Bankruptcy complaint must be served on individual

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Two recent decisions from U.S. Bankruptcy Judge Robert D. Martin require that a debtor must serve an objection to a claim on a specifically named agent or officer of the creditor.

However, the cases also demonstrate that the court will be lenient in allowing debtors to correct their mistakes when they improperly serve a complaint.

In the first case, Lenee D. Cole filed for bankruptcy in the Western District of Wisconsin on Sept. 20, 2005. American Educational Services (AES), one of her creditors, informed her on Aug. 17, 2006, that the debt (a student loan) was generally nondischargeable, and that if she sought to be relieved of the debt, AES would have to be notified in writing with a copy of the Summons and Complaint. However, no officer or agent’s name was included in that letter.

Cole filed a summons and complaint seeking discharge from the debt, and mailed it to AES at the same address as that in the Aug. 17 letter. However, it was not addressed to any person specifically or generally; it only included AES, and an address.

AES did not answer, and default judgment was entered in favor of Cole.

AES then moved to have the judgment vacated, and Judge Martin granted the motion on Sept. 4 of this year.

At issue was Federal Rule of Bankruptcy Procedure 7004(b)(3), which states that service may be made “Upon a domestic or foreign corporation or upon a partnership or other unincorporated association, by mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent or to any other agent authorized by statute to receive service…”

The court noted a split of authority on what constitutes sufficient service.

Most courts have required strict compliance, but at least one case holds that service is effective, if the party to be served had filed an address for service which omitted an officer or agent’s name. Green Tree Financing Servicing Corp. v. Karbel, 220 B.R. 108, 112 (Bankr. Fed.App. 1998).

There is also some dispute among the courts over whether service is effective when the complaint is addressed to a generic recipient such as “Officer” or “President,” rather than to a specific officer or agent.

Judge Martin declined to decide whether the rule must be strictly observed, concluding that even if strict compliance is not required, Cole’s notice was insufficient, because it was not even addressed to a generic “officer.” In addition, AES lacked actual notice.

The court therefore held that service of process was defective and the court never had jurisdiction over AES. Accordingly, the court vacated the default judgment and reopened the case.

However, the court denied a second motion by AES to dismiss the case. Finding that Cole attempted to serve process, and AES has not been prejudiced by delay in proper service, the court tolled the 120-period for service to give Cole the opportunity to serve AES properly.

In the second case, decided Oct. 2 of this year, the court took the step it declined to take in Cole’s case, and expressly held that a complaint must be addressed to a specifically named officer.

Bruce R. & Sandi L. Sunde filed for bankruptcy, and Glen E. Johnson Construction, Inc., filed a secured claim.

Like AES, Johnson Construction did not name a specific person in its proof of claim, but only listed the name of the corporation and an address.

As in Cole’s case, the Sundes’ objection was addressed to the name of the company only, and Johnson Construction did not respond. Accordingly, the court granted the objection. Johnson Construction then sought to vacate the order, claiming it was not properly served.

As in Cole’s case, the court noted the split of authority, but this time, it adopted the position in favor of strict compliance with the rule.

The court wrote, “Rule 7004(b)(3) expressly requires that service be addressed to the attention of ‘an officer, [or] agent’ of the business. The court is not persuaded that the plain language of Rule 7004(b)(3) should be overridden simply because the Creditor failed to provide a proper address for service on its proof of claim form.”

As in Cole’s case, the court thus vacated the default judgment and reopened the case; also as in Cole’s case, the court gave the Sundes another opportunity to serve an objection properly.