In Re Duke
- Reporters:
- , ,
- Before:
- Sledge
MEMORANDUM OPINION
JAMES S. SLEDGE, Bankruptcy Judge.This case comes before the Court on the motion of FNRS Financial Corporation 1 , (“FNRS”), to reconsider the order entered on August 10, 1992, which sustained the standing trustee’s contest of the FNRS proof of claim.
FINDINGS OF FACT
Carl and Betty Duke (“debtors”) filed a petition under chapter 13 of Title 11 of the United States Code on May 14, 1992. Pursuant to the terms of the debtors’ plan, the debt owed to FNRS would be paid directly by the debtors. FNRS filed a proof of claim with the clerk of this Court on June 4; said claim was assigned claim # 5. The proof of claim purported to be a secured claim, but FNRS failed to attach a UCC-1 form or any documents supporting a perfected security interest to its proof of claim. On June 23, the standing trustee filed a contest to claim # 5, alleging that “[s]aid claim on its face does not appear to be entitled to secured claim status.” 2 The trustee’s contest further indicated that the contest would be withdrawn if documents substantiating perfection of FNRS’s security interest were filed.
On September 24,1992, the debtors modified their plan so that the allowed claim of FNRS would be paid by the trustee. The debtors also offered to pay the trustee all of their disposable income, i.e., $157.50 each two weeks for 130 such payments. Pursuant to the modification, the trustee would pay all available funds to unsecured claimholders until all allowed claims were paid, after paying standard administrative claims and one secured claim of $459.94. This modification was served by the debtors on all creditors, including FNRS. No further amendments were subsequently filed and the debtors’ plan, as modified, was confirmed in a hearing on November 5, 1992, after finding that the plan satisfied
On January 11, 1993, approximately two months after the confirmation of the debtors’ plan of reorganization, FNRS filed its motion to reconsider the order entered on August 10, 1992, sustaining the trustee’s contest of claim. The motion alleges that its claim is secured by a mobile home, with its security interest perfected by a recorded UCC Financing Statement. A hearing was held on February 4, 1993, on said motion. At said hearing, the Court advised the parties that written arguments would be accepted by no later than March 1, 1993, and that after such date, the motion would be under submission for a determination. Having considered the arguments presented at the hearing and the written arguments submitted to the Court, the Court finds that the motion to reconsider the order entered on August 10, 1992, is due to be denied.
CONCLUSIONS OF LAW AND APPLICATION TO FACTS
I.
PROCEDURE
In order for this Court to grant FNRS’s motion, the motion must procedurally travel in a vehicle which will allow this Court to reconsider its previous ruling. Federal Rule of Bankruptcy Procedure (hereinafter Rule) 9023, which makes
Rule 3008 provides that “[a] party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate. The court after a hearing on notice shall enter an appropriate order.” No time limits are explicitly stated for the filing of a motion for reconsideration under Rule 3008, and the ten-day time limit in Rule 9023 expressly does not apply. However, when Rule 3008 is considered in light of
“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 suchcreditor has objected to, has accepted, or has rejected the plan.”
Because of the binding effect of the confirmation order under
Finally, reconsideration is not permitted as an appeal under Rules 8001 and 8002. As stated in the earlier findings, FNRS failed to appeal the order sustaining the contest to claim #5. FNRS opted against the appeals process and chose to ask this Court for reconsideration of its earlier order entered approximately five (5) months prior to the request for reconsideration.
The failure of FNRS to timely move to amend or to appeal the contest of its claim, and the failure of FNRS to move to amend or to appeal the order confirming the debtors’ plan means that no means or vehicle of reconsideration exist for FNRS. Accordingly, the motion to reconsider the order entered on August 10, 1992, is denied. FNRS must accept its procedural choice. In re Pence, 905 F.2d 1107, 1110 (7th Cir.1990).
II.
CONFIRMATION IS BINDING
The claims allowance process, which can encompass the implementation of, inter alia,
“The critical aspect of the case at bar is that we are addressing this matter after the debtor’s second amended plan has been confirmed, and distributions have been made.... We cannot at this time address the arguments that would or could have been made at the time hearing on confirmation, since that time has passed.”
Haynes, 107 B.R. at 87 (emphasis original). See Simmons v. Savell (In re Simmons), 765 F.2d 547, 553 (5th Cir.1985) (stating that “under sections 506(a) and 1325(a)(5), a proof of secured claim must be acted upon — that is, allowed or disallowed — before confirmation of the plan or the claim must be deemed allowed for purposes of the plan”). See also Wallis v. Justice Oaks II, Ltd. (In re Justice Oaks II, Ltd.), 898 F.2d 1544 (11th Cir.) (citing In re Simmons with approval), cert. denied, 498 U.S. 959, 111 S.Ct. 387, 112 L.Ed.2d 398 (1990).
The debtors’ submitted their plan to this Court for confirmation after the claims allowance process was completed. No objection to confirmation was filed. The plan was confirmed after this Court found that the plan complied with all of the requirements of
The Sun Finance court acknowledged that a confirmed chapter 13 plan may fix the amount and type of a claim.
“We decline to hold ... that any flaw in the provisions of a Chapter 13 plan may be objected to after confirmation. Such a holding would, as Shoaf recognizes, step too hard on the debtors’ interest in finality after the confirmation of a Chapter 13 plan. We hold only that a debtor who wishes to challenge the amount of a secured claim either by asserting a counterclaim or offset against it or by disputing the amount or validity of the lien must file an objection to the creditors’ claim in order to put the creditor on notice that it must participate in the bankruptcy proceedings. A Chapter 13 plan may by its very nature change the terms of payment and otherwise modify the terms of the debt underlying the lien. Creditors are put on notice of the possibility of these types of modifications by notice of the filing of a Chapter 13 proceeding and must object to theconfirmation of a plan in order to prevent their effect. These plan provisions will be final as to all creditors in those respects because they do not conflict with other provisions of the bankruptcy code.”
Sun Finance, 972 F.2d at 642 (citation omitted). In analyzing its earlier holdings in Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir.1985), and Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir.1987), the court acknowledged that while “a secured creditor may remain outside the bankruptcy proceedings until an interested party objects to his allowed claim[,].... a confirmed Chapter 13 plan is res judicata as to all parties who participate in the confirmation process.” Id. 972 F.2d at 641. Similar rulings exist in this circuit. See Wallis v. Justice Oaks II, Ltd. (In re Justice Oaks II, Ltd.), 898 F.2d 1544 (11th Cir.), cert. denied, 498 U.S. 959, 111 S.Ct. 387, 112 L.Ed.2d 398 (1990) (creditor lost its right to object to another creditors claim once the bankruptcy court confirmed the debtor’s plan); SouthTrust Bank of Alabama v. Thomas (In re Thomas), 883 F.2d 991 (11th Cir.1989) (unless action is taken to avoid a lien, it passes through a bankruptcy proceeding); Fawcett v. Internal Revenue Service (In re Fawcett), 758 F.2d 588 (11th Cir.1985) (debtor, whose confirmed non-specific plan contained a generalized statement indicating that secured creditors would be paid in full — 100%, instead of an actual reduced amount which would not include post-petition interest, is bound by the terms of the plan and must pay 100% of the claim as submitted by creditor).
The Fourth Circuit in
Piedmont Trust Bank v. Linkous (In re Linkous),
990 F.2d 160 (4th Cir.1993), held that the notice given by the bankruptcy court under
After confirmation, only § 1329
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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
Accordingly, the only avenue available to a creditor who wishes to have an order on its claim reconsidered would be through modification of the confirmed plan under
III.
ORDER ON CONTEST OF CLAIM PROPER
The order entered on August 10, 1992, sustaining the contest of claim # 5 is consistent with the holdings of Foremost Fin. Servs. Corp. v. White (In re White), 908 F.2d 691 (11th Cir.1990) and Green Tree Acceptance, Inc. v. Calvert (In re Calvert), 907 F.2d 1069 (11th Cir.1990). The facts in White are, in some respects, similar to the facts presented in this case. In White, the creditor filed two proofs of claim. The first proof of claim was for the principal balance due, and the second proof of claim was for the pre-petition arrearage. Illegible documentation was attached as evidence of its secured status. The bankruptcy court denied confirmation of the debt- or’s first plan of reorganization. However, after the debtor amended his plan, the court confirmed the amended plan on August 11, 1988. It is apparent that at this hearing the court reviewed the creditor’s secured status on its own initiative. The court determined that the creditor’s claim was unsecured based on the failure to provide legible documentation. At a subsequent hearing on October 18, 1988, on the debtor’s modification of the plan and on the creditor’s motion for reconsideration of its secured status, the court denied the motion to reconsider.
The district court dismissed the creditor’s appeal of the bankruptcy court’s denial of the motion to reconsider, because such appeal was untimely filed. The district court was subsequently reversed by the Eleventh Circuit due, in part, to what it found to be “faulty procedures” and “procedural errors” of the bankruptcy court.
The Eleventh Circuit determined that the bankruptcy court “ignore[d]” Rule 3007
7
and, “[apparently, ... relied on the language of
In
Green Tree Acceptance, Inc. v. Calvert (In re Calvert),
907 F.2d 1069 (11th Cir.1990), the Eleventh Circuit found that the notice of the confirmation hearing sent to all creditors failed to comply with the
In the instant case, the errors found to have been committed by the bankruptcy court in White and Calvert 10 are not present. The notice sent to FNRS on May 20, 1992, contains the following statement, arranged in a conspicuous manner on the notice as follows:
“ATTN: CREDITORS file your claim with the clerk of the Court NOW. Claims not filed by bar date generally are not allowed. Bar date is September 9, 1992. All proofs of claim must be filed in DUPLICATE and must have supporting documentation.”
As previously stated, FNRS filed a secured proof of claim on June 4, 1992, but failed to attach evidence of the perfection of its security interest, i.e. a UCC-1 form.
On June 22, 1992, the Trustee mailed a copy of the contest of claim to FNRS, and on June 24, 1992, FNRS was served with the trustee’s contest of claim by the clerk of this Court along with a Notice and Opportunity for a Hearing. The trustee’s contest clearly indicates that the trustee objected to claim # 5 because said claim did not facially appear to be entitled to secured claim status. The caveat located near the bottom of the contest indicates that such contest would be withdrawn if documents evidencing the perfection of FNRS’s security interest were filed. In the notice sent by the clerk, the creditor is alerted to the fact that the trustee had contested its claim, is advised to file a response to the contest if the creditor is opposed to the contest being sustained, and is further advised that if no response is filed, the contest of the claim may be deemed by the Court to have been confessed.
In essence, FNRS was advised three separate times that it was required to file documents that would support its claimed secured status. It is clear to this Court that FNRS received adequate specific notice of the objection to its claim and that such specific notice complies with the requirements of White and Calvert. Cf. Fireman’s Fund Mortgage Corp. v. Hobdy (In re Hobdy), 130 B.R. 318 (Bankr. 9th Cir.1991); Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir.1993). The order should stand as entered.
IV.
PLAN TREATMENT OF FNRS CLAIM PROPER
Upon completion of the claims allowance process, it was determined that the claim filed by FNRS was an allowed unsecured claim in the full amount claimed. Because the confirmed plan treats FNRS’s allowed claim in the same manner as all other allowed unsecured claims, i.e., a pro-rata payments up to five years until all allowed claims are paid in full, no unfair discrimination exists. Additionally, the Court found at the confirmation hearing that the debtors’ plan of reorganization complies with the
The problems that existed in
SouthTrust Bank of Alabama v. Thomas (In re Thomas),
883 F.2d 991 (11th Cir.1989), are not present in this case. In
Thomas,
the debtors granted a purchase money security in
In the instant case, FNRS filed a proof of claim and the debtors’ plan of reorganization “provides for” such claim. Accordingly, FNRS is bound by the plan and is not presently entitled to relief from the automatic stay because it is being provided adequate protection through the provisions of the plan.
Upon completion of the plan, and after a discharge is entered, the debt owed to FNRS will be discharged and its lien avoided.
CONCLUSION
Therefore, pursuant to the findings of fact and conclusions of law as set forth above, it is ORDERED by the Court that the motion filed by FNRS to reconsider the order entered on August 10, 1992, is hereby DENIED.
Notes
. FNRS is the assignee for Resolution Trust Corporation as Receiver for City Federal Savings & Loan.
. It may be argued in terms of procedure that the trustee’s contest should more properly have been filed as an adversary proceeding under
. This conclusion is discussed in more detail in section II.
.
“(a) 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.”
. As discussed later in section III, the notices given in this case satisfy all the requirements discussed in Foremost Fin. Servs. Corp. v. White (In re White), 908 F.2d 691 (11th Cir.1990) and Green Tree Acceptance, Inc. v. Calvert (In re Calvert), 907 F.2d 1069 (11th Cir.1990).
.
“(a) At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured claim to—
(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan;
(2) extend or reduce the time for such payments; or
(3) alter the amount of the distribution to a creditor whose claim is provided for by the plan, to the extent necessary to take account of any payment of such claim other than under the plan.”
. Rule 3007 provides, in part, as follows:
“An objection to the allowance of a claim shall be in writing and filed. A copy of the objection with notice of the hearing thereon shall be mailed or otherwise delivered to the claimant, the debtor or debtor in possession and the trustee at least 30 days prior to the hearing.”
. Rule 3012 provides as follows:
“The court may determine the value of a claim secured by a lien on property in which the estate has an interest on motion of any party in interest and after a hearing on notice to the holder of the secured claim and any other entity as the court may direct.”
. See Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir.1993) (majority opinion follows holding of Calvert) (dissenting opinion gives careful analysis of binding effect of order confirming plan and the urgent need of bankruptcy courts to depend upon finality in disposing of overwhelming volume of cases, as well as duty of creditors to be responsible to protect their interests).
.While the Court is aware that Calvert addressed issues concerning motions for valuation, and not contests of claims, and, therefore, is not directly related to the facts and holding of this case, Calvert is recognized for its holding relating to the importance of the requirement of specific notice.
. When the debtor receives a discharge and property of the estate vests in the debtor, the property will be free and clear of FNRS’s lien.
.
“(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void unless—
“(2) such claim is not an allowed secured claim due to the failure of any entity to file a proof of such claim under section 501 of this title.”
.The broad language of Thomas that a lien-holder can elect to ignore the bankruptcy proceedings, which can be read to conflict with the preclusive effect of a binding order, has caused it to be criticized. 2 Keith M. Lundin, Chapter 13 Bankruptcy, § 6.12 (1992).