In re Jon D. SHOOK; Sharon K. Shook, Debtors. Jon D. Shook; Sharon K. Shook, Appellants, v. CBIC; Kathleen A. McDonald, Chapter 13 Trustee, Appellees.
BAP No. NV-01–1048–MaPRy
United States Bankruptcy Appellate Panel of the Ninth Circuit
May 22, 2002
278 B.R. 815
Argued and Submitted Sept. 20, 2001. Bankruptcy No. 96-20375 LBR.
David K. Rosequist, Las Vegas, NV, for Contractors Bonding & Insurance Co.
Before MARLAR, PERRIS and RYAN, Bankruptcy Judges.
OPINION
MARLAR, Bankruptcy Judge.
INTRODUCTION
This appeal is an example of how chapter 131 debtors can lose the ability to
The creditor filed a secured proof of claim. The chapter 13 plan was silent regarding the secured claim and lien.
When the chapter 13 trustee noticed his intention to pay a 100% distribution to the creditor on its deemed allowed secured claim, unless the debtors objected to the claim within 30 days, the debtors still did not object.
Then, four and one-half years after plan confirmation, the debtors objected to the secured creditor‘s claim, seeking disallowance thereof, and turnover of the funds paid to it. The bankruptcy court applied laches2 and denied their request due to their unreasonable and prejudicial delay.
In AFFIRMING on the basis of laches, we also hold that it was the debtors’ burden to challenge a timely filed proof of secured claim, because their plan did not expressly provide that the claim would be treated as unsecured and that the creditor‘s lien would be avoided.
FACTS
Jon and Sharon Shook (“Debtors“) filed a chapter 13 bankruptcy petition on January 25, 1996. They listed residential real property worth $100,000, which was fully encumbered by secured debt. Seven secured claims were listed, which totaled $113,200. Also listed were priority tax claims in the approximate sum of $100,000.
In their Statement of Financial Affairs, Debtors indicated that there was a judgment against them held by Contractors Bonding and Insurance Co. (“CBIC“). They listed CBIC as an unsecured nonpriority creditor with a debt of $15,145.66. CBIC was placed on the creditor matrix, and was served with notice of the filing and with a copy of the chapter 13 plan.
CBIC filed a timely proof of secured claim for $11,864.83, for the balance due on the judgment. It was undisputed that the judgment had been recorded almost one year prior to bankruptcy, on February 14, 1995. See
Debtors proposed a five-year plan designed to pay only the secured and priority tax debt, with no dividend to the unsecured creditors. The plan called for 59 monthly payments, with the 60th and final payment to be made from the proceeds of a sale or refinancing of their residence.
The plan acknowledged an IRS secured claim ($2,335), recorded on December 5, 1995, and the unsecured priority claims of both the IRS ($77,000) and the State of Nevada ($22,000).3
CBIC was not acknowledged or otherwise mentioned in the plan provisions, either as a secured or an unsecured creditor. CBIC did not object to the plan.
F. With respect to each allowed secured claim provided [sic] by the plan,4 the holder of such claim either accepted, or was deemed to have accepted, the plan [sic] in the alternative—
a. (i) the plan provides that the holder of such claims retain the lien securing such claims; and
(ii) the value, as the [sic] effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim....
Order Confirming Debtor(s) Plan, March 12, 1996.
Paragraph (5)(c) of the confirmation order further set forth the order of payment. After priority claims and trustee fees, the trustee was to pay
Creditors whose claims are timely filed and allowed in such amount and order of preference as may be provided by the plan or as may be required to provide adequate protection of the interest of any entity with an interest in the property of the estate.
Id.
On June 17, 1996, the trustee filed and served a “Notice of Trustee‘s Intent to Pay Claims.” Listed first was the CBIC claim for $11,864.83, which the trustee indicated was classified as “SECURED” and would be paid 100% plus interest. The notice advised that the claim would be deemed allowed pursuant to
Approximately four and one-half years later, when Debtors were selling their home in accordance with the confirmed plan, they discovered and maintained that funds “intended for IRS [had been] erroneously paid to CBIC.” Debtors’ Reply to Opposition, Jan. 23, 2001, p. 2. Although CBIC had provided a Satisfaction of Judgment in order to release its lien in connection with the sale, escrow had not closed, apparently, because the IRS had not been paid and its lien still attached.
Therefore, on December 20, 2000, Debtors filed an objection to the CBIC proof of claim on the grounds that it was, in actuality, an unsecured claim, and had been treated as such in the plan. In addition, Debtors sought the return of the money paid to CBIC. Debtors stated that CBIC‘s Satisfaction of Judgment, given in connection with the sale, had not yet been recorded and could be returned.
CBIC opposed the motion on the grounds that Debtors’ objection was untimely. CBIC stated that, at Debtors’ behest, it had already given a Satisfaction of Judgment to a title company so that Debtors could sell or refinance their residence. CBIC asserted that these facts constituted waiver by Debtors.5
In their reply pleading, Debtors argued, without citation to any Bankruptcy Code provision or Rule, that the CBIC claim was unsecured because the residence was overencumbered by senior liens and/or was exempt property.
A hearing on Debtors’ objection took place on January 25, 2001. When asked by the court why Debtors had not objected to CBIC‘s claim four years before, their attorney stated that he had “overlooked it.” Transcript, Jan. 25, 2001, p. 3:9.
The bankruptcy court found an absence of a plan provision for CBIC‘s secured claim, and that CBIC was therefore entitled to payment on its secured claim because it had filed a proof of secured claim to which no objection had been made. Therefore, the court held that Debtors could not use general plan provisions either to avoid CBIC‘s lien or to reclassify CBIC‘s claim.6 The court overruled Debtors’ objection on the grounds of laches. On February 6, 2001, the court entered its order denying Debtors’ objection, and they timely appealed.
ISSUES
- Whether CBIC‘s secured claim was deemed allowed, so that it was entitled to distribution under the chapter 13 plan provisions.
- Whether Debtors’ chapter 13 plan provisions bound CBIC to unsecured status.
- Whether the bankruptcy court abused its discretion by denying Debtors’ claim objection on the grounds of laches.
STANDARDS OF REVIEW
The panel reviews issues of law under the de novo standard, and reviews findings of fact for clear error. Otto v. Niles (In re Niles), 106 F.3d 1456, 1459 (9th Cir.1997). Interpretation of the Bankruptcy Code presents legal questions, which are reviewed de novo. Cal. Cent. Trust Bankcorp v. Been (In re Been), 153 F.3d 1034, 1036 (9th Cir.1998).
We review the bankruptcy court‘s decision to bar a claim on the basis of laches for an abuse of discretion. Telink, Inc. v. United States, 24 F.3d 42, 47 (9th Cir.1994). A bankruptcy court abuses its discretion if its judgment was based on clearly erroneous factual findings or erro
DISCUSSION
This case presents several undercurrents of controversy surrounding the claims allowance process in chapter 13, the treatment of secured claims, and the binding effect of a chapter 13 plan.
We begin with the longstanding principle that a secured creditor may bypass a debtor‘s bankruptcy proceedings and enforce its lien in the usual way, because unchallenged liens pass through bankruptcy unaffected. See Long v. Bullard, 117 U.S. 617, 620-21 (1886); Dewsnup v. Timm, 502 U.S. 410, 418 (1992). See also Johnson v. Home State Bank, 501 U.S. 78, 84 (1991) (bankruptcy extinguishes in personam claims against the debtor but generally has no effect on in rem claims against the debtor‘s property).
In this case, CBIC filed a proof of secured claim and was a voluntary participant in the bankruptcy proceedings. See
CBIC argues, in counterpoint, that its lien could not be avoided by the plan provisions alone, and that any objection to its properly filed proof of secured claim was barred by the confirmed plan. Alternatively, it maintains that Debtors waited an unreasonably long time before “discovering” the fact of the trustee‘s payment and the filing of their claim objection.
A. CBIC‘s Secured Claim was Deemed Allowed
1. Section 502
To be paid from the estate, a claim must be “allowed” under
Generally, absent a written objection from a party in interest, a claim is “deemed allowed” upon the filing of a timely proof of claim.
Although a claim may initially be deemed allowed, it may thereafter be disallowed, in full or in part, following affirmative action by the debtor or trustee and by court order.
CBIC filed a proof of secured claim. Prior to plan confirmation, Debtors did not object to the claim, either pursuant to the claims objection process, or by initiating an adversary proceeding to determine the extent and validity of CBIC‘s lien. Merely listing the claim as unsecured in their schedules was not enough to divest the CBIC claim of its status as a deemed valid claim and lien interest.
Therefore, we hold that at the time of plan confirmation, CBIC‘s proof of claim was deemed to be an allowed secured claim, and was entitled to distribution from the estate.
2. Section 506(a)—Valuation and the Secured Claim
The Code contains a separate procedure to determine whether sufficient value exists in the collateral which secures a claim to support an in rem right. Although there was no pledged collateral in this case, nevertheless CBIC‘s claim could only be secured to the extent it attached to nonexempt equity in Debtors’ residence.
Section 506(a)8 provides for the bifurcation of an allowed claim into its secured and unsecured components according to the value of the collateral. Only a claim that has first been allowed under
Section 506 does not determine the allowance or disallowance of a claim, but rather governs the amount and treatment of secured claims. 4 Collier on Bankruptcy, supra, ¶ 506.01. This section “was intended to facilitate valuation and disposition of property in the reorganization chapters of the Code.” Oregon v. Lange (In re Lange), 120 B.R. 132, 135 (9th Cir. BAP 1990). In a reorganization case,
Rule 3012 implements the substantive rights of
Indisputably, Debtors did not move to determine whether their residence had sufficient value to secure CBIC‘s lien, nor did they commence an adversary proceeding, prior to plan confirmation, to determine the extent of CBIC‘s lien. On appeal, they contend that the plan provisions, together with their bankruptcy schedules, determined CBIC‘s secured claim to be unsecured and thereby stripped off its lien. See
B. To be Adversely Affected, an Allowed Secured Claim Must be “Provided for” in the Chapter 13 Plan
Section 1327 provides that “[e]xcept as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor” and “the property vesting in the debtor ... is free and clear of any claim or interest of any creditor provided for by the plan.”
The phrase “provided for in the plan,” means that a plan ” ‘makes a provision’ for, ‘deals with,’ or even ‘refers to’ a claim.” Rake v. Wade, 508 U.S. 464, 474 (1993) (citations omitted); Lawrence Tractor Co. v. Gregory (In re Gregory), 705 F.2d 1118, 1122 (9th Cir.1983). The treatment of an allowed secured claim is dictated by the Bankruptcy Code, which both protects lienholders’ rights and empowers chapter 13 debtors to “provide for” and manage liens through the plan. See
Under
The extent to which chapter 13 plan provisions themselves can constitute an “objection to” or “valuation of” a secured claim, or alone can mandate avoidance of the lien, is unsettled. Bankruptcy courts have typically taken one of three approaches: (1) chapter 13 plan confirmation prevails over the claims process; (2) the claims process prevails over plan confirmation; or (3) a middle-of-the-road approach based on due process concerns. See generally In re Basham, 167 B.R. 903, 905-08 (Bankr.W.D.Mo.1994); Eric S. Richards, Due Process Limitations on the Modification of Liens through Bankruptcy Reorganization, 71 Am.Bankr.L.J. 43 (Winter 1997).
We have approved a line of cases which holds that the lien of a participating or nonparticipating creditor cannot be extinguished except through a formal claim objection or lien avoidance action, rather than through an uncontested plan confirmation hearing. See Hobdy, 130 B.R. at 320 (citing with approval Simmons v. Savell (In re Simmons), 765 F.2d 547, 551 (5th Cir.1985), and holding that designating a statutory lienholder‘s claim as an unsecured claim in the chapter 13 plan cannot be deemed an “objection” equal in force to Bankruptcy
The “middle-of-the-road” approach, which has emerged in the case law subsequent to Hobdy, focuses on the sufficiency of the notice and considers the totality of the circumstances. Those courts hold that a debtor can bypass the claims allowance and adversary rules and, instead, “object” to a creditor‘s claim through plan provisions which modify such debt and lien. See Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160, 162-63 (4th Cir.1993) (holding that due process and
We now acknowledge that a plan can effectively determine value and/or avoid a lien only if the creditor receives clear notice that the plan will do so. A plan that is silent about the fate of a secured claim provides no notice of what will happen to the secured claim and therefore cannot effectively avoid a lien or determine its value. See Great Lakes Higher Ed. Corp. v. Pardee (In re Pardee), 193 F.3d 1083, 1085-86 (9th Cir.1999); Bisch v. United States (In re Bisch), 159 B.R. 546, 549 (9th Cir. BAP 1993) (failure to provide for the secured debt and lien in the chapter 13 plan allowed the IRS‘s tax lien to survive the bankruptcy process). See also Cen-Pen Corp. v. Hanson, 58 F.3d 89, 94 (4th Cir.1995) (holding that unless a plan “acknowledges the claim or [lien] interest and makes explicit provision for its treatment ... (for instance, by expressly pro
Debtors’ plan in this case did not “provide for” CBIC‘s secured claim by any of the required methods. Debtors listed the CBIC debt as unsecured in their bankruptcy schedules, but did not refer to it in the plan. The plan treated all unsecured claims similarly, by paying them nothing. Nothing in the plan alerted CBIC that Debtors intended simultaneously to avoid its lien and pay it nothing. Debtors nevertheless contend that CBIC either consented to its treatment as an unsecured claimant or was bound to such status by the confirmed plan, even though the plan nowhere acknowledged or treated CBIC‘s secured claim or lien. We hold that such “treatment” did not meet the due process requirements for the discharge of a secured debt, pursuant to
Due process is the linchpin to determining the rights of secured creditors in chapter 13,10 and if a creditor receives clear notice, but chooses to ignore the bankruptcy proceedings, it does so at its peril. Gregory, 705 F.2d at 1122-23. “If a creditor fails to protect its interests by timely objecting to a plan or appealing the confirmation order, ‘it cannot later complain about a certain provision contained in a confirmed plan, even if such a provision is inconsistent with the Code.’ ” Pardee, 193 F.3d at 1086 (citation omitted).
In Gregory, an undisputedly unsecured creditor complained that a confirmed plan which provided for zero payment to the unsecured class had not provided for its claim. The Ninth Circuit Court of Appeals rejected that argument, holding that a plan which proposes to pay nothing on a claim does indeed “provide for” the claim. Gregory, 705 F.2d at 1123.
However, there is a significant difference between a plan which provides for zero payment to unsecured creditors and
In our Circuit, a creditor with express notice of its proposed treatment in the plan is required to object to the plan, or it will be bound by it. Pardee, 193 F.3d at 1085-86 (creditor with notice of plan, which expressly purported to discharge the postpetition interest on its debt, who failed to object to the plan or to appeal the plan confirmation order, was bound by such order.) See also Wolf, 162 B.R. at 107-09 (plan which provided that the creditor‘s mortgage would be crammed down to zero and its lien canceled satisfied due process and was res judicata); Mason-McDuffie Mortgage Corp. v. Peters (In re Peters), 101 F.3d 618, 620 (9th Cir.1996) (citing Wolf and stating that “the gist of [
We presaged this policy in Hobdy, when, although the case could have been decided solely on statutory grounds, we expressed due process concerns. See Hobdy, 130 B.R. at 320-21. There, the secured creditor filed a secured proof of claim, which was deemed allowed. The debtor did not formally object to the claim, but proposed, in his plan to reduce the creditor‘s claim by $32,000. The creditor alleged that it did not receive notice, or a copy of, the proposed plan. The creditor did not object to the plan or attend the confirmation hearing, and the plan was confirmed. More than a year later, the creditor moved for allowance of its claim, and the bankruptcy court denied the motion. Id. at 319.
On appeal, we reversed, and held that the creditor‘s claim, which was deemed allowed, had been compromised without requisite notice and due process. We held that the debtor could not alter the amount of the claim, nor trump the creditor‘s right to defend its claim, without first bringing a contested claim allowance procedure. Id. at 321.
When a plan is ambiguous, the Ninth Circuit‘s approach puts the risk of challenging the claim upon the debtor-drafter. Id. See also Deutchman v. Internal Revenue (In re Deutchman), 192 F.3d 457, 461 (4th Cir.1999) (a chapter 13 plan does not “provide for” a lien “simply by failing or refusing to acknowledge it or by calling the creditor unsecured“). Thus, it was not incumbent upon CBIC to object to the chapter 13 plan when the plan did not address, nor in any way attempt to value, its secured claim. See Pardee, 193 F.3d at 1085.
Debtors cite In re Harnish, 224 B.R. 91 (Bankr.N.D.Iowa 1998), to support their arguments. There, Sears filed a proof of secured claim, but the debtors had scheduled the claim as unsecured. Their chapter 13 plan was silent concerning the Sears secured claim and lien, but provided for a distribution to unsecured creditors. The bankruptcy court held that the plan “provided for” Sears’ secured claim because the same debt was scheduled by the debtors as an unsecured claim, and the unsecured claims were paid through the plan. Id. at 94. Furthermore, the court held that because the Sears’ lien was not mentioned in the plan, it was extinguished. That case is inconsistent with Ninth Cir
Simply by assuming that the CBIC claim would be classified with the other unsecured claims, Debtors in the case at bar did not “provide for” CBIC‘s allowed secured claim and lien, and thus, the plan could not bind CBIC to an unsecured status. Therefore, CBIC could rightly rely on the conclusion that its unchallenged lien would pass through the bankruptcy unaffected, consistent with well-established law. See In re Beard, 112 B.R. 951, 954 (Bankr.N.D.Ind.1990) (“Even where confirmed without objection, a plan will not eliminate a lien simply by failing or refusing to acknowledge it or by calling the creditor unsecured.“) (citing Simmons, 765 F.2d at 554-59). Merely listing the claim as unsecured in their schedules was not enough to divest the claim of its status as a deemed allowed secured claim, pursuant to
C. Debtors’ Claim Objection was Barred by Laches
CBIC‘s deemed allowed secured claim had been paid in full. Four and one-half years after plan confirmation and payment, Debtors sought to have the court disallow the CBIC secured claim. Applying laches, the bankruptcy court denied Debtors’ motion, finding that the objection came too late. We agree.
1. No Limitations Period for Claim Objections
Debtors contend that neither the Bankruptcy Code nor Rules specify a limitations period for objecting to the allowance of proofs of claim, and that laches did not apply because CBIC was not prejudiced by the delay.12 See
As we explained above, the order confirming the chapter 13 plan did not conclu
To date, there has been no case law in the Ninth Circuit prohibiting postconfirmation claim objections.
Other circuits have viewed postconfirmation claim objections as prohibited collateral attacks upon the final plan confirmation order. The Fifth Circuit in Simmons held that
We are not inclined to make such a blanket ruling. Where the amount stated in the proof of claim differs from the amount proposed for payment under the plan, we have opined that “[s]ections 502(a) and 1327(a) may be harmonized by interpreting
In their objection, Debtors argued that there was no nonexempt equity in their residence to secure CBIC‘s claim and lien. While such an objection questioned whether CBIC‘s claim was thus enforceable, a grounds for objection enumerated in
The timeliness of a valuation determination under
2. Equitable Time Limits for Objection
Generally, when an action is not subject to a statute of limitations, the equitable doctrine of laches may alternatively limit the time within which the action must be brought. Russell v. Todd, 309 U.S. 280, 287 (1940). See also County Fuel Co. v. Equitable Bank Corp., 832 F.2d 290, 294 n. 2 (4th Cir.1987) (the plaintiff waived state law claim, but laches was alternative basis for affirmance); Flournoy v. Cent. Fin. Co., Inc. of Columbus (In re Henderson), 577 F.2d 997, 1001 (5th Cir.1978) (defendant could assert equitable claim of laches against claim objection, under Bankruptcy Act); Heritage Hotel Ltd. P‘ship I v. Valley Bank of Nev. (In re Heritage Hotel Ltd. P‘ship I), 160 B.R. 374, 378-79 (9th Cir. BAP 1993), aff‘d mem., 59 F.3d 175, 1995 WL 369528 (9th Cir.1995) (equitable estoppel barred lender liability action based on
To succeed on its affirmative defense of laches, CBIC was required to present evidence of an inexcusable delay in the exercise of a known right, and that it was thereby prejudiced. See Stevens Tech. Servs., Inc. v. S.S. Brooklyn, 885 F.2d 584, 588 (9th Cir.1989). Our Circuit has observed that “[t]he bare fact of delay creates a rebuttable presumption of prejudice.” Int‘l Tel. & Tel. Corp. v. Gen. Tel. & Elec. Corp., 518 F.2d 913, 926 (9th Cir.1975).
In this case, the evidence of Debtors’ delay in bringing the objection must be viewed in the context of the progression of the chapter 13 case. Debtors’ five-year plan had been confirmed and nearly completed. Administratively, the claims against the estate had been determined years before for purposes of distribution—at the latest, at the time of the trustee‘s notice. The trustee‘s notice clearly stated that CBIC would be paid 100% of its secured claim, and gave a time period for filing written objections to the proposed allowance and payment. Debtors did nothing.
Granted, the trustee‘s notice of payment was not a motion, and no court order allowing the claims as noticed was issued. Compare In re Macias, 195 B.R. 659, 661 (Bankr.W.D.Tex.1996) (trustee obtained court authorization to make distributions in accordance with her recommendations) and Marlow, 216 B.R. at 977 (order entered on trustee‘s motion to allow claims). Nevertheless, such notice was apparently consistent with Nevada‘s local custom and practice. In addition, it informed Debtors that certain creditors had filed proofs of claim and in what amounts, and provided Debtors with an opportunity to file objections to those claims before payment. This procedure, on the part of the trustee, brought prompt closure to the issue of whether it was proper to distribute estate funds to CBIC. See In re Lee, 189 B.R. 692, 694 n. 2 (Bankr.M.D.Tenn.1995); see also 4 Lundin, supra, § 287.1 at 287.1-287.2 and n. 2 (filing of a motion to allow claims could be seen as satisfaction of the trustee‘s duties prescribed in
Although they received the notice, Debtors failed to object, and CBIC‘s claim was paid in full. Four and one-half years later, Debtors finally objected to the allowance of CBIC‘s secured claim, with the weak explanation that counsel had “overlooked” this clearly important matter.16
Debtors contend that they did not discover the payment to CBIC until they attempted to sell their residence. We
Debtors contend that CBIC was not prejudiced by the four-year delay because CBIC‘s Satisfaction of Judgment had not yet been recorded, and as a bonding company, CBIC could easily return the money. We disagree.
As we have said, prejudice is presumed from delay. Further, CBIC presented evidence that it had changed its legal position by virtue of the release of its lien, notwithstanding that the written document had not yet been recorded. The fact that CBIC could have returned the money does not mean that it would not be prejudiced if it were ordered to disgorge the payment. The evidence showed that CBIC released its lien in reliance upon its deemed allowed secured claim, the terms of the confirmed plan, and the payment of its claim by the trustee years before. Indeed, full payment of the secured claim extinguished CBIC‘s lien. Debtors’ argument is insufficient, therefore, to rebut the presumption of prejudicial delay.17
An undue delay in acting may place “an unwarranted burden on the court” as well as on the parties. See Adams v. Gould Inc., 739 F.2d 858, 867-68 (3rd Cir.1984) (discussing prejudicial delay in the context of amendment of pleadings). Here, the integrity of the chapter 13 process itself was brought into issue by Debtors’ objection. The equities weigh heavily against Debtors.
In summary, Debtors’ argument that CBIC was not prejudiced unfairly narrows the scope of the many changes that have taken place, all due to Debtors’ own actions, or more accurately, their inactions. Debtors simply waited too long to object to CBIC‘s secured claim. The bankruptcy court properly determined that the reorganization process should not be undermined because of Debtors’ voluntary inactivity and long-dormant inattention to detail. Therefore, the bankruptcy court did not abuse its discretion by denying relief to Debtors, and applying the equitable doctrine of laches.
CONCLUSION
Debtors had ample opportunities to timely object, but they failed to do so. CBIC filed a timely proof of claim that was deemed allowed. Debtors’ chapter 13 plan neither provided for the CBIC secured claim, nor gave CBIC sufficient notice of Debtors’ intent to treat its unchallenged claim as unsecured.
When, shortly after confirmation, the trustee gave clear notice that he proposed to pay the CBIC allowed secured claim in full unless Debtors objected within 30 days, Debtors did nothing. Once the trustee had paid the CBIC claim in full and CBIC had released its lien, Debtors’ objection was barred by laches.
The bankruptcy court‘s February 6, 2001 order is AFFIRMED.
PERRIS, Bankruptcy Judge, concurring.
I agree that the confirmed chapter 13 plan in this case did not extinguish CBIC‘s lien and that the bankruptcy court did not abuse its discretion in applying laches to bar debtors’ objection to CBIC‘s claim. Confirmation of a plan that does not mention a secured creditor‘s claim in any way cannot affect that creditor‘s lien under either the approach approved in Fireman‘s Fund Mortg. Corp. v. Hobdy (In re Hobdy), 130 B.R. 318 (9th Cir. BAP 1991), which requires either a formal claim objection or lien avoidance action, or the “middle-of-the-road” approach the majority adopts today, which focuses on the sufficiency of notice and the totality of the circumstances to determine whether a debtor can in effect “object” to a creditor‘s claim through plan provisions that modify the debt and lien.
Under either approach, the fact that debtors’ plan did not mention CBIC‘s claim precludes confirmation of that plan from extinguishing CBIC‘s lien. Because the approach taken does not alter the outcome, in my opinion this case is not the appropriate vehicle for deciding whether to depart from our prior holding in Hobdy and adopt a new test. Accordingly, I concur in the outcome, but do not join in part B. of the Discussion section of the opinion, which adopts the sufficiency of notice/totality of circumstances approach.
JIM D. MARLAR
UNITED STATES BANKRUPTCY JUDGE