In re Perez
| Citation | 648 B.R. 833 |
| Decision Date | 25 January 2023 |
| Docket Number | CASE NO. 22-50725-CAG |
| Parties | IN RE: Rosemary PEREZ, Debtor. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Western District of Texas |
Magdalena Gonzales, San Antonio, TX, for Debtor.
Mary K. Viegelahn, San Antonio, TX, Trustee, pro se.
ORDER OVERRULING OVATION SERVICES LLC AS AGENT FOR FGMS HOLDINGS, LLC'S AMENDED OBJECTION TO DEBTOR'S CHAPTER 13 PLAN (ECF NO. 26)
Came on for consideration Ovation Services LLC as Agent for FGMS Holdings, LLC's ("Ovation") Amended Objection to Debtor's Chapter 13 Plan (ECF No. 26)1 ("Amended Objection") and the Chapter 13 Trustee ("Trustee") Response thereto (ECF No. 27) ("Response"). The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(L) (). Venue is proper under 28 U.S.C. § 1408(1). The Court took the matter under advisement. For reasons discussed below, the Court finds that the Amended Objection is OVERRULED.2
Sometime before Debtor filed bankruptcy, she executed a Promissory Note secured by a Deed of Trust -Tax Lien with FGMS Holdings, LLC in exchange for payment of the ad valorem taxes owed on her home. (Proof of Claim No. 4). Ovation, thus, holds a statutory lien. Proof of Claim No. 4 reflects that Ovation is oversecured, entitling it to post-petition attorney's fees and costs.3 11 U.S.C. § 506(b). The heart of this dispute concerns whether Ovation may seek payment of its post-petition attorney's fees and costs outside the bankruptcy or, in the alternative, if it must seek payment through the bankruptcy, if at all.
The Court held a hearing on confirmation of Debtor's chapter 13 amended plan (ECF No. 21) ("Plan") on October 25, 2022. Debtor appeared but did not testify. Counsel for Ovation and Trustee appeared and made argument. The Court admitted Ovation's Exhibits 1-4 which consisted of Ovation's filed proof of claim, a copy of the case docket sheet, Debtor's amended plan, Debtor's schedule of assets and liabilities, and Debtor's statement of financial affairs. A review of the electronic docket in this case indicates the following:
1. Debtor filed her chapter 13 petition, schedules, plan, and SOFA on July 2, 2022. (ECF Nos. 1 and 2).
2. Ovation filed its original objection to Debtor's plan on August 4, 2022. (ECF No. 11).
3. Debtor amended her schedules and chapter 13 plan on September 15, 2022. (ECF Nos. 14 and 15).
4. Debtor amended her chapter 13 Plan on October 14, 2022. (ECF No. 21). This iteration of Debtor's Plan is the operative plan for purposes of confirmation.
5. Trustee filed her response to Ovation's original objection to plan on October 20, 2022. (ECF No. 25).
6. Ovation filed its Amended Objection to Debtor's Amended Plan on October 20, 2022. (ECF No. 26).
7. Trustee filed her Response to Ovation's Amended Objection on October 27, 2022. (ECF No. 27).
Sections 1322 and 1325 of Title 11 govern confirmation of a chapter 13 plan. Fed. R. Bankr. P. 3015(f)4 prescribes the deadline for filing objections to chapter 13 plans and parties that must be served with the objection. The Court's Standing Order 16-015 ("Standing Order") provides that:
A creditor objecting to confirmation of the plan must file an objection to the Plan no later than fourteen (14) days before the confirmation hearing date. Failure of a creditor to affirmatively and timely object to a proposed plan constitutes acceptance of the Plan, including secured claim, under § 1325(a)(5)(A).
The chapter 13 debtor has the burden of meeting all the confirmations requirements under 11 U.S.C. §§ 1322 and 1325. Viegelahn v. Essex , 452 B.R. 195, 198 (W.D. Tex. 2011) (citing Suggs v. Stanley (In re Stanley) , 224 Fed. App'x 343, 346 (5th Cir. 2007) ).6
Ovation, in its Amended Objection, makes the following objections to Debtor's Plan:
(1) Fed. R. Bankr. P. 3015 requires that the Trustee must file a written objection to a debtor's chapter 13 plan to have standing to object to confirmation of a debtor's plan. Further, Ovation argues that Trustee's failure to file a written objection to Debtor's Plan renders Trustee's Response to Ovation's Amended Objection moot because Trustee does not have standing. Finally, Ovation argues that Trustee's reliance on the Court's Standing Order is misplaced because the Court's Standing Order cannot supplant the Federal Rules of Bankruptcy Procedure.
(2) Ovation asserts that as a statutory tax lien holder, the proper way to contest the proper amount of Ovation's post-petition attorney's fees and costs is to seek a determination under § 505. Conversely, Ovation contends that compelling Ovation to seek allowance of its post-petition attorney fees and expenses by filing a motion or application under § 506 is improper. Ovation also argues that it is not subject to Rule 2016, which requires filing a disclosure of compensation or fee application for post-petition attorney's fees and costs.
(3) Ovation contends that its statutory lien cannot be released and discharged through the District Form Chapter 13 Plan after its pre-petition claim is paid in full. Rather, Ovation asserts its lien survives until its post-petition attorney's fees and costs are paid in full, Ovation argues that its lien passes through bankruptcy unaffected by the Plan and that Ovation's lien cannot be avoided under the Plan.
The Trustee filed her Response to Ovation's Amended Objection and argues the following:
(1) Trustee has the statutory authority under § 1302 to appear and be heard on confirmation of all chapter 13 plans. Further, neither § 1302 nor Rule 3015(f) require the Trustee to file a written objection.
(2) The Court's District Form Chapter 13 Plan states under § 7.8 payment of a secured creditor's claim results in satisfaction of the secured creditor's claim and release of the secured creditor's lien.7 Further, should Ovation wish to assert a claim for post-petition attorney's fees and costs, Ovation should do so pursuant to § 506. Additionally, Texas Finance Code § 351.0021(a)(5) indicates that when a property owner files bankruptcy, the property owner may recover attorney's fees and costs. Trustee notes Ovation's proof of claim makes a specific reservation to seek attorney's fees and costs notwithstanding Ovation's argument that it cannot be compelled to seek post-petition attorney's fees and cost in a bankruptcy case.
(3) Trustee contends that Ovation should be required to submit periodic disclosures for its post-petition attorney's fees and costs through notice, motion, or fee application.8 By doing so, the Court, debtor(s), and creditor(s) would know any potential post-petition claims that could render a debtor's plan infeasible and subject a chapter 13 case for dismissal.
(4) Trustee argues that § 506 apples to Ovation's claim and that Ovation must file an application or motion to have its post-petition claim paid. Otherwise, any post-petition claim should be discharged. Trustee argues that a bankruptcy court is the proper forum to adjudicate the reasonableness of Ovation's post-petition attorney fees and costs. Moreover, Rule 2016 requires Ovation to file an application with the Court to have its post-petition attorney's fees and costs paid.
The first issue is whether the Trustee must file a written objection to Debtor's Plan to have standing to object to confirmation of Debtor's Plan and oppose Ovation's Amended Objection. Ovation argues that under Rule 3015 all parties in interest must file an objection to a chapter 13 debtor's plan for the party to be heard on confirmation. Because the Trustee is a party in interest, Ovation also argues that the Court's Standing Order cannot waive the requirement to file an objection for the Trustee alone.
Section 1302 states that the United States trustee appoints an individual to serve as the standing trustee in chapter 13 cases. The chapter 13 trustee's duties are listed in § 1302(b), which incorporates a chapter 7 trustee's duties under § 706(a)(2-7) and (a)(9). Section 1302(b)(2)(B) states that a chapter 13 trustee shall appear and be heard, inter alia , on confirmation of a plan. The Ninth Circuit held that the "requirement to appear and be heard" would be illusory if the trustee could not object when the plan fails to comply with the provisions of the Bankruptcy Code. Andrews v. Loheit , 49 F.3d 1404, 1408 (9th Cir. 1995). Further, a chapter 13 trustee has statutory duty to appear and be heard on plan confirmation. Meyer v. Hill , 268 B.R. 548, 554 (9th Cir. B.A.P. 2001) (citations omitted). The plain language of § 1302 confers standing on the trustee to object to a chapter 13 plan. Austin v. Bankowski , 519 B.R. 559, 565 (D. Mass. 2014).9
Ovation is correct that Rule 3015(f) states that objection shall be filed and served at least seven days before the confirmation hearing. Ovation's contention that Rule 3015(f) requires all parties in interest to object in writing, however, is not supported by the Rule's text. The Rule does not explicitly say who must file an objection to a debtor's chapter 13 plan, but the Court recognizes that the requirement could apply to all parties, including a chapter 13 trustee. That said, § 1302 unequivocally states that a chapter 13 trustee shall appear and be heard on confirmation of a plan. There is no requirement that a chapter 13 trustee file a written objection under § 1302. Notably, the issue here is not the filing of an objection to a debtor's chapter 13 plan, but rather a trustee's response to a creditor's objection. The Court questions whether Rule 3015(f) applies here. The Court does not discern any conflict between the Court's Standing Order and the Bankruptcy Rules and Code, and therefore finds Ovation's argument unavailing. Moreover, Ovation's argument that the Trustee's...
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...fees and costs; and 4) Bankruptcy Rule 2016 applies to the application for post-petition fees and costs. ECF No. 9-2, pp. 371-390; In re Perez, 648 B.R. 833. Bankruptcy Court also stated that because it denied Ovation's objection and reset confirmation, “the Trustee may propose the manner i......