In re Stamps

• Docket Number: Case No. 19 B 21730
• Decision Date: 30 September 2022
• Parties: IN RE: Linda STAMPS, Debtor.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois

644 B.R. 760

IN RE: Linda STAMPS, Debtor.

Case No. 19 B 21730

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Signed September 30, 2022

Michael C. Burr, Kevin Rouse, Borges and Wu, LLC, Chicago, IL, for Debtor.

Yanick Polycarpe, Office of the Chapter 13 Trustee, Chicago, IL, for Trustee.

Celia Meza, Corporation Counsel, David Paul Holtkamp, Chief Assistant Corporation Counsel, Chicago Department of Law, Chicago, IL, for City of Chicago.

MEMORANDUM OPINION

DAVID D. CLEARY, United States Bankruptcy Judge

This matter comes before the court on the motion of the City of Chicago ("City") to enforce confirmed plan and for declaratory relief ("Motion"). Marilyn O. Marshall, Standing Chapter 13 Trustee ("Trustee"), opposed the Motion. The court entered a briefing schedule, and the parties timely filed their response ("Response") and reply ("Reply"). Having read the papers and heard the arguments of the parties, the court will deny the Motion.

I. INTRODUCTION

In the Motion, and in the briefs supporting and opposing it, the parties ask the court to interpret certain language in the national form chapter 13 plan and the plan confirmed in this case:

If relief from the automatic stay is ordered as to any item of collateral listed in this paragraph, then, unless otherwise ordered by the court, all payments under this paragraph as to that collateral will cease, and all secured claims based on that collateral will no longer be treated by the plan.

Official Form 113 ("Form 113"), section 3.1.

To persuade the court to adopt their reasoning, each party debates the importance and meaning of different canons of construction and interpretation. But, such an exercise is unnecessary. "Where the language is plain and admits of no more than one meaning, the duty of interpretation does not arise, and the rules which are to aid doubtful meanings need no discussion." Caminetti v. United States , 242 U.S. 470, 485, 37 S.Ct. 192, 61 L.Ed. 442 (1917). See, e.g., Lamie v. U.S. Trustee , 540 U.S. 526, 536, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004) (The plain meaning "approach respects the words of Congress. In this manner we avoid the pitfalls that plague too quick a turn to the more controversial realm of legislative history."); Pavelic & LeFlore v. Marvel Ent. Grp. , 493 U.S. 120, 123, 110 S.Ct. 456, 107 L.Ed.2d 438 (1989) ("We give the Federal Rules of Civil Procedure their plain meaning, and generally with them as with a statute, when we find the terms ... unambiguous, judicial inquiry is complete[.]") (citation and quotation omitted).

Accordingly, this court's task is to determine whether the plain meaning of this language in Form 113 is unambiguous. Reading Form 113 as a whole, and as confirmed in this case and applied to these parties, the meaning of the language at issue is plain. The court will not alter the terms of Debtor's confirmed plan by enforcing the interpretation presented by the City. The Motion will be denied.

II. BACKGROUND

Debtor Linda Stamps ("Debtor") filed for relief under chapter 13 of the Bankruptcy Code on August 1, 2019. She filed a proposed plan about two weeks later. Debtor then brought a motion to extend stay, and the court granted it without objection. Early in the case, she filed objections to two proofs of claim, one of which was mooted and the other withdrawn. The Trustee filed a motion to dismiss for unreasonable delay, which serves as an objection to confirmation in this district. Capital One Auto Finance ("Capital One") filed an objection to confirmation.

Debtor eventually filed an amended plan ("Plan"). The Trustee withdrew her motion to dismiss, the court confirmed the Plan on December 9, 2019, and on the same day, entered a minute order modifying the Plan to resolve Capital One's objection.

Among other provisions, the Plan treats the claim of Ocwen Loan Servicing ("Ocwen") in section 3.1.¹ Ocwen's claim is secured by a mortgage on the real property at 5307 S. Hermitage Avenue in Chicago (the "Hermitage Property"). The Plan provides for Debtor to make direct monthly payments to Ocwen to maintain her current contractual obligation, and for the Trustee to make disbursements to Ocwen on its $30,715.62 arrearage.

In section 3.2, the Plan treats the claim of the City, secured by the Hermitage Property. The Plan estimates the City's claim at $9,203 and provides for the Trustee to make disbursements to the City of $153.38 each month during the 60-month Plan term. The Plan as modified by the minute order treats Capital One's claim, secured by a 2017 Ford C-Max Hybrid, in section 3.3.

On December 27, 2019, Ocwen filed a motion for relief from the automatic stay. About a month later, the Debtor and Ocwen entered into the Agreed Repay Order with Provision for Stay Relief Upon Default ("Repay Order").

The Repay Order states that if Ocwen does not receive any one scheduled payment and Debtor does not bring the loan current within a certain period of time, "the stay shall be automatically terminated ... upon filing of notice of same with the clerk of the court[.]" On November 16, 2020, Ocwen filed a notice of default under the Repay Order. According to the terms of the Repay Order, the stay automatically terminated.

Some time after the stay terminated, the Trustee stopped making the $153.38 monthly payments to the City. On February 22, 2022, the Trustee sent a letter and email to the City demanding the return of $306.76. In the email, the Trustee wrote:

On 11/16/2020 a Notice of Default and Modification of the Automatic Stay was filed, providing stay relief to Deutsche Bank National Trust Company in regards to the property located at 5307 S Hermitage Ave, Chicago, IL 60609.

The property address is listed in section 3.1 of the plan.

Once the notice was filed on 11/16/2020 all payments on an [sic] claim secured by the referenced property should have ceases [sic].

The Trustee's office disbursed funds in the amount of $306.76 on 11/20/2020.

Therefore the Trustee is requesting a refund in the amount of $306.76.

The City has not returned the requested refund to the Trustee, but instead brought the Motion.

III. CONTENTIONS OF THE PARTIES

In the Motion, the City seeks an order declaring the following:

1. Notwithstanding any purportedly contrary language in paragraph 3.1 of the Plan, the City was at all times, and is going forward, entitled to its set payment under paragraph 3.2 of the Plan;

2. The City is not required to turn over or disgorge to the Trustee the $306.76 she has demanded; and

3. The Trustee must continue making payments to the City as provided for in paragraph 3.2 of the Plan and must take all reasonable actions to make up for payments that she did not make to the City under that paragraph.

(See EOD 61, Proposed Order.)

In support of its position that the Trustee's interpretation of the effect of stay relief on its treatment by the Plan is flawed, the City puts forth three arguments. First, that the Trustee's position conflicts with three canons of construction: (1) the surplusage canon; (2) the general/specific canon; and (3) the harmonious-reading canon. Second, that the Trustee's interpretation would undercut the notice and clarity that Form 113 is intended to provide. Finally, that stopping payments to all creditors secured by property for which the stay is lifted would violate 11 U.S.C. § 1325(a)(5)(B) and render Form 113 unconfirmable.

In opposition to the City, the Trustee focuses on the "ordinary, plain reading of the text of the plan[.]" Response, p. 3. She responds to each of the City's arguments, but urges "the Court ... [to] focus on the text itself and the purpose behind the text." Id. , p. 7.

IV. DISCUSSION

A. Jurisdiction

1. Authority to enter declaratory judgment

The court will first address its jurisdiction to hear the Motion. The City requests entry of a declaratory judgment. So long as a movant's requested relief is limited "to cases of actual controversy, that is, actual legal disputes," Klinger v. Conan Doyle Estate, Ltd. , 755 F.3d 496, 499 (7th Cir. 2014) (citation and quotation omitted), courts may issue declaratory judgments. See 28 U.S.C. § 2201(a). "[T]he bankruptcy court has the power to issue declaratory judgments when the matter in controversy regards the administration of a pending bankruptcy estate." Sears, Roebuck & Co. v. O'Brien , 178 F.3d 962, 964 (8th Cir. 1999). See Walden Inv. Grp. v. First Nations Bank (In re Montemurro ), 580 B.R. 490, 493 (Bankr. N.D. Ill. 2017) ("Declaratory judgments ... are clearly within the court's general authority.").

A request for a declaratory judgment, however, requires the filing of an adversary proceeding. See Fed. R. Bankr. P. 7001(9). Putting aside this requirement, which the Trustee has not raised, the Motion also requests enforcement of the confirmed Plan. The court will decide the limited issue of enforcement of a plan provision in this case and under this Plan.

2. Effect of a confirmed plan

The title of 11 U.S.C. § 1327 is Effect of Confirmation. "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."

11 U.S.C. § 1327(a). Upon confirmation, therefore, Debtor and all of her creditors, including the City, became bound to the terms of the Plan.

After confirmation of a chapter 13 plan, its provisions are implemented over a number of years by the chapter 13 trustee. See 11 U.S.C. § 1302 (describing the duties of a chapter 13 trustee). A chapter 13 case concludes only after: (1) all payments are complete and a discharge is entered; (2) the case is converted; or (3) the court dismisses it.

3. The court has jurisdiction to enforce a confirmed plan

The court has "jurisdiction to interpret and enforce its own prior orders." Travelers Indem. Co. v. Bailey , 557 U.S. 137, 151, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009). This includes the authority to enforce the provisions of a confirmed plan....