Arthur J. Horowitz

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
ARTHUR J. HOROWITZ,
Debtor.
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Case No. 08-00211
(Chapter 13)
MEMORANDUM DECISION AND INTERIM ORDER RE CLAIM OF GMAC
This addresses the debtor’s objection to the proof of claim
of GMAC. 	Although a proof of claim is entitled to a presumption
of prima facie correctness, the attachments to GMAC’s proof of
claim, together with the court record, establish that the debtor
owes far less than the amount claimed.
I
The claim acknowledges that the debtor was current on his
lease payments when the case was filed. 	In addition, the lease
agreement provided that the debtor could end the lease at
anytime. 	The debtor opted to surrender the vehicle prepetition.
A consent order granting relief from the automatic stay to permit
GMAC to sell the automobile was entered on May 21, 2008.
The proof of claim of GMAC recites that $19,061.68 is the
balance of postpetition lease payments owed by the debtor,
The document below is hereby signed. Dated:
September 26, 2008.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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calculated over the remaining life of the lease. 	The proof of
claim then states that including a lease buyout option, the total
amount owed is $34,280.21. 	It indicates that the $34,280.21
figure “includes the purchase option at the end of the lease,
plus remaining lease payments and any unpaid or accrued charges,
minus any unearned lease charges and any sales tax associated
with remaining unpaid monthly lease payments.” 	But the debtor
opted to surrender the car, and the amounts attributable to the
lease buyout option are not applicable.
The lease agreement provided:
37. 	WHAT YOU OWE AT EARLY END. 	In general, unless gap
protection applies, you will owe us any unpaid monthly
payments. 	We will give you a credit for any unearned
rent charge and a credit if we sell the vehicle for
more than residual value. 	We will use the actuarial
method to figure the unearned rent charge. 	(You may
ask us for a written explanation of the actuarial
method.) 	We will treat the rent charge for each
monthly period as fully earned on the period’s first
day. 	We will treat each monthly payment that you made
as if we received it on its due date.
The lease’s “gap protection” provisions dealt with what was to
occur if the vehicle was destroyed (became total loss), and thus
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1 	The lease agreement repeats what is owed at an early end
(on the facts of this case) by stating that if the vehicle is not
a total loss (which it was not in this case), the debtor would
owe at an early end the result of:
The base monthly payment times the number of
payments not yet due,
[minus] 	Any unearned rent charge, figured by the
actuarial method,
[minus] 	Any surplus [over the residual value] on the
vehicle sale,
[plus] 	If there is no surplus, any Early Excess Mileage
and Wear Charge . . . plus any tax.
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have no applicability here. 1 	In determining the surplus over the
residual value, the debtor could have opted to obtain an
appraisal (meeting certain standards) as to the wholesale value
of the vehicle, but the debtor does not allege that he obtained
such an appraisal. 	In the absence of such an appraisal, the
surplus would be determined by the amount received on a sale of
the vehicle at wholesale.
I read the proof of claim itself as establishing that the
debtor is entitled to two types of credits.
A. 	Credit For Excess Over Residual Value Obtained on
Sale of Vehicle
The residual value (the estimated value of the vehicle at
the originally scheduled end of the lease) was set by the lease
at $19,390.25. 	The agreed value at the commencement of the lease
on November 4, 2006, was $35,749.00, which is $16,358.75 more
than the residual value. 	That $35,749.00 figure is likely a
retail value, not a wholesale value. 	A sale of the vehicle
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2 	That $14,889.96 figure can also be derived in the
following way. 	The difference between the $19,061.68 in monthly
payments and the total claim of $34,280.21 is $15,218.53. 	Under
the lease, $19,390.25 was the required amount to be paid to
purchase the vehicle at the end of the lease. 	Accordingly, the
sum of the remaining monthly payments of $19,061.68 and the
$19,390.25 purchase price at the end of the lease total
$38,451.93. 	That is $4,171.72 less than the total claim amount
of $34,280.21. 	Accordingly, GMAC’s proof of claim must include
$4,171.72 in credits to which the debtor was entitled. 	It
follows that the correct amount of the proof of claim should have
been $19,061.68 less a credit of $4,171.72, for a net amount owed
of $14,889.96.
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sometime after May 21, 2008, at wholesale (more than a year and a
half after the lease was entered into) might or might not yield a
surplus over the residual value of $19,390.25. 	GMAC has failed
to respond to the objection to claim and to state what amount was
realized on a sale of the vehicle, and I address that failure in
part II, below.
B. 	Other Credits
The proof of claim necessarily establishes that there were
other credits to which the debtor was entitled. 	As already
noted, the remaining monthly payments on the lease total
$19,061.68, and GMAC calculated a total claim owed of $34,280.21,
which included the cost of the debtor’s purchasing the vehicle at
the end of the lease. 	The proof of claim should have been for
$14,889.96, the total claim of $34,280.21 with the $19,390.25
purchase-at-end-of-lease amount eliminated as a component of the
claim. 2 	In other words, GMAC must have included $4,171.72 in net
credits in its proof of claim to apply against the $19,061.68 in
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unpaid monthly lease payments.
II
The debtor’s objection to GMAC’s proof of claim recites
that:
As of this date GMAC has not advised the Court
regarding the status of its claim--whether or not it
has disposed of the vehicle or if a deficiency balance
is claimed. 	Their claim #6 was filed 4/11/08 which
requests full payment of the outstanding debt totaling
$34,280.21 without deduction for proceeds received from
sale or transfer of the automobile. According to the
NADA book the vehicle has a present retail value of
$24,525.00.
The debtor appears to contend that the proof of claim should be
reduced by the entire amount of the sale proceeds received. 	But
the lease agreement provided for a credit in the amount of the
excess over the residual value of the vehicle, not for a credit
for the full amount of the sale proceeds. 	Moreover, the lease
provided for the vehicle to be sold at wholesale. 	Accordingly,
the debtor’s reliance upon NADA retail values is misplaced.
Finally, even if GMAC sold the vehicle at wholesale for
$24,525.00 (which would be unlikely because that is the NADA
retail value figure), the resulting surplus over the $19,390.25
residual value would come to only $5,134.75. 	That credit would
not eliminate the $14,889.96 otherwise owed: it would reduce the
claim to $9,755.21.
Nevertheless, the debtor’s objection raises a forceful
point: GMAC has failed to report what amount was received on a
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sale of the vehicle by GMAC. 	As already noted, a properly
documented proof of claim is prima facie correct. 	But the
debtor–-and the trustee and the court--are entitled to be advised
by a creditor of any postpetition event that results in a
reduction of the proof of claim. 	A creditor is not entitled to
keep other parties in the dark regarding a sale that may have
resulted in a reduction of the amount owed on its claim. 	It
cannot hide behind a wall of unresponsiveness and expect to avoid
the debtor’s obtaining the benefit of a reduction of the amount
of the claim.
On the other hand, the debtor has not shown that the vehicle
likely could be sold at wholesale for an amount exceeding the
residual value of $19,390.25, and GMAC has not been warned that
it must report what was received on a sale of the vehicle lest
its proof of claim be reduced for failure to make a report.
Accordingly, at this juncture it would be inappropriate to reduce
the claim. 	The court will direct GMAC to file a report regarding
what the vehicle fetched on sale (which may be made by filing an
amended proof of claim making such a report so that an attorney
need not file a report on GMAC’s behalf), and direct that if no
such report is filed, the debtor shall be entitled to obtain a
reduction in the amount of the claim based on the most favorable
evidence of wholesale value as of May 21, 2008, that the debtor
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3 	NADA value or Kelly value or some similar valuation
source could be utilized by the debtor. 	In the absence of a
report by GMAC as to the amount actually received on a sale, the
debtor is entitled to use whichever reporting service regarding
wholesale value reports the highest wholesale value.
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can produce. 3
III
In light of the foregoing, it is
ORDERED that the proof of claim of GMAC is disallowed to the
extent that it exceeds $14,889.96. 	It is further
ORDERED that the proof of claim of GMAC will be reduced
further to take account of any surplus over the $19,390.25
residual value of the vehicle realized by a sale (or estimated to
be received on a sale at wholesale if GMAC fails to file a report
as to the amount received on a sale of the vehicle). 	It is
further
ORDERED that by October 15, 2008, GMAC shall file a report
regarding the amount received on a sale of the vehicle (and the
report may be made by filing an amended proof of claim, or may be
made via an attorney’s filing a report). 	It is further
ORDERED that if GMAC fails to file a report, the court will
estimate the amount received on a sale (and the resulting surplus
over the $19,390.25 residual value of the vehicle) by permitting
the debtor by October 22, 2008, to file a copy of a NADA or
similar report (or other evidence) setting forth the wholesale
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8	O:\TEEL\Judge Temp Docs\Horowitz Mem Decsn & Interim Order re GMAC Claim_v2.wpd
value of the vehicle on or after May 21, 2008.
[Signed and dated above.]
Copies to: Debtor; Debtor’s attorney; Chapter 13 Trustee; Stephen
A. Hecker, Esq. (counsel for GMAC on its motion for relief from
the automatic stay); and:
GMAC
P. Bengtson, Agent
PO Box 130424
Roseville, MN 55113
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