In re Clark
| Decision Date | 19 September 1994 |
| Docket Number | Bankruptcy No. 93-41087. |
| Citation | 172 BR 701 |
| Parties | In re Jimmy W. CLARK, Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Georgia |
Barbara Braziel, Savannah, GA, for debtor.
Sylvia Ford Brown, Chapter 13 Trustee, Savannah, GA.
Ford Motor Credit Company, Daniel F. Bridgers, Decatur, GA, for creditor.
This matter is before the Court on Objection To Allowance Of Claim filed by Jimmy W. Clark ("Debtor"). This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B). Based on the evidence presented to the Court, Debtor's objection will be overruled. The following findings of fact and conclusions of law are published in compliance with Fed.R.Bankr.P. 7052.
Debtor filed this case under Chapter 13 of the Bankruptcy Code on June 6, 1993. Prior to Debtor's filing for bankruptcy protection, Ford Motor Credit Company ("FMCC") repossessed a vehicle from Debtor and obtained a deficiency judgment. FMCC filed a claim in this case for Three Thousand Six Hundred and Three Dollars and Ninety Five Cents ($3,603.95) asserting secured status for the deficiency. The parties have stipulated to the finding that the FMCC claim would not have been allowed as secured if the objection had been heard prior to the confirmation of the case.
FMCC is listed in Debtor's schedules as a creditor holding an unsecured claim for the deficiency. However, Debtor's plan of reorganization designated FMCC as a secured creditor. The plan was confirmed without objection on November 30, 1993.
On June 23, 1994, Debtor filed this objection to FMCC's proof of claim. Debtor contends that FMCC's claim for a deficiency judgment is not entitled to secured status, but rather that FMCC should be treated as an unsecured creditor. FMCC responded asserting res judicata as a defense to Debtor's objection.
Debtor's objection raises the issue of the effect of a confirmed plan on those claims dealt with under the plan. While hindsight demonstrates that the deficiency judgment asserted by FMCC should have been given unsecured status, no party objected to FMCC's claim, and the claim was allowed as filed. 11 U.S.C. § 502(a). Debtor's plan of reorganization treats FMCC's claim as secured, and the plan was confirmed without objection.
The effect of a confirmed plan under Chapter 13 of the Bankruptcy Code is set forth in section 1327(a) as follows:
(a) The provisions of a confirmed 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.
11 U.S.C. § 1327(a) (Law.Co-op.1994).
The effect of section 1327(a) is such that:
An order confirming a Chapter 13 plan is res judicata as to all justiciable issues which were or could have been decided at the confirmation hearing. . . . Section 1327 precludes a creditor from asserting, after confirmation, any other interest than that provided for it in the confirmed plan.
In re Moseley, 74 B.R. 791 (Bankr.C.D.Cal. 1987), citing Anaheim Savings & Loan Assoc. v. Evans (In re Evans), 30 B.R. 530, 531 (9th Cir. BAP 1983).
Under section 1327(a), the order of confirmation fixes the rights of all parties and binds them to the terms of the plan. Just as creditors are bound by the treatment afforded their claims, the debtor is likewise bound by the same terms.1 Upon confirmation, res judicata bars the assertion of any cause of action or objection which was raised, or could have been raised, prior to confirmation.2 In re Eason, No. 91-70109, slip op. at 9, 1994 WL 582522 (Bankr.M.D.Ga. Aug. 2, 1994). The only rights which may be asserted by a party after confirmation are those provided for in the plan. Id. at 9, citing In re Evans.
Parties wishing to attack the plan after confirmation may (1) appeal the confirmation order; (2) file a motion to alter or amend the order, including a motion for reconsideration or for rehearing; (3) file a motion to dismiss the case; (4) file a motion to correct a clerical mistake; (5) file an adversary proceeding to revoke confirmation; (6) file a motion to set aside the confirmation on due process grounds; or (7) file a motion to modify the Chapter 13 plan. In re Moseley, at 798. Although not recognized by the Moseley court, Rule 60(b) may provide additional grounds under which to attack a confirmed plan. Southmark Properties v. Charles House Corp., 742 F.2d 862 (5th Cir. 1984).3
The case of Wallis v. Justice Oaks II, Ltd. (In re Justice Oaks, II, Ltd.), 898 F.2d 1544 (11th Cir.1990), cert. denied, 498 U.S. 959, 111 S.Ct. 387, 112 L.Ed.2d 398 (1990) is dispositive in the matter before this Court. The operative facts are virtually identical to those of the case at bar. In Justice Oaks, a party in interest objected to the secured status of a creditor after confirmation of the debtor's plan of reorganization. In both a proposed settlement and the debtor's plan, the creditor in question was treated as a secured creditor. The objecting party contended that the secured creditor should have been treated as unsecured.
Although Rule 3007 governing objections to proofs of claim does not contain a time limit, a deadline is "implicit in several provisions of the Code." Id. at 1553. "Under section . . . 506(a) . . . a proof of secured claim must be acted upon — that is, allowed or disallowed — before confirmation of the plan or the claim must be deemed allowed for purposes of the plan." Id. at 1553, citing Simmons v. Savell (In re Simmons), 765 F.2d 547, 553 (5th Cir.1985). The Eleventh Circuit held that the objecting party "waived their right to object by failing to object prior to confirmation." Justice Oaks at 1553. "When the objection is based on an argument that the plan misclassified the objectionable claim, the objection must be made prior to confirmation of the plan." Id. at 1553.
The order confirming Debtor's plan served as the final allowance of FMCC's claim under the plan fixing FMCC's entitlement to treatment as a secured creditor in this case. The doctrine of res judicata prevents Debtor's objection under Bankruptcy Rule 3007. However, this does not signal an end to the Court's analysis.
Debtor's objection is in the nature of a motion for reconsideration of the order of confirmation which fixed the rights of FMCC as a secured creditor. Claims may be reconsidered after confirmation in accordance with 11 U.S.C. § 502(j), which provides:
(j) A claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case. Reconsideration of a claim under this subsection does not affect the validity of any payment or transfer from the estate made to a holder of an allowed claim on account of such allowed claim that is not reconsidered, but if a reconsidered claim is allowed and is of the same class as such holder\'s claim, such holder may not receive any additional payment or transfer from the estate on account of such holder\'s allowed claim until the holder of such reconsidered and allowed claim receives payment on account of such claim proportionate in value to that already received by such other holder. This subsection does not alter or modify the trustee\'s right to recover from a creditor any excess payment or transfer made to such creditor.
11 U.S.C. § 502(j) (Law.Co-op.1994).4
Claims allowance determinations are one of the principle duties of a Bankruptcy Court. When a plan is confirmed, the confirmation order necessarily incorporates any orders that may be entered by the Court in connection with the allowance of claims, including an order which defers the consideration of a claim beyond the confirmation date.5 In order for the Court to reconsider a claim after confirmation the movant must first demonstrate "cause". Cause under section 502(j) is defined in relation to Rule 60(b). Colley v. National Bank of Texas (In re Colley), 814 F.2d 1008 (5th Cir.1987).
Movant alleges that FMCC's claim should not have been allowed as secured. Rather than challenge the claim, Debtor proposed to treat FMCC's interest as secured under the plan. Without an objection from Debtor, the Chapter 13 trustee or some other party in interest, the claim is deemed allowed. 11 U.S.C. § 502(a). Debtor impliedly alleges that the FMCC claim was not challenged through inadvertence or some form of excusable neglect. Although inadvertence and excusable neglect may provide cause for the Court to reconsider its confirmation order, such reconsideration is discretionary and is only to be undertaken according to the equities of the case. Colley at 1010; 11 U.S.C. § 502(j).
"The court's broad discretion should not . . . encourage parties to avoid the usual rules for finality of contested matters." Colley at 1010. The equitable power of the Court to reconsider claims after confirmation must be exercised cautiously, acknowledging the just expectations of all parties that the rights fixed under a plan are final. In the case before the Court, Debtor offers no explanation for its failure to object to FMCC's claim. The entire bankruptcy process depends upon the vigilance of the parties to monitor claims made upon the estate. If the Court were to allow reconsideration of claims merely upon a showing that the debtor was asleep at the switch, there would be no finality to the bankruptcy process. As the court in Colley observed, "Old bankruptcy cases, like old soldiers, never die . . .".6 It appears instead that they haunt the halls of the bankruptcy court until they are laid to rest. If there were no finality to the confirmation and claims allowance process, such restless spirits would likely overwhelm the entire system.
The maxim "vigilantibus non dormientibus aequitas subvenit", or "equity aids the vigilant, not those who slumber on their rights"7 has particular application in such a case....
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