In re Duke, Bankruptcy No. 92-41327 (13).

• Decision Date: 11 May 1993
• Docket Number: Bankruptcy No. 92-41327 (13).
• Citation: 153 BR 913
• Parties: In re Carl DUKE and Betty Duke, Debtors.
• Court: U.S. Bankruptcy Court — Northern District of Alabama

153 B.R. 913 (1993)

In re Carl DUKE and Betty Duke, Debtors.

Bankruptcy No. 92-41327 (13).

United States Bankruptcy Court, N.D. Alabama.

May 11, 1993.

Sandra Campbell, Talladega, AL, for debtors.

Paul J. Spina, III, Birmingham, AL, for creditor.

MEMORANDUM OPINION

JAMES S. SLEDGE, Bankruptcy Judge.

This case comes before the Court on the motion of FNRS Financial Corporation¹, ("FNRS"), to reconsider the order entered on August 10, 1992, which sustained the standing trustee's contest of the FNRS proof of claim.

FINDINGS OF FACT

Carl and Betty Duke ("debtors") filed a petition under chapter 13 of Title 11 of the United States Code on May 14, 1992. Pursuant to the terms of the debtors' plan, the debt owed to FNRS would be paid directly by the debtors. FNRS filed a proof of claim with the clerk of this Court on June 4; said claim was assigned claim # 5. The proof of claim purported to be a secured claim, but FNRS failed to attach a UCC-1 form or any documents supporting a perfected security interest to its proof of claim. On June 23, the standing trustee filed a contest to claim # 5, alleging that "said claim on its face does not appear to be entitled to secured claim status."² The trustee's contest further indicated that the contest would be withdrawn if documents substantiating perfection of FNRS's security interest were filed.

On June 24, the clerk of this Court sent notice to FNRS which stated that in order to oppose the trustee's contest, a timely response and a request for a hearing must be filed and served within fourteen (14) days of the date of the notice. The clerk's notice also informed FNRS that unless a timely response was received, "the contest of the claim may be deemed by the Court to have been confessed by the creditor, and the Court may then enter such order thereon as appears appropriate." On August 10, 1992, an order was entered which sustained the contest of claim. As of that date, FNRS had failed to file a timely response to the trustee's contest of claim # 5. Thus, FNRS was allowed an unsecured claim for the full amount stated, $14,401.63. No appeal was taken by FNRS of the order sustaining the contest of its claim.

On September 24, 1992, the debtors modified their plan so that the allowed claim of FNRS would be paid by the trustee. The debtors also offered to pay the trustee all of their disposable income, i.e., $157.50 each two weeks for 130 such payments. Pursuant to the modification, the trustee would pay all available funds to unsecured claimholders until all allowed claims were paid, after paying standard administrative claims and one secured claim of $459.94. This modification was served by the debtors on all creditors, including FNRS. No further amendments were subsequently filed and the debtors' plan, as modified, was confirmed in a hearing on November 5, 1992, after finding that the plan satisfied 11 U.S.C. §§ 1322 and 1325. An order confirming the plan was entered on November 6. Pursuant to the confirmed plan, FNRS will receive a pro rata distribution with all other unsecured claimholders until its allowed claim of $14,401.63 is paid in full. No motion to reconsider the order confirming the plan was filed and no appeal was taken.

On January 11, 1993, approximately two months after the confirmation of the debtors' plan of reorganization, FNRS filed its motion to reconsider the order entered on August 10, 1992, sustaining the trustee's contest of claim. The motion alleges that its claim is secured by a mobile home, with its security interest perfected by a recorded UCC Financing Statement. A hearing was held on February 4, 1993, on said motion. At said hearing, the Court advised the parties that written arguments would be accepted by no later than March 1, 1993, and that after such date, the motion would be under submission for a determination. Having considered the arguments presented at the hearing and the written arguments submitted to the Court, the Court finds that the motion to reconsider the order entered on August 10, 1992, is due to be denied.

CONCLUSIONS OF LAW AND APPLICATION TO FACTS

I. PROCEDURE

In order for this Court to grant FNRS's motion, the motion must procedurally travel in a vehicle which will allow this Court to reconsider its previous ruling. Federal Rule of Bankruptcy Procedure (hereinafter Rule) 9023, which makes Fed.R.Civ.P. 59 applicable to title 11 cases, contains a ten-day time limit for filing a motion to alter or amend a judgment after the entry of the judgment. Rule 9023(e). However, it is made explicitly clear that "Rule 59 FRCivP applies in cases under title 11 of the United States Code, except as provided in Rule 3008."

Rule 3008 provides that "a party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate. The court after a hearing on notice shall enter an appropriate order." No time limits are explicitly stated for the filing of a motion for reconsideration under Rule 3008, and the ten-day time limit in Rule 9023 expressly does not apply. However, when Rule 3008 is considered in light of 11 U.S.C. § 1327(a), an apparent time limit appears. According to § 1327(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."

Because of the binding effect of the confirmation order under § 1327(a), the rights of the creditors are fixed and subsequent reconsideration under Rule 3008 is not permissible.³ If there were no such limitation on a Rule 3008 motion, the confirmation order would not be binding. An interpretation of Rule 3008 to permit reconsideration after confirmation makes Rule 3008 in conflict with § 1327(a). Just as courts should interpret statutes to be in harmony and not in conflict to the extent possible, see Shumate v. Patterson, 943 F.2d 362, 365, (4th Cir.1991), aff'd, ___ U.S. ___, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992), rules and statutes should be interpreted to be in harmony, if possible. However, "where a bankruptcy rule does conflict with a statute, certainly said rule is invalid, 28 U.S.C. § 2075". In re Spencer, 137 B.R. 506, 513 (Bankr.N.D.Okla.1992). In this case, the confirmed plan provides that FNRS possesses an allowed unsecured claim of $14,401.63 which will be paid in full along with all other unsecured claimholders. If there were no order confirming the plan of reorganization, then a motion under Rule 3008 could be considered. Cf. Johnson v. Wasserman (In re International Yacht and Tennis, Inc.), 922 F.2d 659 (11th Cir.1991) (wherein the court determined that reconsideration under Rule 3008 should have been granted, however, the opinion fails to mention or consider the effect of an order confirming a plan of reorganization).

Finally, reconsideration is not permitted as an appeal under Rules 8001 and 8002. As stated in the earlier findings, FNRS failed to appeal the order sustaining the contest to claim #5. FNRS opted against the appeals process and chose to ask this Court for reconsideration of its earlier order entered approximately five (5) months prior to the request for reconsideration.

The failure of FNRS to timely move to amend or to appeal the contest of its claim, and the failure of FNRS to move to amend or to appeal the order confirming the debtors' plan means that no means or vehicle of reconsideration exist for FNRS. Accordingly, the motion to reconsider the order entered on August 10, 1992, is denied. FNRS must accept its procedural choice. In re Pence, 905 F.2d 1107, 1110 (7th Cir. 1990).

II. CONFIRMATION IS BINDING

The claims allowance process, which can encompass the implementation of, inter alia, 11 U.S.C. §§ 502 and 506 as well as Rules 3007, 3008, and 3012, is a process that occurs pre-confirmation. See In re Haynes, 107 B.R. 83 (Bankr.E.D.Va.1989). Cf. Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir.1987). The Haynes court's discussion of the claims process and confirmation process makes this fact clear.

"The critical aspect of the case at bar is that we are addressing this matter after the debtor\'s second amended plan has been confirmed, and distributions have been made. . . . We cannot at this time address the arguments that would or could have been made at the time hearing on confirmation, since that time has passed."

Haynes, 107 B.R. at 87 (emphasis original). See Simmons v. Savell (In re Simmons), 765 F.2d 547, 553 (5th Cir.1985) (stating that "under sections 506(a) and 1325(a)(5), 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"). See also Wallis v. Justice Oaks II, Ltd. (In re Justice Oaks II, Ltd.), 898 F.2d 1544 (11th Cir.) (citing In re Simmons with approval), cert. denied, 498 U.S. 959, 111 S.Ct. 387, 112 L.Ed.2d 398 (1990).

The debtors' submitted their plan to this Court for confirmation after the claims allowance process was completed. No objection to confirmation was filed. The plan was confirmed after this Court found that the plan complied with all of the requirements of 11 U.S.C. §§ 1322 and 1325. The plan as confirmed will pay the FNRS allowed claim in full along with all other unsecured claimholders. Because of the binding effect of 11 U.S.C. § 1327(a) on creditors when a confirmed plan fixes the allowed amount of a creditor's claim, this Court is not permitted to reconsider the order entered which sustained the trustee's contest of FNRS's proof of claim. See In re Chappell, 984 F.2d 775 (7th Cir.1993) (confirmed plan precludes later claim for § 506(b) interest on real estate mortgage note, and order confirming plan can be revoked or set aside only when procured by fraud); In re Pence, 905 F.2d 1107 (7th Cir.1990) (confirmed plan binding on creditor who may not have received official notice of confirmation...