In re Williams, Bankruptcy No. 87-0175-BKC-DTH
Decision Date | 20 October 1989 |
Docket Number | Bankruptcy No. 87-0175-BKC-DTH,Adv. No. 89-4079. |
Citation | 108 BR 119 |
Parties | In re Ira WILLIAMS and Faye Williams, Debtors. Ira WILLIAMS and Faye Williams, Plaintiffs, v. FIRST NATIONAL BANK, ROSEDALE, MISSISSIPPI, Defendant. |
Court | U.S. Bankruptcy Court — Northern District of Mississippi |
Levi Boone, III, Cleveland, Miss., for Ira and Faye Williams.
Robert Johnston, Cleveland, Miss., for First Nat. Bank of Rosedale, Miss.
On consideration of the complaint filed by the debtors, Ira Williams and Faye Williams, hereinafter referred to as debtors or plaintiffs; answer and affirmative defenses having been filed by the defendant, First National Bank, Rosedale, Mississippi, hereinafter referred to as First National Bank; all parties being represented by their respective attorneys of record; and the Court having heard and considered same hereby finds as follows, to-wit:
I.
The Court has jurisdiction of the subject matter of and the parties to this proceeding pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157(b). This is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(A), (K), (L), and (O).
II.
The debtors filed their voluntary Chapter 13 bankruptcy case on September 23, 1987. Their Chapter 13 plan was confirmed by the Court on November 16, 1987, and provided for the following payments, to-wit:
A. Unifirst Bank, original principal indebtedness in the sum of $54,450.00 — the debtors proposed to pay the sum of $621.00 per month outside the plan, representing the regular monthly installments on the indebtedness, in addition to the payment of $69.00 per month through the plan to cure a prepetition arrearage in the sum of $2,486.79.
Unifirst Bank currently holds a first deed of trust which is secured exclusively by the debtors' principal place of residence.
B. First National Bank, Rosedale, Mississippi, original principal indebtedness in the sum of $24,235.68 — the debtors proposed to pay the sum of $288.52 per month outside the plan, representing the regular monthly installments on the indebtedness, in addition to the payment of $24.04 per month through the plan to cure a prepetition arrearage in the sum of $865.56.
At the time that the debtors' plan was confirmed, they were under the impression that the indebtedness owed to First National Bank was secured by a second deed of trust, exclusively encumbering their principal place of residence, which was subordinate to the Unifirst Bank deed of trust. Subsequently, the debtors ascertained that this indebtedness was secured by other collateral which is discussed immediately hereinbelow.
When the debtors ascertained that the indebtedness owed to First National Bank was secured by collateral other than their principal place of residence, i.e., a rental house, they initiated the instant adversary proceeding on May 8, 1989, with the filing of a complaint seeking to modify First National Bank's second deed of trust.
First National Bank had previously filed a motion to dismiss the bankruptcy case and a motion to strike. A hearing was conducted by the Court on these motions on May 23, 1989. At said hearing, the Court made certain findings of fact from the bench which are incorporated in this Opinion by reference. Also, at said hearing, the Court ascertained that the debtors had amassed a post-petition arrearage on the payments owed to First National Bank, which were to be paid outside the plan, in the sum of $4,056.09. The Court informed the parties that a post-petition default in an amount this significant would ordinarily warrant the dismissal of the bankruptcy case. However, because the debtors had treated the claim of First National Bank in their original Chapter 13 plan either erroneously or inadvertently, the Court was of the opinion that the issue of modification should be considered further. The Court overruled the motion to dismiss, but lifted the automatic stay so that First National Bank could commence the foreclosure of its deed of trust encumbering the rental property. An order was entered to this effect on June 9, 1989. At that point, there were three questions that required resolution, to-wit:
1. What was the balance of the indebtedness owed to Unifirst Bank?
2. What was the value of the debtors' residential real property? (At a subsequent hearing conducted on July 20, 1989, which was set to consider the debtors' complaint, the parties agreed that the value of the residential real property was the sum of $55,000.00.)
3. Are the debtors precluded by the theories of res judicata or collateral estoppel from modifying their plan post-confirmation to "cram down" the secured claim of First National Bank? (This question has been briefed by the parties and will be resolved in this Opinion.)
III.
Because the debtors proposed to cure the prepetition arrearage owed to First National Bank, as well as, pay the regular monthly installments due under the indebtedness, First National Bank did not object to the confirmation of the debtors' plan. Since the debtors are now seeking to modify First National Bank's claim substantially, First National Bank has posited the defense that the plan cannot be modified post-confirmation because of the theories of res judicata and/or collateral estoppel. In support of this defense, First National Bank has relied on the cases of In re Rush, 1 CBC 2d 904 (Bankr.S.D.Fla.1980), In re Johnson, 25 B.R. 178 (Bankr.N.D.Ga. 1982), Matter of Abercrombie, 39 B.R. 178 (Bankr.N.D.Ga.1984), and In re Kitchen, 64 B.R. 452 (Bankr.D.Mont.1986). These cases all prohibit the modification of a secured creditor's claim post-confirmation, generally under the theory that the confirmation order is res judicata as to all justiciable issues which were decided or which could have been decided at the confirmation hearing.
Two persuasive cases which hold to the contrary are In re Stone, 91 B.R. 423 (Bankr.N.D.Ohio 1988) and In re Jock, 95 B.R. 75 (Bankr.M.D.Tenn.1989).
In Stone, the surviving debtor, after the death of his spouse, moved to amend the Chapter 13 plan post-confirmation in order to abandon a vehicle, which secured an indebtedness owed to GMAC, and to pay reduced payments on the resulting unsecured deficiency claim. The deficiency clain was calculated as the difference between the value received by GMAC following the sale of the vehicle and the original amount of the secured indebtedness less the payments made subsequent to the plan being confirmed. Judge William Bodoh perceptively analyzed this issue and offered the following comment:
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