In re Rubinski, No. 05-16818-WCH.
| Decision Date | 13 September 2006 |
| Docket Number | No. 05-16818-WCH. |
| Citation | 349 B.R. 320 |
| Parties | In re Edward G. RUBINSKI, Debtor. |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Laurel E. Bretta, Bretta and Grimaldi, PA, Medford, MA, for Debtor.
The matter before me is the objection by Edward G. Rubinski ("Debtor") to claim number 4 ("Claim 4") of the Massachusetts Department of Revenue Child Support Enforcement Division ("MDOR/CSE").1 The Objection essentially challenges the amount of Claim 4, with a twist: the Debtor also alleges that confirmation of the Debtor's Chapter 13 plan is res judicata as to the dischargeability of the claims of the MDOR/CSE. For the reasons stated below, I will enter an order overruling the Objection.
The facts are straightforward and undisputed. The Debtor filed for relief under Chapter 13 of the Bankruptcy Code on July 30, 2005. The MDOR/CSE timely filed two proofs of claim on behalf of two different custodial parents on October 6, 2005.2 Claim 4 specified other amounts the Debtor allegedly owed for child support arrearages in a total amount of $45,267.50, with a breakdown into an unsecured portion of $22,343.64 and priority portion of $22,923.86.
The Debtor's plan that I confirmed on June 20, 2006 (the "Plan"),3 provides that the Debtor will make 59 monthly payments of $400.00 beginning October 1, 2005, and a final lump sum payment of $75,350.00, for payments totaling $98,950.00. The Plan promises a minimum dividend of 51% to general unsecured creditors.4 With respect to priority claims, including those of the MDOR/CSE,5 the Plan contains the following language:
Total of priority claims to be paid through the Plan: $20,000.00 [1]
*Notwithstanding the amounts stated above, the amount paid shall be based on a timely Proof of Claim filed by the creditor. If none is filed, no payments shall be made to that creditor and the debt shall be deemed discharged.
The Debtor is unsure as to whether the amount owed to the Department of Revenue is due to the Department of Revenue as a collection agent or as a result of expenditures made by the Commonwealth of Massachusetts. The Debtor will determine, after examining the Proofs of Claim, what priority status said claims may have and will object accordingly.
. . .
The Debtor has received various accountings of amounts that are alleged as owing to the child enforcement division of the Massachusetts Department of Revenue. If Proofs of Claim, as filed, are determined to be greater than twenty-thousand ($20,000.00) dollars, then the Debtor will need to amend this Chapter 13 Plan at which time the dividend payable to general unsecured creditors may change. In no event will the Child Support Division be paid, as a priority claim, an amount greater than twenty-thousand ($20,000.00) dollars as a priority claim under the terms of this Plan.6
The Debtor filed the Objection on April 11, 2006 alleging, inter alia, that Claim 4 included portions already satisfied by an agreement for judgment from Christine Rubinski, the Debtor's former spouse. The MDOR/CSE responded that it was willing to make any necessary adjustments to the Debtor's account, although it disputed the authority of Ms. Rubinski to waive penalties that may be owed to the Commonwealth. The MDOR/CSE, apparently in response to the Objection, subsequently amended Claim 4 by claim number 11 ("Claim 11") on June 27, 2006 to reduce the total claim to an unsecured amount of $15,112.07 only, with no priority portion.7
The parties, however, through their briefs and at oral argument on August 17, 2006, raise an additional issue. The parties take opposing positions as to whether the Plan will accomplish a discharge of any balance of amounts not paid to the MDOR/ CSE pursuant to the Plan for its claims. The MDOR/CSE, citing In re Foster, 292 B.R. 221, 225 n. 3 (Bankr.M.D.Fla.2003), alleges that 11 U.S.C. § 1328 excepts the remaining child support arrears from discharge. The Debtor, alternatively, argues that since the MDOR/CSE did not object to the Plan prior to its confirmation, the MDOR/CSE is now estopped from pursuing its claim of nondischargeability pursuant to the doctrine of res judicata, relying upon In re Burrell, 346 B.R. 561 (1st Cir. BAP 2006).
The Plan sets forth the amount and number of payments the Debtor is to make to the Chapter 13 Standing Trustee, as well as the minimum dividend to be paid to creditors. Additionally, the Plan clearly provides for payment of the MDOR/CSE claims by identifying it as a potential priority creditor. Even though the MDOR/ CSE amended Claim 4 to a general unsecured claim,8 the MDOR/CSE is still entitled to payment for this claim according to the terms of the Plan along with other general unsecured claims. The Plan is clear and unambiguous in providing for payment to unsecured creditors. They are to receive a minimum dividend of 51%, and this dividend will now be increased due to the absence of priority claims.
"A claim or interest ... is deemed allowed, unless a party in interest ... objects." 11 U.S.C. § 502(a). Subsequent to the Objection, the MDOR/CSE amended its claim. Claim 11 substantially reduces the amounts claimed owed, and reclassifies the claim from a priority to an unsecured claim. As the Debtor's Objection only brought issue with the total amount of Claim 4, the fact of the amended claim and lack of objection thereto leads me to conclude that the Objection has been resolved with respect to the amount of the claim Therefore, I will overrule the Objection as it relates to the amount of the claim.
The parties have raised the additional issue as to whether the Plan will discharge any balances of amounts the Debtor owes to the MDOR/CSE not paid pursuant to the Plan. To establish res judicata, a party must prove three elements: "(1) a final judgment on the merits in an earlier proceeding; (2) sufficient identicality between the causes of action asserted in the earlier and later suits; and (3) sufficient identicality between the parties in the two actions." Gonzalez-Pina v. Rodriguez, 407 F.3d 425, 429 (1st Cir.2005). According to 11 U.S.C. § 1327(a), "[t]he 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; Doral Mortgage Corp. v. Echevarria (In re Echevarria), 212 B.R. 185, 188 (1st Cir. BAP 1997). The Bankruptcy Appellate Panel for the First Circuit Court of Appeals has held that the failure of a party to object to or appeal a confirmation is res judicata and binding on a debtor and creditor. Id.; Burrell, 346 B.R. 561, 568-69 (citing Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir.1999)).
In this case, while the confirmation order was entered as a final judgment on the merits, and both the Debtor and the MDOR/CSE were parties during the confirmation and present proceeding, the second element of res judicata is not satisfied: the issue with respect to the dischargeability of the MDOR/CSE's claims was not adjudicated prior to confirmation. In other words, while the Debtor is now alleging that any unpaid balance on the claims of the MDOR/CSE will be dischargeable al the end of the Chapter 13 proceeding, the Plan made no such provision with respect to dischargeability and no such action has been initiated.9
In the Burrell case, the terms of the plan were not ambiguous with respect to its proposed treatment of a creditor's claim, where despite the creditor's secured status, the creditor's claim was provided for as a priority unsecured claim. 346 B.R. 561, 568-69. Where a plan is ambiguous with respect to its treatment of particular aspect of a creditor's claim, however, courts have found that res judicata does not...
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