United States Court of Appeals
For the First Circuit
No. 04-1286
IN RE CURTIS M. PERRY
Debtor,
CURTIS M. PERRY,
Debtor, Appellant,
v.
FIRST CITIZENS FEDERAL CREDIT UNION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Torruella, Circuit Judge,
Campbell, Senior Circuit Judge,
and Lipez, Circuit Judge.
Gary W. Cruickshank for appellant.
Cara J. Daniels with whom Brian M. Hurley and Rackemann,
Sawyer & Brewster were on brief for appellee.
December 1, 2004
CAMPBELL, Senior Circuit Judge. Curtis M. Perry
("Perry") appeals from the district court's affirmance of the order
of the bankruptcy court overruling his objection to the proof of
claim of First Citizens Federal Credit Union ("First Citizens").
We affirm.
I.
The undisputed facts are set forth at length in the
district court's opinion, Perry v. First Citizens Fed. Credit
Union, 304 B.R. 14, 15-17 (D. Mass. 2004). We summarize them
briefly here.
In April 1990, First Citizens made a mortgage loan to
Perry. Perry defaulted on the loan, and First Citizens conducted
a foreclosure sale in May 1996, which resulted in a deficiency of
$62,393.05. First Citizens obtained a judgment and an execution
against Perry in state court for that amount.
During the course of its efforts to collect on the
judgment, First Citizens was notified that Perry had filed a
Chapter 11 petition, and thereafter desisted from its collection
efforts. Unknown to First Citizens, Perry's Chapter 11 proceeding
was subsequently converted to a Chapter 7 case. First Citizens
received no notice of this conversion as Perry had listed an
incorrect bank name, First Federal Savings Bank (instead of First
Citizens), and an incorrect address, 278 Union Street, New Bedford,
Massachusetts (instead of 271 Union Street), on his list of
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creditors. It was not until April 3, 2001 that First Citizens
learned that Perry's case had been converted to Chapter 7. On that
date, First Citizens received a subpoena from the Chapter 7
Trustee's counsel in connection with an adversary proceeding the
Trustee had brought against Perry and against his wife, Isabel,
individually and as trustee of various realty trusts, charging them
with having made certain fraudulent conveyances. By this time,
nearly two years had passed since the deadline for filing proofs of
claim. Nevertheless, later that month, First Citizens filed a
proof of claim relative to its judgment against Perry.
On November 7, 2002, the Trustee and the Perrys entered
into a settlement agreement that resolved the Trustee's adversary
proceeding against Perry and his wife. The settlement agreement
authorized Perry to file an objection to First Citizens' tardily
filed claim:
The Trustee has authorized [Perry], for this claim only
. . . , to file an objection to the Late Claim. . . . If
the Late Claim is allowed by this Court, Isabel agrees to
pay same within thirty (30) days of the allowance of the
final Order of this Court approving the Settlement
Agreement or allowing the Late Claim, which [sic] is
later.
On November 8, 2002, Perry filed an objection to First Citizens'
proof of claim on the grounds that it was tardily filed and the
applicable state statute of limitations had expired. On January
15, 2003, the bankruptcy court issued an order overruling Perry's
objection. Perry appealed to the United States District Court of
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Massachusetts, which affirmed in a thorough and well-considered
opinion following a rationale slightly different, in one respect at
least, from that of the bankruptcy court. See Perry, 304 B.R. at
18-24.
II.
We review for abuse of discretion the bankruptcy court's
decision to allow First Citizens' claim over Perry's objection.
Neal Mitchell Assocs. v. Braunstein (In re Lambeth Corp.), 227 B.R.
1, 6 (B.A.P. 1st Cir. 1998).
Perry makes two major arguments: (1) the bankruptcy
court abused its discretion in allowing First Citizens' claim
because First Citizens should be deemed to have had actual
knowledge of the Chapter 7 case as a result of its knowledge of the
Chapter 11 filing; and (2) Section 726 of the Bankruptcy Code,
which authorizes payment of tardily filed claims, does not apply
because the source of funds for payment of First Citizens' claim
against Perry, if allowed, would be Perry's wife Isabel, and not
his estate. We agree with the district court that neither argument
has merit, and we affirm for essentially the same reasons set forth
in the district court's decision.1 "We have long proclaimed that
1
Besides those mentioned above, Perry makes two additional
arguments. First, he contends that he will be prejudiced by the
bankruptcy court's allowance of First Citizens' claim. For the
reasons set forth in the district court's decision, we find no
error. Second, Perry asserts that the bankruptcy court erred in
finding that he failed to present sufficient evidence that the
execution obtained by First Citizens did not pertain to the
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when a lower court produces a comprehensive, well-reasoned
decision, an appellate court should refrain from writing at length
to no other end than to hear its own words resonate." Velez v.
Awning Windows, Inc., 375 F.3d 35, 42 (1st Cir. 2004) (quoting
Lawton v. State Mut. Life Assurance Co. of Am., 101 F.3d 218, 220
(1st Cir. 1996)); see also Ayala v. Union de Tronquistas de P.R.,
Local 901, 74 F.3d 344, 345 (1st Cir. 1996); Holders Capital Corp.
v. Cal. Union Ins. Co. (In re San Juan Dupont Plaza Hotel Fire
Litig.), 989 F.2d 36, 38 (1st Cir. 1993). We add only the
following additional comments.
First, we consider whether we have jurisdiction over this
appeal. While neither party questioned our jurisdiction, we asked
for briefing of the issue, noting a possible question as to whether
the bankruptcy court's order was a final, appealable order as
required by 28 U.S.C. § 158(d). See In re Recticel Foam Corp., 859
F.2d 1000, 1002 (1st Cir. 1988) (stating, "a court has an
mortgage deficiency resulting from the May 1996 foreclosure sale.
First Citizens presented an affidavit from one of its employees
attesting that Perry defaulted on the mortgage loan and that First
Citizens thereafter conducted a foreclosure sale, which resulted in
a deficiency in the amount of $62,393.05. Attached to that
affidavit was a copy of the execution obtained by First Citizens
against Perry in that amount. Perry submitted no evidence to rebut
the affidavit, but he argues that First Citizens did not establish
that the affidavit was prima facie valid as the affidavit did not
specifically indicate that the execution submitted in support of
First Citizens' claim related to the mortgage deficiency. Perry
concedes, however, that the amount on the affidavit was the same as
the amount on the execution. We find the affidavit was prima facie
valid and that Perry failed to rebut the proof of claim.
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obligation to inquire sua sponte into its subject matter
jurisdiction"). To be final, a bankruptcy order need not resolve
all of the issues in the proceeding, but it must finally dispose of
all the issues pertaining to a discrete dispute within the larger
proceeding. Shimer v. Fugazy (In re Fugazy Express, Inc.), 982
F.2d 769, 776 (2d Cir. 1992); see also In re Saco Local Dev. Corp.,
711 F.2d 441, 445-46 (1st Cir. 1983).2 Courts have ruled that an
order allowing the late filing of a proof of claim is not a final,
appealable order in cases where the order failed to determine if
the claim would be allowed or to resolve the amount that would be
paid. See, e.g., New Life Health Ctr. Co. v. IRS (In re New Life
Health Ctr. Co.), 102 F.3d 428 (9th Cir. 1996); Charter Co. v.
Petroleos Mexicanos (In re Charter Co.), 76 B.R. 191, 194 (M.D.
Fla. 1987); X-Cel, Inc. v. Int'l Ins. Co. (In re X-Cel, Inc.), 68
B.R. 131, 133 (N.D. Ill. 1986).
The above cases are distinguishable, however, because the
instant bankruptcy court order left open no unresolved dispute
pertaining to First Citizens' claim. See Prestige Ltd. P'ship-
Concord v. E. Bay Car Wash Partners (In re Prestige Ltd. P'ship-
Concord), 234 F.3d 1108, 1113-14 (9th Cir. 2000) (district court's
order, which disposed of all issues in the bankruptcy case by
2
In In re Saco Local Dev. Corp., this court was interpreting
28 U.S.C. § 1293(b), the predecessor statute to 28 U.S.C. § 158(d).
However, courts have accorded the two statutes the same meaning.
See Giles World Mktg., Inc. v. Boekamp Mfg., Inc., 787 F.2d 746,
748 n.2 (1st Cir. 1986).
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overruling debtor's objection to lender's claim, was final and
appealable, even though court declined to rule on issue of amount
of lender's claim); Greyhound Lines, Inc. v. Rogers (In re Eagle
Bus Mfg., Inc.), 62 F.3d 730, 734 (5th Cir. 1995) (concluding that
bankruptcy court's order granting motion to file untimely proof of
claim was final and appealable where debtor's reorganization plan
had been confirmed and, under that plan, all proofs of claim were
to go through alternative dispute resolution program); cf. In re
Saco Local Dev. Corp., 711 F.2d at 445-46 (holding that a "final
judgment, order, or decree" entered in a bankruptcy case "includes
an order that conclusively determines a separable dispute over a
creditor's claim or priority"). Here, the bankruptcy court's order
allowing First Citizens' claim has resolved all of the disputed
issues pertaining to First Citizens' rights relative to Perry; the
amount of the claimed deficiency is not in issue; and the
settlement agreement provides that the late proof of claim, if
allowed, will be paid by Isabel. We are satisfied that the
bankruptcy court's order finally disposes of all the material
issues pertaining to this discrete dispute and is, therefore, final
and appealable.
Second, we consider whether the district court properly
rejected Perry's argument that Section 726 of the Bankruptcy Code
is inapplicable to the timeliness issue because the source of the
funds is not "property of the estate."
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Perry's argument before the district court was that
"because Section 726 is entitled 'Distribution of property of the
estate,' Isabel's agreement to pay the claim prohibits the
application of Section 726." Perry, 304 B.R. at 20 (emphasis
added). On appeal, Perry notes that not only the title, but the
opening text of clause (a) of Section 726 indicates that the focus
of the statute is limited to distribution of property of the
estate.3 Since the actual source of funds for payment of First
3
Section 726(a) of the Bankruptcy Code, in pertinent part,
provides:
(a) . . . [P]roperty of the estate shall be distributed--
. . . .
(2) second, in payment of any allowed unsecured claim,
other than a claim of a kind specified in paragraph
(1), (3), or (4) of this subsection, proof of which
is--
. . . .
(C) tardily filed under section 501(a) of this
title, if--
(i) the creditor that holds such claim did not
have notice or actual knowledge of the case in
time for timely filing of a proof of such claim
under section 501(a) of this title; and
(ii) proof of such claim is filed in time to
permit payment of such claim;
(3) third, in payment of any allowed unsecured claim
proof of which is tardily filed under section 501(a)
of this title, other than a claim of the kind
specified in paragraph (2)(C) of this
subsection . . . .
11 U.S.C. § 726(a). Section 501(a) of the Bankruptcy Code,
referenced in the above Section 726(a), provides pertinently, "[a]
creditor . . . may file a proof of claim." 11 U.S.C. § 501(a).
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Citizens' proof of claim would be Isabel, and not "property of the
estate," Perry argues that the provisions in paragraphs (1), (2),
and (3) of Section 726(a) relative to untimely claims are
inapplicable here. Perry further argues that the district court
ignored the realities of the case by saying that payment of First
Citizens' late claim would, in any case, have come from the estate
had there been no settlement. According to Perry, Isabel agreed to
pay significant settlement funds for the estate only because the
estate lacked sufficient assets to pay creditors in full.
But regardless of the estate's ability to have paid the
claim from its own assets, we believe the bankruptcy court had
authority to allow the claim in the present circumstances. The
settlement agreement expressly permitted Perry to object to First
Citizens' late claim, and then provided that Isabel, Perry's wife,
would pay that claim if the court allowed it. This provision for
payment would make no sense if the claim was, as a practical
matter, unallowable. The bankruptcy court thereupon considered the
objection, rejected it, and allowed the claim. The claim itself
was, on its face, a legally proper and valid claim of the kind
contemplated by Section 501(a) of the Bankruptcy Code, subject only
Section 502(b)(9) provides that the court, after notice and a
hearing, shall determine the amount of an objected-to claim filed
under Section 501 and shall allow such claim except to the extent
that "proof of such claim is not timely filed, except to the extent
tardily filed as permitted under paragraph (1), (2), or (3) of
section 726(a) . . . ." 11 U.S.C. § 502(b)(9).
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to the issue of its late filing. The district court ruled that the
untimeliness issue was effectively resolved in First Citizens'
favor by Sections 502(b)(9) and 726(a) of the Bankruptcy Code. See
Perry, 304 B.R. at 21. By reference to paragraph (2)(C) of Section
726(a), Section 502(b)(9) authorizes a court to allow a claim in
payment of any tardily filed unsecured claim if the creditor did
not have notice or actual knowledge of the case in time for timely
filing of a proof of claim. See 11 U.S.C. §§ 502(b)(9),
726(a)(2)(C); see also Perry, 304 B.R. at 21. At a lower level of
priority, the court is also authorized to allow payment to tardy
creditors with notice. See 11 U.S.C. §§ 502(b)(9), 726(a)(3).
While Sections 726(a)(2)(C) and (a)(3) do not guarantee payment of
tardily filed claims, courts are authorized to allow payment of
such claims. See, e.g., In re Bargdill, 238 B.R. 711, 719-20
(Bankr. N.D. Ohio 1999) (late proof of claim of creditor with
notice and actual knowledge of the case in time to timely file a
proof of claim would be allowed but subordinated to claims of other
unsecured creditors); In re Mid-Miami Diagnostics, L.L.P., 195 B.R.
20, 22-23 (Bankr. S.D.N.Y. 1996) (same).
We agree with the district court that Isabel's express
agreement to pay the claim for the estate dispels any need to
discuss the issue of priority. See Perry, 304 B.R. at 21. We
think it also dispels any question, if such there be, of the effect
of the alleged inadequacy of the estate funds to pay First
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Citizens' claim. It would make little sense to construe Section
726 as allowing payment of a late-filed claim from estate funds,
but as disallowing payment of such a claim pursuant to the terms of
an express settlement agreement between the debtor and his Trustee
that makes alternative provision for payment of the late-filed
claim against the estate. Especially is this so where First
Citizens' tardiness was caused by Perry's error in providing the
wrong name and address for First Citizens on the list of
creditors.4
There is nothing in the settlement agreement between the
Trustee and the Perrys to suggest that Isabel's agreement to pay
First Citizens' claim, if allowed, was conditioned on the
availability of the estate assets. The terminology of the
settlement agreement indicates that Isabel anticipated that the
validity of First Citizens' late claim would first be resolved by
the court and that, if the claim was allowed, she would pay it.
4
By way of further argument, counsel for First Citizens
pointed out to us during oral argument that Section 502(b)(9)
permits allowance of tardily-filed claims "as permitted under
paragraph (1), (2), or (3) of section 726(a) of this title" and
that paragraphs (1), (2), and (3) do not, by themselves, mention
distribution of estate property, a concept spelled out only
elsewhere in the statute. This being so, First Citizens suggests
that the untimeliness exception need not be limited to estate
distributions. We need not decide this argument. Even assuming
the timeliness exceptions are addressed to estate distributions,
Isabel's negotiated arrangement was in lieu of payment from the
estate of a valid claim against the estate. As a matter of common
sense, the same timeliness exceptions, where otherwise applicable,
apply.
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This is inconsistent, as the district court noted, with any notion
that the fact the claim would be paid by her, and not with estate
proceeds, would be used as an argument against the validity of the
claim itself. As the district court noted, "[s]imply switching the
means of payment from Perry's estate to Isabel, individually,
should not result in the disallowance of a valid claim." Perry,
304 B.R. at 22.
For the reasons elucidated above and in the district
court's opinion, we affirm.
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