In re Valentine

296 B.R. 384, 2001 Bankr. LEXIS 1963, 2001 WL 34126363
CourtUnited States Bankruptcy Court, E.D. Virginia
DecidedJuly 31, 2001
DocketNo. 01-60320
StatusPublished

This text of 296 B.R. 384 (In re Valentine) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Valentine, 296 B.R. 384, 2001 Bankr. LEXIS 1963, 2001 WL 34126363 (Va. 2001).

Opinion

MEMORANDUM OPINION

DOUGLAS O. TICE, Jr., Chief Judge.

Hearing was held July 25, 2001, on a motion by the estate of Daniel B. Delaney for resolution of a disputed § 702 trustee election and on the Delaney estate’s objection to the U.S. Trustee’s report of disputed election. At conclusion of the hearing, the matter was taken under advisement. For the reasons stated herein, the Delaney estate’s objection to the report of disputed election will be overruled. The court holds that the Delaney estate’s claim is disputed for purposes of § 702(a)(1), and it was not qualified to request the election of a trustee under § 702(b).

Procedural History and Positions of the Parties.

On May 4, 2001, the U.S. Trustee filed a report of disputed election. The report details the history of this bankruptcy case and the circumstances surrounding the election. The trustee believes that the Delaney estate’s election of Marc Albert, interim trustee, is subject to a bona fide dispute and pending a resolution by the court, Albert continues in office.

[385]*385On May 15, 2001, the Delaney estate filed an objection to the trustee’s report and a motion for resolution of a disputed § 702 trustee election.1 The Delaney estate’s motion goes into great detail about the probate issues and resulting monetary judgment giving rise to its claim against debtor. It argues that the claim is “not disputed in the classic sense of the word” and that the claim is not adverse to the debtor’s estate because the claim was tested in probate court and should be given full faith and credit. Delaney Objection, p. 10. Moreover, the Delaney estate asserts that its claim is not materially adverse to other unsecured creditors because the only point at issue is the claim’s amount. Finally, the Delaney estate asserts its belief that debtor’s appeal of the probate court judgment has no merit and that its interest in dismissing the appeal does not put it in conflict with other unsecured creditors.

On June 27, 2001, debtor filed a motion in opposition to the Delaney estate’s objection. Debtor asserts three arguments as to why the interim trustee should remain in the case. First, debtor argues that the Delaney estate’s motion should be stricken “because it is fatally tainted with defamatory and false statements of fact.”2 Debt- or’s Response, at 2. Neict, debtor asserts that because there was never a trial on the merits in the probate court, the principles of res judicata and collateral estoppel do not apply and the judgment is not entitled to full faith and credit. Finally, debtor asserts that the Delaney estate failed to provide a sound legal or factual justification to challenge the trustee’s report.

The U.S. Trustee did not file a response to these motions, and he took a neutral position at the hearing held July 25, 2001.

Findings of Fact.

1. The Election Dispute.

Debtor filed for relief under chapter 7 on February 27, 2001. On February 28, 2001, Sherman B. Lubman was appointed interim chapter 7 trustee.

Prior to debtor’s § 341 meeting of creditors, counsel for the Delaney estate contacted the U.S. Trustee and requested an election of a permanent chapter 7 trustee pursuant to § 702. On April 4, 2001, the interim chapter 7 trustee initiated debtor’s § 341 meeting of creditors and the U.S. Trustee attempted to hold the election. At that time, counsel for the Delaney estate informed the parties that he was not prepared for the election because the party he intended to nominate backed out at the last minute. The election was cancelled and the interim trustee conducted the § 341 meeting.

Debtor’s § 341 meeting was continued to May 2, 2001. Counsel for the Delaney estate informed the parties that the election should be held on that date.

On May 2, 2001, the U.S. Trustee conducted the election. Those present at the election included: debtor, debtor’s counsel, counsel for the Delaney estate and three creditors.

Debtor’s counsel objected to the election because debtor disputes the Delaney estate’s claim. The U.S. Trustee proceeded [386]*386with the election and stated that he would submit a report so that the court could resolve the matter.

Counsel for the Delaney estate nominated Marc Albert. A creditor nominated the interim trustee. It was decided that it was not necessary to vote on the interim trustee because he would become permanent if the vote on Albert’s nomination failed. Counsel for the Delaney estate voted the unsecured portion of its claim in favor of Albert.

The U.S. Trustee filed his report of disputed election and asked the court to resolve the issue of whether the Delaney estate is entitled to vote due to the possible disputed nature of its claim.

2. The Delaney Estate’s Proof of Claim.

The Delaney estate filed a proof of claim in this case based on a judgment it received from the D.C. Superior Court, probate division, for approximately $514,000.00 plus interest. Debtor has appealed the probate court’s ruling.

Debtor’s schedule D, which was filed on March 13, 2001, prior to the § 341 meeting, lists the Delaney estate as a secured creditor and indicates in the appropriate place that the claim is disputed.3

On May 11, 2001, debtor filed an objection to the Delaney estate’s proof of claim. No answer was received, and an order was entered on July 10, 2001, disallowing the claim.4

The interim chapter 7 trustee conducted an initial investigation into the Delaney estate’s claim, and he found that debtor’s appeal is pending in D.C. If the appeal is successful, debtor’s bankruptcy estate stands to receive approximately $600,000.00. If the appeal is not pursued then, effectively, debtor has no estate to administer.

The Delaney estate vigorously asserts that the probate court’s ruling should be upheld, and it will oppose debtor’s attempts to have that ruling overturned on appeal. The Delaney estate also would oppose any efforts by the chapter 7 trustee to avoid the judgment lien secured by debtor’s real property.

Conclusions of Law.

The election of a trustee is governed by 11 U.S.C. § 702, which states:

A creditor may vote for a candidate for trustee only if such creditor — (1) holds an allowable, undisputed, fixed, liquidated, unsecured claim of a kind entitled to distribution under section 726(a)(2), 726(a)(3), 726(a)(4), 752(a), 766(h), or 766(i) of this title; (2) does not have an interest materially adverse, other than an equity interest that is not substantial in relation to such creditor’s interest as a creditor, to the interest of creditors entitled to such distribution; and (3) is not an insider.

11 U.S.C. § 702(a).

Federal Rule of Bankruptcy Procedure 2003 also governs elections. Specifically, Rule 2003(b)(3) states that

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Related

In Re Sforza
174 B.R. 656 (D. Massachusetts, 1994)

Cite This Page — Counsel Stack

Bluebook (online)
296 B.R. 384, 2001 Bankr. LEXIS 1963, 2001 WL 34126363, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-valentine-vaeb-2001.