Hope v. Quantum3 Grp. LLC (In re Seltzer)

529 B.R. 385

In re: Barbara Lundy Seltzer, Debtor.

Camille Hope, Standing Chapter 13 Trustee, Movant

v.Quantum3 Group LLC, as agent for MOMA Funding LLC, Respondent.

Case No. 13–51318–AEC

United States Bankruptcy Court, M.D. Georgia, Macon Division.

Signed March 27, 2015

For Debtor: Richard Katz, 355 Cotton Ave, Macon, Georgia 31201

For Standing Chapter 13 Trustee: Camille Hope, P.O. Box 954, Macon, Georgia 31202

For Respondent: Lisa Ritchey Craig, 271 17th St., NW, Suite 2200, Atlanta, Georgia 30363

Contested Matter

MEMORANDUM OPINION

Austin E. Carter, United States Bankruptcy Judge

This contested matter comes before the Court on an Objection to Claim by Camille Hope, as trustee in this case. In her objection, the trustee asks the Court to disallow claim number 7–1, filed by Quantum3 Group LLC as agent for MOMA Funding LLC (hereinafter, “MOMA”). The Debtor supports the trustee's objection. MOMA filed a response opposing the disallowance of the claim. MOMA, the trustee, and the Debtor appeared at the hearing and argued in support of their respective positions.

Proceedings to determine the allowance or disallowance of claims against the estate are core proceedings under 28 U.S.C. § 157(b)(2)(B). The Court states its findings of fact and conclusions of law separately pursuant to Federal Rule of Civil Procedure 52, made applicable here by Federal Rule of Bankruptcy Procedure (“Bankruptcy Rule”) 7052.

Findings of Fact

The facts in this matter are undisputed.

The Debtor filed her Petition for Chapter 13 bankruptcy relief on May 24, 2013, along with her Schedules. On Schedule F—Creditors Holding Unsecured Nonpriority Claims, the Debtor scheduled a claim of $2,191.00 held by Applied Bank. The Debtor did not mark this claim as “disputed” on Schedule F.

At some point prior to the filing of this case, the Applied Bank claim was transferred to MOMA. On July 2, 2013, MOMA timely filed proof of a general unsecured claim in the amount of $2,739.93. At the time the case was filed, this claim was time-barred under the statute of limitations applicable under Georgia law.

The Debtor's plan was filed on May 24, 2013 and confirmed by order of the Court entered October 15, 2013 (the “Plan”). The Plan obligates the estate to pay a 100% dividend to all holders of unsecured claims that are proven and allowed. After confirmation—from January 2014 until September 2014 (when she filed the instant objection)—the trustee, pursuant to the Plan, made eight payments on the MOMA claim, totaling $546.85. On September 20, 2014, the trustee filed an objection to MOMA's claim on the ground that it is barred by the statute of limitations applicable under Georgia law. That objection is the subject of this Opinion.

Conclusions of Law

This case presents an issue that apparently has not previously been addressed in reported decisions of bankruptcy courts seated in Georgia—whether, under Georgia law, a time-barred debt is revived under O.C.G.A. § 9–3–112 by: (1) a debtor's listing of the time-barred claim in her schedules as undisputed and providing in her plan for the payment in full of allowed unsecured claims; and (2) the commencement of payments by the trustee to the holder of such claim under a confirmed plan.

Section 502 is the foundation for determining whether a claim is allowed in a bankruptcy case.¹ According to § 502, “[a] claim ..., proof of which is filed under section 501 ..., is deemed allowed, unless a party in interest ... objects,” and “if such objection is made, the court ... shall allow such claim in such amount except to the extent that” one of the nine specific disallowance provisions in § 502(b) applies. 11 U.S.C. § 502(a), (b). Section 502(b)(1) provides for the disallowance of any claim to the extent that “such claim is unenforceable against the debtor and property of the debtor, under ... applicable law....” Id. § 502(b)(1).

Once a party in interest raises an objection pursuant to § 502(b)(1), the burden of proof is determined by applicable nonbankruptcy law. In re Crutchfield, 492 B.R. 60, 69 (Bankr.M.D.Ga.2013) (citing Raleigh v. Ill. Dep't of Revenue, 530 U.S. 15, 21, 120 S.Ct. 1951, 147 L.Ed.2d 13 (2000) ). The parties concede that Georgia law is applicable. The trustee asserts an affirmative defense under Georgia's statute of limitations and MOMA counters with O.C.G.A. § 9–3–112, a Georgia revival statute. Although MOMA's claim has the presumption of validity under Bankruptcy Rule 3001(f), the parties agree that the statute of limitations bars MOMA's claim, but for the possible application of O.C.G.A. § 9–3–112. Therefore, the burden under Georgia law is on MOMA to show that the elements of O.C.G.A. § 9–3–112 have been met. See O.C.G.A. § 24–14–1 ; see also Douglas Kohoutek, Ltd. v. Hartley, Rowe & Fowler, P.C., 543 S.E.2d 406, 407, 247 Ga.App. 422, 423 (2000) (stating burden shifts to plaintiff upon defendant's establishing prima facie statute of limitations defense).

O.C.G.A. § 9–3–112 provides: “A payment entered upon a written evidence of debt by the debtor or upon any other written acknowledgment of the existing liability shall be equivalent to a new promise to pay.” Thus, to “revive” a time-barred debt under this statute, two elements must be shown: (1) a payment by the debtor on the time-barred debt, which is entered upon (2) written evidence or other written acknowledgement of the debt by the debtor.² Although the statute refers to the revival as being equivalent to “a new promise to pay,” such “new promise shall revive or extend the original liability; it shall not create a new one.” See O.C.G.A. § 9–3–113.

MOMA contends that the elements of O.C.G.A. § 9–3–112 are met because: (1) the Plan payments it received from the trustee were made by the trustee on the debtor's behalf; and (2) the Debtor acknowledged the debt in writing in her Schedule F (which did not show MOMA's claim as disputed) and in her Plan (which proposed to pay allowed unsecured claims in full). For the reasons that follow, the Court finds these arguments unpersuasive.

A. Payments on Debt.

To qualify under the Georgia revival statute, the subject payments must be made by the debtor or one authorized by her to act as her agent. Ryal v. Morris, 68 Ga. 834, 834 (1882) (“A partial payment of a promissory note, to relieve it of the bar of the statute of limitations, must be entered by the debtor or some one authorized by him to do so....”); Green v. Juhan, 66 Ga. 531, 535 (1881) (ruling that payments could be made by agent, so long as there was clear evidence of an agency relationship); George v. Gardner, 49 Ga. 441, 450 (1873) (holding that payments made by partnership in which debtor was partner did not revive debt because not made by partner individually). MOMA contends that the trustee made the Plan payments to MOMA on behalf of the Debtor and that the Georgia statute is therefore satisfied by such payments.

The Court disagrees. The trustee does not represent the Debtor, nor does the trustee make Plan payments on the Debtor's behalf. Section 323(a) of the Bankruptcy Code (made applicable in Chapter 13 cases by § 103(a)) establishes that the trustee is the representative of the estate. No code provision provides that the trustee is the representative of the debtor. Other courts have recognized that, in making payments to creditors, the trustee does not serve as agent for the debtor. See, e.g., In re Obie Elie Wrecking Co., 35 B.R. 114, 115 (Bankr.N.D.Ohio 1983) (“[T]he attorney for the debtor argues obliquely that the trustee, acting as agent for the debtor, makes payments at the direction of the debtor, and that the payments are, therefore, voluntary acts of the debtor. Obviously, the trustee is not the agent of the debtor. 11 U.S.C. § 323(a). He acts as representative of the estate, managing the estate's funds for the benefit of creditors of the estate.”). This Court agrees.³

A related obstacle to MOMA's position is that trustee payments cannot be used to support the revival of a time-barred debt is that such payments are not voluntary in the sense traditionally required for revival. In U.S. v. Lorince, the court, interpreting a federal revival statute similar to Georgia's, recognized that:

[P]ayments must be voluntary in order to reflect the debtor's acknowledgment of his obligation. For this reason, other courts have rejected the notion that payments made by trustees in bankruptcy qualify as partial payments reviving the statute of limitations.

773 F.Supp. 1082, 1092 (N.D.Ill.1991) (citations omitted).

This concept is further supported by the fact that, in this case, the trustee's payments were not made on account of the debtor's scheduling of the MOMA claim, but instead were made only because of MOMA's filed claim (which, until the trustee filed her objection, was deemed allowed under § 502(a) ). In re VanCleef, 479 B.R. 809, 815 (Bankr.N.D.Ind.2012) (“[I]n order for a Chapter 13 Trustee to disburse to a creditor, even under the terms of a confirmed plan, that creditor must file a proof of claim.”); In re Jackson, 482 B.R. 659, 663 (Bankr.S.D.Fla.2012) (same); see also Fed. R. Bankr.P. 3002(a). This is contrary to the terms of the revival statute, which requires that payments be “entered upon” the Debtor's acknowledgement of the debt.⁴

Even if the trustee's payments to MOMA had been made on behalf of, or as agent for, the Debtor, however, such payments cannot revive the debt because they were made post-petition. Section 558 provides that the debtor's estate has the benefit of all defenses of the debtor (including, specifically, the statute of limitations), and that a debtor cannot waive the estate's use of any such defense through her post-petition conduct.⁵

Although it did not cite § 558, a recent decision from the U.S. Bankruptcy Court for the Middle District of Louisiana, on strikingly similar facts (and featuring this creditor's agent), found for the debtor, repudiating the creditor's argument that a debtor's post-petition actions can trigger revival:

[The

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