In re: James C. Gianulias Cameo Homes

FILED
APR 05 2013
1 SUSAN M SPRAUL, CLERK
U.S. BKCY. APP. PANEL
2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. CC-12-1194-PaDKl
)
6 JAMES C. GIANULIAS; ) Bankr. No. 08-13150-CB
CAMEO HOMES, ) (substantively consolidated
7 ) with No. 08-13151-CB)
Debtors. )
8 ___________________________________)
)
9 VRE ACCEPTANCE, LLC; VIRTUAL )
REALITY ENTERPRISES, LLC, )
10 )
Appellants, )
11 )
v. ) M E M O R A N D U M1
12 )
THOMAS SEAMAN, Trustee of the )
13 Creditors Trust for the Reorganized)
Debtors James C. Gianulias and )
14 Cameo Homes, )
)
15 Appellee. )
___________________________________)
16
Argued and Submitted on February 22, 2013,
17 at Pasadena, California
18 Filed - April 5, 2013
19 Appeal from the United States Bankruptcy Court
for the Central District of California
20
Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding
21
22 Appearances: Bergeron H. Pierre of Squire Sanders (US) LLP
argued for appellants VRE Acceptance, LLC and
23 Virtual Reality Enterprises, LLC; Elissa D. Miller
of SulmeyerKupetz, APC argued for appellee Thomas
24 Seaman.
25
26
1
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may have
(see Fed. R. App. P. 32.1), it has no precedential value. See 9th
28 Cir. BAP Rule 8013-1.
-1-
1 Before: PAPPAS, DUNN and KLEIN,2 Bankruptcy Judges.
2 Memorandum by Judge Pappas
Concurrence by Judge Klein
3
4 Creditors VRE Acceptance, LLC (“VREA”) and Virtual Realty
5 Enterprises, LLC (“Virtual”) appeal the order of the bankruptcy
6 court denying their “Motion for Determination That Their Claims
7 Were Properly Filed.” We REVERSE.
8 FACTS
9 James C. Gianulias (“Gianulias”) was a California real estate
10 developer who developed dozens of commercial and residential real
11 estate projects over the last forty years. Gianulias’ business
12 practice was to vest the title to each new development project in
13 a separate entity, usually a limited liability company or limited
14 partnership.
15 In 1968, Gianulias founded Cameo Homes, a California
16 corporation (“Cameo”); he was its sole shareholder. For each
17 project he developed, Gianulias would install Cameo as the general
18 partner or managing member of the owner-entity, together with
19 granting it a small ownership interest in the entity. Gianulias
20 would hold the remaining ownership interests and, although Cameo
21 was usually designated as the managing entity, Gianulias
22 controlled each project.
23 One such project was a proposed multi-phase, eighty-three
24 unit condominium project in Carlsbad, California (the “Project”).
25 Gianulias organized Arenal Road, LLC (“Arenal Road”) to develop
26 the Project. On September 16, 2006, Arenal Road entered into a
27
2
The Honorable Christopher M. Klein, Chief Bankruptcy Judge
28 for the Eastern District of California, sitting by designation.
-2-
1 construction loan agreement with Bank Midwest which allowed it to
2 borrow up to $60,629,568.00 for the Project, secured by a Note and
3 Deed of Trust (the “Construction Loan”) on the Project. Gianulias
4 and Cameo both executed a single continuing guaranty agreement
5 with Bank Midwest on September 16, 2006, for the Construction
6 Loan. VREA purchased the Construction Loan from Bank Midwest on
7 June 11, 2008. At the time of purchase by VREA, the Construction
8 Loan balance was $11,754,741.98. After a default, VREA foreclosed
9 on the Project on June 13, 2008.
10 Also on September 16, 2006, Arenal Road obtained a loan from
11 Virtual for $11,590,118, secured by a Note and Deed of Trust, to
12 purchase certain real property related to the Project (the “Land
13 Loan”). Gianulias and Cameo also both signed a single guaranty of
14 the Land Loan.
15 On June 6, 2008, three creditors (not involved in this
16 appeal) filed separate involuntary bankruptcy petitions under
17 chapter 7 against Gianulias and Cameo. The Gianulias bankruptcy
18 case was assigned case number 08-13150; the Cameo case was
19 assigned case number 08-13151. Gianulias and Cameo each
20 eventually consented to the entry of an Order for Relief, and then
21 requested that the cases be converted to chapter 11 on July 1,
22 2008. The bankruptcy court granted their motions to convert the
23 two bankruptcy cases to chapter 11 on July 2, 2008.
24 On July 22, 2008, Gianulias and Cameo filed motions for
25 orders authorizing the joint administration of the two separate
26 bankruptcy cases. The bankruptcy court granted the motions in
27 part on July 25, 2008, allowing joint administration of the cases,
28 but deferring any decision regarding consolidation of the debtors’
-3-
1 accounts for a further hearing. After a final hearing on the
2 motions was conducted on August 8, 2008, the bankruptcy court
3 confirmed its order of July 25, 2008, that the cases were jointly
4 administered, but denied the requests to consolidate the two
5 debtors’ accounts.3
6 On August 27, 2008, two different attorneys associated with
7 Squire Sanders LLP (“Squire Sanders”) filed separate pleadings
8 entitled “Notice of Appearance and Request for Notice” in the
9 Cameo bankruptcy case. The notices indicate that the attorneys
10 are “an interested party”; they do not indicate that the attorneys
11 were appearing as counsel in the bankruptcy cases for any
12 particular parties.
13 On September 12, 2008, the Debtors filed and served two
14 separate notices advising interested parties of the bar date that
15 had been set by the bankruptcy court for filing proofs of claim in
16 the bankruptcy cases. A proof of claim (“POC”) form was attached
17 to each notice and, while the content of the two notices was
18 identical, the proof of claim form attached to each notice was
19 slightly different. The POC form attached to the first-filed
20 notice, in the space labeled “Name of Debtor,” contains two check
21 boxes, one each for Gianulias and Cameo, and in the space labeled
22 “Case Number,” the bankruptcy cases numbers for both bankruptcy
23 cases, 08-13150 for Gianulias, and 08-13151 for Cameo, appear.
24 The POC form attached to the later-filed notice lists only
25 Gianulias in the space labeled “Name of Debtor” and only the case
26
27 3
From this point forward in our chronology, unless
otherwise necessary, we will refer to Gianulias and Cameo
28 collectively as the “Debtors.”
-4-
1 number for the Gianulias bankruptcy case in the space labeled
2 “Case Number.” Both notices provided that the last day to file a
3 POC was November 11, 2008.
4 On November 10, 2008, VREA and Virtual each filed a POC with
5 the bankruptcy court. VREA filed POC 38 in the amount of
6 $12,131,120. The filed POC listed only one debtor, Gianulias, and
7 only one of the bankruptcy case numbers, 08-13150. Attached to
8 POC 38 was, in addition to copies of all of the Construction Loan
9 documents, a copy of the continuing guaranty executed by both
10 Gianulias and Cameo.
11 Virtual filed POC 39 in the amount of $12,981,470.94. That
12 POC also lists only one debtor, Gianulias, and one case number,
13 08-13150. A copy of the guaranty of payment of the Land Loan
14 signed by both Gianulias and Cameo was attached to POC 39.
15 Both POCs were signed by Squire Sanders attorneys, and listed
16 the law firm’s address. Neither of the POCs utilized the form
17 POCs attached to the notices.4
18 Debtors had filed a motion to substantively consolidate the
19 two bankruptcy cases on November 7, 2008. Among the factors
20
21 4
The POC forms filed by Virtual and VREA through counsel
were different in format from either of the two forms sent by
22 Debtors to them attached to the notices of bar date. The forms
accompanying the notices of bar date had seventeen sections; the
23 POCs submitted by VRE and Virtual had twenty sections. The format
of the information requested by the POCs was also slightly
24 different. The filed POCs both appear to substantially comply
with, and provide the information required in, Official Form B-10.
25 See Rule 9009 (providing that “the Official Forms prescribed by
the Judicial Conference of the United States shall be observed and
26 used with alterations as may be appropriate”); see also Advisory
Comm. Note (1983) to Rule 9009 (“The use of Official Forms has
27 generally been held subject to a ‘rule of substantial
compliance.’”). Appellees have never challenged the adequacy of
28 the filed POCs.
-5-
1 identified by Debtors in the motion in favor of substantive
2 consolidation was the challenge in dealing with the many
3 interlocking guaranties executed by Gianulias and Cameo. The
4 motion explained:
5 A substantial number of the lenders that provided
financing to the Project Level entities insisted that
6 Cameo and Gianulias guarantee their obligations. The
claims from this creditor constituency against Gianulias
7 total approximately $135 million. These claims comprise
eighty-eight percent of the total claims against his
8 estate. . . . Since substantially all of the guarantee
claims filed against Cameo’s estate are co-guaranteed by
9 Gianulias, Cameo’s claims base is effectively a subset
of Gianulias’ claims base.
10
The creditors who obtained guarantees from Cameo
11 and Gianulias did not delineate what part of each claim
was being guaranteed by Gianulias and what part was
12 guaranteed by Cameo, or otherwise take any action that
would suggest they relied on the separate credit or
13 status of either entity. To the contrary, the evidence
confirms that these claimants viewed Cameo’s and
14 Gianulias’ assets and liabilities as a common and
obligatory recovery pot, in the event of nonpayment,
15 since they made no effort to allocate their debts
between the two obligors.
16
17 Motion for Order Substantially Consolidating Chapter 11 Estate of
18 Cameo Homes into Chapter 11 Estate of James G. Gianulias, at 6-7,
19 November 7, 2008.
20 A Joint Committee of Unsecured Creditors for the two
21 bankruptcy cases had been appointed on August 4, 2008. The Joint
22 Committee and Debtors executed a stipulation to substantively
23 consolidate the two bankruptcy cases, which was approved in an
24 order entered by the bankruptcy court on December 10, 2008.
25 Included in the order approving the stipulation was the following
26 condition:
27 Substantive consolidation of the Gianulias and Cameo
estates will have no effect, either during the cases or
28 post-confirmation, on the rights and obligations of
-6-
1 either estate, or of Gianulias or Cameo as debtors, to
third parties with respect to any contract or agreement
2 to which either Gianulias or Cameo is a party.
3 Stipulation and Order Substantively Consolidating Chapter 11
4 Estate of Cameo Homes into Chapter 11 Estate of James C.
5 Gianulias, at 5, December 11, 2008.
6 Without objection, the bankruptcy court confirmed the
7 Debtors’ Fourth Amended Plan of Reorganization in the consolidated
8 bankruptcy case on July 19, 2010. Under the confirmed plan, a
9 Creditors’ Trust (the “Trust”) was established to oversee receipts
10 and disbursements to unsecured creditors in Class 3 under the
11 plan, which would include the VREA and Virtual claims if allowed.
12 Class 3 provided that those claims in the substantively
13 consolidated case would be paid either in full, or pro rata with
14 all other unsecured claims, whichever amount was less. The Trust
15 was responsible for objecting to unsecured claims by December 6,
16 2010, and any claims not objected to were to be deemed allowed
17 under the plan. Payments to the unsecured creditors were
18 originally scheduled to begin on September 12, 2012.
19 On December 3, 2010, the trustee for the Trust, VREA and
20 Virtual entered into a stipulation extending the time for the
21 Trust to file an objection to the creditors’ claims through
22 February 7, 2011. This “first” stipulation acknowledged that
23 “[i]n the Case [VREA and Virtual] filed several claims against
24 both Debtors.” A second, third and fourth stipulation were
25 executed to extend the time to object to these claims until,
26 eventually, June 17, 2011. In contrast to the first stipulation,
27 however, the second through fourth stipulations acknowledged only
28 that “[VREA and Virtual] filed two claims.”
-7-
1 The Trust had not objected to the VREA or Virtual claims by
2 the expiration date provided in the Fourth Stipulation, which
3 date was not extended. In Trustee’s Third Status Report for the
4 Gianulias Creditors Trust filed on November 29, 2011, the Trustee
5 reported that:
6 All claims objections have now been heard and
adjudicated, however, there is one remaining potential
7 open issue with respect to creditor claims. Virtual
Realty Enterprises and VRE Acceptance (“VRE”) filed
8 claims in the Gianulias case only. After reviewing
their claims the Trustee decided not to object.
9 However, VRE now claims that it is entitled to claims in
both the Gianulias and Cameo case. (At the time claims
10 were filed the cases were jointly administered, not
consolidated.) It is the Trustee’s position that VRE is
11 not entitled to a claim in both cases and did not seek
the appropriate remedy in the [] proper time frame
12 (prior to approval of the Plan) to allow dual claims.
13 Trustee’s Third Status Report for the Gianulias Creditors Trust,
14 at 12, November 29, 2011.5
15 On February 28, 2012, VREA and Virtual filed a “Motion for
16 Determination That Their Claims Were Properly Filed.” They argued
17 in the motion that they had filed proper, formal proofs of claim
18 as to both Gianulias and Cameo because they had complied with the
19 Debtors’ claim filing process in reliance on the second bar date
20 notice, and the accompanying POC form, and that any failure to
21 comply with the filing requirements resulted from confusion
22 created by the Debtors’ use of two bar date notices.
23 Alternatively, the creditors argued that the proofs of claim that
24 were filed in the now-consolidated bankruptcy case should be
25
5
Trustee’s Third Status Report was not included in the
26 excerpts of record, but may be found at docket number 943 of the
Gianulias bankruptcy case (08-13150). We may take judicial notice
27 of the underlying bankruptcy records with respect to an appeal.
O'Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d
28 955, 957-58 (9th Cir. 1988).
-8-
1 treated and allowed as informal proofs of claim in the Cameo
2 bankruptcy case.
3 The Trust responded to the motion on March 7, 2012. The
4 Trust argued that the bar notices were not ambiguous, that VREA
5 and Virtual had admitted receiving both notices, that the
6 creditors’ filed proofs of claim were inadequate to constitute a
7 formal proof of claim in the Cameo case, that the creditors’
8 request that the bankruptcy court allow informal proofs of claim
9 in the Cameo case was a belated attempt to amend the filed claims,
10 and that the creditors had not established that allowance of their
11 informal claims would not prejudice other creditors.
12 A hearing on VREA and Virtual’s motion was held on March 27,
13 2012. After hearing arguments of counsel, the bankruptcy court
14 announced its ruling on the record:
15 I’m going to deny the motion. These were
administratively consolidated cases and bankruptcy
16 lawyers know you have to file separate claims in each
case. They were not substantively consolidated. There
17 were two lawyers and, frankly, a proof of claim is a
form that counsel can do on their own without getting it
18 from the court. I understand your argument that some
times there’s different instruction, but to say that one
19 notice filed basically at the same time as another
somehow because it’s later filed one you can ignore the
20 fact that they are only administratively consolidated.
I feel that is a totally inappropriate argument.
21
22 Hr’g Tr. 23:16–24:2, March 12, 2012.
23 The bankruptcy court entered an order denying the VREA and
24 Virtual motion “based on the findings and conclusions as set forth
25 on the record of the proceeding and good cause appearing
26 therefore.” Neither the oral ruling nor the bankruptcy court’s
27 order denying the motion addressed VREA and Virtual’s alternative
28 argument that they had presented an allowable informal proof of
-9-
1 claim in the Cameo case. The creditors timely appealed.
2 JURISDICTION
3 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 13344 and 157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.
5 ISSUE
6 Whether the bankruptcy court erred in deciding that VREA and
7 Virtual had not filed proper formal proofs of claim in the Cameo
8 case.
9 Whether the bankruptcy court erred in concluding that VREA
10 and Virtual’s filed proofs of claim in the Gianulias case should
11 not be treated as allowed informal proofs of claim in the Cameo
12 case.
13 STANDARDS OF REVIEW
14 The bankruptcy court’s interpretation of the Bankruptcy Code
15 and Rules is reviewed de novo. Samson v. W. Capital Partners, LLC
16 (In re Blixseth), 684 F.3d 865, 869 (9th Cir. 2012).
17 Whether a valid informal proof of claim exists in a
18 bankruptcy case is a question of law reviewed de novo. Pac.
19 Resource Credit Union v. Fish (In re Fish), 456 B.R. 413, 417 (9th
20 Cir. BAP 2011). De novo review requires the Panel to
21 independently review an issue, without giving deference to the
22 bankruptcy court's conclusions. See Cal. Franchise Tax Bd. v.
23 Wilshire Courtyard (In re Wilshire Courtyard), 459 B.R. 416, 423
24 (9th Cir. BAP 2011) (citing First Ave. W. Bldg., LLC v. James
25 (In re Onecast Media, Inc.), 439 F.3d 558, 561 (9th Cir. 2006)).
26 DISCUSSION
27 VREA and Virtual argue that, on this record, they properly
28 filed formal proofs of claim against both Gianulias and Cameo
-10-
1 because they complied with the process required in the bar date
2 notices, and that any failure to list Cameo in their filed POCs
3 resulted from confusion created by the Debtors' use of two bar
4 date notices. In the alternative, VREA and Virtual argue that the
5 POCs they filed in the Gianulias bankruptcy case constituted
6 informal proofs of claim in the Cameo case.
7 In denying their motion, the bankruptcy court addressed the
8 first of the VREA and Virtual arguments in its oral ruling at the
9 March 12 hearing: “to say that one notice filed basically at the
10 same time as another somehow because it's later filed [] you can
11 ignore the fact that they are only administratively consolidated.
12 I feel that is a totally inappropriate argument.” The bankruptcy
13 court did not address VREA and Virtual’s informal proof of claim
14 argument.
15 I.
16 Virtual and VREA did not file formal proofs
of claim in the Cameo bankruptcy case.
17
18 Under § 501, a creditor may file a proof of claim. Section
19 502(a) provides that “a claim or interest, proof of which is filed
20 under section 501 of this title, is deemed allowed unless a party
21 in interest . . . objects.” Rule 3001(a) requires that all proofs
22 of claim be in writing and conform substantially to the Official
23 Form. And Rule 3001(f) further provides that “a proof of claim
24 executed and filed in accordance with these rules shall constitute
25 prima facie evidence of the validity and amount of the claim.” In
26 chapter 11 cases, Rule 3003(c)(2), consistent with § 1111(a),
27 requires a creditor to file the proof of claim if its claim is
28 either not scheduled by the debtor, or is scheduled as contingent,
-11-
1 unliquidated or disputed. Here, it is undisputed that Cameo’s
2 schedules list the claims of both VREA for the Construction Loan,
3 and Virtual for the Land Loan, as debts that are undisputed, but
4 contingent and unliquidated.6 Consequently, under the Code and
5 Rules, both VREA and Virtual were required to file a proof of
6 claim in the Cameo bankruptcy case.
7 When a bankruptcy court orders that two or more bankruptcy
8 cases be jointly administered, it has no effect on the rights and
9 obligations of debtors and creditors in those cases:
10 Joint administration is thus a procedural tool
permitting use of a single docket for administrative
11 matters, including the listing of filed claims, the
combining of notices to creditors of the different
12 estates, and the joint handling of other ministerial
matters that may aid in expediting the cases.
13 Rule 1015, Advisory Committee Note (1983). Used as a
matter of convenience and cost saving, it does not
14 create substantive rights.
15 Reider v. FDIC (In re Reider), 31 F.3d 1102, 1109 (11th Cir.
16 1994). See also Bunker v. Peyton (In re Bunker), 312 F.3d 145,
17 153 (4th Cir. 2002) (“Under joint administration the estate of
18 each debtor remains separate and distinct . . . . Joint
19 administration does not affect the substantive rights of either
20 the debtor or his or her creditors.”); Unsecured Creditors Comm.
21 v. Leavitt Structural Tubing Co., 55 B.R. 710, 712 (N.D. Ill.
22 1985) (joint administration is merely a matter of convenience and
23 cost saving; it does not create substantive rights);
24 In re Estrada, 224 B.R. 132, 135 (Bankr. S.D. Cal. 1998)(until
25 substantively consolidated, jointly administered estates are
26
27 6
We take judicial notice of the schedules filed by
Gianulias in bankruptcy 08-13150 and Cameo Homes in bankruptcy
28 08-13151. In re E.R. Fegert, Inc., 887 F.2d at 957-58.
-12-
1 separate).
2 In a joint administration, the claims of creditors in one
3 case are treated separately from claims in the other cases.
4 The purpose of joint administration is to make case
administration easier and less expensive than in
5 separate cases, without affecting the substantive rights
of creditors (including inter-debtor claims). There is
6 no merging of assets and liabilities of the debtors, and
inter-entity claims survive. Creditors of each debtor
7 continue to look to that debtor for payment of their
claims.
8
9 Gill v. Sierra Pac. Construction, Inc. (In re Parkway Calabasas,
10 Ltd.), 89 B.R. 832, 836 (Bankr. C.D. Cal. 1988), aff’d, 949 F.2d
11 1058 (9th Cir. 1991) (emphasis added).
12 On November 10, 2008, when VREA and Virtual filed the POCs
13 listing Gianulias as the debtor, and bearing only the Gianulias
14 bankruptcy case number, the Gianulias and Cameo bankruptcy cases
15 were being jointly administered, but the bankruptcy cases had not
16 yet been substantively consolidated. As a result, at that time,
17 VREA and Virtual were not absolved of their obligation under the
18 Bankruptcy Code and Rules that, if they wished to assert a claim
19 in the Cameo bankruptcy case, they must file a proof of claim in
20 that case. As explained by the bankruptcy court in this appeal,
21 “These were administratively consolidated cases and bankruptcy
22 lawyers know you have to file separate claims in each case.”
23 The bankruptcy court’s ruling is consistent with case law.
24 The First Circuit considered a comparable situation in Liakas v.
25 Creditors’ Comm. of Deja Vu, Inc., 780 F.2d 176 (1st Cir. 1986).
26 There, the bankruptcy cases of related debtors Harbor House and
27 Deja Vu, Inc. were being jointly administered, but had not been
28 substantively consolidated. 780 F.2d at 176. A creditor, Liakas,
-13-
1 filed a proof of claim that listed only Harbor House as the
2 debtor. Liakas argued that because the debt was owed by both
3 Harbor House and Deja Vu, the filing of its proof of claim in
4 Harbor House was also sufficient to establish its claim in Deja
5 Vu. The First Circuit disagreed:
6 There is no indication that the estates of Harbor House
and Deja Vu were being administered as one estate during
7 the bankruptcy proceedings. . . . The proof of claim
that Liakas filed in the Harbor House proceedings cannot
8 be construed as a claim against Deja Vu, as it did not
refer in any way to Deja Vu as a debtor.
9
10 Id. at 179. For support, the court cited to an earlier decision
11 of the Second Circuit decided under the Bankruptcy Act.
12 In re Chemo Puro Mfg. Corp., 213 F. Supp. 845 (S.D.N.Y. 1962),
13 aff'd and adopted as circuit policy sub nom. Arthur Andersen & Co.
14 v. Vincent, 313 F.2d 631 (2d Cir. 1963)(per curiam) (holding that
15 a proof of claim filed in one bankruptcy case against a
16 corporation could not be deemed to have been filed in a bankruptcy
17 case involving a subsidiary of the corporation). See also
18 Ne. Office & Commercial Properties v. Smith Valve Corp.
19 (In re Ne. Office & Commercial Properties, Inc.), 178 B.R. 91520 (Bankr. D. Mass 1995) (holding that a proof of claim filed in one
21 case has no effect as a claim filed in another case. “To be
22 effective, a claim against the debtor must appear of record in the
23 debtor's case.”).
24 VRE and Virtual have cited no authority for the proposition
25 that, in two jointly administered cases, a proof of claim filed in
26 one case should be treated as a formal proof of claim in the other
27 case. To the contrary, under the applicable provisions of the
28 Code and Rules, we conclude that the bankruptcy court did not err
-14-
1 in not treating the Virtual and VREA POCs filed in the Gianulias
2 case as formal proofs of claim in the Cameo case.
3 Instead of citing to the Code or Rules, Virtual and VREA
4 argue on equitable grounds that their claims should be allowed in
5 the Cameo case. They claim confusion was created by their
6 attorneys’ receipt of the two bar date notices and accompanying
7 POC forms and allege inequitable conduct by the Trustee.
8 At oral argument before the Panel, counsel for VREA and
9 Virtual urged us to review the declaration of Patrick J. Fields, a
10 colleague at Squire Sanders who was involved in casting ballots
11 for the Gianulias plan of reorganization and the negotiation of
12 the four stipulations to extend the time for the Trust to object
13 to claims.
14 As to the balloting on the plan, Fields declared: “The
15 ballots did not allow a creditor to specify that it had a claim
16 against one, but not the other debtor, but if it had done so, VREA
17 and Virtual would have specifically indicated it had claims
18 against both Debtors.” Fields’ Dec. at ¶ 3. We take this as an
19 admission that VREA and Virtual did not “specifically indicate[]
20 that [they] had claims against both debtors” in the balloting on
21 the Gianulias plan of reorganization.7
22
7
23 There is a continuing dispute among the parties regarding
the effect of confirmation of the plan on filing of claims.
24 Article VII-F of the plan conferred on the Trust the authority and
responsibility for objecting to the unsecured claims. The
25 deadline for objecting to claims was December 6, 2010. The First
Stipulation was executed on December 3, 2010, in advance of the
26 deadline, and each of the four Stipulations was approved by the
bankruptcy court. Therefore there was no inconsistency between
27 the plan and the extensions of time to object. If we consider the
alternative argument that there never was an objection to the
28 claim filed, and under the Code, the Rules and the plan, an
(continued...)
-15-
1 As to the four stipulations, Fields declared that he signed
2 the First Stipulation on behalf of VREA and Virtual, which
3 included the statement, “In the case VRE filed several claims
4 against both Debtors.” Fields Dec. at ¶ 10. But in reviewing the
5 proposed Second Stipulation, Fields declared “I noted to
6 Ms. Miller [Trust counsel] that the language in the draft had been
7 modified to state that VRE filed claims against Gianulias. After
8 some negotiation on that point, the draft stipulation was modified
9 to state: ‘In the case, VRE filed two claims.’” Fields Dec. at
10 ¶ 11 (emphasis added). Fields signed the Second, Third and Fourth
11 Stipulations, all of which contained the statement that VRE filed
12 two claims. Fields Dec. at ¶ 12. The declaration clearly
13 indicates that the issue of the number of claims was specifically
14 subject to a continuing negotiation between VREA and Virtual and
15 the Trust. Consequently, we find that the Fields Declaration does
16 not support VREA and Virtual’s argument that the Trust acted
17 inequitably in delaying its decision that claims were not filed in
18 the Cameo case.
19 We find the creditors’ equitable arguments unpersuasive. As
20 noted, the Code and Rules prescribe the procedure for filing
21 appropriate proofs of claim in bankruptcy cases, and that
22 procedure cannot be varied by the provisions of a debtor’s notice
23 advising of the bar date. Moreover, our review of the bar date
24 notices (which we find identical in content) allows no room for
25
26 7
(...continued)
27 unchallenged claim is deemed allowed, we have concluded for the
reasons stated in this section that there never were formal claims
28 filed in the Cameo case and thus not deemed allowed under either
the plan or the Code and Rules.
-16-
1 any confusion that creditors must file proofs of claim in both
2 bankruptcy cases to share in distributions. That one of the form
3 POCs listed only one debtor and one bankruptcy case number does
4 not change that.
5 In addition, the allegedly inequitable conduct of Trustee is
6 of no moment, since even if the Trustee wavered or delayed in
7 deciding whether to contest the status of the VREA and Virtual
8 claims in the Cameo case, all of his actions, including his
9 execution of the stipulations, occurred long after the bar date
10 for filing timely proofs of claim had expired. Equity affords no
11 remedy to VREA and Virtual under these facts.
12 II.
13 The VRE and Virtual Proofs of Claim filed in the Gianulias Case
Constituted Informal Proofs of Claim in the Cameo case.
14
15 VREA and Virtual alternatively argue that their filings of
16 the POCs in the Gianulias bankruptcy case were sufficient to
17 constitute informal proofs of claim in the Cameo bankruptcy case.
18 The bankruptcy court did not discuss this argument at all in its
19 oral decision nor in the order. However, based upon our de novo
20 review of the record, we conclude that, under the Ninth Circuit’s
21 liberal standard, the POCs submitted by VREA and Virtual in the
22 Gianulias bankruptcy case meet the requirements for allowance of
23 informal proofs of claim in the Cameo bankruptcy case.
24 The informal proof of claim doctrine has been long recognized
25 in the Ninth Circuit. Pac. Res. Credit Union v. Fish (In re
26 Fish), 456 B.R. 413, 417 (9th Cir. BAP 2011). Simply stated, "for
27 a document to constitute an informal proof of claim, it must state
28 an explicit demand showing the nature and amount of the claim
-17-
1 against the estate, and evidence an intent to hold the debtor
2 liable." 931 F.2d at 622 (quoting In re Sambo's Restaurants, Inc.,
3 754 F.2d 811, 815 (9th Cir. 1985)). This doctrine is an extension
4 of the "so-called rule of liberality in amendments to creditors'
5 proofs of claim so that the formal claim relates back to
6 previously filed informal claim." In re Holm, 931 F.2d at 622
7 (quoting In re Anderson-Walker Indus., Inc., 798 F.2d 1285, 1287
8 (9th Cir. 1986). As the Ninth Circuit has observed:
9 The reason for this "liberal" rule is elemental.
Bankruptcy courts are courts of equity, and must assure
10 "that substance will not give way to form, [and] that
technical considerations will not prevent substantial
11 justice from being done." Pepper v. Litton, 308 U.S.
295, 305, 84 L. Ed. 281, 60 S. Ct. 238 (1939); In re
12 International Horizons, Inc., 751 F.2d 1213, 1216 (11th
Cir. 1985). The "liberal" rule reflects our preference
13 for resolution on the merits, as against strict
adherence to formalities.
14
15 In re Anderson-Walker Indus., Inc., 798 F.2d at 1286.
16 Applying this historically liberal standard, a variety of
17 types of documents and pleadings submitted by creditors in
18 bankruptcy cases have been recognized as adequate to constitute an
19 informal proof of claim in a bankruptcy case. See Wright v. Holm
20 (In re Holm), 931 F.2d at 622-23 (a debtor’s disclosure
21 statement); Pizza of Haw., Inc. v. Shakeys, Inc. (In re Pizza of
22 Haw., Inc., 761 F.2d 1374, 1381-82 (9th Cir. 1985) (a creditor’s
23 complaint for relief from the automatic stay with attachments);
24 In re Sambo's Restaurants, Inc., 754 F.2d at 815-16 (a creditor’s
25 complaint removed from state court to bankruptcy court); County of
26 Napa v. Franciscan Vineyards (In re Franciscan Vineyards),
27 597 F.2d 181, 182-83 (9th Cir. 1979) (a simple letter sent to a
28 bankruptcy trustee, even though it had not been filed with the
-18-
1 bankruptcy court); Sun Basin Lumber Co. v. United States, 432 F.2d
2 48 (9th Cir. 1970) (an objection to a trustee's motion to sell
3 property); In re Fish, 456 B.R. 413 (a creditor’s motions for
4 relief from the automatic stay).
5 This Panel has summarized the elements necessary for a
6 creditor to establish an informal proof of claim in the Ninth
7 Circuit:
8 (1) presentment of a writing;
(2) within the time for the filing of claims;
9 (3) by or on behalf of the creditor;
(4) bringing to the attention of the court;
10 (5) the nature and amount of a claim asserted against
the estate.
11
12 In re Fish, 456 B.R. at 417 (quoting Dicker v. Dye (In re
13 Edelman), 237 B.R. at 150). As noted in Edelman,
14 [T]here must have been presented, within the time limit,
by or on behalf of the creditor, some written instrument
15 which brings to the attention of the court the nature
and amount of the claim. Perry v. Certificate Holders
16 of Thrift Savings, 320 F.2d 584, 590 (9th Cir. 1963).
17 In re Edelman, 237 B.R. at 153.
18 Under this case law, VREA and Virtual argue that the POCs
19 they filed in the Gianulias bankruptcy case satisfy the
20 requirements for an informal proof of claim in the Cameo case. We
21 agree.
22 POCs 38 and 39 were unquestionably writings filed by
23 creditors Virtual and VREA in the bankruptcy court on November 10,
24 2008, one day before the bar date of November 11, 2008, for claims
25 in the jointly administered cases. The case law emphasizes that
26 in determining adequacy of an alleged informal proof, the critical
27 inquiry is whether the subject documents focus attention on the
28 nature and amount of the creditor’s claim. In other words,
-19-
1 whether to allow an informal proof of claim is not determined so
2 much by the form or type of document, but instead by an
3 examination of its contents and the creditor’s conduct.
4 In re Fish, 456 B.R. at 417-18.
5 For example, in the In re Holm case, the court held that a
6 disclosure statement and plan submitted by a creditor evidenced
7 the intent of the creditor to hold the debtor liable for a debt.
8 Similarly, in In re Pizza of Haw., Inc., a request for relief from
9 the automatic stay stated that the creditor intended to join the
10 debtor as a defendant in a civil suit, and the court found that
11 was evidence of intent to hold the debtor’s estate liable.
12 In the discussion above concerning formal proofs of claim,
13 the bankruptcy court correctly noted that, because the VREA and
14 Virtual POCs listed only Gianulias and his case number, they could
15 not constitute formal proofs of claim in the Cameo bankruptcy
16 case. But in analyzing the adequacy of alleged informal proofs of
17 claim, our task is not to examine the form of the document that is
18 filed with the bankruptcy court, but to instead look to its
19 content to determine the intent of the creditor. Here, the POCs
20 submitted by VREA and Virtual were timely filed writings which
21 clearly bring to the attention of the Debtors and the bankruptcy
22 court the nature and amount of VREA and Virtual’s claims against
23 not only Gianulias, but also against Cameo. Indeed, the POCs not
24 only include the relevant information on the face of the POCs, the
25 attachments establish that the creditors’ debts are founded upon
26 the same loan documents, and most importantly, the same guaranty
27 executed by both Gianulias and Cameo. Fairly read, the POCs
28 manifest the intent of VREA and Virtual to hold not only
-20-
1 Gianulias, but also Cameo, liable under the terms of the
2 guaranties. In fact, looking to the substance of what was filed,
3 the only information lacking on the filed POCs is Cameo’s name and
4 bankruptcy case number. On this record, it is of no consequence
5 that the POCs listed only Gianulias as the debtor, and only the
6 Gianulias case number, because case law on informal proofs of
7 claim instructs us to look beyond the form of the subject document
8 to determine the intent of the creditor.
9 Applying a de novo standard of review, and consistent with
10 the Ninth Circuit command that we look to the substance and not
11 the form of documents offered as informal proofs of claim, we
12 conclude that the VREA and Virtual POCs filed in the Gianulias
13 bankruptcy case constitute valid informal proofs of claim in the
14 Cameo bankruptcy case. As a result, the bankruptcy court erred in
15 denying the creditors’ “Motion for Determination That Claims Were
16 Properly Filed.”
17 CONCLUSION
18 We REVERSE the order of the bankruptcy court.
19
20
21
22
23
24 Concurrence begins on next page.
25
26
27
28
-21-
1 KLEIN, Bankruptcy Judge, CONCURRING:
2
3 I join the majority decision and write separately to point
4 out that “joint administration” is an amorphous and imprecise
5 procedure that is intentionally flexible and that requires
6 definition by the court that orders joint administration.
7 Confusion is inevitable unless the court takes seriously its
8 obligation to be specific when ordering joint administration.
9 Here, some of the confusion that led to this situation in
10 which the appellants get paid only half of what other similarly
11 situated creditors are paid is likely attributable to imprecision
12 by the court in its order directing joint administration.
13 The Bankruptcy Code does not provide for joint
14 administration. Rather, joint administration is a creature of
15 Federal Rule of Bankruptcy Procedure 1015(b), which permits the
16 court to “order a joint administration of the estates” of certain
17 related debtors but says next to nothing about what is meant by
18 joint administration. Fed. R. Bankr. P. 1015(b).
19 The Rule 1015(b) procedure is intentionally flexible in the
20 name of reducing expense. Thus, the advisory committee note
21 explains:
22 Joint administration as distinguished from consolidation
may include combining the estates by using a single docket
23 for the matters occurring in the administration, including
the listing of filed claims, the combining of notices to
24 creditors of the different estates, and the joint handling of
other purely administrative matters that may aid in
25 expediting the cases and rendering the process less costly.
26 Fed. R. Bankr. P. 1015(b), Advisory Committee Note (1983).
27 Rule 1015(b) provides that, “[p]rior to entering an order the
28 court shall give consideration to protecting creditors of
-1-
1 different estates against potential conflicts of interest.” Fed.
2 R. Bankr. P. 1015(b) (second sentence). This, in view of the
3 flexibility described in the advisory committee note, operates as
4 a direction to the court to be careful and precise about what is
5 being ordered.
6 In addition, Rule 2009 permits, but does not require, a
7 single trustee in jointly administered cases unless creditors or
8 equity security holders would be prejudiced by conflicts of
9 interest of a common trustee. Fed. R. Bankr. P. 2009(d).
10 The only mandatory requirement for a joint administration is
11 that there be separate accounts. Rule 2009(e) is the sole
12 specific direction for jointly administered cases:
13 (e) Separate Accounts. The trustee or trustees of
estates being jointly administered shall keep separate
14 accounts of the property and distribution of each estate.
15 Fed. R. Bankr. P. 2009(e).
16 Everything else about the details of a particular joint
17 administration is left to the discretion of the court.
18 If the court had been meticulous about clarifying the details
19 of this particular joint administration, then the confusion
20 leading to this appeal might have been obviated.
21 Accordingly, our application of the “informal proof of claim”
22 doctrine is an appropriate corrective measure.
23
24
25
26
27
28
-2-