## Facts

- Michael J. Rovell, an attorney, maintained a secured line of credit and deposit accounts with American National Bank and Trust Company of Chicago (ANB).
- In September 1994, Rovell wrote a $38,250 check (check 1) to Pretty Eyes Detective Agency but later concluded he had overpaid by more than $10,000.
- Rovell directed his employee, attorney Lisa Fair, to contact ANB to determine whether check 1 had cleared and, if it had not, to stop payment and issue a corrected replacement check.
- Around 1:40 p.m. on September 19, 1994, Fair called Linda Williams, ANB’s officer assigned to Rovell’s account.
- Fair had some identifying details (including the account number, payee, and amount) but was uncertain about the check number and date; the evidence conflicted as to what specific identifying information Fair provided and what Williams told Fair about the status of check 1.
- Fair ultimately placed a stop-payment order on check 1, and ANB advised her to wait a couple of days before issuing any replacement check.
- ANB’s processing system made a stop-payment order effective at the opening of the next business day, not immediately upon receipt.
- Before the stop-payment became effective under ANB’s system, check 1 cleared.
- Believing check 1 had not cleared, Rovell issued a replacement check (check 2) for the corrected amount, resulting in Pretty Eyes receiving payment on both checks and leaving Rovell with the resulting loss.
- Rovell later filed a voluntary Chapter 11 bankruptcy petition.
- ANB filed a proof of claim for $50,081.25, reflecting the amount owed on Rovell’s secured line of credit; Rovell did not dispute that amount as owed on the credit line.
- Rovell objected to the proof of claim and sought to reduce it by an offset, arguing that ANB’s handling of the stop-payment request and its communications about check 1 amounted to negligent misrepresentation causing the double payment.
- After an evidentiary hearing, the bankruptcy court overruled Rovell’s objection, allowed ANB’s claim in full, and later denied Rovell’s motion to reconsider; Rovell appealed to the district court.

## Issues

1. Whether Rovell produced evidence sufficient to overcome the prima facie validity of ANB’s properly filed proof of claim and establish a basis to reduce the claim by an offset.
2. Whether the bankruptcy court committed reversible error in rejecting Rovell’s negligent misrepresentation theory based on ANB’s statements and conduct concerning the status of check 1 and the stop-payment order.

## Decision

- The district court affirmed the bankruptcy court’s order allowing ANB’s proof of claim in full and affirmed the order denying reconsideration.
- The court held that ANB’s proof of claim was prima facie valid and that Rovell failed to carry his burden to rebut that presumption with evidence establishing a legally valid offset.
- Given the conflicting testimony about what was said during Fair’s phone call with Williams, the court deferred to the bankruptcy court’s credibility determinations and factual findings, reviewing them only for clear error.
- The court concluded that Rovell did not prove negligent misrepresentation by ANB in connection with the stop-payment communications and the timing of the stop-payment’s effectiveness.
- Although the district court disagreed with one aspect of the bankruptcy court’s reasoning, it found no abuse of discretion and no basis to disturb the result allowing the claim in full.

## Legal Principles

- A properly filed proof of claim constitutes prima facie evidence of the claim’s validity and amount under Federal Rule of Bankruptcy Procedure 3001(f); the objecting party must produce evidence sufficient to rebut that presumption.
- On appeal from the bankruptcy court, factual findings are reviewed for clear error, and the appellate court gives strong deference to the bankruptcy court’s credibility determinations; it does not retry the facts.
- A debtor seeking to reduce a creditor’s claim by offset must prove the facts and legal elements of the asserted offsetting cause of action.
- Under Illinois law, negligent misrepresentation requires proof of a false statement of material fact, carelessness in ascertaining truth, intent to induce reliance, justifiable reliance, and resulting damages; disputed or imprecise communications and uncertain identifying details may defeat proof of falsity, reasonable reliance, or causation.

## Conclusion

The district court affirmed allowance of ANB’s $50,081.25 bankruptcy claim because ANB’s proof of claim was prima facie valid and Rovell did not rebut it with evidence establishing an offset; the bankruptcy court’s credibility-based findings on the disputed stop-payment communications were not clearly erroneous, and Rovell failed to prove negligent misrepresentation or other actionable bank conduct that would reduce ANB’s claim.


Rovell v. American National Bank, 232 B.R. 381 (1998)