Claim and Accompanying Motion
20        On February 8, 2016, the Rocheleaus filed a formal proof of
21   claim, which included as an attachment a copy of the state court
22   judgment.   Shortly thereafter, on February 12, 2016, they also
23   filed the Motion for Order to Allow Late Filing of Proof of Claim
24   (the “Claim Motion”).
25        The Claim Motion requested that the bankruptcy court allow
26   the Rocheleaus’ formal proof of claim as timely based on two
27   alternative theories: first, that the June 15, 2015 deadline to
28   file a proof of claim should be extended as to the Rocheleaus

                                     -5-
 1   because their mistaken belief that no proof of claim had to be
 2   filed was the result of “excusable neglect”; second, that
 3   pursuant to applicable Ninth Circuit case law, the August 17
 4   Letter qualified as a timely informal proof of claim to which the
 5   late-filed claim could relate back and therefore the formal claim
 6   should be deemed an amendment to the informal claim.   Avitabile
 7   opposed the Claim Motion2 asserting that the August 17 Letter did
 8   not meet the requirements for an informal proof of claim, mainly
 9   because it was not brought to the attention of the bankruptcy
10   court.
11   G.   The Bankruptcy Court’s Disposition
12        On April 12, 2016, the bankruptcy court held a hearing on
13   the Claim Motion and granted the Claim Motion in part and
14   rejected it in part.
15        The bankruptcy court denied the Rocheleaus’ excusable
16   neglect argument because it determined that the application of
17   Rule 9006 was limited by Rule 3002(c), which controls the
18   expansion of the deadline under which creditors must file a proof
19   of claim against the estate in chapter 7 cases.   Specifically,
20   the bankruptcy court determined that Rule 3002(c) listed only six
21   exceptions to the requirement to timely file a proof of claim,
22   and excusable neglect was not one of them.   This aspect of the
23   bankruptcy court’s ruling is not contested in this appeal.
24        The bankruptcy court granted the Claim Motion insofar as it
25   asserted that the August 17 Letter satisfied the requirements set
26
27
          2
            As part of the settlement, the Trustee assigned standing
28   to oppose the Claim Motion to Avitabile.

                                    -6-
 1   forth for a finding that it was a timely informal proof of claim.
 2   Avitabile timely appealed.
 3                                JURISDICTION
 4        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
 5   §§ 1334 and 157(b)(2)(B).    We have jurisdiction under 28 U.S.C.
 6   § 158.
 7                                   ISSUE
 8        Did the bankruptcy court err in determining that the
 9   August 17 Letter constituted a timely informal proof of claim?
10                            STANDARD OF REVIEW
11        Whether a document satisfies the requirements for an
12   informal proof of claim is a question of law that we review de
13   novo.    Dicker v. Dye (In re Edelman), 237 B.R. 146, 150 (9th Cir.
14   BAP 1999) (citing Pizza of Hawaii, Inc. v. Shakey’s, Inc. (Matter
15   of Pizza of Hawaii, Inc.), 761 F.2d 1374 (9th Cir. 1985)).
16                                 DISCUSSION
17        The Ninth Circuit has long applied a rule of “liberality in
18   amendments” to creditors’ proofs of claim, permitting a later
19   filed claim to relate back to a prior informal claim.   Wright v.
20   Holm (In re Holm), 931 F.2d 620, 622 (9th Cir. 1991); County of
21   Napa v. Franciscan Vineyards, Inc. (In re Franciscan Vineyards,
22   Inc.), 597 F.2d 181, 182-83 (9th Cir. 1979) (citing
23   In re Patterson-MacDonald Shipbldg. Co., 293 F. 190, 191 (9th
24   Cir. 1923)).   To constitute an informal proof of claim, a
25   document must: (1) be presented via a writing; (2) be presented
26   within the time frame for the filing of claims; (3) be asserted
27   by or on behalf of the creditor; (4) be brought to the attention
28   of the bankruptcy court; (5) indicate an intent to assert a claim

                                      -7-
 1   against the estate in a set or determinable amount.
 2   In re Franciscan Vineyards, Inc., 597 F.2d at 182-83; Pacific
 3   Resource Credit Union v. Fish (In re Fish), 456 B.R. 413, 417
 4   (9th Cir. BAP 2011); In re Edelman, 237 B.R. at 155.
 5        Avitabile does not dispute that the August 17 Letter was a
 6   writing presented on behalf of the Rocheleaus within the time
 7   frame for filing proofs of claim or that it indicated an intent
 8   to assert a claim against the estate; the only element at issue
 9   is whether the August 17 Letter was brought to the attention of
10   the bankruptcy court.3
11        The Ninth Circuit has expressly determined that it is not
12   necessary that an informal proof of claim be filed with the
13   bankruptcy court or otherwise appear on the bankruptcy court’s
14   record in order to satisfy this requirement.   In re Holm,
15 931 F.2d at 622 (“The document that purports to be an informal
16   proof of claim need not be filed in the court.”);
17   In re Franciscan Vineyards, Inc., 597 F.2d at 183 (informal
18
          3
19          With respect to the second element, whether the August 17
     Letter was presented within the time frame for filing proofs of
20   claim, the bankruptcy court found that this element was met
     because under Rule 3002, (in the absence of other court order) a
21   proof of claim is timely if filed no later than 90 days after the
     first date set for the § 341 meeting. However, when the
22
     August 17 Letter was sent to Trustee, no claims bar date had been
23   set because the case appeared to be a no asset chapter 7. We are
     not convinced that a document presented before a claims bar date
24   has been set could always satisfy the timing requirement. Such a
     document would not be relevant where no assets are available to
25   pay creditors, and the creditor could not plausibly argue that it
26   intended to assert a claim against an estate with no assets. But
     to the extent the bankruptcy court erred in this aspect of its
27   ruling, it was harmless error because the August 17 Letter was
     filed with the court as an attachment to the Extension Motion on
28   the same day the claims bar date was set.

                                    -8-
 1   letter sent to the trustee who did not forward it to the
 2   bankruptcy court or any other party); In re Anderson-Walker
 3   Indus., Inc., 798 F.2d 1285, 1286 (9th Cir. 1986) (informal
 4   letter sent to trustee’s counsel in response to a collection
 5   letter demanding payment to the estate); In re Sambo’s
 6   Restaurants, Inc., 754 F.2d 811, 812 (9th Cir. 1985) (wrongful
 7   death complaint filed in a different jurisdiction from bankruptcy
 8   case).
 9        Moreover, although the Rocheleaus sent the August 17 Letter
10   to the Trustee and not the bankruptcy court, a closer look at the
11   record demonstrates that the August 17 Letter was filed with the
12   bankruptcy court on March 12, 2015 as an exhibit to the Extension
13   Motion.   The Extension Motion not only included a copy of the
14   August 17 Letter but it also explained that the information from
15   the Rocheleaus was the reason why the Trustee was able to uncover
16   Avitabile’s interest in the undisclosed asset.    The certificate
17   of service attached to the Extension Motion reflects that service
18   was made on Avitabile, Avitabile’s counsel, the United States
19   Trustee, and all creditors.    It is undisputed that Avitabile
20   received a copy of the August 17 Letter after it was filed with
21   the bankruptcy court.   Thus, even if the document had to be filed
22   with the bankruptcy court, the Extension Motion satisfied that
23   requirement.
24                                 CONCLUSION
25        For the reasons set forth above, we find no error in the
26   bankruptcy court’s allowance of the Rocheleaus’ formal proof of
27   claim as an amendment to their timely informal proof of claim.
28        Accordingly, we AFFIRM.

                                      -9-