604 B.R. 417
Bankr. S.D. Florida2019Background
- Debtor filed Chapter 13 in July 2013; Wells Fargo filed a secured proof of claim showing prepetition arrears and monthly mortgage payments. Debtor confirmed a plan that cured prepetition arrears and provided for ongoing postpetition payments.
- Early in the case Debtor paid $500/month as adequate protection for 12 months while pursuing a mortgage modification; after modification efforts failed Debtor’s confirmed plan (10th Amended Plan) increased later monthly payments by $136.26 to amortize the shortfall created by the initial $500 payments.
- Wells Fargo received notice of the 10th Amended Plan, did not object, and the plan was confirmed. Later, multiple modified plans were filed; one post-hearing modified plan (6MP) contained an unintended drafting error reducing aggregate payments to Wells Fargo by about $5,433.42 versus the confirmed 10th Amended Plan.
- The 6MP was confirmed in July 2015, Wells Fargo received the 6MP and the confirmation order, accepted trustee payments for nearly four years, and did not object or appeal the confirmation.
- After trustee reported plan completion in July 2018, Wells Fargo objected to the trustee’s notice of final cure payment, asserting a postpetition delinquency (~$4,810.37). Debtor moved to be deemed current based on the confirmed 6MP; the bankruptcy court granted that motion in May 2019.
- Wells Fargo moved to reconsider, arguing (1) Eleventh Circuit precedent in Bateman controls and prevents modification of mortgage claims on a principal residence, and (2) it lacked adequate notice of the change in treatment; the court denied reconsideration.
Issues
| Issue | Plaintiff's Argument (Wells Fargo) | Defendant's Argument (Debtor) | Held |
|---|---|---|---|
| Whether a creditor can challenge, after the fact, that a confirmed Chapter 13 plan improperly modified a home mortgage secured by the debtor’s principal residence | Bateman controls: §1322(b)(2)’s anti-modification rule prevents plan modification of such mortgages; the confirmation should not bind Wells Fargo | Under §1327(a) and Espinosa, a confirmed plan that provided Wells Fargo notice is binding; Wells Fargo’s failure to object or appeal bars collateral attack | Court held Espinosa supersedes Bateman; confirmed 6MP binds Wells Fargo and bars collateral attack |
| Whether Bankruptcy Rule 3002.1 procedure permits Wells Fargo to undo or collaterally attack confirmation by asserting postpetition payment shortfalls | Rule 3002.1 allows filing of notices of payment change and an objection to final cure; Wells Fargo says that process lets it enforce correct postpetition payments and expose the 6MP as incorrect | Rule 3002.1 provides a mechanism to resolve payment change disputes but does not permit collateral attack on a final confirmation order; modification of a confirmed plan requires §1329 procedures | Court held Rule 3002.1 does not allow collateral attack on a final confirmation; it only addresses payment-change disputes and cannot undo confirmation |
| Whether Wells Fargo received constitutionally adequate notice to be bound by the 6MP despite the modified plan being filed after the modification hearing | Wells Fargo contends the motion to modify did not propose changing its claim and the 6MP (filed post-hearing) surprised it, so notice was inadequate | Wells Fargo received the 6MP and the confirmation order, and had repeated opportunities over four years to object or appeal; documents plainly reflected the changed treatment | Court held Wells Fargo received notice reasonably calculated to apprise it and thus had adequate process under Espinosa |
| Whether reconsideration is permissible where Wells Fargo raises arguments that existed at time of the original order | Wells Fargo effectively asks the court to revisit Bateman and notice arguments | Debtor argues reconsideration is improper because arguments could have been raised earlier and finality binds parties | Court denied reconsideration, holding the motion raised matters that could have been presented earlier and thus failed under Rule 59(e)/60(b) standards |
Key Cases Cited
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010) (a confirmed Chapter 13 plan is binding on parties with adequate notice, barring collateral attack even if plan violates the Code)
- Universal American Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir. 2003) (confirmed plan cannot modify a claim secured solely by the debtor’s principal residence in violation of §1322(b)(2))
- Lufkin v. McCallum, 956 F.2d 1104 (11th Cir. 1992) (prior panel precedent may be disregarded to give full effect to an intervening Supreme Court decision)
- Provenzano v. Barnett, 215 F.3d 1233 (11th Cir. 2000) (panels must follow intervening Supreme Court authority over prior panel precedent)