MEMORANDUM OPINION AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
According to the parties, this adversary proceeding presents the following question: does surrender of property by way of a confirmed Chapter 13 plan remove that property from the bankruptcy estate? The defendant, CitiMortgage, Inc. (“Citi-Mortgage”), says yes in its motion for summary judgment (“CitiMortgage Motion”) (Adv. Doc. 11)
I. Jurisdiction
The Court has jurisdiction to hear and determine this adversary proceeding pursuant to 28 U.S.C. §§ 157 anfi 1334 and the general order of reference entered in this district. This is a core proceeding. See 28 U.S.C. § 157(b)(2).
II. Procedural and Factual Background
The parties are in agreement as to the facts that give rise to this dispute. The procedural history of the matter is drawn from the documents on file in the Debtors’ underlying bankruptcy case (Case No. 09-64460), as well as those of record in this adversary proceeding.
Antonieo and Gleudes Crum (“Debtors”), husband and wife, became the owners of property located at 32185 Cobb-Harriman Road, Richwood, Ohio 43344 (“Property”) by way of a survivorship deed executed March 7, 2003 and recorded at the Recorder’s Office of Union County, Ohio on March 20, 2003. (Adv. Doc. 1, Ex. A, Part A.) Also on March 7, 2003, Anto-nieo Crum executed a note (“Note”) in favor of ABN AMRO Mortgage Group, Inc., in the amount of $124,053.00. Id. at Part B. That same day, Antonieo Crum executed a mortgage (“Mortgage”) to secure the note. Id. at Part C. Gleudes Crum initialed each page of the Mortgage and signed the Mortgage as well. Id. A notary public certified that both Antonieo and Gleudes Crum personally appeared before him, signed the Mortgage, and acknowledged their signatures. Id. The first page of the Mortgage states as follows:
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As shown below, neither the signatures at the end of the Mortgage, nor the certificate of acknowledgment, contained any limiting language regarding release of dower.
Id.
On December 11, 2009, the Crums filed a Chapter 13 bankruptcy petition and accompanying schedules of assets and liabilities. (Doc. 1.) Their Schedule A (Real Property) lists the Property as being owned jointly, with a current value of $105,000, encumbered by a lien giving rise to a secured claim in the amount of $113,960. In lieu of a third-party appraisal, the Debtors filed a copy of the real estate tax duplicate from the Union County, Ohio auditor’s office, reflecting a value of $105,290.
B(4)» Property to be Sarreatfered.
Debtor mil ooreader ihe- following real property and any resulting deficiency balance shall fee treated as a Class 5 general unsecured claim:
Creditor Property Description Estimated Deficiency Amount
CitiMortgage 32185 Cqbb-Harriman; Rd Riohwood OH $20,277.80
Section G(4) of the Plan provides that upon confirmation of the plan, property of the estate does not vest in the Debtors, but remains property of the estate:
<A4). Vesting,
hlaih one:
[¶] Ccnfirmation ofdie Plan v’ests all prcpeatyof the estate in Debtor free and dear of any clams oí interest of any creditor provided far by fit* Plan pm'tr.ani to P and (c)"
Property of die «tiíe .dial! not vest in Debtor upon confirmation but slrall remans, jiropeily of the estate until the c vs* h drumssed, converted, or a discharge is issued, whichevej occurs first.
On January 20, 2010, CitiMortgage filed a proof of claim asserting a secured claim in the amount of $122,386.91. (Claims Register, Claim 5.) Copies of the Note and Mortgage were attached to CitiMort-gage’s proof of claim. No objection to the proof of claim has been filed.
CitiMortgage did not object to confirmation of the Plan. The Trustee filed an objection to confirmation, noting that Citi-Mortgage’s deficiency claim, according to his calculation, was $17,096.91 rather than the $20,277 listed in the Plan. (Doc. 20.) The basis of that calculation is unknown and was not set forth in the Trustee’s objection. The Trustee’s objection was subsequently withdrawn (Doc. 27), and the Plan was confirmed by order entered May 25, 2010 (Doc. 29). The confirmation order states, in part, that “the Court finds that the Plan meets the requirements of 11 U.S.C. § 1325.” Id. at 1.
A little more than a month following confirmation, CitiMortgage filed a motion for relief from stay in order to proceed with a state court foreclosure action (“Stay Relief Motion”) (Doc. 33). The Stay Relief Motion was accompanied by copies of the Note and Mortgage. The Debtors responded to the Stay Relief Motion by stating:
The intent of the Chapter 13 plan is that the mortgage lien creditor shall be entitled to retake possession of the real estate and either retain the real estate in full satisfaction of the debt or liquidate it in a commercially reasonable manner. Further, in the event the creditor liquidates the collateral, the creditor shall only retain an unsecured claim in the Chapter 13 estate. The Debtors object as the Motion for Relief from Stay seeks authority to obtain a judgment in personam against the Debtors. The motion seeks general relief from the automatic stay in violation and in contravention of the Chapter 13 Plan and 11 U.S.C. § 362. Debtors do not waive the benefits of their Bankruptcy Code protections.
Doc. 37 at 1.
An agreed order resolving the Stay Relief Motion was entered on August 4, 2010 (Doc. 41), granting CitiMortgage relief
On September 29, 2010, CitiMortgage filed a complaint in foreclosure in the Court of Common Pleas of Union County, Ohio (“Foreclosure Complaint”) (Adv. Doc. 1, Ex. C). Count Three of the Foreclosure Complaint states that “the title deed was prepared in the names of Antonieo Crum and Gleudes C. Crum. Although the parties intended to mortgage their interest, and although Antonieo Crum and Gleudes C. Crum properly signed the mortgage, the subject mortgage was mistakenly recorded with Gleudes C. Crum signing to release her dower interest.” Id. at 3. Among other relief, the Foreclosure Complaint sought a declaratory judgment “declaring that the parties intended that Gleudes C. Crum was to execute Plaintiffs mortgage and that the mortgage was to encumber the entire interest in the property[J” Id.
Thus alerted to the possibility that the Mortgage may not encumber Gleudes Crum’s interest in the Property, the Debtors filed an answer in the foreclosure proceeding, alleging that CitiMortgage failed to join an indispensable party, namely the Trustee. The Debtors also filed a motion to dismiss the foreclosure action on that basis. On March 28, 2011, the Trustee filed a motion to intervene in the foreclosure action. CitiMortgage responded by alleging that the Trustee’s interest, as well as the bankruptcy estate’s interest in the Property, was terminated by the order confirming the Plan. Eventually, pursuant to an agreement between the parties, the Property was sold, and the proceeds of the sale are being held by the clerk of the state court pending the outcome of this adversary proceeding.
The complaint filed by the Trustee in this adversary proceeding (“Complaint”) (Adv. Doc. 1) alleges that the Trustee first became aware that the Mortgage may not encumber the entire interest in the Property on November 1, 2010, after the Debtors brought CitiMortgage’s foreclosure papers to counsel’s office.
III. Legal Analysis
A.Summary Judgment Standard
Under Rule 56 of the Federal Rules of Civil Procedure (“Civil Rule(s)”), made applicable in this adversary proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure, a court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.Civ.P. 56(a). “On a motion for summary judgment, facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts.” Ricci v. DeStefano,
B. Relevant Statutory and Plan Provisions
There are a number of Bankruptcy Code and Plan provisions implicated in this dispute: §§ 541 and 1306, which specify the property that is included in a Chapter 13 debtor’s bankruptcy estate; § 1325(a)(5) which provides for surrender of property to a secured creditor as one of three ways in which a debtor may satisfy a secured claim under a Chapter 13 plan; section B(4) of the Plan, which provides for surrender of the Property; § 554, which provides for abandonment of property of the estate; § 1302, which enumerates the duties of a Chapter 13 trustee; § 1329, which sets forth the circumstances under which a debtor may modify a. plan post-confirmation; § 1327(a), which makes the provisions of a confirmed plan binding on the debtor and each creditor; § 1327(b), which provides that upon confirmation, unless otherwise stated in a Chapter 13 debt- or’s plan, all property of the estate vests in the debtor; and Plan section G(4), which provides that the property of the estate of each of the Debtors does not vest in the Debtors but instead remains property of the estate. Despite the wide range of statutes and Plan provisions discussed by the parties with regard to the issue of whether the Property remained property of the estate following confirmation of the Plan and the granting of relief from stay, the resolution of the matter does not hinge on that question, but is instead resolved by application of §§ 1327 and 1329 of the Bankruptcy Code.
C. Arguments of the Parties
CitiMortgage argues that because the Plan provides for surrender of the Property, and because the Plan was confirmed, the bankruptcy estate’s interest in the Property is extinguished and the Trustee has no standing to pursue the relief re
For his part, the Trustee argues that the Property was never abandoned from the Debtors’ bankruptcy estate—either directly by the Trustee or under the terms of the confirmed Plan. Because the Property remains property of the estate, the Trustee argues, he has standing to bring this action and is entitled to seek a determination by the Court that Mrs. Crum’s one-half interest in the Property is not encumbered by CitiMortgage’s lien.
D. Res Judicata Effect of Confirmation, Judicial Estoppel and Post-confirmation Modification of Plan
While the Trustee seeks a declaration that the Property remains property of the estate and thus subject to further administration, the Court concludes that the goal the Trustee/Debtors seek to achieve in this adversary proceeding would not be served by such a declaration. Because in order to alter the treatment of CitiMort-gage’s secured claim provided for under the confirmed Plan, the Trustee must first establish a basis for the Plan’s modification. And as explained below, under the circumstances of this case, the doctrines of judicial estoppel and/or res judicata preclude the Debtors or the Trustee from modifying the Plan to change the treatment of CitiMortgage’s secured claim.
Section 1327(a) provides that “[t]he 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.” 11 U.S.C. § 1327(a). The Supreme Court has held that a confirmation order is enforceable and binding if affected parties had proper notice of the provisions of a plan and did not object or file a timely appeal. United Student Aid Funds, Inc. v. Espinosa, — U.S. —,
Despite the binding effect of a confirmation order, a debtor, a trustee, or the holder of an allowed unsecured claim may move to modify a plan post-confirmation. 11 U.S.C. § 1329. The modification may be to increase or reduce the amount of payments on claims of a particular class provided for by the plan, to extend or reduce the time for such payments, or to 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 the claim other than under the plan. 11 U.S.C. § 1329(a)(1), (2) and (3). Case law makes clear, however, that post-confirmation challenges to the validity of a secured claim are generally prohibited.
In Mbazira v. Litton Loan Servicing, LLP (In re Mbazira),
As explained below, the three prerequisites for application of the judicial estoppel doctrine set forth in Mbazira are met here. The Court accordingly concludes that judicial estoppel bars the Trustee from pursuing an adversary proceeding to avoid the Mortgage and thereby modify the treatment of CitiMortgage’s secured claim provided for under the confirmed Plan.
The first prong of the judicial estoppel test—the assertion of inconsistent positions—is established here. The Trustee’s attempt to keep the Property in the estate is in direct contradiction to the confirmed Plan’s provision calling for the surrender of the Property and permitting CitiMort-gage either to (1) retain the Property in full satisfaction of its claim or (2) sell the Property, apply the sale proceeds to its secured claim and receive a distribution at the same dividend paid to general unsecured creditors on any deficiency claim. Prior to the filing of the foreclosure action, the Crums—by all indications—were keen to relinquish ownership of the Property to CitiMortgage. At the time the petition was filed, they did not reside in the residence located on the Property nor did they claim an exemption in the Property. They filed no objection to the secured claim of CitiMortgage. Their Plan called for surrender of the Property. They reiterated this intention in their response to the Stay Relief Motion. The presumptively defec
Moreover, had the Trustee believed that the Mortgage was avoidable, he would not have recommended confirmation of a plan calling for payment of a one-percent dividend to general unsecured creditors. Section 1325(a)(4) requires that in order to be confirmed, a plan must provide that “the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date,” ie., a Chapter 13 plan must meet the best-interests-of-creditors test. 11 U.S.C. § 1325(a)(4). When reviewing plans for confirmation, the standing Chapter 13 trustee is charged with calculating the value of the non-exempt assets and disposable income available in the estate for payment, over time, to unsecured creditors. Part of this calculation is determining how much, if any, equity the Debtors may have in real property. Here, the Trustee determined that a zero-percent distribution to unsecured creditors met the best-interests-of-creditors test. See Estate Docs. 20 & 27.
In a decision addressing whether debtors have standing in Chapter 13 cases to bring avoidance actions, the Sixth Circuit Bankruptcy Appellate Panel (“BAP”) noted that “[tjheoretically at least, the analysis of what would be distributed to unsecured creditors in a hypothetical Chapter 7 liquidation should assume, among other things, avoidance of preferences, fraudulent conveyances and unper-fected liens. Otherwise, an unsecured creditor could argue that the bankruptcy court failed to use a truly hypothetical Chapter 7 liquidation as its benchmark. To meet the liquidation benchmark that assumes lien and transfer avoidance, a Chapter 13 debtor naturally must propose a plan of reorganization that contemplates the actual avoidance of such liens and transfers.” Countrywide Home Loans v. Dickson (In re Dickson),
The second prong of the test—that the party prevailed in convincing the court to
Thus, the summary judgment record establishes the existence of each element of the judicial estoppel test articulated by the court in Mbazira: the Debtors and the Trustee have taken inconsistent positions regarding surrender and retention of the Property; the provision in the Plan calling for surrender became effective by way of the Court’s confirmation order, and Citi-Mortgage will suffer an unfair detriment by losing its secured status as to one-half of the Property should the Court accept the Trustee’s new position. For these reasons, the Court finds that the Trustee is judicially estopped from asserting that the Property may now be administered for the benefit of creditors.
The Court acknowledges that Sixth Circuit law is not altogether clear on the question of whether the doctrine of judicial estoppel should be applied in situations that do not fall squarely within the tests set forth in Eubanks v. CBSK Fin. Group, Inc.,
Even if the Court were to conclude that judicial estoppel should not be applied on these facts, application of the doctrine of res judicata leads to precisely the same result. There is ample case law supporting the proposition that a confirmed plan is res judicata as to all issues that were, or could have been, decided at the time of confirmation. In Storey v. Pees (In re Storey),
Other courts have reached the same conclusion when debtors have attempted to reclassify secured claims post-confirmation. See Celli v. First Nat’l Bank of N. New York (In re Layo),
Because the Trustee may not modify this Plan under the circumstances presented here, the Court need not determine the question of whether the surrender of prop
IT IS SO ORDERED.
Notes
. References to documents filed in the Debtors' underlying bankruptcy case will be desig
. Six months after this adversary proceeding was filed, the administration of the Debtors' case was transferred to Chapter 13 trustee Jeffrey P. Norman. There has been no motion to substitute Mr. Norman as the real party in interest in this adversary proceeding.
. The parties responded to each others' papers: Trustee’s response (Doc. 13); CitiMort-gage’s response (Doc. 14).
. LBR 3015-3(e)(3) provides that if real property is to be surrendered under a Chapter 13 plan, an auditor’s valuation is an acceptable appraisal.
. Because the Debtors’ street address on their petition is different than the address of the Property, the Court presumes that the Debtors were not residing in the residence located on the Property at the time of the filing and thus were not entitled to claim a homestead exemption in the Property.
. On December 14, 2010, counsel for the Debtors filed an application to be retained as special counsel for the Trustee in order to prosecute the adversary proceeding to determine the validity of the Mortgage and to represent the interests of the Trustee in the foreclosure action. (Doc. 48.) There were no objections to the application, and the Court entered an order approving Debtors' counsel’s retention as special counsel for the Trustee on February 3, 2011 (Doc. 52).
. The Trustee’s calculation of the dividend necessary to meet the best-interests-of-creditors test was originally set forth in the Trustee’s objection to confirmation. (Doc. 20.) The objection was withdrawn, but the best interests calculation of zero percent was again set forth in the document filed by the Trustee withdrawing his objection to confirmation. (Doc. 2.)