FOR THE NORTHERN DISTRICT OF CALIFORNIA
DOROTHY PAMLYN KELLY, No. 1-88-00271
Debtor. Chapter 12
Memorandum of Decision
Prior to the debtor's Chapter 12 filing, creditor Sharon Kennedy obtained a state court
judgment against the debtor and a nondebtor codefendant in the amount of approxomately
$120,000.00. The debtor filed her petition on February 17, 1988.
On February 24, 1988, the clerk gave notice that in order for a creditor to share in
distribution it must file a proof of claim by June 14, 1988. The notice was duly served on
Kennedy, and her counsel admits that he received it from her in a timely manner. Kennedy did
not file a proof of claim until October 18, 1988, some four months after the bar date and the day
after the debtor's plan was confirmed. The successor to Kennedy's claim rights, Affiliated
Development Company ("ADC"), now seeks to share in distributions notwithstanding the
lateness of its claim.
ADC makes two arguments in support of its position. First, it argues that the time to file
claims should be extended pursuant to Bankruptcy Rule 9006(b)(1) due to "excusable neglect"
on the part of Kennedy's counsel. Second, it argues that letters written by Kennedy's counsel to
the debtor's counsel on March 10 and March 14, 1988, constituted amendable "informal" proofs
The Court can deal summarily with the "excusable neglect" argument, as there has been no
showing of any excuse whatsoever for the neglect to file a claim. The declaration of Kennedy's
counsel only recites that he was under the mistaken impression that he had filed a proof of claim,
without stating any reasons why he had such an impression. For neglect to be excusable, it must
have been caused by some agency or sequence of events which might have led any reasonably
prudent person to make the same mistake. Here, counsel attributes his failure to file a timely
claim to nothing more than a mistaken belief without any explanation as to how this belief came
about. There is nothing upon which the Court can base a finding that such neglect was
Under the fairly liberal requirements of this circuit, it is clear that the letters sent to debtor's
counsel had sufficient content to be deemed informal proofs of claim. In re Franciscan
(9th Cir.1979) 597 F.2d 181, 182. The crucial issue, however, is whether the
letters can be considered proofs of claim if sent to the debtor's counsel in a Chapter 12 case.
The procedural basis for allowing an informal proof of claim is Bankruptcy Rule 5005(b),
which allows the court to deem as properly filed papers mistakenly sent to certain specified court
officers, including the trustee and trustee's counsel. To constitute an amendable proof of claim,
the writing must have been sent to one of these officials. In re Anderson-Walker Industries, Inc.
(9th Cir.1986) 798 F.2d 1285, 1288 (construing old Rule 509(c), the predicessor to Rule
5005(b)). The issue here is whether the debtor's attorney was such an official.
A debtor's attorney in a Chapter 7 case is clearly not a court official for purposes of Rule
5005(b); in cases under that chapter, the debtor's knowledge of the claim is irrelevant. In re
Smith Atlantic Financial Network
(11th Cir.1985) 767 F.2d 814, 819. Likewise, it has been held
that debtor's counsel in a Chapter 13 case is not a person encompassed by Rule 5005(b). In re
(Bkrtcy.E.D.Pa.1987) 70 B.R. 472. On the other hand, a debtor in possession in Chapter
11 has the same powers and duties as a trustee pursuant to section 1107(a) of the Bankruptcy
Code, and is therefore deemed to be a court official for Rule 5005(b) purposes. In re Sambo's
(9th Cir.1985) 754 F.2d 811, 815. The Court must therefore decide if a
Chapter 12 debtor is more like a Chapter 11 debtor than a Chapter 7 or Chapter 13 debtor.
The Court concludes that a Chapter 12 debtor, like a Chapter 11 debtor, is to be considered
a "trustee" for purposes of Rule 5005(b), and hence a letter to debtor's counsel may be an
amendable proof of claim. While there is a separate trustee appointed in Chapter 12 cases, the
debtor is still called a debtor in possession, and section 1203 of the Code gives the Chapter 12
debtor the same powers as a debtor in possession in Chapter 11.
Having determined that the letters sent to debtor's counsel may be amendable proofs of claim
does not mean that they are automatically deemed as such; the rule is permissive, not mandatory.
If there has been significant prejudice to the debtor or the other creditors in reliance on the
formal claims, such as confirmation of a plan which would become unfeasible or unlawful if the
informal claim is allowed, the court may still exercise its discretion to disallow the claim. In re
, supra, at 816.
The Court will hold an evidentiary hearing on the issue of prejudice on June 16, 1989, at
10:00 A.M. All direct testimony at said hearing shall be in the form of declarations filed and
served at least seven days before the hearing. Declarants shall be available in court for
cross-examination unless such appearance is waived by the opposing party. If the Court finds
no significant prejudice, it will allow the claim; if there has been significant prejudice, the claim
will be disallowed.
Dated: May 15, 1989 _______________________