Providing notice to creditors of actions that could affect their interests is one of a debtor’s most important responsibilities.  Absent proper notice, relief requested by a debtor that may be warranted could nonetheless be denied.  Indeed, the Federal Rules of Bankruptcy Procedure set out pages and pages of rules regarding the time periods, form, and content of notices that a debtor, among others, must follow.  As the United States Bankruptcy Court for the District of Colorado recently reminded us in the chapter 13 case of Albert and Anita Quintana, abiding by these notice requirements pays off.  Despite the Quintana’s creditor’s efforts to convince the bankruptcy court otherwise, the bankruptcy court refused to find that notice was improper where the debtors simply followed the rules. 

Background

On November 28, 2014, the debtors filed an objection to a creditor’s proof of claim, disputing the amount of arrears and fees sought.  The debtors served the objection on the creditor at the address listed under the section entitled “name and address where notices should be sent” on the proof of claim filed by the creditor.  On January 28, 2015, the debtors filed a notice of their objection with the court and provided a response deadline of February 27, 2015.  The notice was mailed to both the address where the objection was sent and to the address listed in the proof of claim in the section entitled “name and address where payment should be sent.”  The response deadline passed without a response from the creditor, and, on June 2, 2015, the court entered an order granting the debtors’ objection and striking the arrears claimed on the creditor’s proof of claim.

After the court granted the debtors’ objection to the creditor’s proof of claim, the creditor sought to vacate the order pursuant to Fed. R. Civ. P. 60(b), which permits the court to relieve a party from an order or judgment based on certain grounds.  According to the creditor, because the debtors did not serve the objection on an officer, managing agent or general agent, or any other agent, as required by Fed. R. Bank. P. 9014 and 7004(b)(3), service of the objection was deficient and the creditor had been deprived of an opportunity to file a timely response.  The debtors contended that the objection was properly served because they mailed both the objection and the notice to the addresses listed by the creditor in its proof of claim.

Court’s Analysis of the Request to Vacate

As an initial matter, the bankruptcy court ruled that the creditor incorrectly sought relief under Rule 60(b) and that it should have instead sought relief under section 502(j) of the Bankruptcy Code.  That section establishes the process for reconsideration with respect to the allowance or disallowance of claims:  “A claim that has been allowed or disallowed may be reconsidered for cause.  A reconsidered claim may be allowed or disallowed according to the equities of the case.”

In interpreting the standard set forth in section 502(j), Judge Romero considered the analysis of his fellow judge in In re Disney, where the court explained that “Congress chose not to limit the circumstances under which a court may reconsider a claim, but used the broad ‘for cause’ language that requires the bankruptcy court to examine the circumstances on a case by case basis to determine if cause exists.” There, the court declined to adopt an interpretation of section 502(j) that would, according to the court, limit courts’ actions only to reversing their decisions under a Rule 60(b) framework for determining “cause” under section 502(j).  In agreeing with the Disney court’s analysis, Judge Romero ruled that a flexible standard should apply when a court reconsiders a claim.  Therefore, the court reviewed the creditor’s motion to vacate under section 502(j) and weighed the equities of the case.

Noting that the matter was one of first impression in the district, the bankruptcy court turned to the issue of whether service on the creditor at the precise address designated on its proof of claim constituted adequate notice of the objection despite the notice failing to specify an officer or agent.  To address the issue, the court looked to Bankruptcy Rule 3001, which details the form to be used when filing a proof of claim, and to Bankruptcy Rule 2002(g)(1)(A), which states that “a proof of claim filed by a creditor . . . that designates a mailing address constitutes a filed request to mail notices to that address . . . .”  Accordingly, the court found that the creditor had consented to service at the address provided in its proof of claim and knowingly chose not to designate an officer or agent.  Further, the court ruled that the equities of the case did not support the relief requested, explaining that the creditor could not reasonably have expected to file a proof of claim with a specific address for receipt of notices, which lacked reference to any particular officer, agent, or other representative, and then receive notices other than at that address.  For these reasons, the court refused to vacate the order granting the debtors’ objection to the creditor’s proof of claim.

Conclusion

This decision should serve as a reminder to practitioners, debtors, and creditors alike to pay close attention to not only the rules governing notice, but also to the notice address provided to the debtor.  When providing such address, a creditor should be vigilant in checking its mail or risk losing its right to object to a proposed course of action that may negatively affect its rights.  Unfortunately, the creditor in Quintanalearned this lesson the hard way.