HORIZON NATURAL RESOURCES
COMPANY, et al.
DEBTORS CASE NO. 02-14261
The plaintiffs (the "Turner Heirs") in Adversary Proceeding No. 02-7416 (the "Adversary Proceeding") are before the court on the Plaintiffs' Motion to Submit Documents of Record as a Substitute for a Proof of Claim, or in the Alternative, for Leave to File a Late Proof of Claim that they filed in these cases on September 4, 2003. Having considered the motion and the briefs and arguments of counsel, the court finds and concludes that the motion should be granted.
Factual and Procedural Background
In the Adversary Proceeding, the Turner Heirs seek a judgment against two of the debtors and another entity for royalties allegedly due under a lease of certain real property for mining purposes. The litigation was commenced in state court prior to the bankruptcy filings, and was removed to this court in November 2002. That same month the Turner Heirs filed in the Adversary Proceeding copies of the state court pleadings, including the lease agreement, and the plaintiffs' motion for summary judgment and supporting affidavit and memorandum.
On March 19, 2003 the court set June 30, 2003 as the deadline for filing proofs of claim in these cases and directed the debtors' claim processing and noticing agent to give notice of the deadline to all known creditors by April 11, 2003. Only one of the Turner Heirs received that notice, although the Turner Heirs' attorney had notice of the bar date. None of the Turner Heirs filed a formal proof of claim.
Section 501(a) of the Bankruptcy Code permits creditors to file proofs of claim and Section 502(a) provides that a claim asserted by a filed proof of claim is allowed unless an objection is filed and sustained. Rule 3002(a) of the Federal Rules of Bankruptcy Procedure makes clear that creditors must file proofs of claim for their claims to be allowed. Subsection (b)(9) of Code Section 502 requires the disallowance of late claims (with exceptions not applicable here). Chapter 11 plans usually provide that only allowed claims are entitled to a distribution. Rule 3003(c)(3) of the Federal Rules of Bankruptcy Procedure requires the court to set a deadline for filing proofs of claim in Chapter 11 cases.
The Turner Heirs assert, first, that the papers filed in the state court litigation and the Adversary Proceeding are tantamount to a formal proof of claim, so the court should deem them to have timely filed a proof of claim. Bankruptcy Rule 3001(a) provides that "[a] proof of claim is a written statement setting forth a creditor's claim. A proof of claim shall conform substantially to the appropriate Official Form." The Turner Heirs' pleadings do not "conform substantially to the appropriate Official Form" and do not, therefore, constitute a proof of claim within the meaning of Rule 3002(a). (1) While pre-bar date filings not conforming to the official form may constitute an "informal" proof of claim that may be "amended after the bar date so that it is in conformity with the requirements of Fed. R. Bankr.P. 3001(a)," Barlow v. M.J. Waterman & Assocs. (In re M.J. Waterman & Assocs.), 227 F.3d 604, 608 (6th Cir. 2000), the filings themselves do not comply with the rule unless they "conform substantially to the appropriate official form." There is no principle, independent of the "informal proof of claim" doctrine, that pleadings not in the official form may be treated as a formal proof of claim. (2)
Turning to the "informal proof of claim" doctrine, the Sixth Circuit has held that "[c]reditors who have failed to adhere to the strict formalities of the Bankruptcy Code but who have taken some measures to protect their interests in the bankruptcy estate may be able to preserve those interests by showing that they have complied with the spirit of the rules." Id. at 608-09. In this circuit, there are four requirements before an informal proof of claim will be given effect:
The standards used by courts varies [sic] throughout the country, but this jurisdiction has settled on a four element test articulated in In re Vaughn Chevrolet, 160 B.R. 316 (Bankr.E.D.Tenn.1993):
1. The proof of claim must be in writing;
In re Vaughn, 160 B.R. at 319 (citing In re McCoy Management Servs., Inc., 44 B.R. 215, 217 (Bankr.W.D.Ky.1984)). The Vaughn court went on to state that if a filing meets the above considerations, the court may examine a fifth factor -- whether it would be equitable to allow the amendment of the informal proof. Id. at n. 2. We note at the outset that the first four factors under Vaughn are indicative only of the proposed claim's validity, while the fifth factor deals with the question of whether the amendment should be allowed once the informal proof of claim is determined to be valid.
Id. at 609. The Turner Heirs' pleadings satisfy the four requirements for treatment of their filings as an informal proof of claim. Their motion does not ask for leave to amend the proof of claim, so the "equity" factor need not be considered. However, the court will direct the Turner Heirs effectively to amend the informal proof of claim by filing a formal proof of claim so as to clarify the record.
For the foregoing reasons, the court will enter a separate order deeming the Turner Heir's filings in the Adversary Proceeding to constitute an informal proof of claim and directing them to amend the proof of claim to comply with the requirements of Rule 3001(a) of the Federal Rules of Bankruptcy Procedure. (3)
Richard A. Getty, Esq.
Jason L. Hargadon, Esq.
Paul E. Sullivan, Esq.
Randy D. Shaw, Esq.
1. In addition, the pleadings were not sent to the debtors' claims processing agent as instructed in the bar date notice and were not even filed in the debtors' bankruptcy cases, but were filed only in the Adversary Proceeding.
2. The Turner Heirs cite In re Bargdill, 238 B.R. 711, 717 (Bankr. N.D. Ohio 1999), for its statement that "[n]o particular form . . . is required for a proof of claim." However, the court did point out the requirement that the proof of claim must conform substantially to the official form and held that the creditor in that case did not timely file "any statement . . . even closely comporting with the requirements of Rule 3001." In re Key, 64 B.R. 786, 789 (Bankr. M.D. Tenn. 1986), does contain language seeming to support the Turner Heirs' position, but that case actually applied the "informal proof of claim" doctrine.
3. Although the court need not address the Turner Heirs' alternative request for leave to file a late proof of claim, the court would, if necessary, be inclined to grant the request in light of procedural due process problems in holding the Turner Heirs to a bar date of which only one of them received notice as required by Bankruptcy Rule 2002(a)(7), see City of N.Y. v. New York, N.H. & H.R. Co., 344 U.S. 293, 297 (1953); Bratton v. Yoder Co. (In re Yoder Co.), 758 F.2d 1114, 1121 (6th Cir. 1985), and considering the lack of prejudice to the debtors, the shortness of the delay, its lack of a potential impact on the debtors' reorganization (in that no plan has yet been formulated), and the Turner Heirs' lack of culpability, see Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'Ship, 507 U.S. 380 (1993); INVST Fin. Group, Inc. v. Chem-Nuclear Sys., Inc., 815 F.2d 391, 399 (6th Cir. 1987).