In re Richardson

• Decision Date: 17 August 2016
• Docket Number: Case No. 4:13-bk-14257
• Citation: 557 B.R. 695
• Parties: In re: Barry Richard Wertz, II Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Arkansas

557 B.R. 695

In re: Barry Richard Wertz, II Debtor.

Case No. 4:13-bk-14257

United States Bankruptcy Court, E.D. Arkansas, Little Rock Division .

Signed August 17, 2016

James O. Wyre, II, Conway, AR, for Debtor.

Joseph F. Kolb, Little Rock, AR, for Creditor Ally Financial, Inc.

ORDER

Phyllis M. Jones, United States Bankruptcy Judge

Before the Court is the Objection to Confirmation (the “Objection ”) filed by Ally Financial, Inc. (“Ally ”) on November 1, 2015 (Doc. No. 11), objecting to confirmation of the Chapter 13 Plan (the “Current Plan ”) filed by Barry Richard Wertz, II (the “Debtor ”) on October 16, 2015 (Doc. No. 4). The Objection was heard on December 17, 2015. Ally appeared by and through its counsel, Mr. Joseph F. Kolb. The Debtor appeared in person and by and through his attorneys, Bankruptcy Professional Center, by Mr. James O. Wyre, II. The issue before the Court is whether the value of the Debtor's vehicle in a confirmed plan in the Debtor's prior bankruptcy case that was dismissed before completion must be assigned as the value to the vehicle in the Debtor's current bankruptcy case. At the close of the hearing, the Court took the matter under advisement. The parties each submitted cases offered in support of their positions following the hearing. For the reasons stated below, the Court finds that the Objection should be overruled.

I. JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L). The following shall constitute the Court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052, made applicable to this contested matter by Federal Rules of Bankruptcy Procedure 3015(f) and 9014.

II. FINDINGS OF FACT

On September 9, 2011, the Debtor entered into a retail installment sales contract with Frank Fletcher Chrysler Jeep (the “Seller ”) to purchase a new 2011 Dodge Ram 1500 (the “Vehicle ”) for a total sale price of $47,058.24, with the Debtor financing $42,594.95 of the purchase price with the Seller at an annual percentage rate of 1.90%. (Ally's Ex. 1). A notation at the bottom of the contract indicates that the Seller assigned its interest in the contract to Ally. (Ally's Ex. 1). Ally is listed as first lienholder on the face of the certificate of title to the Vehicle. (Ally's Ex. 2).

After purchasing the Vehicle, the Debtor filed for protection under the provisions of Chapter 13 of the United States Bankruptcy Code in 2012. His case, however, was dismissed in August 2013 for failure to make payments to the Chapter 13 Trustee. The Debtor filed another bankruptcy case in 2014 (the “2014 Case ”), but that case was likewise dismissed in August 2015 for failure to make payments to the Chapter 13 Trustee. The Debtor's third and current case was filed on October 16, 2015. (Ally's Ex. 12). The Debtor is represented by different counsel in the instant case than in the 2014 Case. It is the series of events and agreements between the parties in the 2014 Case that forms the basis for Ally's objection to the Debtor's Current Plan.

The Debtor proposed a plan in the 2014 Case and Ally objected to confirmation of the plan. (Ally's Ex. 3). Ally's objection was settled without a hearing by an agreement between the parties, which provided in part that within twenty-one days, the Debtor would modify his plan to “value the [Vehicle] at, and propose to pay Ally the sum of $32,275.00, together with interest at 5.25% per annum.” (Ally's Ex. 4). The settlement was memorialized by order entered on September 9, 2014. (Ally's Ex. 4). The order was approved by the attorney for the Debtor. (Ally's Ex. 4). The Debtor testified that he was not aware of this agreement. Before the plan was modified consistent with the terms of the agreement, however, the 2014 Case was dismissed on March 18, 2015, for the Debtor's failure to make payments to the Chapter 13 Trustee as required by a strict compliance order. (Ally's Ex. 5). The order of dismissal was later set aside on June 4, 2015. While the case was dismissed, Ally sought relief from the automatic stay. After the case was reinstated, the parties entered into an agreement settling the motion for relief from stay. (Ally's Exs. 6-8). Pursuant to the agreed order entered on June 30, 2015, settling the motion for relief, the motion for relief was withdrawn on conditions, including that the Debtor, within ten days, modify his plan to again “value the [Vehicle] at, and propose to pay Ally the sum of $32,275.00, together with interest at 5.25% per annum.” (Ally's Ex. 8).

On July 13, 2015, the Debtor modified his plan in the 2014 Case consistent with the terms of the parties' settlements, proposing to pay Ally the value of $32,275.00 for the Vehicle plus interest at 5.25%. (Ally's Ex. 9). Pursuant to the modified plan, the Debtor was to pay $1,882.00 per month to the Chapter 13 Trustee. (Ally's Ex. 9). The Debtor's plan, as modified, was confirmed in the 2014 Case on August 12, 2015. (Ally's Ex. 10). On August 24, 2015, however, the Debtor's 2014 Case was dismissed for the Debtor's failure to make payments to the Chapter 13 Trustee as required by a strict compliance order. (Ally's Ex. 11). During the pendency of the 2014 Case, Ally received at least two payments totaling $2,773.04,¹ but at the time the 2014 Case was dismissed, the arrearage due on Ally's claim was $5,446.92.²

At the December 17, 2015, hearing in the current case, the Debtor testified that he never agreed to value the Vehicle at $32,275.00 in the 2014 Case. He explained that he had an extremely difficult time communicating with his bankruptcy counsel in his prior case. The Debtor testified that he often attempted to call, email, and even text his attorney in his prior case, but seldom received a response. The Debtor further testified that he was unaware of Ally's objection to confirmation of his plan in the 2014 Case, he was unaware of any agreement to modify his plan to increase the value of the Vehicle, and that he was unaware of any delay in filing the modified plan. He added that he was never provided copies of documents or pleadings that were filed in the 2014 Case by his previous bankruptcy counsel. The Debtor testified that the 2014 Case was dismissed because he could not afford the plan payments. The Debtor acknowledged that $32,275.00 may have been an accurate value for the Vehicle in 2012, the date of his first bankruptcy case, but not in 2014 or later. The Court finds the Debtor's testimony credible.

The Debtor filed the instant bankruptcy case on October 16, 2015, and was represented by new counsel. Along with his voluntary petition, the Debtor filed his Current Plan. (Ally's Ex. 13). In his Current Plan, the Debtor proposes to pay $1,215.00 per month to the Chapter 13 Trustee in semi-monthly installments. (Ally's Ex. 13). Of this amount, $722.00 is to be applied to the debts of secured creditors, leaving $493.00 per month for administrative claims and unsecured creditors. (Ally's Ex. 13). Mr. Pine, an attorney with the Chapter 13 Trustee's office, testified at the hearing that the Debtor had already made one semi-monthly payment to the Trustee's office in the amount of $800.00 as of the date of the hearing.

The Debtor's Current Plan values the Vehicle at $21,000.00 and proposes payment to Ally of $399.00 per month at 5.25% interest. (Ally's Ex. 13). At the hearing, the Debtor introduced an NADA report for a 2011 Ram 1500 dated November 23, 2015, which reflected an overall “clean retail” price of $20,275.00, and a slightly lower clean retail price of $18,150.00 with the specific mileage and options included on the report. (Debtor's Ex. 1). Moreover, the Debtor testified that he believed the Vehicle to be in “average” condition, as opposed to clean, as the windshield needs to be repaired, and the tires need to be replaced. In addition, upon questioning by counsel for the Debtor, Mr. Pine testified that Ally has filed a proof of claim in the Debtor's current bankruptcy case, which claim values the Vehicle at $24,925.00.

Ally objects to confirmation of the Debtor's Current Plan on four grounds: (1) that the plan is not proposed in good faith; (2) that the doctrine of res judicata applies to the valuation given to the Vehicle in the confirmed plan in the 2014 Case, which valuation must be used in the current case; (3) that confirmation of the Current Plan is barred by the doctrines of equitable estoppel, judicial estoppel, or the doctrine of inconsistent positions in that the Current Plan values the Vehicle at 21,000.00 rather than $32,275.00 as in the 2014 Case; and (4) that confirmation of the Current Plan should be denied under Section 105 of the Bankruptcy Code because confirmation would reward the Debtor for allowing the 2014 Case to be dismissed, resulting in an abuse of process and inequitable treatment of Ally's claim.³

III. CONCLUSIONS OF LAW: OBJECTION TO CONFIRMATION

A. Good Faith

Ally's first argument is that the Debtor has not proposed the plan in good faith. In order for the Court to confirm a Chapter 13 plan, the plan must be “proposed in good faith and not by any means forbidden by law.” 11 U.S.C. § 1325(a)(3) (2012). Good faith is not defined by the Bankruptcy Code. In determining good faith under Section 1325(a)(3), the Eighth Circuit evaluates the “totality of the circumstances.” Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346, 1349 (8th Cir.1990). In evaluating the totality of the circumstances, the Court “must look at factors such as whether the debtor has stated his debts and expenses accurately; whether he has made any fraudulent misrepresentation to mislead the bankruptcy court; or whether he has unfairly manipulated the Bankruptcy Code.” Education Assistance Corp. v. Zellner, 827 F.2d 1222, 1227 (8th Cir.1987). In addition, the Court may also look at additional factors such as the type of debt to be discharged, whether the debt is nondischargeable under ...