Genaro Mendoza

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
GENARO MENDOZA, 	No. 09-11678
Debtor(s).
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Memorandum on Objection to Claim
_________________
Chapter 11 debtor in possession Genaro Mendoza originally objected to Claim #19 filed by
U.S. Bank on grounds that it included a prepayment premium and default interest. The Bank concedes
that the objection on these grounds should be sustained unless the order confirming Mendoza’s plan,
now under appeal, is reversed or vacated, as that order has not been stayed.
However, the objection has morphed into something different. The Bank’s claim contains an
error understating the principal balance by about $600,000.00. The Bank seeks to amend its claim to
correct this error, which Mendoza agrees was made. In the absence of prejudice, amendments to
timely-filed claims are freely allowed. In re Enron Corp., 419 F.3d 115, 133 (2nd Cir. 2005).
Mendoza argues that there is prejudice.
The court notes that the original claim included about $600,000.00 in now-disallowed
prepayment premiums, so that the net amount of the claim as amended (about $4.6 million) remains
about the same as the original claim, making it difficult for most creditors to argue that they were
misled by the original claim. More importantly, none of Mendoza’s arguments of prejudice have
Entered on Docket
December 01, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-11678 Doc# 314 Filed: 12/01/10 Entered: 12/01/10 17:29:05 Page 1 of
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1The parties have also argued that certain postpetition fees, costs and charges claimed by the
Bank are unreasonable and therefore not allowable pursuant to § 506(c) of the Bankruptcy Code. The
court will address this dispute separately.
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merit.
Contrary to Mendoza’s assertions, neither attorneys’ fees and expenses contesting the
amendment nor a reduced dividend to other creditors constitutes prejudice. Smith v. Lenches, 263 F.3d
972, 976 (9th Cir.2001)[prejudice means prejudice to a legal claim or interest, not having to incur
litigation expenses]; In re Arnold, 252 B.R. 778, 786-87 (9th Cir. BAP 2000)[theoretical
disappointment of creditors, without proof of actual damages, cannot support a finding of prejudice];
Manousoff v. Macy's Northeast, Inc. (In re R.H. Macy & Co.), 166 B.R. 799, 802 (S.D.N.Y.1994) [the
depletion of resources otherwise available for other claims is not prejudice]. Mendoza has not shown
that he lost any rights because of the mistake in the Bank’s original claim, or that he has taken any
irrevocable action in reasonable reliance on the mistake. There is therefore no prejudice such as would
defeat an attempt to amend a claim.
For the foregoing reasons, Mendoza’s original objection to the prepayment consideration and
default interest portions of the claim will be sustained, subject to reconsideration if the order
confirming the plan is reversed or vacated on appeal. The objection to the amended claim, insofar as it
corrects the principal balance owing on the date of bankruptcy, will be overruled. Counsel for
Mendoza shall submit an appropriate form of order which counsel for the Bank has approved as to
form.1
Dated: December 1, 2010
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 09-11678 Doc# 314 Filed: 12/01/10 Entered: 12/01/10 17:29:05 Page 2 of
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