Hope v. Acorn Fin., Inc.

• Decision Date: 26 September 2013
• Docket Number: No. 12–10709.,12–10709.
• Citation: 731 F.3d 1189
• Court: U.S. Court of Appeals — Eleventh Circuit
• Parties: Camille HOPE, Trustee for Rickey Fluellen, Plaintiff–Appellant, v. ACORN FINANCIAL, INC., Defendant–Appellee.

731 F.3d 1189

Camille HOPE, Trustee for Rickey Fluellen, Plaintiff–Appellant,

v.ACORN FINANCIAL, INC., Defendant–Appellee.

No. 12–10709.

United States Court of Appeals, Eleventh Circuit.

Sept. 26, 2013.

Camille Hope, Macon, GA, pro se.

Jenny Martin Stansfield, Martin & Snow, LLP, Macon, GA, for Defendant–Appellee.

Appeal from the United States District Court for the Middle District of Georgia. D.C. Docket No. 5:11–cv–00276–MTT, Bkcy No. 5:10–05108.

Before BARKETT and JORDAN, Circuit Judges, and SCHLESINGER,^* District Judge.

JORDAN, Circuit Judge:

A Chapter 13 bankruptcy proceeding involves a number of participants. The debtor sets events in motion by filing a petition for relief and submitting a proposedbankruptcy plan, which serves as a road map for the things to come; the creditors try to preserve as much of their interests as possible; and the trustee “oversees the administration of the debtor's assets.” Litton v. Wachovia Bank (In re Litton), 330 F.3d 636, 640 (4th Cir.2003). “Upon satisfaction of the plan and completion of the plan's terms, the debtor is discharged of his or her debts and, in theory, faces a future of solvency.” Universal Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821, 826 (11th Cir.2003).

Under 11 U.S.C. § 1327(a) (“Effect of Confirmation”), the “provisions of a confirmed [Chapter 13] 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.” As the quoted text indicates, however, § 1327(a) makes no mention of the trustee. It is that word left unwritten which has led to the dispute in this case.

We are called upon to decide whether a confirmed Chapter 13 plan which gives a creditor a secured position is binding on a trustee who, aware of defects in that creditor's security interest, does not assert any objections to, and affirmatively recommends confirmation of, the plan. We hold that, notwithstanding her omission from the language of § 1327(a), under such circumstances a Chapter 13 trustee is bound by a confirmed plan and may not pursue a post-confirmation avoidance action against the creditor.

I

In June of 2010, Ricky Fluellen purchased a car from TCL Auto Sales. Mr. Fluellen financed the purchase through Acorn Financial, Inc., which obtained a security interest in the vehicle. Shortly thereafter, Mr. Fluellen found himself financially insolvent, and on July 21, 2010, he filed for bankruptcy relief under Chapter 13. Acorn did not perfect its security interest in the vehicle until July 27, 2010, when it delivered an application for a certificate of title to the Commissioner of the Georgia Department of Revenue.

As part of Mr. Fluellen's bankruptcy proceeding, Acorn filed a proof of claim on August 12, 2010. Someone in the office of the Chapter 13 trustee, Camille Hope, then contacted the office of the local county tax commissioner to find out whether Acorn had a perfected lien on Mr. Fluellen's vehicle. On August 24, 2010, the tax commissioner responded that, according to his office's records, Acorn's security interest was not perfected until July 27, 2010, six days after Mr. Fluellen filed his bankruptcy petition. The bankruptcy court therefore found that Ms. Hope “knew about the defects in Acorn's security interest 30 days prior to the confirmation hearing.” See Bankruptcy Court's Memorandum Opinion [D.E. 55] at 12. Ms. Hope, despite this knowledge, did not take any further immediate action concerning Acorn's claim.

In the meantime, Mr. Fluellen had submitted a proposed bankruptcy plan. The plan provided, in relevant part, for “payments to secured creditors, whose claims are duly proven and allowed[,]” and treated Acorn as a secured creditor entitled to monthly payments of $146. In her report to the bankruptcy court, Ms. Hope “recommend[ed] that [the] plan be confirmed” because it complied with the requirements of 11 U.S.C. § 1325. The bankruptcy court, noting Ms. Hope's recommendation, confirmed the proposed plan on September 30, 2010, thereby “vest[ing] all of the property of the estate in [Mr. Fluellen].” 11 U.S.C. § 1327(b).

On October 8, 2010, a week or so following confirmation of the plan, Ms. Hope filed an adversary proceeding against Acorn, seeking to avoid its lien as a preferential transfer, see11 U.S.C. § 547, and designate its claim as unsecured debt. Acorn moved for summary judgment, arguing that Ms. Hope was bound by the terms of the confirmed Chapter 13 plan and that, as a result, her complaint was barred by res judicata (i.e., claim preclusion). The bankruptcy court granted summary judgment in favor of Acorn, and the district court affirmed. See Hope v. Acorn Financial, Inc., 2012 WL 74874 (M.D.Ga. January 10, 2012). Ms. Hope now appeals. With the benefit of oral argument, we too affirm.

II

On an appeal of a bankruptcy court's judgment, we act as “the second court of review.” Barrett Dodge Chrysler Plymouth, Inc. v. Cranshaw ( In re Issac LeaseCo, Inc.), 389 F.3d 1205, 1209 (11th Cir.2004). We exercise plenary review of any “determinations of law, whether made by the bankruptcy court or by the district court.” Williams v. EMC Mortgage Corp. ( In re Williams ), 216 F.3d 1295, 1296 (11th Cir.2000).

A

Ms. Hope argues that, because § 1327(a) does not specifically say that trustees are also bound by a confirmed Chapter 13 plan, they are not so bound and can pursue post-confirmation avoidance actions within the two-year limitations period set forth in 11 U.S.C. § 546(a)(1)(A). She points out that several other provisions of Chapter 13 specifically mention trustees, ¹ and reasons that the exclusion of trustees from § 1327(a) was not a mere legislative oversight. See Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983) (“[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.”) (internal quotation marks and citation omitted). She also notes our previous refusal, in the bankruptcy context, to add (or read in) missing statutory language. See Myers v. Toojay's Management Corp., 640 F.3d 1278, 1284–86 (11th Cir.2011) (explaining, in part, that we are not “licensed to practice statutory remodeling”).

This is a close case, and Ms. Hope's statutory argument is simple and straightforward. But, for a number of reasons, it does not carry the day.

B

Choosing the most appropriate canon of construction in a given circumstance is usually a matter of contextual judgment, for statutory interpretation “is a holistic endeavor.” United Savings Ass'n of Texas v. Timbers of Inwood Forest Ass., Ltd., 484 U.S. 365, 371, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988). The Russello presumption on which Ms. Hope relies is only a presumption, and a rebuttable one at that. See Springer v. Gov't of Philippine Islands, 277 U.S. 189, 206, 48 S.Ct. 480, 72 L.Ed. 845 (1928) (“The general rule that the expression of one thing is the exclusion of others is subject to exceptions. Like other canons of statutory construction, it is only an aid in the ascertainment of the meaning of the law, and must yield whenever a contrary intention on the part of the lawmaker is apparent.”). Indeed, the Supreme Court, in a case involving an interstate compact among several states, recently declined to apply the presumption because it “fail[ed] to account for other sections of the compact that cut against its reading” and “produce[d] ... anomalous results.” Tarrant Regional Water District v. Herrmann, ––– U.S. ––––, 133 S.Ct. 2120, 2131–32, 186 L.Ed.2d 153 (2013) (“At the very least, the problems that arise from Tarrant's proposed reading [under Russello ] suggest that § 5.05(b)(1)'s silence is ambiguous regarding cross-border rights under the compact.”). See also Pugliese v. Pukka Dev., Inc., 550 F.3d 1299, 1304 (11th Cir.2008) (finding Russello presumption inapplicable).

Here, as in Herrmann, the Russello presumption does not quite work. As a statutory matter, § 1327(a) cannot be read in isolation, and other provisions of Chapter 13 strongly suggest that a confirmed plan is binding for at least some purposes on the trustee. For example, §§ 1326(a)(2) and (c) require the trustee to make certain distributions as required by the confirmed plan, and one would think that no duty to distribute can or would arise unless such a plan was binding on the trustee. In addition, § 1329(a) provides that, after confirmation, the plan may be modified in certain ways “upon request of the debtor, the trustee, or the holder of an allowed unsecured claim,” while § 1330(a) permits any “party in interest” (which a Chapter 13 trustee certainly is) to request revocation of a plan for fraud within 180 days of confirmation. These provisions would be “unnecessary if the confirmed plan did not already bind the trustee as it does the debtor.” Bankowski v. Wells Fargo Bank, N.A. (In re Reid), 480 B.R. 436, 445 (Bankr.D.Mass.2012).

The trustee, moreover, acts in a representative capacity when she seeks post-confirmation avoidance. The bankruptcy court's confirmation of the proposed plan generally vests the property of the estate in the debtor, see§ 1327(b), and the “primary purpose of the Chapter 13 trustee is ... to serve the interests of all creditors.” Overbaugh v. Household Bank, N.A. (In re Overbaugh), 559 F.3d 125, 129–30 (2d Cir.2009). So, whether the trustee is (generally speaking) trying to benefit the debtor or certain creditors through an avoidance action, she is not acting for her own account.

C

Significantly, the bankruptcy terrain we traverse is not pristine. In Wallis v. Justice Oaks II, Ltd. (In re Justice Oaks II, Ltd.), 898 F.2d 1544, 1553 (11th Cir.1990), a Chapter 11 case, we held that certain creditors could not mount a post-confirmation challenge to the claim of another creditor...