OPINION AND ORDER ON CLAIM OBJECTIONS
Part I — Introduction
Several cases, including the one styled above, are before the court on debtors’ objections, under Rule 3007,
A second subset of claims and objections, which to some extent overlap, with the first subset, include claims that were filed before confirmation in cases where the chapter 13 trustee has since made distributions on the claims pursuant to a confirmed plan (in some cases, the claims have been paid in full). Some of the claims were filed as long as two and a half years before the claim objections were filed, and almost all of the confirmed plans provided for a distribution on unsecured claims.
The debtors did not object to the validity of the underlying debts other than to say the statute of limitations for filing suit to collect the debts has expired, which, if true, would mean a remedy was no longer available but would not mean the debts were no longer valid. See Johnson v. Midland Funding, LLC,
Part II — Open Account v. Account Stated
Pursuant to Bankruptcy Code § 502(a), a proof of claim is deemed allowed unless a party in interest objects. Rule 3002(f) provides that “[a] proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim.” Under Alabama law the statute of limitations is an affirmative defense, and the party asserting an affirmative defense bears the burden to prove that defense. Ala. R. Civ. P. 8(c); Stewart v. Brinley,
Initially, the debtors argue that the medical debts, incurred more than three
Alabama case law provides the following guidance in analyzing the nature of the debts:
An account stated is a post-transaction agreement. It is not founded on the original liability, but is a new agreement between parties to an original account that the statement of the account with the balance struck is correct and that the debtor will pay that amount. Martin v. Stoltenborg,
A prima facie case on an account stated is made when the plaintiff proves (1) a statement of the account between the parties is balanced and rendered to the debtor; (2) there is a meeting of the minds as to the correctness of the statement; and (3) the debtor admits liability. Ingalls v. Ingalls Iron Works Co., supra; Barber v. Martin,
Univ. of South Ala. v. Bracy,
An account stated is an agreement between parties who have had previous monetary transactions. Karrh v. Crawford-Sturgeon Ins., Inc.,468 So.2d 175 , 176. A prima face case is established when the plaintiff proves three elements: “(1) a statement of the account between the parties is balanced and rendered to the debtor; (2) there is a meeting of the minds as to the correctness of the statement; and (3) the debtor admits liability.” Univ. of South Alabama v. Bracy,466 So.2d 148 , 150 (Ala.Civ. App.1985) (citing Ingalls v. Ingalls Iron Works Co.,258 F.2d 750 (5th Cir.1958)). An account stated claim is founded not on the original liability between parties, “but rather on the defendant’s admission (which can be express or implied) that a definite sum is due.” Karrh,468 So.2d at 176 .
Compass Bank v. Limon,
The debtors offered no evidence that the medical debts had not been incurred and billed in the ordinary course of events. In fact, some claims included charges for multiple visits, and the debtors admitted that the charges for services rendered within three years before their bankruptcy cases were filed would not be barred under any circumstances. For example, with regard to claim 14 in the Hammon case, Case No. 13-40433-JJR13,
However, the court need not rest on that admission to decide the matter. Even for the claims supported by only one service date, the result is the same. The objecting debtors have offered no evidence whatsoever that the debts are in the nature of open accounts to defeat the claims’ prima facie validity. When asked to explain his position at the hearing, debtors’ counsel responded that the medical debts should be treated as open accounts because there were no signed contracts, and if these debts were treated as accounts stated, that could mean that any debt that was originally an open account (assuming these originally were) could be converted into an account stated if certain steps were taken. Creditors’ counsel countered that the debtors’ attorney’s statement regarding the possibility of converting an open account into an account stated, by rendering a statement showing the charges and receiving no objection to those charges, was, in fact, an accurate pronouncement of Alabama law, and the court agrees.
The court finds that the debtors have not met their burden of proving that the medical debts were open accounts, and therefore barred by the statute of limitations when the cases were filed. No evidence was offered that the medical debts at issue had proceeded in any manner other than the ordinary course for the provision of, and payment for, medical services. The debtors did not dispute that the services were provided on the days and in the amounts as shown on the claims’ attachments. The debtors did not allege, and did not attempt to prove, that they were not billed for those services in proximity to their provision, nor did they allege that any of the bills were ever disputed after they were received. Many of the debts were scheduled by the debtors as undisputed in the exact or higher amount than that for which claims were filed (as was the case, for example, with claims 3 and 4 in the Perry case, Case No. 12-41504-JJR13). The debtors offered no evidence to substantiate the treatment of the medical bills as open accounts, in contravention of the treatment of the accounts as distinct obligations, incurred at different times and for each of which the amount owing had been rendered without regard to the other obligations, as shown on the claim attachments. In short, the debtors have not rebutted the prima facie validity of the claims in any fashion. Therefore,-as to the nature of the medical debts, the court finds those debts are not open accounts but are accounts stated, and are not barred by the applicable six-year statute of limitations. Accordingly, the following ob
Case No. Debtor’s Name Claim No. Creditor Objection No. Doc.
12-41504 Perry Quantum3 Group Doc. 73
12-42047 Bowers Quantum3 Group Doc. 72
12-42047 Bowers Quantum3 Group Doc. 73
12-42047 Bowers Quantum3 Group Doc. 74
12-42139 Latham GRMC c/o PASI Doc. 90
12-42161 Neeiv GRMC c/o PASI Doc. 50
13-40433 Hammon 14 Franklin Collec. Doc. 69
13-41787 Johnson GRMC c/o PASI Doc. 37
13-42119 Hotchkiss DRMC c/o PASI Doc. 55
14-40812 Fail 10 GRMC c/o PASI Doc. 40
Part III — Effect of Payments by Trustee Pursuant to Conftrmed Plans
The second subset of claims includes some of the medical claims that fell within the three-to-six-year window prepetition— more than three years but less than six years old — as well as older medical and credit card claims that were indisputably stale and showed on the face of the claims that they were subject to a statute of limitations challenge when they were filed, but which have since received a distribution from the trustee under confirmed plans. As to those claims, regardless of their age, on which the trustee made payments, the creditors contend that partial payments (and in some cases, full payment) by the trustee removed the statute of limitations’ bar pursuant to Ala.Code 1975 § 6-2-16. The creditors contend further that for those claims filed preconfir-mation, the plan language that provided the debtors would pay some dividend toward unsecured claims qualified as an “unconditional promise in writing signed by the party to be charged” sufficient to extinguish the bar under that same bar-removal Alabama Code provision. Finally, the creditors argued that the confirmed plans are res judicata as to the statute of limitations argument against claims filed preconfirmation, or if not, then laches should apply and bar any defense. The court will address each contention in turn,
a. Alabama Code 1975 § 6-2-16: Partial Payment
Alabama Code 1975 § 6-2-16 provides:
No act, promise, or acknowledgment is sufficient to remove the bar to an action created by the provisions of this chapter, nor is such evidence of a new and continuing contract, except a partial payment, made upon the contract by the party sought to be charged before the bar is complete or an unconditional promise in writing signed by the party to be charged thereby.
Under the unambiguous language of § 6-2-16, a partial payment must be made “before the bar is complete” in order to remove the bar. The payments by the trustee as to the indisputably stale subset of claims were all made after the cases were filed, and after the statute of limitations of six years had run, so that the bar was, in fact, complete when the cases were filed. What has been lost in the creditors’ argument is that partial payments made after the bar of the statute of limitations is in place do not remove the bar. Chapman v. Barnes,
b. Alabama Code 1975 § 6-2-16: Unconditional Promise in Writing
. Alternatively, the creditors asserted that for those claims on which payments were made pursuant to confirmed chapter 13 plans, the language in the plans that provides for some percentage payment to the unsecured claimholders is an unconditional promise in writing signed by the party to be charged, and is therefore sufficient to remove the bar. The court disagrees. In the case of Chapman v. Barnes, supra, the Supreme Court of Alabama examined letters written and signed by the parties to be charged in which they acknowledged the debt, were specific as to amount, and expressed a desire and expectation to pay the debt, further showing a desire and a willingness to pay the debt after a time and containing a proposal for how the payment could be accomplished. Id. at 590. However, despite specifically acknowledging the debt and a willingness to pay it along with a future payment proposal, the letters did not rise to the level of an unconditional promise to pay the debt, and did not “import the written absolute undertaking to pay the debt required to a removal of the bar of the statute.” Id.
The provisions of a chapter 13 plan are similar. It is true that chapter 13 plans are in writing and are signed by debtors. Once confirmed, a plan’s provisions become binding on the debtor, creditors, and the trustee. Code § 1327(a). Those provisions are not, however, a new unconditional promise by debtors to pay those creditors who filed their claims preconfir-mation. The commitments of debtors under chapter 13 plans, even if they could be construed as “promises” between the debtors and creditors, are “conditional.”
As a demonstration of the nature of the commitments by debtors under confirmed chapter 13 plans, consider the consequences of default. If a chapter 13 debtor defaults under a confirmed plan, creditors do not have a breach of contract cause of action for the amounts that remained owing under the plan — which may be a fraction of the original debt — but instead creditors may move to dismiss the case, and if the case is dismissed, the debtor will be denied the continued benefits of chapter 13, including the automatic stay and discharge upon completion of plan payments. This stands in contrast to the effect of confirmation in a non-individual chapter 11 reorganization case, in which the discharge is entered at confirmation and the provisions of the confirmed plan become the new contract between the debtor and its creditors. See In re Troutman Enters.,
While state statutes of limitations may be extended against the debtor and co-obligors in certain circumstances when
In contrast to an unconditional promise to repay debts, chapter 13 plan provisions are the debtors’proposals for dealing with debts, much like the proposal letter at issue in Chapman v. Barnes, supra, and that proposal when approved by the court is binding on all parties by virtue of the confirmation order. But the plan’s repayment proposal, even after confirmation, is always conditioned upon the debtor receiving the benefits of chapter 13. In the event the case is dismissed and those benefits are lost, the plan and its order of confirmation no longer have a binding effect on the debtors or anyone else as to payments that have not yet been made. See In re Parrish,
Part IV — Finality of Conñrmed Plans
Although the provisions of confirmed plans are not unconditional new promises to pay debts, they are nonetheless binding. It is well-established law in the Eleventh Circuit that, pursuant to Code § 1327, chapter 13 confirmation orders are final judgments on the merits of issues that were, or could have been raised at confirmation. “Confirmation of a Chapter 13 plan by a bankruptcy court of competent jurisdiction, in accordance with the procedural requirements of notice and hearing of confirmation, ‘is given the same effect as any district court’s final judgment on the merits.’ ” Universal American Mort. Co. v. Bateman (In re Bateman),
In Bateman, the Eleventh Circuit analyzed a secured mortgage creditor’s obli
Similarly, it was years after confirmation that the creditor in Bateman objected to its plan treatment, and the circuit court found that although a timely objection to confirmation would have no doubt succeeded, the creditor had waited too late to assert itself and was precluded from then raising an issue (i.e., the motion to dismiss for failure of the plan to comply with the Code’s requirements) that it could have asserted at confirmation. “Because it did not vindicate its rights at the appropriate stages of the Chapter 13 process, however, [the creditor] cannot now argue for a dismissal of the petition at its near conclusion without assuming some responsibility for letting the discrepancy go this far unchallenged.” Id. at 833. The end result in Bateman was that the creditor waited too late to object to its plan treatment and the trustee waited too late to object to the creditor’s claim. “[The creditor’s] proof of claim and the Plan’s listed distribution amount, however improper, was within the definition of claim preclusion because it very well might have been and, as we have articulated should have been, presented ... prior to the Plan confirmation.” Id. (citing Starling,
The Eleventh Circuit again visited principles of res judicata and the effect of Code § 1327 in Hope v. Acorn,
In its analysis, the circuit court acknowledged, “Significantly, the bankruptcy terrain we traverse is not pristine.” Id. at 1193. The court then described its holding in Justice Oaks II as requiring that an objection by a creditor to another creditor’s claim on grounds that the chapter 11
Importantly, the Hope panel’s reliance on Bateman and Justice Oaks II confirmed their continuing validity despite the fact that many chapter 13 confirmations now take place before the proof of claim bar date, although the circuit court stressed that its holding was narrow and did not address what difference might be made had the trustee become aware of the defect in perfection- only after confirmation. Id. at 1195. More significantly for the objections now before this court, none of the controlling case law deals specifically with what effect, if any, the confirmation order had on the ability to mount a post-confirmation challenge to a general unsecured claim filed pre-confirmation, where the claim disclosed on its face that it was subject to a statute of limitations objection, and more particularly, when the confirmation order confirmed a plan that provided for some distribution to the holders of unsecured claims.
This court skirted the edges of this territory in Graves v. First Educators Credit Union (In re Graves),
A recent Fourth Circuit decision addressed a similar, but distinct, issue and
Similarly, a ruling for the debtors in the instant cases would necessitate a finding that the unsecured claims at issue, are not allowed claims despite the fact that the plans were confirmed years past, and payments have been made on those claims.
The court in Covert went further:
The Plaintiffs, as debtors in their own bankruptcy proceedings, could have objected to [the creditor’s] proofs of claim at the time they were filed on the basis that they violated these consumer protection statutes.... Here, Plaintiffs do not assert that any information necessary to make out their statutory claims were unavailable to them at the time their plans were confirmed. Accordingly, Plaintiffs should have raised these statutory claims during the plan confirmation hearings, and their failure to do so means that these claims are barred by res judicata.
Id. at 247-48. The same analysis applies here, particularly when the basis for the objection is the expiration of the statute of limitations, a fact easily gleaned from information contained in the proofs of claim. Explaining the policy supporting its ruling forbidding post-confirmation challenges via separate proceeding to the validity of claims filed pre-confirmation but not objected to before confirmation, the Fourth Circuit focused on the importance of not only encouraging debtors to act timely to bring possible statutory damages assets into the estate, but also the overarching policy of finality and the line in the bankruptcy sand that is drawn by the confirmation order. “Were we to hold that proofs
Distinguishing its precedent that allows a creditor to mount a postconfirmation challenge to a plan’s reclassification of a secured claim to unsecured, because an action to determine the validity of a lien must be brought by adversary proceeding and is therefore not part of the confirmation process, the Fourth Circuit in Covert emphasized that its earlier decision in Cen-Pen Corp. v. Hanson,
A finding of preclusion is further supported by the identity of the party being bound by the effect of the confirmed plan on preconfirmation claims: to-wit, the debtor. “Any such concerns over the notice necessary before altering the rights of third parties are inapplicable here, where the Plaintiffs seeking relief from the confirmation orders are the debtors themselves, and they clearly suffered from no lack of notice of the claims against them.” Covert,
Case No. Debtor’s Name Claim No. Creditor Objection Doc. No.
12-40968 Templeton Quantum3 Group 98
12-40968 Templeton Quantum3 Group 99
12-41504 Pern’ Quantum3 Group 73
12-41585 Stevens Jefferson Capital 88
12-
12-42356 Collom Quantum3 Group 66
12-42356 Collom Quantum3 Group 67
Alternatively to a finding of preclusion for the claims filed before confirmation, and in every case in which the claims were filed after confirmation and payments have been made by the trustee, it has simply been too long, and too many parties have relied too much upon the debtors’ inaction to now reward the debtors’ delay by disallowing the claims. The doctrine of laches is an essentially equitable doctrine resting upon two elements: “(1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense.” Costello v. United, States,
The equitable doctrine of laches “bars a plaintiff from maintaining a suit if he unreasonably delays in filing a suit and as a result harms the defendant.” Amtrak v. Morgan,536 U.S. 101 ,122 S.Ct. 2061 , 2077,153 L.Ed.2d 106 (2002). “To establish laches, a defendant must demonstrate (1) a delay in asserting a right or a claim, (2) that the delay was not excusable, and (3) that there was undue prejudice to the party against whom the claim is asserted.” AmBrit, Inc. v. Kraft, Inc.,812 F.2d 1531 , 1545 (11th Cir.1986); see also In re Sly,305 B.R. 67 , 71 (Bankr.N.D.Fla.2003) (citing Am-Brit, Inc. and analyzing a laches claim in the context of a bankruptcy proceeding).
General Lending Corp. v. Cancio,
The prejudice that can form the basis of a laches determination is more than a showing that allowing the objections to be sustained would harm another (such as the claimholders). “This is a misunderstanding of what [prejudicial] means.... To say that an error is prejudicial 19 means not that if the error is corrected someone will lose, which is almost always true, but that the error itself imposed a cost, as by misleading someone.” Matter of Stoecker,
Disallowance this far into the case will raise other issues, such as the propriety of recovering the amounts paid from the creditors and re-distributing the recovery to other allowed claimants, and adjusting plan percentages or bases as may be required. It is not equitable to allow the debtors to create such problems for the other parties affected when the failure to object in a reasonable time is completely without excuse. See, e.g., Shook,
Accordingly, the objections to the following claims are overruled based on laches, and the claims are allowed as filed:
12-40968 Templeton Quantum3 Group 98
12-40968 Templeton Quantum3 Group 99
12-40968 Templeton 17 Jefferson Capital 102
12-41504 Perry Quantum3 Group 73
12-41585 Stevens Jefferson Capital 88
12-42139 Latham GRMCc/oPASI 90
12-42161 Neely GRMCc/oPASI 50
12-
12-42356 Collom Quantum3 Group 66
12-42356 Collom Quantum3 Group 67
13-41787 Johnson GRMCc/oPASI 37
Part VI — Conclusion
For those claims
Regarding claims
So DONE and ORDERED.
Notes
. References to the "Code” or "Bankruptcy Code” refer to the United States Bankruptcy Code, 11 U.S.C: § 101, et seq. References to a "Rule” refer to a Federal Rule of Bankruptcy Procedure.
. Alabama Code 1975 § 6-2-37 reads in relevant part: "The following must be commenced within three years: (1) Actions to recover money due by open or unliquidated account, the time to be computed from the date of the last item of the account or from the time when, by contract or usage, the account is due.”
. Alabama Code 1975 § 6-2-34 reads in relevant part: "The following must be commenced within six years: ... (4) Actions founded on promises in writing not under seal; .... (5) Actions for the recovery of money upon a loan, upon a stated or liquidated account or for arrears of rent due upon a parol demise; ... (9) actions upon any simple contract or specialty not specifically enumerated in this section.”
.It is worth noting that it was only upon realizing an additional financial incentive— the possibility of an award of attorney fees for prosecuting violations of the Fair Debt Collection Practices Act based upon the filing of stale claims in light of In re Crawford,
. Not every creditor whose claims are dealt with in this Opinion and Order responded to the objections to their claims. However, in light of the prima facie validity of the claims under Rule 3001(f) and the statute of limitations being an affirmative defense (as further discussed herein), the debtors bear the burden of proving their objections even when no response in opposition was filed. The trustee provided information about payments made on the claims at issue regardless of whether the creditor responded.
. Alabama Code 1975 § 6-2-16 provides: “No act, promise, or acknowledgment is sufficient to remove the bar to an action created by the provisions of this chapter, nor is such evidence of a new and continuing contract, except a partial payment, made upon the contract by the party sought to be charged before the bar is complete or an unconditional promise in writing signed by the party to be charged thereby.”
. In pertinent part, Code § 108(c) provides: •
(c) [Ilf applicable nonbankruptcy law [e.g. statute of limitations] ... fixes a period for commencing or continuing a civil action ... on a claim against the debtor, or against an individual ... protected under section 1201 or 1301 ... and such period has not expired before the [petition date] ... then such period does not expire until the later of—
(1) the end of such period, including any suspension of such period occurring on or after the [petition date]; or
(2) 30 days after notice of the termination or expiration of the stay under section 362, 922, 1201, or 1301....
. In Hope, the trustee’s objection was not a "validity” or "amount” objection, but rather was an objection based on classification and was nonetheless barred by principles of res judicata. Res judicata must, then, be broader in scope than Rule 3001(f), which addresses the prima facie'evidentiary effect as to validity and amount, but not classification.
. In the context of chapter 13, a claim is “provided for in the plan” if the plan " ‘makes provision’ for, ‘deals with,’ or even ‘refers to’ a claim.” Rake v. Wade,
. "Moreover, allowing these kinds of post-confirmation collateral attacks on a bankruptcy plan’s terms would 'destroy the finality' that bankruptcy confirmation is intended to provide.’ ” Covert,
. Claims listed in the schedule appearing supra at the end of Part II.
. Claims listed in the schedule appearing supra at the end.of Part IV.
. Claims listed in the schedule appearing supra at the end of Part V.
. While the objections that are overruled based on the res judicata effect of plan confirmation would also be defeated because of laches, the objection to claim 17 filed by Jef