HAN-HSIEN TUAN et al v. TUAN

Filing 10

OPINION. Signed by Judge William J. Martini on 10/21/13. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

In re:

Civ. No. 2:13-00324 (WJM)

HAN-HSIEN TUAN, AKA HAN TUAN,
OPINION

Debtor.

WILLIAM J. MARTINI, U.S.D.J.:
Appellants DeHeng Chen, LLC (“DeHeng”) and Rong Xie, Esq. (“Xie”) appeal
the Bankruptcy Court’s November 21, 2012 Order disallowing DeHeng’s claim in
Bankruptcy Case No. 12-19848 and dismissing its related Adversary Case No. 12-01766.
For the reasons stated below, the Bankruptcy Court’s decision is AFFIRMED.
I.

BACKGROUND
Debtor Han-Hsien Tuan (“Tuan”) filed a Chapter 13 Voluntary Petition on April

16, 2012. (Chapter 13 Voluntary Pet., Apr. 16, 2012, available at Bankr. Case No. 1219848, ECF No. 1.)1 That same day, Tuan also filed his first proposed Chapter 13 Plan.
(Chapter 13 Plan and Motions, Apr. 16, 2012, available at Bankr. Case No. 12-19848,
ECF No. 2.) On April 17, 2012, the Bankruptcy Court filed a notice stating that the first
meeting of creditors would occur on May 22, 2012 and setting August 20, 2012 as the bar

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This Court takes judicial notice of the bankruptcy docket and other filings that were not part of the designated
record on appeal. See, e.g., U.S. v. Falcone, 2010 WL 1372435, at *1 n.1 (D.N.J. Mar. 31, 2010) (holding court may
take judicial notice of public records from other proceedings).
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date for filing proofs of claim. (Meeting of Creditors and Notice of Appointment of
Trustee Marie-Ann Greenberg, Apr. 17, 2012, available at Bankr. Case No. 12-19848,
ECF No. 4.)
Creditor DeHeng, a law firm, claims that it never received payment for legal
services that it provided Tuan. (Objection to Confirmation of Plan 1-2, July 5, 2012,
available at Bankr. Case No. 12-19848, ECF No. 24.) DeHeng has a pending lawsuit in
New York state court seeking recovery of those fees. (Objection to Confirmation of Plan
2, July 5, 2012.) DeHeng filed two related objections to the Chapter 13 Plan, one on June
8, 2012 and the other on July 5, 2012. (Objection to Confirmation of Plan, June 8, 2012,
available at Bankr. Case No. 12-19848, ECF No. 15; Objection to Confirmation of Plan,
July 5, 2012.) On July 27, 2012, DeHeng also commenced an adversary case against
Tuan alleging non-dischargeability, false pretenses, false representation and fraud (the
“Adversary Proceeding”). (Compl. ¶¶ 19-24, available at Bankr. Case No. 12-19848,
ECF No. 28.)
DeHeng was admittedly aware of the August 20, 2012 bar date for filing proofs of
claim. (Objection to Confirmation of Plan 1, July 5, 2012) Nevertheless, DeHeng failed
to file its proof of claim until August 21, 2012. (Objection to Claim, Ex. A, at 1, Sept.
18, 2012, available at Bankr. Case No. 12-19848, ECF No. 29.) Accordingly, Tuan filed
an objection seeking to disallow DeHeng’s claim as untimely. (Objection to Claim 1.)
Tuan also filed a motion to dismiss the Adversary Proceeding, because it was filed after

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the statute of limitations under Federal Rule of Bankruptcy Procedure 4007(c).2 (Mot. to
Dismiss, Aug. 22, 2012, available at Bankr. Case No. 12-01766, ECF No. 4.)
The Honorable Donald H. Steckroth, U.S.B.J., entered an order granting Tuan’s
motion to dismiss the Adversary Proceeding on October 10, 2012. (Order, October 10,
2012, available at Bankr. Case No. 12-01766, ECF No. 9.) Then, at a hearing on
November 14, 2012, Judge Steckroth also granted Tuan’s objection to the proof of claim
(the “November Hearing”). (Hr’g Tr. 11:12-13, Nov. 14, 2012, available at Bankr. Case
No. 12-19848-DHS, ECF No. 55.) Accordingly, on November 21, 2012, Judge Steckroth
entered an order disallowing the claim (the “November Order”). (Order, Nov. 20, 2012,
available at Bankr. Case No. 12-19848, ECF No. 41.) For reasons that are not entirely
clear, the November Order also referenced the previously dismissed Adversary
Proceeding, this time dismissing it as moot. DeHeng, which blames the post office for its
failure to timely file the proof of claim, appeals the November Order.

(Hr’g Tr. 5:18-

6:4.)
II.

LEGAL ANALYSIS
The Bankruptcy Court had subject matter jurisdiction pursuant to 28 U.S.C.

§ 1334. This Court lacks jurisdiction over certain aspects of this appeal and has
jurisdiction over the remainder pursuant to 28 U.S.C. § 158(a). On appeal, this Court
reviews “the bankruptcy court’s legal determinations de novo, its factual findings for

Rule 4007(c) provides that “. . . a complaint to determine the dischargeability of a debt under §523(c) shall be filed
no later than 60 days after the first date set for the meeting of creditors under §341(a).”
2

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clear error, and its exercise of discretion for abuse thereof.” Hefta v. Official Comm. of
Unsecured Creditors (In re American Classic Voyages Co.), 405 F.3d 127, 130 (3d Cir.
2005). Where a case presents mixed questions of law and fact, this Court will apply the
relevant standard to each component of the issue. In re Sharon Steel Corp., 871 F.2d
1217, 1222-23 (3d Cir. 1989).
DeHeng and Xie raise six issues on appeal, which can be boiled down to four
issues: (1) whether the Bankruptcy Court erred by holding that the proof of claim was
untimely filed; (2) whether the Bankruptcy Court erred in determining that “excusable
neglect” did not permit the late filing of the proof of claim; (3) whether the Bankruptcy
Court properly determined that the Objection to Confirmation of Plan filed on July 5,
2012 (the “Objection to Confirmation”) was not an informal proof of claim; and (4)
whether the Bankruptcy Court properly dismissed the Adversary Proceeding.
This Court lacks jurisdiction over Xie’s appeal in its entirety, as well as DeHeng’s
appeal concerning the fourth issue, and will consider these jurisdictional issues sua
sponte. Adapt of Phila. v. Phila. Hous. Auth., 433 F.3d 353, 361 n. 10 (3d Cir. 2006)
(noting a court’s inherent obligation to consider sua sponte whether it has appellate
jurisdiction over a particular claim); Steele v. Blackman, 236 F.3d 130, 134 n. 4 (3d Cir.
2001) (“[W]e are required to raise issues of standing sua sponte if such issues exist.”).
The Court will then address the remaining three issues in turn.

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A. Jurisdictional Issues
i.

Xie lacks standing to appeal the November Order.

Xie lacks standing to appeal the November Order. Standing to appeal an order of
a bankruptcy court is limited to persons aggrieved by that order. Gen. Motors
Acceptance Corp. v. Dykes (In re Dykes), 10 F.3d 184, 187-88 (3d Cir. 1993). An
individual is personally aggrieved if his “rights or interests are directly and adversely
affected pecuniarily” by an order. Id. at 187 (finding that an individual who never filed a
formal or informal proof of claim lacked standing to challenge an order of distribution).
A showing of potential harm incidental to the order is not enough. In re Combustion
Engineering, Inc., 391 F.3d 190, 215 (3d Cir. 2004). Accordingly, the Third Circuit has
held that an individual shareholder and president of a corporation was not a “person
aggrieved” by an order entered against the corporation, and therefore lacked standing to
challenge the order. In re EToys, Inc., 234 Fed. App’x. 24, 25 (3d Cir. 2007). Whether a
litigant has standing to appeal a bankruptcy court order is a question of fact for the
district court. In re Dykes, 10 F.3d at 188.
It is unclear why Xie, who represented DeHeng before the Bankruptcy Court, was
joined as an appellant in this appeal. The November Order does not mention Xie.
Rather, the November Order concerned DeHeng’s, not Xie’s, claim and adversary
proceeding. Nor does Xie gain standing by virtue of being DeHeng’s employee.
Accordingly, similar to the individual in In re EToys, Xie is not a “person aggrieved” by
the November Order. 234 Fed. App’x. at 25 (finding that a shareholder-president could

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not appeal an order entered against his corporation, because a corporation is a separate
legal entity and the order denied the corporation’s, not the shareholder-president’s,
motion). Thus, Xie lacks standing, and this Court lacks jurisdiction over his appeal.
ii.

Deheng’s appeal regarding the Adversary Proceeding is untimely.

The Court also lacks jurisdiction over DeHeng’s appeal concerning the Adversary
Proceeding. Judge Steckroth originally dismissed DeHeng’s Adversary Proceeding with
prejudice on October 10, 2012, because DeHeng’s claim was filed after the statute of
limitations under Bankruptcy Rule 4007(c). (Order, October 10, 2012, available at
Bankr. Case No. 12-01766, ECF No. 9.) For reasons that are not entirely clear, the
Bankruptcy Court reopened the Adversary Proceeding to enter the November Order, this
time dismissing the Adversary Proceeding as moot. DeHeng is attempting to appeal this
second order.
Under Federal Rule of Bankruptcy Procedure 8002(a), a party seeking to appeal an
order must file a notice within fourteen days. Failure to file a timely notice is a
jurisdictional defect barring appellate review. In re Caterbone, 640 F.3d 108, 113 (3d
Cir. 2011). Furthermore, when a court reenters a judgment without altering the
substantive rights of the litigants, the entry of the second judgment does not affect the
time within which a party must appeal the decisions made in the first order. Federal
Trade Comm'n v. Minneapolis-Honeywell Regulator Co., 344 U.S. 206, 211-12 (1952).
Rather, the clock begins to tick when the first order is entered. See In re Slimick, 928
F.2d 304, 307 (9th Cir. 1990) (stating that “if, after filing a final disposition, a court files

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a more formal judgment, the latter does not constitute a second final disposition or extend
the appeal period”).
The clock for DeHeng’s appeal of the dismissal of the Adversary Case began
ticking on October 10, 2012 and expired on October 24, 2012. DeHeng’s notice of
appeal was filed on November 27, 2012. (Notice of Appeal, November 27, 2012,
available at Bankr. Case No. 12-19848, ECF No. 44.) Thus, DeHeng’s appeal of the
dismissal of the Adversary Proceeding is untimely, and the Court lacks jurisdiction over
this portion of DeHeng’s appeal.
B. The Bankruptcy Court correctly held that the proof of claim was timebarred.
Moving to the issues that the Court has jurisdiction to consider, DeHeng
challenges the Bankruptcy Court’s holding that the proof of claim was untimely. The
Court reviews this factual finding for clear error. In re Outboard Marine Corp., 386 F.3d
824, 827 (7th Cir. 2004). DeHeng also argues that the Bankruptcy Court should have
found its proof of claim to be timely, because it was postmarked August 17, 2012, a legal
determination that the Court reviews de novo. In re Chrysler Motors Corp. v.
Schneiderman, 940 F.2d 911, 914 n. 3 (3rd Cir. 1991).
Under Federal Rule of Bankruptcy Procedure Rule 3002(c), unsecured creditors in
a Chapter 13 case must file a proof of claim within ninety days of the first scheduled date
for the meeting of creditors, with certain exceptions that do not apply to the instant case.
This bar date is equivalent to a statute of limitations. Clark v. Valley Fed. Sav. and Loan
Ass’n (In re Reliance Equities, Inc.), 966 F.2d 1338, 1345 (10th Cir. 1992). If a creditor
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fails to file a timely claim, then its claim will be disallowed. Fed. R. Bankr. P. 3002(a);
In re Dennis, 230 B.R. 244, 249 (Bankr. D.N.J. 1999). Furthermore, Rule 3002 explicitly
states that “an unsecured creditor . . . must file its proof of claim or interest [emphasis
added].” Filing requires delivery to the court. Chrysler Motors Corp., 940 F.2d at 914.
Accordingly, a mailing is not a filing. Id.
Here, the date set for the first meeting of creditors was May 22, 2012. Thus, the
bar date for filing proofs of claims was August 20, 2012. DeHeng, an unsecured creditor,
did not file its proof of claim until August 21, 2012. DeHeng argues that the Bankruptcy
Court should have found its proof of claim to be timely, because it was postmarked
August 17, 2012. However, a mailing does not constitute a filing. Therefore, the proof
of claim was time-barred, and the Bankruptcy Court correctly disallowed the claim. The
Court affirms its holding.
C. The Bankruptcy Court correctly determined that excusable neglect does
not apply to this Chapter 13 case.
DeHeng also challenges the Bankruptcy Court’s determination that excusable
neglect does not apply to this Chapter 13 case, a question of law that we review de novo.
Donaldson v. Bernstein, 104 F.3d 547, 551 (3d Cir. 1997). Federal Rule of Bankruptcy
Procedure 9006 enumerates the filing deadlines that cannot be extended for excusable
neglect. Pioneer Investment Servs. Co. v. Brunswick Assoc. Ltd. P’ship, 507 U.S. 380,
389 n.4 (1993). One of those excluded deadlines is that for filing proofs of claim in a
Chapter 13 case. Fed. R. Bankr. P. 9006(b)(3). Thus, as the Bankruptcy Court correctly

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determined, excusable neglect does not apply to this Chapter 13 case. The Court affirms
this holding.
D. The Bankruptcy Court did not abuse its discretion by refusing to view the
Objection to Confirmation as an informal proof of claim.
Finally, DeHeng argues that the Bankruptcy Court should have treated its
Objection to Confirmation as an informal proof of claim that could be amended post bar
date. We review de novo the question of law as to whether DeHeng’s Objection to
Confirmation constitutes an informal proof of claim. In re American Classic Voyages
Co., 405 F.3d at 130. But, we review any balancing of the equities by the Bankruptcy
Court in connection with this determination for abuse of discretion. Nikoloutsos v.
Nikoloutsos (In re Nikoloutsos), 199 F.3d 233, 235-36 (5th Cir. 2000).
The informal proof of claim doctrine permits a bankruptcy court to treat a late
formal proof of claim as timely because it relates back to a document – the informal proof
of claim – filed before the bar date. Grubb v. Pittsburg Nat’l Bank (In re Grubb), 169
B.R. 341, 347 (Bankr. W.D. Pa. 1994). The Third Circuit uses a five-part test to
determine whether a document qualifies as an informal proof of claim. In re Am. Classic
Voyages Co., 405 F.3d at 130-31 (3d Cir. 2005). Specifically, a document constitutes an
informal proof of claim if: 1) it is in writing, 2) it contains a demand by the creditor on
the estate, 3) it expresses an intent to hold the debtor liable for the debt, 4) it is filed with
the bankruptcy court, and 5) given the facts of the case, it would be equitable to treat the
document as a proof of claim. Id. A document must satisfy each part of this test to

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qualify as an informal proof of claim. In re Petrucci, 256 B.R. 704, 706 (Bankr. D.N.J.
2001).
The debate here centers on the fifth prong of the test – whether it would be
equitable to treat the document as an informal proof of claim. The doctrine is less likely
to apply where the claimant is sophisticated, had actual notice of the bar date, and was
intimately involved in the debtor’s case. See In re Outboard Marine Corp., 386 F.3d
824, 828 (7th Cir. 2004) (finding that a creditor did not meet the fifth prong of the test
where it had actual notice of the bar date and still failed to timely file); In re Grubb, 169
B.R. at 248-49 (finding the equitable prong unfulfilled where the creditor was
sophisticated, was intimately engaged in the debtor’s case, and had received notice of the
claims bar date). Additionally, courts are less likely to employ the doctrine where the
creditor is represented by counsel. In re Outboard Marine Corp., 386 F.3d at 828.
Attorneys practicing in the bankruptcy court are charged with a general knowledge of the
Federal Rules of Bankruptcy Procedure. In re Grubb, 169 B.R. at 348-49. As such, they
“are expected to file the appropriate thing at the appropriate time.” In re Fink, 366 B.R.
870, 877 (Bankr. N.D. Ind. 2007) (refusing to invoke the doctrine where a represented
creditor filed a claim for $3.2 million one day late). Finally, courts are less likely to
employ the doctrine if permitting the late claim would significantly affect the payout to
creditors with timely filed claims. In re Outboard Motor Corp., 386 F.3d at 828-29.
DeHeng claims that the Bankruptcy Court failed to acknowledge its argument that
the Objection to Confirmation constituted an informal proof of claim. However, the

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Bankruptcy Court explicitly acknowledged DeHeng’s argument at the November
Hearing. (Hr’g Tr. 11:8-11:13.) Moreover, based on the record before this Court, the
Bankruptcy Court did not abuse its discretion in finding that DeHeng failed to satisfy the
fifth prong of the test. The hearing transcript indicates that DeHeng, a law firm, was a
sophisticated creditor represented by one of its own attorneys before the Bankruptcy
Court. (Hr’g Tr. 4:19-5:1.) Furthermore, DeHeng and its attorney were admittedly
aware of the bar date. (Hr’g Tr. 5:18-19.) Finally, the transcript shows that allowing
DeHeng’s claim to proceed would create delay for the creditors with timely filed claims,
as its claim is contingent upon a finding of liability in New York state court. (Hr’g Tr.
6:18-7:6.)
The only excuse that DeHeng and Xie offered for the untimely filing was that the
post office assured them that the proof of claim, which was mailed on Friday, August 17,
2012, would be delivered by Monday, August 20, 2012. (Hr’g Tr. 5:20-5:23.) Moreover,
even though DeHeng’s Adversary Proceeding had previously been dismissed for similar
reasons, DeHeng does not mention taking any steps to confirm that the proof of claim had
arrived at the Bankruptcy Court. (Hr’g Tr. 3:24-4:4.) Based on these facts, the
Bankruptcy Court was well within its discretion in finding that the equities did not
warrant treating the Objection to Confirmation as an informal proof of claim.
Accordingly, the Objection to Confirmation failed to satisfy the fifth prong of the test,
and the Bankruptcy Court correctly determined that it did not qualify as an informal proof
of claim. The Court affirms this determination.

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III.

CONCLUSION

For the reasons stated above, Xie’s entire appeal, and DeHeng’s appeal regarding
the Adversary Proceeding, are DISMISSED, and the November Order is AFFIRMED.
An appropriate Order follows.

/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: October 25, 2013

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