In re Risser, Bankruptcy No. 82-00011-M13
| Decision Date | 02 September 1982 |
| Docket Number | Bankruptcy No. 82-00011-M13,Adv. No. C82-0952-M13. |
| Citation | 22 BR 868 |
| Parties | In re William Elwyn RISSER and Kathy Louise Risser, Debtors. LOS ANGELES TITLE AND TRUST DEED COMPANY, A California corporation, Union Home Loans, dba Western Loan Services, a California corporation, and Joseph Immordino and Antoinette Immordino, husband and wife, and Elise R. Douat, Plaintiffs, v. William Elwyn RISSER and Kathy Louise Risser, Debtors, and Harry Heid, Trustee, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of California |
H. Brian Todd, of Wiles, Circuit & Tremblay, La Jolla, Cal., for plaintiff.
Robert Shanner, for Ralph E. Garner, San Diego, Cal., for debtors.
Harry W. Heid, San Diego, Cal., trustee.
This adversary proceeding for relief from stay came on regularly for trial on August 25, 1982, at which time the court announced its decision. This opinion is written to explain the oral decision announced at trial upon the legal issue raised by Plaintiff as to the invalidity of the Debtors' Chapter 13 Plan constituting "cause" for relief from the automatic stay of 11 U.S.C. § 362.
The Debtors filed a petition for relief under Chapter 13 on January 4, 1982, Case No. 82-00011-M13. The petition was accompanied by a statement of affairs and a Chapter 13 plan. The plan was confirmed on February 11, 1982. No objections to the plan were filed, and there were no appearances in opposition to the plan at the confirmation hearing.
The statement of affairs listed the Debtor's residence as an asset valued at $70,000, and encumbered by trust deeds totaling $42,500. Plaintiff, Los Angeles Title and Trust Deed Company, (L.A. Title), is the trustee under the second and third deeds of trust. The total amount owing on the second trust deed is approximately $6,532. The total amount now owing on the third trust deed is approximately $23,841. The second trust deed becomes all due and payable in October, 1984. The third trust deed becomes all due and payable in October, 1983.
The Debtor's plan sets the amount of pre-petition arrearages on the second trust deed at $558.75, and proposes to pay $16 per month on the arrearages until paid in full. It will take 35 months to pay the arrearages on the second trust deed. The plan sets the arrearages on the third trust deed at $3,100 and proposes to pay $87 per month. It will take 36 months to pay the arrearages on the third trust deed.
Under the terms of the plan confirmed on February 11, 1982, neither of the subject trust deeds will be paid in full by the time of their respective due dates.
At the preliminary hearing on the relief from stay complaint, L.A. Title argued that § 1322(b)(2) prohibits Debtor Risser from modifying L.A. Title's rights because it is secured solely by an interest in the Debtor's principal residence.1 L.A. Title argues that the only exception to § 1322(b)(2), found in § 1322(b)(5), is not applicable in the instant proceeding. Section 1322(b)(5) states:
notwithstanding paragraph (2) of this subsection, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due....
The provisions of the plan which deal with L.A. Title's claims clearly do not comply with § 1322(b)(5). Neither of the obligations to L.A. Title will be paid in full through the plan prior to the due dates on the underlying promissory notes.
L.A. Title would have this Court declare the plan a nullity because it does not comply with § 1322(b)(5). However, no evidence that the plan did not comply with § 1322(b)(5) was introduced at the confirmation hearing and the plan was confirmed without objection. Nothing in the file or at that hearing alerted the Court to the early due dates on the Plaintiff's notes. The question now presented is whether this creditor is bound by the provisions of the confirmed plan pursuant to § 1327(a).2
The Debtors argue that L.A. Title cannot prevail on its § 362 complaint because it, like all other creditors, is bound by the confirmed plan. 11 U.S.C. § 1327(a). The Debtors contend that any objection to the plan should have been raised at the confirmation hearing as provided by § 1324. Section 1324 provides that "a party in interest may object to the confirmation of the plan."
Section 1327(a) states:
"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."
That language is sufficient to put all creditors on notice that objections to the plan must be made prior to confirmation. When § 1327 is read together with the provision for objecting to the plan in § 1324, it is clear that § 1327(a) binds all creditors after the confirmation order is entered. L.A. Title, in addition to notice of the statutory provisions, received actual notice of the terms of the plan prior to confirmation. The notice of the confirmation hearing sent to all creditors specified that, under the plan as proposed, L.A. Title was to receive $16 per month on the second trust deed, and $87 per month on the third trust deed.
The Debtors now concede that their plan does not comply with § 1322(b)(5). Had the Court been aware of this defect at the time of confirmation, it is unlikely the plan would have been confirmed. However, the mandatory language of § 1325(a)3 allows the court no discretion. Where the plan appears to satisfy the requisites of § 1325(a) and no evidence to the contrary is presented, the Court must confirm it. Once confirmed the plan is binding on all parties by virtue of § 1327(a).
Under the circumstances presented in this case the Court finds no reason to allow L.A. Title to avoid the binding effect of § 1327.
L.A. Title has attacked the plan in the context of a complaint for relief from stay "for cause" pursuant to 11 U.S.C. § 362(d)(1). However, once the plan is confirmed a § 362 complaint is not, in most cases, the proper procedural vehicle for attacking the plan.4 Absent a direct successful attack of the plan, L.A. Title and all other creditors are bound by its terms. Therefore, any request for relief from stay, other than one based upon post-confirmation events, must be denied.
The only parties usually noticed in a Chapter 13 relief from stay proceeding are the Debtor and the Trustee. The relief sought by L.A. Title may affect all creditors, and all creditors, therefore, should receive notice.5
The foregoing shall constitute Findings of Fact and Conclusions of Law pursuant to Bankruptcy Rule 752 as to the "For Cause" issue raised by Plaintiff. A partial Summary Judgment shall be prepared by Debtors' counsel within ten (10) days. The remaining evidentiary matters shall be continued at the request of the parties for further hearing on September 14, 1982, at 2:00 P.M. o'clock in Department No. 2, in the interim, the automatic stay of 11 U.S.C. § 362 shall remain in effect.
1 L.A. Title argued that § 1322(b)(5) is unavailable to the Debtor because the curing of the default herein would constitute the modification of the rights of a creditor secured by the Debtor's principal residence which is prohibited by subsection (b)(2). In the recent case of In re Taddeo, 685 F.2d 24 (2d Cir. 1982), the Second Circuit "did not read `curing...
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