In re Adams
| Citation | 270 BR 263 |
| Decision Date | 04 December 2001 |
| Docket Number | No. 99-B-04507.,99-B-04507. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
| Parties | In re Michael & Lynette ADAMS, Debtors. |
Erik A. Martin, Erik A. Martin & Associates, Chicago, IL, for Plaintiff.
Sherman & Sherman, Chicago, IL, for Defendant.
Tom Vaughn, trustee.
FINDINGS OF FACT AND CONCLUSIONS OF LAW ON Debtors' "MOTION TO DISALLOW SECURED CLAIM" FILED BY THE FORD MOTION CO.
This case was filed under Chapter 13 of the Bankruptcy Code by Debtors' Michael and Lynette Adams ("Debtors") to "disallow" the secured claims of Ford Motor Credit Company ("Ford") ("Motion"). Those claims were filed after Debtors' Chapter 13 Plan (the "Plan") was confirmed. Debtors argue that Ford's secured claims should be "disallowed" because two vehicles constituting collateral securing that claim were repossessed and sold by Ford after Debtors' Plan was confirmed, and ask that Ford's remaining claims as yet unpaid be allowed only as unsecured claims. For reasons set forth below, that Motion has been treated under 11 U.S.C. § 506(a) as one to value collateral at zero, and also to reconsider under § 502(j) the balances now due on the claims after the repossessed vehicles were sold by Ford and the Trustee made payments on those claims. However, no grounds have been shown for disallowance under 11 U.S.C. § 502(b), and Plaintiff's Motion for disallowance will be denied.
The relief specified by Debtors is disallowance of the Ford secured claim asserted by it as to a Mercury auto and allowance of an unsecured claim for the remaining debt after credits from sale proceeds and Trustee payments. The Motion does not specify an attack on the secured claim as to the other vehicle, yet it alleges Ford's sale of both vehicles and was read as applying to both claims. Debtors contend that Ford no longer has secured claims because its collateral was repossessed and sold.
Since the Motion became a contested proceeding under Rule 9014 Fed.R.Bankr. P., a final date was scheduled to hear any evidence to be offered and to determine through evidence whether the repossessed vehicles were in fact sold by Ford, and also to determine the reduced amount of remaining debts due on Ford's claims after payments by the Chapter 13 Trustee and receipt of sale proceeds. The parties filed their Stipulation of Facts covering sales of the repossessed autos, and then rested. Since no evidence was offered concerning Trustee payments to Ford, the trial was reopened for the parties to offer such evidence. The disputing parties did not do so, but the Chapter 13 Trustee did and then all rested again. Now, therefore, the Court now makes and enters the following final Findings of Fact and Conclusions of Law.
The prevailing Debtors' counsel was ordered to tender a final judgment order in accord with reasoning in an earlier opinion herein, but did not do so; therefore, the Court did not have the benefit of their input when preparing the final judgment order being separately entered this date.
Debtors filed a Chapter 13 petition on February 11, 1999. As of that filing date they were owners of a 1995 Ford Mustang and 1996 Mercury Villager (together, the "vehicles"). Ford held first liens on those vehicles when the bankruptcy was filed. Each vehicle was scheduled by Debtors as exempt.
Debtors' Chapter 13 Plan provided for payments by them to the Chapter 13 Trustee of $1,187 per month for up to 60 months. Secured creditors were to "be paid 100% of allowed claims," while unsecured creditors were to be paid 10%. Ford was scheduled as a secured creditor (secured as to a $13,000 asserted value for the Mercury, unsecured as to $12,194; secured as to a $9,690 asserted value for the Mustang, unsecured as to $9,664), though it was not named or otherwise identified in the Plan. But the Plan did not incorporate Debtors' schedules by reference, and Ford was not mentioned by name in the Plan.
The Plan was confirmed on June 3, 1999. Prior to confirmation, Ford had not filed a claim. However, on October 7, 1999, it filed two post-confirmation proofs of claim, one asserting a secured claim of $18,713.66 and an unsecured claim of $3,335.49 on the Mercury, and another claiming the Mustang as secured for $12,081.37 and unsecured for $5,457.94. The Chapter 13 Trustee began payments to Ford Credit under the confirmed Plan after those claims were filed. In May 2000 an Agreed Order was entered herein as to the two subject vehicles, conditioning continuation of the automatic stay under 11 U.S.C. § 362 on continued payments by Debtors to the Chapter 13 Trustee and maintenance of auto insurance coverage.
Subsequent to that Agreed Order, and pursuant thereto, the stay was modified and Ford repossessed and sold the two vehicles. Debtors have filed nothing that casts any doubt or raises any objection to the total dollar amounts claimed by Ford to be due. Debtors' current Motion objects to Ford's secured claims contending that they should now be deemed unsecured because those claims are no longer secured by collateral, and that the amounts due on each should be reduced by the sale proceeds and Trustee payments to date. But the Motion seeks "disallowance" of those claims without citing any legal basis under 11 U.S.C. § 502(b) for disallowance.
1. On February 11, 1999 Michael & Lynette Adams filed a petition for relief under Chapter 13 of the Bankruptcy Code.
2. When Debtors filed their petition for relief in bankruptcy, they were owners of two motors vehicles, a 1995 Ford Mustang and a 1996 Mercury Villager.
3. When the petition for relief was filed, Ford had a perfected security interest in each of the two aforesaid vehicles.
4. On or about October 7, 1999, after the June 3, 1999 confirmation of Debtors' Plan, Ford filed two separate proof of claims in the Debtors' Chapter 13 case.
5. The claim filed by Ford for the 1996 Mercury Villager asserted a secured claim in the sum of $18,713.66, plus an unsecured claim in the sum of $3,335.49.
6. The claim for the 1995 Ford Mustang was filed in the secured amount of $12,018.37, plus an unsecured amount of $5,457.94.
7. On May 4, 2000 an Agreed Order was entered between Debtors and Ford, providing that if at any time after entry of the Order should Debtors' Plan payments to the Chapter 13 Trustee accrue a default equal to two monthly payments or more, Ford could send notice of such default to the Debtors and their attorney, and if the default was not completely cured within fourteen days of the mailing of the notice, the automatic stay imposed by § 362 of the Bankruptcy Code would be modified without further notice, hearing or order, to allow Ford to exercise its state court rights over its collateral.
8. Subsequent thereto, the debtors payments to the Chapter 13 Trustee accrued a default equal to more than two monthly payments under terms of their confirmed Chapter 13 Plan.
9. On July 26, 2000 counsel for Ford sent a letter to the Debtors and their attorney advising them of the default, thereby triggering the fourteen day cure period under terms of the Agreed Order.
10. The Debtors failed to cure the payment default to the Trustee within fourteen days subsequent to the letter sent on July 26, 2000.
11. On August 18, 2000 counsel for Ford sent a letter to the Debtors and their attorney advising them that they had failed to cure the default, and further advising them that Ford considered the automatic stay imposed by § 362 of the Bankruptcy Code to have been modified pursuant to the Agreed Order entered on May 4, 2000, and that it would proceed accordingly.
12. Thereafter, both vehicles were repossessed by Ford.
13. The 1996 Mercury Villager was sold at auction by Ford for $5,300.00.
14. The 1995 Ford Mustang was sold at auction by Ford for $5,350.00.
15. The Debtors filed the instant Motion seeking to disallow the secured claims previously filed by Ford, such Motion being predicated on facts hereinabove set forth.
16. During the course of this bankruptcy case, following confirmation of Debtors' Plan, the Chapter 13 Trustee paid Ford $2,687.85 on its Mustang claim and $4,163.38 on its Mercury claim.
17. After crediting all payments by the Chapter 13 Trustee to Ford and the amounts recovered by it on sale of the two vehicles, the balances now due on its claims herein are as follows:1
As to the Ford Mustang vehicle $ 9,501.46
As to the Mercury Villager vehicle $12,585.77
18. For reasons set forth below, the value of each of Ford's secured claims is now zero, and the balances due on each claim are unsecured.
19. Facts set forth in the Conclusions of Law will be deemed as additional Findings of Fact and Conclusions of Law.
Subject matter jurisdiction lies under 28 U.S.C. § 1334(b). This matter is a core proceeding under 28 U.S.C. §§ 157(b)(2), (B) and (K), and is referred here under Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. Venue is proper under 28 U.S.C. § 1409(a).
Debtors brought their pending Motion as one to "disallow" secured claims. Though movants cited no supporting Bankruptcy Code section in their Motion, no basis was shown to disallow either claim under 11 U.S.C. § 502(b), and it appears that the Motion should be analyzed as one to reduce the amounts due under 11 U.S.C. 502(j), and for valuation of collateral under 11 U.S.C. § 506(a).
Ford essentially raises two arguments: (1) that Debtors are precluded from challenging the extent of Ford's claim under the doctrine of collateral estoppel based on the Plan confirmation order, and (2) that the relief sought is a disguised Motion to modify the confirmed Plan and should be determined and denied under Code § 1329.
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