In re Vincent

• Decision Date: 01 December 2003
• Docket Number: BAP No. 03-6025EA.
• Citation: 301 B.R. 734
• Parties: In re Johnny L. VINCENT, Debtor. Johnny L. Vincent, Debtor-Appellant, v. Fairbanks Capital Corporation, Creditor-Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Eighth Circuit

Page 734

301 B.R. 734

In re Johnny L. VINCENT, Debtor Johnny L. Vincent, Debtor-Appellant, v. Fairbanks Capital Corporation, Creditor-Appellee.

BAP No. 03-6025EA.

United States Bankruptcy Appellate Panel of the Eighth Circuit.

Submitted: October 29, 2003.

Filed: December 1, 2003.

James F. Valley, Helena, AR, for appellant.

Kimberly D. Burnette, Little Rock, AR, for appellee.

Before SCHERMER, DREHER, and FEDERMAN, Bankruptcy Judges.

DREHER, Bankruptcy Judge.

This is an appeal from the bankruptcy court's¹ order which sustained an objection to Debtor's modification of a Chapter 13 plan. For the reasons stated below we dismiss the appeal for lack of jurisdiction.

PROCEDURAL HISTORY AND FACTS

On October 8, 1998, Debtor, Johnny Vincent ("Debtor"), filed a petition for bankruptcy relief under Chapter 13. Debtor scheduled his home as an asset in his bankruptcy case and valued it at $28,500. Debtor also scheduled IMC Mortgage ("IMC") as a secured creditor holding a lien in the home to secure a claim of $22,700. IMC's claim was secured solely by Debtor's principal residence. The last payment on the mortgage is due on May 18, 2010. Therefore, the debt to IMC is a long-term claim as provided by 11 U.S.C. § 1322(c), not subject to modification under 11 U.S.C. § 1325(b)(5).

A plan of reorganization was attached to the original petition which provided for payments to be made in the sum of $930.00 monthly for a period of 60 months. The plan listed no long-term debts. Instead, the obligation to IMC was listed as a secured claim which would not extend beyond the length of the plan. The plan proposed to pay IMC's secured claim by paying the $22,700 value of the collateral in full over the life of the plan at the rate of $378.33 per month without payment of any interest. Thus, the plan misclassified the IMC debt.

On March 15, 1999, IMC filed a motion to modify the plan. The bankruptcy court construed the motion as an objection to confirmation. In its objection, IMC asserted that its claim was a long term debt not subject to modification. IMC also filed a motion for adequate protection requesting immediate payment from either the Debtor or the Chapter 13 Trustee.

In response to the objection, Debtor modified his plan to pay IMC's claim of $23,309.09 plus an arrearage of $544.00. The modified plan still did not provide to pay interest on IMC's claim. On May 4, 1999, an order submitted by IMC's counsel was entered withdrawing its motion and reciting that Debtor had modified his plan to pay IMC's pre-petition arrearage claim at the rate of $46.00 per month and the ongoing mortgage payment at $477.65 a month. Thereafter, IMC's claim of $23,309.09, which did not include a claim for interest,² was allowed by order dated May 12, 1999. On June 4, 1999, the bankruptcy court issued an order confirming Debtor's modified plan.

Two years later, on May 22, 2001, IMC, having discovered its error, filed an amended secured claim in the amount of $30,449.06. In response, the Chapter 13 Trustee filed a motion to allow the claim in that amount. The bankruptcy court entered an order on that date which provided that: "the above claim be allowed as has been recommended by the Trustee and payable as provided by the Debtor's plan and other orders of this Court or paid in full if not otherwise provided in the plan of the Debtor." The order further provided that Debtor had thirty days in which to file a written application for modification of the order or to modify the plan to pay less than the full amount of the allowed claim. Debtor timely filed an objection to the claim, arguing that the claim was untimely and inconsistent with the previously filed claim. In response, Fairbanks Capital Corporation, successor to IMC ("Fairbanks"),³ filed a motion to compel Debtor to comply with discovery requests. The motion was granted by agreement and an order was entered on October 9, 2001 which provided, in part, that Debtor would have until October 12, 2001, to comply with discovery requests in the absence of which Fairbanks would be entitled to submit an ex parte order overruling Debtor's objection.

Debtor failed to respond to discovery. Fairbanks then filed a motion seeking the ex parte order overruling the Debtor's objection to the claim. Accordingly, an order overruling the Debtor's objection was entered on October 23, 2001, putting into effect the May 24, 2001 order which had allowed the amended claim. Debtor did not appeal from that order. Moreover, the Chapter 13 Trustee did not change the amount of the payments being made to Fairbanks. At least in the understanding of the Trustee, while the amended claim had been allowed, the confirmed plan had never been modified to change the treatment of Fairbanks' claim.

Soon thereafter, Debtor lost his job and was entitled to a lump sum severance payment. He wished to complete his obligations under the confirmed Chapter 13 Plan. At Debtor's request the Chapter 13 Trustee informed Debtor what he would need to pay in order to complete his payments under the Plan. On April 24, 2002, Debtor filed a Modification to Close and a Notice of Opportunity to Object to Closure of Plan in which he proposed to pay a lump sum of $17,336.56 to be used to pay the full unpaid balance of Fairbanks' original claim as directed by the Chapter 13 Trustee.⁴ Fairbanks objected on the grounds that the modification should not be allowed because Debtor was not proposing to pay Fairbanks allowed claim of $30,449.06 in full. Fairbanks sought an order sustaining its objection to the modified plan and either requiring Debtor to pay the full amount of the allowed claim in full over the remaining life of the plan or that Debtor be ordered to modify his plan to provide for the secured claim of Fairbanks in the sum of $30,449.06 to be treated as a long term debt not subject to modification and paid at the rate of $523.65 per month. After related proceedings not relevant to this decision, the bankruptcy court issued its order dated April 24, 2003, in which the bankruptcy court sustained the objection of Fairbanks to plan modification but did not require the Debtor to modify his Plan.

In its ruling, the bankruptcy court held that IMC had erred in the proceedings leading up to the confirmation of the modified plan and further erred when it filed the amended claim which provided for interest on its claim. The debt to IMC/Fairbanks was a debt on Debtor's principal residence which was not due within the term of the plan. Section 1325(b)(5) of the Bankruptcy Code does not allow for modification of such claims in the context of a Chapter 13 Plan. Nonetheless, the modified plan patently did not provide for the payment of interest on the claim and IMC/Fairbanks failed to object. Having done so, the plan was confirmed and the confirmed plan bound Fairbanks to payments terms provided in the confirmed plan. The bankruptcy court further held that when IMC/Fairbanks filed the amended claim, Debtor's objection should have been sustained because the treatment of IMC/Fairbanks' claim had already been determined by the final order confirming the plan which was res judicata on that issue. However, Debtor had failed to file an appeal from the order allowing the claim in the sum of $30,449.06. The bankruptcy court then went on to construe its May 21, 2001 Order as having modified the Chapter 13 Plan to require Debtor to make full payment of Fairbanks' claim in the sum of $30,449.06, which sum would not be discharged without full payment and, therefore, sustained Fairbanks' objection to modification of the plan.

DECISION

This court has an independent obligation to determine its own jurisdiction. See Lewis v. United States, 992 F.2d 767, 771 (8th Cir.1993); Crockett v. Lineberger, 205 B.R. 580, 581 n. 3 (8th Cir. BAP 1997). As we previously discussed in Safeco Ins. Co. v. Farmland Indus. Inc. (In re Farmland Industries, Inc.), 296 B.R. 793 (8th Cir. BAP 2003):

The Eighth Circuit has adopted a three factor test to determine whether a bankruptcy court order is final for purposes of 28 U.S.C. § 158(d), considering "the extent to which (1) the order leaves the bankruptcy court nothing to do but execute the order, (2) delay in obtaining review would prevent the aggrieved party from obtaining effective relief, and (3) a later reversal on that issue would require recommencement of the entire proceeding." The Eighth Circuit Bankruptcy Appellate Panel has applied this test for determining finality under 28 U.S.C. § 158(a)(1).⁵

Id. at 800. (internal citations omitted)

[An] order, although not a final judgment on the merits on all claims and to all parties, may be reviewed as a final collateral order if it meets the test set out in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). Three requirements must be met; (1) the order must conclusively determine the disputed question, (2) the order must resolve an important question completely separate from the merits of the action, and (3) the order must be effectively unreviewable on appeal from final judgment.

Id. (citing National City Bank v. Coopers and Lybrand, 802 F.2d 990, 993 n. 2 (8th Cir.1986); Moxley v. Comer (In re Comer), 716 F.2d 168, 172 (3rd Cir.1983) (holding that an order is final when its subject matter is not one that can wait final resolution of the bankruptcy proceeding, the particular controversy will not return to the court, and effective review of the order cannot await final disposition of the case in the bankruptcy court); and Bayer v. Nicola (In re Bestmann), 720 F.2d 484, 486 (8th Cir.1983)(the essence of the test to determine finality of a bankruptcy order is...