In re Stafford

• Decision Date: 25 January 1991
• Docket Number: No. CV-90-N-2384-W.,CV-90-N-2384-W.
• Citation: 123 BR 415
• Parties: In re Ricky Lamar STAFFORD and Brenda Lee Stafford, Debtors. BOWEST CORPORATION, Appellant, v. Ricky Lamar STAFFORD and Brenda Lee Stafford, Appellees.
• Court: U.S. District Court — Northern District of Alabama

123 B.R. 415 (1991)

In re Ricky Lamar STAFFORD and Brenda Lee Stafford, Debtors BOWEST CORPORATION, Appellant, v. Ricky Lamar STAFFORD and Brenda Lee Stafford, Appellees.

No. CV-90-N-2384-W.

United States District Court, N.D. Alabama, W.D.

January 25, 1991.

William A. Ratliff, Wallace Brooke & Byers, Birmingham, Ala., for appellant.

William K. Higgins, Jr., Beaird Thomas & Higgins, Jasper, Ala., for appellees.

C. Michael Stilson, Tuscaloosa, Ala., pro se.

MEMORANDUM OF OPINION

EDWIN L. NELSON, District Judge.

This matter is before the court on appeal, pursuant to 28 U.S.C. § 158(a), from final orders of the United States Bankruptcy Court for the Northern District of Alabama which confirmed the debtors' modified Chapter 13 plan and denied the appellant's motion for relief from the automatic stay provisions of 11 U.S.C. § 362, 121 B.R. 109.¹ The court has carefully examined the entire file and applicable provisions of law and, pursuant to Bankruptcy Rule 8012(3), specifically finds that "the facts and legal arguments are adequately presented in the briefs and record and the decisional process would not be significantly aided by oral argument." Accordingly, the court will decide the appeal on the basis of the record and briefs of counsel and without oral argument.

The court starts from the settled rule that findings of fact by the Bankruptcy Judge must be accepted by this court unless they are clearly erroneous, giving due regard to the opportunity of the court below to judge the credibility of the witnesses first hand. Federal Landbank of Jackson v. Cornelison, 901 F.2d 1073 (11th Cir.1990). The deference due the bankruptcy court's factual findings is not applicable to its conclusions of law. On such conclusions, this court's review is de novo. In re Sublett, 895 F.2d 1381, 1383 (11th Cir.1990). While there was no evidence received at the hearing on the amended Chapter 13 plan, the Bankruptcy Judge gleaned certain factual findings from the record and the appellant does not seriously contend that those factual findings are clearly erroneous. Judge Wright's findings were:

Debtors, Ricky Lamar Stafford and Brenda Lee Stafford, filed a petition for protection under Chapter 13 of 11 U.S.C. on January 30, 1990. The Staffords had originally listed a $45,000.00 obligation to Bowest Corporation of San Diego, California, first mortgage on their home, as a non-plan secured obligation with a monthly payment of $428.00 to be made outside their Chapter 13 reorganization plan. The mortgage is on a mobile home that serves as the Stafford family residence. That initial listing of debt for the plan also included a $2,670.00 arrearage to Bowest for overdue payments from September of 1989 to January of 1990.

The $45,000.00 Bowest mortgage is the largest obligation in the total $66,638.69 in secured and unsecured debts listed by the Staffords at their bankruptcy. Other large debts included $3,700.00 for a pickup truck and $6,000.00 for a 1982 International Harvester cabover truck Mr. Stafford used in his work. The Staffords listed a total of $4,908.14 in unsecured debt at the time of their bankruptcy. Of this total unsecured debt, $3,421.98 consisted of bills for various medical services, many of them for pediatric medicine, many of them in the hands of collection agencies by the time the petition was filed.

Mr. Stafford, a lease truck driver, reported approximately $12,000.00 in income for the year prior to filing bankruptcy; Mrs. Stafford, a substitute teacher, approximately $500.00. The couple listed three dependent children on their disclosure statement.

On April 3, 1990, this Court confirmed the Staffords\' plan for reorganization of their personal finances under Chapter 13. The order, which provided for 100 percent payment to secured and unsecured creditors, granted Bowest a $75.00-per-month payment on the prepetition arrearage filed as Claim No. 19. It also provided that: "Further, that the regular monthly payment to Bowest Corporation is to be paid direct by debtor to creditor; further, that said creditor is granted limited relief from automatic stay to contact the debtor by mail or telephone concerning the payment of post-petition (sic) (no pre-petition) (sic) monthly installment payments. (Motion No. 5-2583)."

Then on April 24, 1990, the Court approved a modification to the Staffords\' plan which added a $50.00 payment for arrearage and late charges for February, March, and April of 1990, and the regular monthly mortgage payments of $428.00 to the plan. The amendment, presented by Counsel for the Debtors, also raised the $475.00-per-month original installment to $953.00 to bring the regular mortgage payments and payments on both pre and post-petition arrearages into the plan.

On June 1, 1990, Creditor Bowest filed its Objection to Confirmation and Motion for Relief from Automatic Stay based on the contention that Chapter 13 plans may not be modified to cure post-petition (sic) arrearages. Bowest amended its motion August 16, 1990 to say that it had received no payments inside or outside of the plan and that the Staffords were in default for February through August of 1990 payments.

At a hearing that same day, August 16, 1990, the Court had set the final hearing for September 13, 1990. The Court also directed the Debtors to pay two payments, plus late charges, $890.24, to Bowest as adequate protection before the date of the September hearing.

Counsel for Debtors at the September hearing indicated that this amount had been paid directly to the attorney for Bowest. Bowest offered no evidence in support of its motion at the hearing. The Court overruled Bowest\'s Objection to Confirmation and entered an order denying its Motion to Lift Stay on September 21, 1990.

Bowest Corporation filed notice of appeal to the United States District Court for the Northern District of Alabama on October 2, 1990.

On this appeal Bowest argues: (1) the bankruptcy court is not authorized under the provisions of 11 U.S.C. § 1329(a) to modify a Chapter 13 reorganization plan to cure a postpetition arrearage; (2) under 11 U.S.C. § 1322(b) the rights of a creditor whose claim is secured only by a mortgage on the debtor's principal residence may not be modified except to cure a pre-petition default; and (3) it is entitled to relief from the automatic stay provisions of 11 U.S.C. § 362 because its interest is not adequately protected under the amended Chapter 13 plan.

In the case of In re Hollis, 105 B.R. 1003 (N.D.Ala.1989), another judge of this court held that the debtor in a Chapter 13 proceeding was not entitled under the applicable law to cure a default that occurred after the bankruptcy court had confirmed the Chapter 13 plan. Bowest argues that Judge Wright's decision was "in direct opposition to this binding precedent," suggesting that the Hollis decision constitutes the law of this district and that the bankruptcy and district judges of this court are bound to follow it. Such is not the case. The court holds the utmost respect for all the judges of the court and is always pleased to have the benefit of their opinions. Respectfully, however, the court must suggest that Hollis does not constitute precedent binding on this court. Colby v. J.C. Penney, 811 F.2d 1119, 1124 (7th Cir.1987); Jackson v. Johns, 714 F.Supp. 1126, 1130 (D.C.Colo.1989); King v. County of Nassau, 581 F.Supp. 493, 503 (E.D.N.Y.1984); E.E.O.C. v. Pan American World Airways, 576 F.Supp. 1530, 1535 (S.D.N.Y. 1984). To the extent, however, that Hollis is both applicable and persuasive, the court will be pleased to consider it.

A debtor's plan under Chapter 13 of the Bankruptcy Code must (1) allocate a sufficient portion of future income to provide for execution of the plan, (2) provide for payment in full in deferred cash payments of all claims entitled to priority under 11 U.S.C. § 507, and (3) treat all claims within the same class equally. 11 U.S.C. § 1322(a). Additionally, subject to the requirements of 11 U.S.C. § 1322(a), the plan may,

(2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor\'s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims; (3) provide for the curing or waiving of any default; and

* * * * * *

(5) 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;

11 U.S.C. § 1322(b)(2) and (5). (Emphasis added.) The bankruptcy court must confirm the plan provided the conditions of 11 U.S.C. § 1325 are met.

Under 11 U.S.C. § 1323(a), the debtor may modify a Chapter 13 plan at any time before it is confirmed, provided the plan, as modified, conforms to the requirements of 11 U.S.C. § 1322. Once confirmed, the modified plan becomes the Chapter 13 plan. As noted in Judge Wright's opinion, the Staffords' plan was not modified before confirmation pursuant to section 1323(a). Rather, it was modified after confirmation pursuant to the provisions of 11 U.S.C. § 1329.²

The case has been treated to this point as though it presents a single question regarding the authority of the bankruptcy court to approve a modified Chapter 13 plan that cures the debtors' defaults occurring after the petition was filed. No consideration has been given to what concerns, if any, are implicated by the fact that the debtors were permitted to cure defaults that occurred after the petition was filed and both before and after the original confirmation order.³ Since modifications to Chapter 13 plans before the initial confirmation are authorized under 11 U.S.C. § 1323 and a modification after initial confirmation is controlled by 11 U.S.C. § 1129, the two categories of defaults...