In re Bateman

• Decision Date: 22 May 2003
• Docket Number: No. 02-11221.,02-11221.
• Citation: 331 F.3d 821
• Parties: In re: Carmen BATEMAN, Debtor. Universal American Mortgage Company, Plaintiff-Appellant, v. Carmen Bateman, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

331 F.3d 821

In re: Carmen BATEMAN, Debtor Universal American Mortgage Company, Plaintiff-Appellant, v. Carmen Bateman, Defendant-Appellee.

No. 02-11221.

United States Court of Appeals, Eleventh Circuit.

May 22, 2003.

William P. McCaughan, Miami, FL, for Plaintiff-Appellant.

Lawrence M. Shoot, Law Offices of Lawrence M. Shoot, Paul A. Avron, Berger, Singerman, P.A., Miami, FL, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before BIRCH, DUBINA and KRAVITCH, Circuit Judges.

BIRCH, Circuit Judge:

In this bankruptcy appeal, we decide that a secured creditor cannot collaterally attack a confirmed Chapter 13 plan, even though the plan conflicted with the mandatory provisions of the bankruptcy code, when the secured creditor failed to object to the plan's confirmation or appeal the confirmation order. We also hold that a secured creditor's claim for mortgage arrearage survives the confirmed plan to the extent it is not satisfied in full by payments under the plan, or otherwise satisfied under the terms § 1325(a)(5), because to permit otherwise would deny the effect of 11 U.S.C. § 1322(b)(2), which, in effect, prohibits modifications of secured claims for mortgages on a debtor's principal residence. The bankruptcy court confirmed the plan at issue and, after the plan's confirmation, granted the debtor's objection to the creditor's allowed claim, thereby reducing the secured claim for mortgage arrearage to the amount provided for in the confirmed plan, but denied the creditor's motion to dismiss the Chapter 13 bankruptcy. The district court affirmed the bankruptcy court. For the following reasons, we AFFIRM in part and REVERSE in part.

I. BACKGROUND

On 26 November 1996, Debtor-Appellee Carmen Bateman filed a Chapter 13 bankruptcy petition and confirmation plan in the United States Bankruptcy Court for the Southern District of Florida. On 18 December 1996, Creditor-Appellant Universal American Mortgage Company ("Universal") timely filed proof of a secured claim, pursuant to 11 U.S.C. § 502 in the amount of $49,178.80.¹ The claim was for arrearage on a first mortgage that was secured by Bateman's principal residence. Bateman did not file an objection to Universal's proof of claim. On 5 February 1997, the first creditors' meeting was held; Universal did not attend. On 13 February 1997, Bateman filed an amended confirmation plan (the "Plan"). The initial plan and the amended plan both provided for payment to Universal of $21,600.00. The confirmation hearing was set for 19 February 1997; Universal did not attend.

On 14 March 1997, the bankruptcy court entered the Confirmation Order, which contained the $21,600.00 amount to be paid to Universal over the course of the Chapter 13 plan. Universal did not at any time object to the Plan's confirmation. Universal did not appeal the Confirmation Order to the district court, even though the plan erroneously provided for the payment of the "disputed" amount contrary to its timely filed proof of claim.²

Over a year after the Plan was confirmed, the bankruptcy trustee noted that Universal's filed proof of claim did not match the Plan amount. The trustee contacted Bateman and thereafter, on 7 May 1998, Bateman filed an objection to Universal's proof of claim, to which Universal responded. On 13 July 1998, Universal filed a motion to dismiss the bankruptcy because the Plan failed to comply with the bankruptcy code.

The bankruptcy court sustained Bateman's objection and denied Universal's motion to dismiss, holding in part that "[a]s a matter of substance the Chapter 13 plan provided an objection to the claim which placed a duty on [Universal] to pursue the matter if the $21,600.00 was not acceptable." R1-2-B20 at 2. Because Universal did not object to the Plan as confirmed, the bankruptcy court gave the Plan res judicata effect and found that Universal was bound to the $21,600.00 amount for its claim. In doing so, the bankruptcy observed that:

"The binding effect on the confirmation order establishes the rights of the debtor and creditors as those which are provided in the plan. It is therefore incumbent upon creditors with notice of the Chapter 13 case to review the plan and object to the plan if they believe it to be improper, they may ignore the confirmation hearing only at their peril...

... A creditor that had the opportunity to object that the plan did not meet the standards for confirmation, which provide the protections Congress deemed appropriate for the various types of creditors may not later assert any interest other than that provided for it by the confirmed plan."

Id. at 3 (quoting Collier on Bankruptcy, ¶ 1327.01[1][a] (15th rev. ed. 1993)). Noting that Universal

is a successful, organized, mortgage lender and servicer, it elected not to retain an attorney, filed its claim, ignored the Chapter 13 plan, corrected Chapter 13 plan, failed to attend the creditors meeting, the confirmation hearing, and had the right to timely proceed after the Order of Confirmation. Creditor[s,] especially lending institutions like the mortgagee, must follow the administration of the bankruptcy estate to determine what aspects of the proceeding that they may want to challenge.

Id. at 3-4.

The bankruptcy court held that Universal's

lien passes through the bankruptcy proceeding, however the amount of the arrearage is res judicata. Upon successful completion of the Chapter 13 plan or upon earlier payment of the arrears in the sum of $21,600.00, the mortgagees must as a matter of law provide that the mortgagor is current in her mortgage account. Her principal sum owed on the mortgage, the date the sum of $21,600.00 has been paid to the mortgagee must be the same as if no delinquency had ever occurred. The mortgagee may not seek at any future time to charge back against the debtor or any successor any portion of the difference between the $21,600.00 and the claimed amount of $49,178.80. The mortgagee waived its rights to contest the amount of the arrearage and is bound by the confirmed plan.

Id. at 4.

Universal filed a motion to reconsider, which the bankruptcy court denied. Universal appealed to the United States District Court for the Southern District of Florida, which affirmed the bankruptcy court on the basis that Universal was precluded from collaterally attacking the Plan, and was bound to the amount provided for in the Plan on the grounds of res judicata, because it failed to object previously to the Plan. Universal timely appealed the district court's order, which is now properly before us.

II. DISCUSSION

Universal's appeal before us challenges, first, the bankruptcy court's sustainment of Bateman's objection and ruling that Universal was bound by the claim amount provided for in the Plan, despite the fact that Bateman did not file an objection to counter Universal's proof of claim prior to confirmation. Second, Universal urges us to find error in the bankruptcy court's denial of Universal's motion to dismiss the bankruptcy because it did not comply with 11 U.S.C. § 1325, which it argues requires that a secured claim must be provided for in full as a prerequisite to plan confirmation. Thus, Universal seeks both to avoid the res judicata effect of the Plan's confirmation as to its claim and to unravel the bankruptcy altogether as invalidly confirmed. Bateman argues that the Plan is conclusive as to the treatment of Universal's claim and it cannot be dismissed for such treatment, whether improper or not, at this late stage when Universal neither objected to nor appealed from the Plan's confirmation. We deny both of Universal's requests, but nevertheless hold that Universal's secured claim for the mortgage arrearage remains intact.

This appeal pits the procedural requirements and substantive provisions of 11 U.S.C. §§ 502(a), 1322, and 1325 of the bankruptcy code, against the res judicata effect of a confirmed plan under 11 U.S.C. § 1327.³ We now undertake to harmonize these provisions and decide an issue of first impression in this circuit.⁴ "[D]eterminations of law, whether made by the bankruptcy court or by the district court, [are reviewed] de novo." Equitable Life Assurance Soc'y v. Sublett (In re Sublett), 895 F.2d 1381, 1383 (11th Cir.1990).

The issues before us present questions of statutory interpretation and evaluation of the interlocking nature of the bankruptcy code. Provisions within a statute are read to be consistent whenever possible. See Clark v. Uebersee Finanz-Korporation, 332 U.S. 480, 488, 68 S.Ct. 174, 178, 92 L.Ed. 88 (1947). If the two provisions may not be harmonized, then the more specific will control over the general. Green v. Bock Laundry Mach. Co., 490 U.S. 504, 524, 109 S.Ct. 1981, 1992, 104 L.Ed.2d 557 (1989). With these principles in mind, we navigate the intricacies of the bankruptcy code and bankruptcy procedure to decide Universal's appeal and whether Universal's claim survived Bateman's confirmed Chapter 13 Plan.

Before we reach the issue whether the bankruptcy court properly granted Bateman's objection to Universal's proof of claim, we will review the confirmation and claims process to give the issue context in the bankruptcy law and procedure. In general terms, when a debtor initiates a Chapter 13 bankruptcy, he or she files a petition and, in many instances simultaneously, a proposed plan. The plan contains the treatment to be afforded each creditor, including whether and how much each is to receive during the course of the plan's term. During the petition's pendency, before a Chapter 13 plan is confirmed, debtor and creditor alike have an opportunity to file claims and litigate any dispute regarding the validity and the amount of such claims. See generally 11 U.S.C. § 501. This is facilitated through filings and scheduled conferences and hearings. Upon satisfaction of the plan and completion of the plan's term, the debtor is discharged of his or her debts and,...