Andrews, In re, 93-16632

• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Citation: 49 F.3d 1404
• Docket Number: No. 93-16632,93-16632
• Parties: , 32 Collier Bankr.Cas.2d 1826, Bankr. L. Rep. P 76,396 In re William ANDREWS; Elana Andrews, Debtors. William ANDREWS; Elana Andrews, Appellants, v. Lawrence J. LOHEIT, Chapter 13 Trustee, Appellee.
• Decision Date: 15 February 1995

Page 1404

49 F.3d 1404 63 USLW 2563, 32 Collier Bankr.Cas.2d 1826,
Bankr. L. Rep. P 76,396 In re William ANDREWS; Elana Andrews, Debtors.
William ANDREWS; Elana Andrews, Appellants,
v.
Lawrence J. LOHEIT, Chapter 13 Trustee, Appellee. No. 93-16632. United States Court of Appeals,
Ninth Circuit. Submitted Feb. 15, 1995 ^*.
Decided March 8, 1995.

Page 1405

Andrew M. Henderson, Fair Oaks, CA, for appellants.

Yvonne N. Aldama, Sacramento, CA, for appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel.

Before: TANG, and O'SCANNLAIN, Circuit Judges, and ROBERT R. MERHIGE, Jr., ^** District Judge.

TANG, Senior Circuit Judge:

Appellants filed a plan of reorganization to which only the Chapter 13 trustee objected. No secured creditors objected. The bankruptcy

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appellate panel ("BAP") held that a Chapter 13 trustee had standing to object to confirmation of a plan under Sec. 1325(a)(5) of the Bankruptcy Code. ¹ We have jurisdiction under 28 U.S.C. Sec. 158(d) and we affirm. We hold that the trustee had standing to object under 11 U.S.C. Sec. 1325(a)(1) rather than Sec. 1325(a)(5).

I.

William and Elena Andrews, debtors, filed their Chapter 13 petition concurrently with their plan of reorganization on February 28, 1992 ("plan"). The Andrews' schedules listed four secured creditors with claims totalling $161,064, of which $13,933 was to be disbursed by the Chapter 13 trustee. The remainder, which was the amount due on the Andrews' mortgage with Beneficial California, Inc., ("Beneficial") would be paid directly by the Andrews. The Andrews also owed to Beneficial a mortgage arrearage of $5,664. In addition, the Andrews owed $6,700 to General Motors Acceptance Corporation, $869 to Montgomery Ward, and $700 to Bank of America.

The plan proposed monthly payments of $396 over 60 months which would pay 27 percent of the allowed non-priority unsecured claims and would pay the secured creditors through a pro-rata share. No regular monthly payment was proposed to any creditor. The creditors with smaller claims could not receive payments each month because the trustee's distribution system would not distribute any amount under $15.

A meeting of creditors, pursuant to 11 U.S.C. Sec. 341(a), was held May 28, 1992. No creditors objected to the plan. The Chapter 13 trustee ("trustee"), however, suggested modifications to the plan that changed the manner of distribution to the secured creditors. The trustee argued these modifications were necessary, inter alia, to provide a distribution in which the smaller secured claims would receive adequate protection. The Andrews rejected the modifications because no secured creditors had objected to the original plan.

On June 24, 1992, the trustee filed a Notice of Intent to Deny Confirmation and Dismiss the Case, arguing in part that the secured creditors would not receive adequate protection. On September 1, 1992, the Andrews filed an opposition to the trustee's objection, arguing that the trustee does not have standing to object to the confirmation on behalf of secured creditors and that the Andrews' plan complied with the Bankruptcy Code. The bankruptcy court found, inter alia, that the Chapter 13 trustee had standing to object. The bankruptcy appellate panel affirmed, finding that the trustee had standing to object under 11 U.S.C. Sec. 1325(a)(5). ²

We review the bankruptcy appellate panel's decision de novo. In re Johnston, 21 F.3d 323, 326 (9th Cir.1994). We hold that the trustee had standing to object under 11 U.S.C. Sec. 1325(a)(1).

II.

The Chapter 13 trustee has standing to object to a plan that does not meet the requirements for confirmation. Section 1302(b) of the Bankruptcy Code states:

The trustee shall--

(1) perform the duties specified in sections 704(2), 704(3), 704(4), 704(5), 704(6), 704(7), and 704(9) of this title;

(2) appear and be heard at any hearing that concerns--

(A) the value of property subject to a lien;

(B) confirmation of a plan; or

(C) modification of the plan after confirmation;

11 U.S.C. Sec. 1302(b). The plain language of Sec. 1302(b)(2) confers standing to object to

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confirmation of a plan because Sec. 1302(b)(2) requires a trustee to "appear and be heard at any hearing" that concerns the "confirmation of a plan." See, e.g., In re Erwin, 10 B.R. 138, 139 (Bankr.D.Colo.1981) ("[T]he clear language requiring the trustee to be 'heard' concerning confirmation leads to the inescapable conclusion that the trustee is a 'party in interest' with standing to object to confirmation.").

We now turn to 11 U.S.C. Sec. 1325 because it sets forth the requirements for confirmation of a plan. Subsection (a) of Sec. 1325 states:

(a) Except as provided in subsection (b), the court shall confirm a plan if--

(1) the plan complies with the provisions of this chapter and with the other applicable provisions of this title;

. . . . .

(5) with respect to each allowed secured claim provided for by the plan--

(A) the holder of such claim has accepted the plan;

(B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and

(ii) the value, as of the 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; or

(C) the debtor surrenders the property securing such claim to such holder;

....

Subsection (b) of Sec. 1325 states:

(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan--

(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or

(B) the plan provides that all of the debtor's projected disposable income to be received in the three-year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan.

Appellants argue that because a Chapter 13 trustee's "primary obligation" is to unsecured creditors, the Chapter 13 trustee does not have standing to object to confirmation on behalf of secured creditors under Sec. 1325(a)(5). Appellants' note that subsection 1325(b)(1), which deals with unsecured creditors, specifically makes reference to the trustee,...