PCFS Fin. v. Spragin (In re Nowak), 586 F.3d 450 (6th Cir. 2009)
Nov 13, 2009OUTCOME: For all of the reasons set forth above, we AFFIRM the judgment of both the BAP and the bankruptcy court.
Before: O'CONNOR, Associate Justice; GILMAN and GIBBONS, Circuit Judges.* ARGUED: David A. Freeburg, McFadden & Freeburg Co., L.P.A., Cleveland, Ohio, for Appellant. Lydia Evelyn Spragin, Akron, Oh ... io, for Appellee. ON BRIEF: David A. Freeburg, McFadden & Freeburg Co., L.P.A., Cleveland, Ohio, for Appellant. Lydia Evelyn Spragin, Akron, Ohio, for Appellee. Three years prior to filing for Chapter 7 bankruptcy relief, Michael and Christina Nowak executed a mortgage on their residence in favor of PCFS Financial. Lydia Spragin, the trustee of the Nowaks' bankruptcy estate, successfully voided PCFS's lien on the residence based on a technical defect in the execution of the mortgage instrument. After losing its secured-creditor status, PCFS failed to file a formal proof of claim with the bankruptcy court. Spragin's final report to the bankruptcy court, therefore, did not propose any distribution to PCFS from the bankruptcy estate. PCFS objected to the report and moved the court to allow an informal proof of claim based on PCFS's prior filings as a putative secured creditor. The bankruptcy court denied the motion, concluding that PCFS's prior filings did not constitute an informal proof of claim. In the alternative, the court determined that the equities did not favor PCFS even if the prior filings were deemed to meet the informal-proof criteria. On appeal, the Bankruptcy Appellate Panel (BAP) disagreed with the bankruptcy court's first conclusion, but affirmed on the basis that the court's alternative conclusion regarding the equities was not an abuse of discretion. For the reasons set forth below, we AFFIRM the judgment of both the BAP and the bankruptcy court. *The Honorable Sandra Day O'Connor, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation.
