House of Wines, Inc.

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
HOUSE OF WINES, INC.,
Debtor.
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Case No. 06-00127
(Chapter 7)
(Not for Publication in
West’s Bankruptcy Reporter)
MEMORANDUM DECISION AND ORDER TO SUPPLEMENT OBJECTION TO
PROOF OF CLAIM OF VEND LEASE COMPANY, INC.
The trustee has filed an objection (Docket Entry No. 62) to
the proof of claim (Claim Number 17) filed on June 13, 2006, on
behalf of Vend Lease Company, Inc., in the amount of $6,538.23.
The trustee asserts, upon information and belief, that the
claimant compromised its claim by accepting $5,000 from the
debtor’s guarantor. 	He asserts in the alternative that even if
this payment was not in full satisfaction of the claim, the
claimant should be required, within 10 days of entry of the order
disallowing the claim, to amend its claim to reflect the payment
received. 	The debtor’s schedules reflected a debt owed to the
claimant in excess of $6,000. 	I thus surmise that any payment by
the guarantor occurred postpetition.
The order below is hereby signed.
Signed: May 15, 2007.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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I
The claimant’s failure to respond to the objection to claim
is insufficient to sustain the trustee’s objection to the claim.
The trustee must file an affidavit or affidavits (or otherwise
adduce evidence) rebutting any prima facie validity of the claim.
A properly executed and filed proof of claim constitutes “prima
facie evidence of the validity and amount of the claim.” 	F.R.
Bankr. P. 3001(f). 	Essentially, Rule 3001(f) treats a proof of
claim, executed under penalty of perjury, as the equivalent of an
affidavit supporting the creditor's claim, casting the burden on
the objecting party to adduce contrary evidence.
Under Rule 3001(f), the court may direct that the objector
file affidavits to overcome the prima facie evidence of the
validity and amount of a claim. 	See Garner v. Shier (In re
Garner), 246 B.R. 617 (9th Cir. B.A.P. 2000); In re Nejedlo, 324
B.R. 697, 701 (Bankr. E.D. Wis. 2005) (evidence rebutting prima
facie validity of claim may come “in the form of an affidavit or
declaration, especially when the claimants themselves do not
respond or appear at the hearing on the Objections,” citing
Garner). 	The trustee has not contended that Rule 3001(f) is
inapplicable to the proof of claim.
Moreover, a debtor bears the burden of proof on the
affirmative defense of payment of a debt. 	See Weidenfeld v.
Pacific Imp. Co., 43 F.2d 817, 820 (2d Cir. 1930); Haughton v.
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Haughton, 394 N.E.2d 385, 390 (Ill. 1979); Petter v. Jackson, 298
S.W.2d 289 (Ky. 1957). 	Furthermore, the Federal Rules of
Bankruptcy Procedure were not intended to alter burden of proof
rules. 	Raleigh v. Illinois Dep't of Revenue, 530 U.S. 15 (2000).
Finally, partial payment would not satisfy the entire debt absent
an agreement to the contrary. 	Even if there was such an
agreement, the result would not be that the claim is invalid but
that the guarantor would step into the shoes of the creditor by
way of subrogation under 11 U.S.C. § 509(a) unless some ground
exists under § 509(b) for barring such subrogation. 	Accordingly,
the trustee would need to adduce evidence showing that there is
no such right of subrogation if the debt has been fully
satisfied.
II
If the guarantor’s payment was made, but did not satisfy the
entire debt, then the trustee’s alternative ground of objection
appears unsound. 	Presumably the gurantor’s payment gave rise to
a right of reimbursement or contribution (or a right to be
subrogated to Vend Lease Company, Inc.’s rights). 	Under 11
U.S.C. § 509(c), however, the court must subordinate to the claim
of Vend Lease Company, Inc. and for the benefit of Vend Lease
Company, Inc., any allowed claim that the guarantor has by way of
subrogation or for reimbursement or contribution. 	In other
words, the guarantor’s claim is disallowed until the claim of the
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Vend Lease Company, Inc., as the primary obligee, has been paid
in full. 	As stated by the District Court in Washington
Bancorporation v. F.D.I.C. (In re Washington Bancorporation),
1996 WL 148533, * 18 (D.D.C. March 19, 1996) (Lamberth, J.):
The principle applied by the court in this case is
simply that a bankruptcy claim is not reduced or
impaired by subsequent payments received from third
party obligors until such claim has been satisfied in
full. 	See, e.g., In re Realty Assocs. Securities
Corp., 66 F. Supp. 416, 424 (E.D.N.Y. 1946) ("But it
has been conclusively settled that ... the holder of a
claim upon which several parties are liable may prove
its entire claim against the estate of any who become
bankrupt and recover dividends calculated on the basis
of such entire claim as it existed when the petition
was filed, without regard to partial payments made by
other obligors until from all sources it has been paid
in full."); In re Coastland Chrysler Plymouth, Inc., 76
B.R. 212, 213 (Bankr. S.D. Fla. 1987) (applying the
principle to claims against the bankrupt in the face of
partial payment by surety); In re Sacred Heart Hosp. of
Norristown, 182 B.R. 413, 417-18 (Bankr. E.D. Penn.
1995); In re Gessin, 668 F.2d 1105, 1107 (9th Cir.
1982). . . . FDIC-C, as assignee of the commercial
paper claimants, is entitled to assert the full amount
of the commercial paper claims until it receives full
satisfaction of the claims.
Presumably once the creditor has received a full satisfaction, it
is entitled itself to no further distribution. 	However, 11
U.S.C. § 509(a) subrogates a guarantor who has paid a claim to
the rights of the creditor, so at that juncture, the guarantor
would step into the shoes of the creditor as to the balance of
payments owed on the filed proof of claim. 	Perhaps the trustee
could make such payments to the creditor who would hold the
excess distributions in trust for the guarantor. 	See In re
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Realty Assocs., 66 F. Supp. at 423 (creditor may receive excess
payments and then is to hold them in trust for the guarantor),
citing Swarts v. Fourth Nat’l Bank, 117 F. 1, 12-13 (8th Cir.
1902) (same). 	But that is an academic issue unless distributions
from the estate will be sufficient to result in a full
satisfaction of the creditor’s claim (when added to the payment
the guarantor made). 	The trustee has not stated an estimate of
the percentage distribution that would be made to creditors.
In accordance with the foregoing, it is
ORDERED that within 35 days after entry of this order, the
trustee shall file and serve on the affected creditor an
affidavit or affidavits (or a request for a hearing at which he
may present evidence) demonstrating that no claim is owed. 	It is
further
ORDERED that to the extent the trustee fails to file an
affidavit or a request for a hearing regarding the claim, the
court will overrule the objection as to the claim without
prejudice to a renewed objection to the claim.
[Signed and dated above.]
Copies to: Kevin R. McCarthy, Trustee; Office of U.S. Trustee;
Debtor; Debtor’s Attorney; and:
Vend Lease Company, Inc.,
Attention: Todd G. Sukeena, Credit Manager
P.O. Box 9553
Rosedale, MD 21237-0553
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