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#2217 signed 5-17-96

THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS









In Re:

BLUE MOUNTAIN INVESTMENTS, LTD.,

DEBTOR.

CASE NO. 86-41407-7



ORDER DENYING TRUSTEE'S OBJECTION TO CLAIM NO. 1 ON

PRESENT SHOWING AND SCHEDULING CONFERENCE

This matter is before the Court on the trustee's objection to the claim of William and Grace Shamblin, designated as claim number 1 on the claims docket in this case. The trustee asks the Court to completely disallow the claim. The trustee appears by counsel James E. Kelley, Jr., of Lewis, Rice & Fingersh, L.C., of Kansas City, Missouri. The Shamblins appear by counsel Ronald S. Weiss, David J. Weimer, and Samuel S. Ory of Berman, DeLeve, Kuchan & Chapman, L.C., of Kansas City, Missouri. After those parties submitted briefs on certain legal issues posed by the trustee's objection, the debtor raised additional objections to the claim through counsel Michael J. Friesen of Friesen & Wendler, P.A., of Garden City, Kansas. The Court has deferred consideration of the debtor's objections until the Court resolves the legal issues already presented. Having reviewed the briefs of the trustee and the Shamblins, the Court concludes the relief requested by the trustee must be denied for the time being.

The Shamblins' claim seeks damages for slander of title and malicious interference with a specific contract allegedly caused by the debtor's recording of an "Affidavit of Equitable Interest" in 1984. Attached to the claim are documents which purportedly support it. The trustee argues there is no basis in fact or law for the claim. The Shamblins respond that the claim is sufficiently stated to survive the trustee's attack, and that in any hearing the proof of claim should be considered prima facie evidence of the validity and amount of their claim. The Court disagrees with the positions of both parties.

The Shamblins' claim is unliquidated and disputed. Neither the underlying premise nor the value of the claim has been validated through litigation. The photocopied documents attached to the claim do not demonstrate the existence of the alleged contract to sell real property. The documents do not contain the signatures of the alleged contracting parties, but they do contain handwritten, material changes which appear to be initialed by the Shamblins but not the other party to the alleged contract. Thus, the documents appear at most to show an offer to sell or buy the property. In addition, to be valid and enforceable, the purported contract had to be approved by the Bankruptcy Court for the Southern District of California, and there is absolutely no indication that court's approval was ever sought, much less granted. Thus, the proof of claim cannot constitute prima facie evidence of the validity or the amount of the Shamblins' claim. Instead, the Shamblins must carry the burden of proving their claim without the benefit of any presumption concerning its validity and amount.

On the other hand, the proof is sufficient to give the trustee notice that the Shamblins hold a disputed, unliquidated claim against the debtor. The Shamblins may be able to prove at trial their entitlement to the damages claimed. At a minimum, the cost of clearing the "Affidavit of Equitable Interest" from the title to the property may be a recoverable item of damage, even if they had no contract to sell the property. The trustee's objection cannot be sustained on the present showing.

The Court believes it should hold a chambers conference with counsel for the trustee, the Shamblins, and the debtor to discuss the future course of this dispute. This conference is hereby scheduled for Friday, June 28th, 1996, at 1:20 p.m. in the Court's conference room.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of May, 1996.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

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