The National Latina/o Lesbian, Gay, Bisexual & Tra

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
THE NATIONAL LATINA/O
LESBIAN, GAY, BISEXUAL &
TRANSGENDER ORGANIZATION,
Debtor.
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Case No. 04-01537
(Chapter 7)
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION REGARDING
MOTION TO ALLOW PAYMENT OF MISFILED PRIORITY CLAIM
Martin Ornelas has filed a Motion to Allow Payment of
Misfiled Priority Claim. 	This decision will assume, without
deciding, that Ornelas’s version of the facts is correct.
Ornelas’s motion will be denied without prejudice for the
following reasons.
I
Ornelas timely filed a proof of claim which included a wage
priority claim for $4,925.00, but the case number on the proof of
claim was erroneously reflected as being 01-01537 instead of 04-
01537. 	By a later letter of October 12, 2005, well before the
trustee prepared his final report, Ornelas’s counsel notified the
clerk of the mistake, but the clerk failed to correct the claims
The decision below is signed as a decision of
the court.
Signed: January 03, 2008.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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1 	The amounts distributed on the two priority claims whose
distributions went unclaimed exceeded the amounts listed in the
final report as being proposed to be distributed. 	This
undoubtedly arose because the funds held by the trustee accrued
interest between the date of the filing of the final report and
the date of the later distribution pursuant to that report.
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register in this case (Case No. 04-01537) to reflect Ornelas’s
claim.
The trustee filed, and the court approved, a final report
that included no distribution on Ornelas’s priority claim. 	He
then made distributions pursuant to that report. 	Two claimants,
Jose Melendez and Iemld Aguirre (who held wage priority claims
aggregating $6,084.29 out of the $42,452.54 in total wage
priority claims listed on the final report), failed to claim
$4,305.79 in distribution checks, and on August 2, 2007, the
trustee deposited those funds in the registry of the court
pursuant to 28 U.S.C. § 2041 (made applicable to this case by 11
U.S.C. § 347(a)). 	Ornelas’s motion seeks to have that $4,305.79
in uncashed distribution checks applied to his priority claim of
$4,925.00.
II
The trustee appears to have distributed $30,043.23 in funds.
That figure is derived by examining the percentage distribution
that was made on the two priority claims whose distributions went
unclaimed. 1 	Those claims totaled $6,084.29 (the sum of $1,159.29
plus $4,925.00). 	Their holders received a distribution of
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2 	Although the motion’s certificate of service does not
reflect that the motion was served on the chapter 7 trustee, he
has filed a response to the motion in which he reports that
“there would have been a distribution of approximately 63.2
percent going to Mr. Jacobs’s client or the sum of approximately
$3,112.00 . . . .” 	I have not attempted to ascertain an
explanation for the difference between my computations and the
trustee’s computations as it does not affect the outcome of the
instant motion. 	I will assume for the moment that my
computations are correct.
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$4,305.79 or 70.76898% (the result of $4,305.79 divided by
$6,084.29). 	Accordingly, total funds distributed to wage
priority claimants must have been the amount that would represent
70.76898% of the priority claims of $42,452.54 listed on the
final report, namely, $30,043.23. 	Had Ornelas’s priority claim
been included on the final report, total wage priority claims
would have been $47,377.54, and the percentage available for
distribution to the priority claimants would have been 63.41238%
(the result of $30,043.23 divided by $47,377.54). 	The final
report would then show Ornelas entitled to receive only $3,123.06
(that is, 63.41238% of his priority claim of $4,925.00). 2
Clearly he is not entitled to fare better than other priority
claimants, yet his motion seeks to recover 87.4272% of his claim.
III
More importantly, Ornelas’s motion improperly seeks in large
part to recover funds that would still belong to other claimants,
Jose Melendez and Iemld Aguirre, even if Ornelas’s proof of claim
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had been filed in the proper case. 	Even if the final report were
belatedly corrected to reflect Ornelas’s wage priority claim and
that wage priority claimants should accordingly have received
only 63.41238% of their claims, Jose Melendez and Iemld Aguirre,
the two claimants whose distributions went unclaimed, would have
been entitled to distributions totaling $3,858.19 (that is,
63.41238% of their claims of $6,084.29). 	Accordingly, $3,858.19
of the funds deposited in the registry of the court would belong
to them, and Ornelas would not be entitled to recover that
$3,858.19 even though the funds still remain unclaimed.
The court can distribute the deposited funds to only the
persons having an ownership interest in the funds (namely, in the
language of the governing statutory provisions, “the rightful
owners” (28 U.S.C. § 2041) or “the person entitled thereto” (28
U.S.C. § 2042)). 	See Hansen v. United States, 340 F.2d 142, 144
(8th Cir. 1965). 	Ornelas has no ownership right to the
distributions that were payable to Jose Melendez and Iemld
Aguirre. 	Those individuals, not Ornelas, are entitled to the
distributions that were owed them, and this remains true despite
their failure so far to seek an order for the funds to be paid to
them out of the registry of the court.
It follows that the court must reject as well the trustee’s
proposal that the court release from the deposited funds to
Ornelas’s attorney the amount of distribution to which Ornelas
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would have been entitled (that is, $3,123.06) if Ornelas’s
attorney “personally guarantees to return these funds to the
court registry if the other creditors [Jose Melendez and Iemld
Aguirre] lay claim to these funds.” 	The granting of a guarantee
would not suffice to give Ornelas an ownership right in funds
belonging to Jose Melendez and Iemld Aguirre.
IV
Had Ornelas’s claim been included in the final report, the
distributions to Jose Melendez and Iemld Aguirre would have
aggregated $3,858.19, not $4,305.79, a difference of $447.60. 	On
the facts so far presented, Ornelas would be entitled to recover
$447.60 pursuant to a correction of the final report (as $447.60
of the funds in the registry necessarily would belong to Ornelas
if the final report were corrected). 	However, Ornelas has failed
to file a motion to amend the order approving the final report in
order to effect a correction of the final report. 	If he intends
to pursue such a motion, he should file a motion to reopen the
case, to waive the fee for reopening the case (if such waiver is
sought and is warranted), to amend the order approving the final
report, and to obtain a recovery of the $447.60 out of the
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3 	Under the order approving the final report, Jose Melendez
and Iemld Aguirre are the rightful owners of the deposited funds.
Until that order is modified to correct the final report, they
remain the individuals entitled to the funds. 	Although a motion
to recover funds from the registry of the court likely does not
require a motion to reopen the case, a motion to amend the order
approving the final report would.
4 	Although the debtor and the former trustee might lack
standing to be heard on the motion (as the outcome of the motion
would not affect them), they might be aware of information that
could be passed along to the United States Trustee who would have
standing to be heard.
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registry of the court. 3
At least on the present record, it is unlikely that anyone
would object to any such motion, and the court is sympathetic to
Ornelas who appears to have been a victim of mistakes, and who
through such a motion would recover a mere fraction of the amount
he would have recovered but for those mistakes. 	But such a
motion would have to be served, at a minimum, on the United
States Attorney, on the debtor and the debtor’s attorney at their
addresses of record, and on the former chapter 7 trustee. 	Under
28 U.S.C. § 2042, the United States Attorney is entitled to
notice of a motion to withdraw funds from the registry of the
court. 	The other parties should be given notice of an
opportunity to oppose the motion so that the court is not left
with what amounts to an ex parte motion without the opportunity
for the court to obtain the views of the parties most likely to
take a position regarding such a motion. 4 	Notice of such a
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5 	To the extent that Ornelas seeks to alter the
distribution entitlement of other creditors under the final
report, such creditors are entitled to notice of the motion at
their addresses of record.
7	O:\Judge File\Fund Locators\National Latina [Latino] Lesbian, Gay, Etc. Org. Memorandum Decision re Mtn to Recover Funds v4.wpd
motion should additionally be given to any affected creditors. 5
V
An order follows denying Ornelas’s motion without prejudice.
[Signed and dated above.]
Copies to: Debtor; Debtor’s attorney; Bryan S. Ross, former
Chapter 7 Trustee; Office of United States Trustee; Jeffrey M.
Sherman, Esq. (counsel for former trustee); Lawrence S. Jacobs,
Esq. (counsel for Martin Ornelas).
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