554 B.R. 250
Bankr. D. Kan.2016Background
- Debtor hired Rayne-Storm to repair storm damage to his house; Rayne sued in state court and obtained a judgment (including attorney fees) recorded in Johnson County, Kansas.
- Debtor filed Chapter 13 on April 2, 2015, listed Rayne as an unsecured creditor, and served notice of the bankruptcy in the state case.
- Debtor’s Chapter 13 plan was confirmed; Rayne did not object to confirmation and did not file a timely proof of claim (its late claim was disallowed).
- Rayne sought relief from the automatic stay to foreclose/executive on its judgment lien, arguing its work was an "erection of improvements" exempted from homestead protection; Debtor opposed, claiming the homestead exemption shielded the residence.
- The bankruptcy court denied Rayne stay relief, found Rayne’s work was repair (not an improvement), held Rayne’s judgment lien did not attach to the homestead, found Rayne violated the automatic stay by retaining postpetition wages, and later denied Rayne’s motion to reconsider.
Issues
| Issue | Rayne-Storm's Argument | Debtor's Argument | Held |
|---|---|---|---|
| Whether Rayne’s judgment lien attached to Debtor’s homestead because its work constituted an "erection of improvements" under Kansas law | Work replaced/renewed roof and used new materials; industry usage and mechanic’s lien authorities show repairs here are "improvements" | Rayne did repairs, not improvements; did not timely protect rights (no mechanic’s lien filed, no timely proof of claim, no objection to plan/exemptions) | Court: Work was repair/replacement, not erection of improvements; homestead exemption prevented lien attachment, so Rayne had no lien on homestead and no stay relief. |
| Whether confirmation of Chapter 13 plan bars Rayne from seeking relief and binds it despite lack of allowed claim | Rayne argued it may still litigate lien attachment and equitable relief (and raised § 522(f) issues) | Debtor: Rayne waived challenges by failing to object to plan/exemption and by not timely filing claim | Court: Confirmation is binding (res judicata effect) on matters that should have been raised pre-confirmation; Rayne’s failure to act timely precludes relief; only plan default would justify relief post-confirmation. |
| Whether Rayne was entitled to an evidentiary hearing (and to present witness testimony) before denial of stay relief | Rayne argued it was denied due process and lacked a full evidentiary hearing under § 362(e) | Debtor: Rayne participated in briefing/oral argument and waived a requested evidentiary hearing; exhibits are cumulative/irrelevant | Court: Rayne waived right to evidentiary hearing by not timely requesting it; participation in arguments and delay forfeited that right. |
| Whether the order should be altered, amended, or vacated under Rules 59/60 (reconsideration) | Rayne claimed manifest error of law/fact, newly discovered evidence, and misapplication of law (mechanic’s lien analogies, industry usage) | Debtor argued Rayne seeks to re-argue matters and presents no new evidence or change in law; failure to meet Rule standards | Court: Reconsideration denied — Rayne showed no clear error, no new evidence, no intervening change in law, and no manifest injustice; Rule 59 relief is extraordinary and not warranted. |
Key Cases Cited
- Espinosa v. United Student Aid Funds, Inc., 559 U.S. 260 (2010) (confirmed Chapter 13 plan has binding res judicata effect)
- Farrey v. Sanderfoot, 500 U.S. 291 (1991) (purpose of § 522(f) lien avoidance is to protect debtor’s exemptions and fresh start)
- Matter of Gregory, 705 F.2d 1118 (9th Cir. 1983) (creditor’s failure to oppose discharge before confirmation can bar later challenge)
- De Priest v. Ransom, 165 Kan. 147 (Kan. 1948) (Kansas homestead exemption jurisprudence distinguishing scope of homestead protection)
- Haz-Mat Response, Inc. v. Certified Waste Servs. Ltd., 259 Kan. 166 (Kan. 1996) (Kansas decisions construe homestead exceptions narrowly)