HEATHER EDWARDS, Plaintiff and Appellant, v. BROADWATER CASITAS CARE CENTER, LLC, et al., Defendants and Respondents.
No. B247596
Second Dist., Div. Five
Dec. 5, 2013
221 Cal. App. 4th 1300
Lyon Law and Geoffrey C. Lyon for Plaintiff and Appellant.
Levinson Arshonsky & Kurtz, Robert A. Levinson and Yoonis J. Han for Defendants and Respondents.
Opinion
TURNER, P. J.—
I. INTRODUCTION
Plaintiff, Heather Edwards, has appealed cost and attorney fee awards imposed by the trial court against her following the unsuccessful arbitration of her employment discrimination claim. She argues the trial court exceeded its jurisdiction in awarding costs and attorney fees to defendants, Broadwater Casitas Care Center, LLC, and Nathan Ure. Defendants have moved to dismiss plaintiff‘s appeal as moot. Defendants argue the merits of plaintiff‘s appeal have been resolved against her in a bankruptcy proceeding under
II. BACKGROUND
On September 19, 2012, following confirmation of the arbitration award, the trial court awarded defendants $19,826 in costs. A writ of execution
III. DISCUSSION
Defendants assert the chapter 13 plan confirmation order precludes plaintiff from challenging the cost and attorney fee awards issued by the trial court. The res judicata effect of the chapter 13 plan confirmation order is primarily a question of law. (In re Summerville (Bankr. 9th Cir. 2007) 361 B.R. 133, 139; In re Brawders (Bankr. 9th Cir. 2005) 503 F.3d 856 [325 B.R. 405, 410]; see State Farm General Ins. Co. v. Workers’ Comp. Appeals Bd. (2013) 218 Cal.App.4th 258, 268, fn. 4 [159 Cal.Rptr.3d 779]; Noble v. Draper (2008) 160 Cal.App.4th 1, 10 [73 Cal.Rptr.3d 3].) We disagree with defendants’ position.
Chapter 13 allows an individual with regular income to adjust his or her debts under a repayment plan. (
The preclusive effect of a confirmed plan is defined in
In cases which require construction of statutory language, the United States Supreme Court has noted, “[T]he statutory language controls its construction.” (Ford Motor Credit Co. v. Cenance (1981) 452 U.S. 155, 158, fn. 3 [68 L.Ed.2d 744, 101 S.Ct. 2239]; see Griffin v. Oceanic Contractors, Inc. (1982) 458 U.S. 564, 571 [73 L.Ed.2d 973, 102 S.Ct. 3245] [” ‘There is, of course, no more persuasive evidence of the purpose of a statute than the words by which the [L]egislature undertook to give expression to its wishes.’ “].) Further, in interpreting a statute, the Supreme Court has emphasized the importance of avoiding “absurd results” (United States v. Turkette (1981) 452 U.S. 576, 580 [69 L.Ed.2d 246, 101 S.Ct. 2524]), ” ‘an odd result’ ” (Public Citizen v. Department of Justice (1989) 491 U.S. 440, 454 [105 L.Ed.2d 377, 109 S.Ct. 2558]), or “unreasonable results whenever possible” (American Tobacco Co. v. Patterson (1982) 456 U.S. 63, 71 [71 L.Ed.2d 748, 102 S.Ct. 1534]). Moreover, the United States Supreme Court has noted, “Judicial perception that a particular result would be unreasonable may enter into the construction of ambiguous provisions, but cannot justify disregard of what Congress has plainly and intentionally provided.” (Commissioner v. Asphalt Products Co., Inc. (1987) 482 U.S. 117, 121 [96 L.Ed.2d 97, 107 S.Ct. 2275]; see U.S. v. Ninety-Three Firearms (6th Cir. 2003) 330 F.3d 414, 420.) In Griffin v. Oceanic Contractors, Inc., supra, 458 U.S. at p. 571, the Supreme Court stated: “Nevertheless, in rare cases the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters, and those intentions must be controlling. . . . [Citation.]” (See United States v. Ron Pair Enterprises, Inc. (1989) 489 U.S. 235, 242 [103 L.Ed.2d 290, 109 S.Ct. 1026] [“In such cases, the intention of the drafters, rather than the strict language, controls.“].)
Under
However, the res judicata effect of a confirmed chapter 13 plan is limited. (See In re Enewally, supra, 368 F.3d at pp. 1172-1173; In re Seidler (11th Cir. 1995) 44 F.3d 945, 948-949; In re Summerville, supra, 361 B.R. at p. 140; In re Brawders, supra, 325 B.R. at p. 411.) As the United States District Court for the Western District of Virginia has explained: “Generally, [section] 1327(a) does provide a res judicata effect to the terms of a confirmed plan. [Citation.] This effect, however, is premised on the notion that the bankruptcy court has addressed in the confirmed plan and order only those issues that are properly within the scope of the confirmation hearing.” (In re Linkous (Bankr. W.D.Va. 1992) 141 B.R. 890, 898, affd. (4th Cir. 1993) 990 F.2d 160, 163.) Thus, the federal courts have held in specified circumstances that a confirmed chapter 13 plan has limited preclusive effect. Among the specified circumstances are cases where there were issues that were not or could not have been resolved in the confirmation process. (See In re Seidler, supra, 44 F.3d at pp. 948-949 [mortgage lien]; In re Summerville, supra, 361 B.R. at pp. 140-141 [validity of note and deed of trust]; In re Brawders, supra, 325 B.R. at pp. 410-411 [county tax lien]; In re Beard (Bankr. N.D.Ind. 1990) 112 B.R. 951, 954 [federal tax lien]; In re Minick (Bankr. D.C. 1986) 63 B.R. 440, 441-442 (Minick) [mortgage].)
For example, a confirmed plan has no preclusive effect as to issues that must be brought by an adversary proceeding in the bankruptcy court. (See In re Enewally, supra, 368 F.3d at p. 1173 [“a Chapter 13 plan confirmed while an adversary proceeding was pending would not have res judicata effect on the adversary proceeding.“]; In re Summerville, supra, 361 B.R. at p. 141 [quoting Enewally]; In re Beard, supra, 112 B.R. at p. 956 [“If an issue must be raised through an adversary proceeding it is not part of the confirmation process and, unless it is actually litigated, confirmation will not have a preclusive effect.“].) A confirmed plan is not binding as to the amount of a creditor‘s claim when the claims bar date has not passed. (In re Grogan (Bankr. E.D.Cal. 1993) 158 B.R. 197, 199-200; see Minick, supra, 63 B.R. at p. 442.) And a confirmed plan is not res judicata if to so conclude would result in a due process denial. (In re Linkous, supra, 990 F.2d at pp. 162-163; see In re Summerville, supra, 361 B.R. at p. 141; In re Brawders, supra, 325 B.R. at p. 411.)
Moreover, federal decisional authority explains that
In Elliott, supra, 150 B.R. at page 38 for example, the debtors filed a chapter 13 bankruptcy petition in which they acknowledged a debt to certain ITT Corporation entities (ITT). The bankruptcy court confirmed the plan. The
Similarly, in Minick, supra, 63 B.R. at page 441, the United States Bankruptcy Court for the District of Columbia confirmed a chapter 13 plan. The confirmation order was based on the amount the creditor claimed was due rather than the lesser amount the debtor acknowledged. The bankruptcy court determined it was more important to begin to cure the debtor‘s arrears than to delay while determining the precise amount thereof. (Minick, at p. 441.) The creditor argued the precise amount of its claim should have been judicially determined prior to confirmation of the debtor‘s chapter 13 plan. The bankruptcy court disagreed. The bankruptcy court held: “[Section] 1327(a), which states that ‘the provisions of a confirmed plan bind the debtor and each creditor . . .‘, does not say and certainly does not mean that something that is not a ‘provision of a confirmed plan‘—that is, the precise amount of each creditor‘s claim—is ‘binding’ when it has not yet been determined. . . . Bankruptcy courts nationwide routinely confirm Chapter 13 plans without awaiting judicial resolution of all claims. Indeed, in most Chapter 13 cases, the time for creditors even to file their claims . . . does not expire until some two months after the date normally set for the
Moreover, as noted, under specified circumstances, a debtor or creditor may seek to modify a confirmed plan.
We believe the following Seventh Circuit analysis describes why res judicata principles do not in every case apply to a debtor‘s modification petition: “Similarly, the statutory framework of the Bankruptcy Code plainly assumes the possibility of modifications of bankruptcy plans after they are confirmed. Section 1327 of the bankruptcy code provides that ‘the provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.’ § 1327. Congress, however, also provided a mechanism to change the binding effect of § 1327 when it passed § 1329 to allow for modifications. ‘If the drafters of the Bankruptcy Code intended for a confirmation hearing to have res judicata effect, there would be little or no reason for Section 1329.’ In re Williams, 108 B.R. 119, 123 (Bankr. N.D.Miss. 1989). Moreover, Congress could have specifically imposed a precondition to a § 1329 modification, but it did not do so. In fact, where it deemed appropriate, Congress could have specifically provided a ‘change in circumstance’ prerequisite under another provision of the Bankruptcy Code. § 1328(b). See In re Phelps, 149 B.R. 534, 538 (Bankr. N.D.Ill. 1993); In re Powers, 140 B.R. 476, 479 n. 3 (Bankr. N.D.Ill. 1992). This provision makes it clear that Congress did not intend the common law doctrine of res judicata to apply to § 1329 modifications.” (In re Witkowski (7th Cir. 1994) 16 F.3d 739, 745; see In re Taylor, supra, 208 B.R. at p. 833; In re Duke (Bankr. N.D.Ala. 1993) 153 B.R. 913, 918 [§ 1329 “permits a modification of a plan‘s treatment of a claim, which must be strictly and narrowly construed as an exception to the binding effect of § 1327(a)“].) Thus, if plaintiff is successful in her appeal, she can move to modify the confirmation plan to reduce her payments, i.e., eliminate them, to defendants.
We conclude, utilizing established rules for construing federal statutes,
We now turn to our case. Here, it is undisputed the trial court‘s authority to impose costs and attorney fees was not actually litigated in the bankruptcy court. The parties did not raise the issue in the bankruptcy court other than to report each side‘s view as to the amount due. Nor did the bankruptcy court address the question of the correctness of the cost and attorney fees awards. The issue was not actually litigated and decided in the chapter 13 confirmation process. Nor was it necessary to determine the validity of the obligation in order to resolve any plan confirmation issue. The confirmed chapter 13 plan does not preclude plaintiff‘s appeal challenging the trial court‘s cost and attorney fees award. No doubt, plaintiff acknowledged the existing debt in her chapter 13 plan and voluntarily agreed to make payments on it. But nothing in federal bankruptcy law prevents her from, outside the bankruptcy proceeding, challenging the trial court‘s authority to impose the obligation on her in the first instance.
This appeal would be moot if we could not potentially grant plaintiff any effectual relief. (Eye Dog Foundation v. State Board of Guide Dogs for the Blind (1967) 67 Cal.2d 536, 541 [63 Cal.Rptr. 21, 432 P.2d 717]; Mercury Interactive Corp. v. Klein (2007) 158 Cal.App.4th 60, 77-78 [70 Cal.Rptr.3d 88].) However, because of the limited res judicata effect of the confirmed plan, we can determine if plaintiff owes no or less money to defendants. Further, if plaintiff is successful, she can seek modification of the confirmed plan to limit her payments to defendants. We recognize the bankruptcy court may not permit the confirmation plan to be amended or the judgment in our case to be affirmed. What the future holds for the litigants is unclear. And that is why this appeal is not moot. We need not address any issues at this point concerning the authority of a bankruptcy court to determine the merits of state court suit which does not involve public rights. (Stern v. Marshall (2011) 564 U.S. [180 L.Ed.2d 475, 131 S.Ct. 2594, 2608-2620]; Crowell v. Benson (1932) 285 U.S. 22, 50 [76 L.Ed. 598, 52 S.Ct. 285].)
IV. DISPOSITION
Defendants’ motion to dismiss the appeal is denied. The foregoing conclusions are fully consistent with federal bankruptcy decisional authority.
Kriegler, J., and Kumar, J.,* concurred.
*Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.