Bankowski v. Wells Fargo Bank, N.A. (In re Reid)
480 B.R. 436
Bankr. D. Mass.2012Background
- Debtors own property at 119 Vesey Street, Brockton, MA; mortgage currently held by Wells Fargo via MERS nominee for Taylor, Bean & Whitaker; plan elects cure and maintain under §1322(b)(5) and treats Wells Fargo’s claim as unmodified secured and paid through the Trustee.
- Debtors filed Chapter 13 in 2009; Wells Fargo filed proofs of claim for about $271.6k secured by the mortgage; no objections to the claim or amended claim prior to plan confirmation.
- Confirmation Order entered December 29, 2009, confirming a plan that paid Wells Fargo’s prepetition arrears ($2,000) through the Trustee over 60 months and left Wells Fargo’s lien intact; plan indicated no modified secured claims.
- Trustee filed a four-count adversary complaint on December 15, 2010 seeking (Count I) lien avoidance under §544(a) for a defective notarization, (Count II) to treat the claim as unsecured, and (Counts III–IV) to recover payments made under the plan for redistribution to unsecured creditors.
- Wells Fargo moved for summary judgment arguing plan confirmation bars relief under res judicata and judicial estoppel; court held the plan confirmation precludes all relief sought in four counts.
- Court concluded the Confirmation Order is preclusive as to all four counts and that the Chapter 13 Trustee is bound by the confirmed plan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether confirmation precludes relief under res judicata | Trustee argues plan not binding on her; seeks avoidance | Plan binds trustee; res judicata applies | Yes; plan precludes relief on all counts |
| Whether the trustee is bound by plan under §1327(a) | Trustee not explicitly bound by §1327(a) | Plan binds trustee as a participant in proceedings | Yes; trustee bound by confirmed plan |
| Whether Counts III–IV are barred by plan distributions | Recovery of payments through plan is not contemplated | Plan set distributions to unsecured claimants and barred changes | Yes; Counts III–IV precluded by Confirmation Order |
| Whether Counts I–II are barred given the lien status under plan | Lien can be avoided; plan not final on trustee | Confirmation fixed Wells Fargo’s lien and treated claim as unmodified | Yes; Counts I–II precluded by Confirmation Order |
Key Cases Cited
- Carvalho v. Federal National Mortgage Association (In re Carvalho), 335 F.3d 45 (1st Cir.2003) (confirmation typically precludes issues decided during confirmation)
- In re Layo (Celli v. First Nat’l Bank of N. Y.), 460 F.3d 289 (2d Cir.2006) (trustee bound by confirmation order; res judicata applies to plan issues)
- Monarch Life Ins. Co. v. Ropes & Gray, 65 F.3d 973 (1st Cir.1995) (elements of claim preclusion in federal law)
- United Student Aid Funds, Inc. v. Espinosa, 131 S. Ct. 1367 (2010) (confirmation order not void when plan includes relief properly brought in adversary)