In The Matter Of: Rickey Fluellen

Decision Date18 March 2011
Docket NumberCase No. 10-52284 JPS,Adversary Proceeding No. 10-5108
PartiesIn the Matter of: RICKEY FLUELLEN, Debtor CAMILLE HOPE, TRUSTEE, Plaintiff v. ACORN FINANCIAL, INC., Defendant
CourtUnited States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Georgia

SO ORDERED.

JAMES P. SMITH

UNITED STATES BANKRUPTCY JUDGE

BEFORE

JAMES P. SMITH

UNITED STATES BANKRUPTCY JUDGE

APPEARANCE:

Plaintiff: Camille Hope

Defendant: Jenny Martin Stansfield

MEMORANDUM OPINION

Before the Court is Acorn Financial, Inc.'s ("Acorn") motion for summary judgment in which Acorn contends that Trustee's avoidance action is barred by res judicata because the action was commenced after the confirmation of Debtor's Chapter 13 plan. The Court, having considered the motion, the response and the record, now publishes this memorandum opinion.

FACTS

The undisputed facts and the Court's record show that on June 10, 2010, Debtor Rickey Fluellen granted Acorn a security interest on his vehicle. On July 21 Debtor filed a Chapter 13 petition. On July 27 Acorn perfected its security interest by delivering an application for a certificate of title to the applicable official.1 On August 12 Acorn filed a proof of claim accompanied by a copy of the certificate of title which listed Acorn's security interest on the vehicle. In response to an inquiry by Trustee, the Bibb County Tax Commissioner informed Trustee by e-mail dated August 24 that Acorn had applied for a certificate of title on July 27. The confirmation hearing on Debtor's Chapter 13 plan was held on September 23, and an order confirming the plan was entered by this Court on September 30. On October 8 Trustee filed this adversary proceeding2 seeking to avoid as apreferential transfer the perfection of Acorn's security interest on Debtor's vehicle.3 The bar date for creditors (except governmental units) to file proofs of claims was November 22.

Debtor's confirmed Chapter 13 plan provided, in part:

3. After the above payments, payments to secured creditors whose claims are duly proven and allowed as follows:

+--------------------------------------------------------------+
                ¦Creditor Name Value¦Int.¦Description          ¦Monthly Payment¦
                +-------------------+----+---------------------+---------------¦
                ¦TCL AUTO SALES Debt¦6.00¦2004 Chrysler Sebring¦$146.00        ¦
                +--------------------------------------------------------------+
                

Although the record is not clear, Debtor apparently purchased his vehicle from TCL Auto Sales and Acorn either financed the purchase or received an assignment from TCL Auto Sales. Despite the fact that the confirmed plan listed TCL Auto Sales rather than Acorn as the "creditor", neither Acorn nor Trustee contend that this error is of any consequence.

DISCUSSION

"A motion for summary judgment should be granted when 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.' F.R.Civ.P. 56(c)."... Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L.Ed. 2d 265 (1986); see also Morisky v. Broward County, 80 F.3d 445, 447 (11th Cir. 1996). On a summary judgment motion, the record and all reasonable inferences that can be drawn from it must be viewed in the light most favorable to the non-moving party. See Cast Steel, 348 F.3d at 1301." Midrash Sephardi, Inc. v. Town of Surfside, 366 F.3d 1214, 1223 (11th Cir. 2004), cert. denied 543 U.S. 1146, 125 S. Ct. 1295, 161 L. Ed.2d 106 (2005).

In general terms, when a debtor files a Chapter 13 petition, he or she also files within 14 days a plan proposing the treatment (priority, secured or unsecured) to be afforded to creditors. Fed. R. Bank. P. 3015(b). A meeting of creditors is scheduled to be held no earlier than 21 and no more than 50 days after the bankruptcy filing. 11 U.S.C. § 341(a), Fed. R. Bank. P. 2003(a). The deadline or "bar date" for most creditors to file a proof of claim is 90 days after the first date set for the meeting of creditors and the court may not reduce that time. Fed. R. Bankr. P. 3002(c), 9006(c)(2).

A duly filed proof of claim is deemed allowed unless a party in interest objects. 11 U.S.C. § 502(a). A duly filed proof of claim constitutes prima facie evidence of the validity and amount of the claim. Fed. R. Bank. P. 3001(f). A proof of claim asserting a security interest in property must be accompanied by evidence that the security interest has been perfected. Fed. R. Bank. P. 3001(d). A claim that has been allowed or disallowed may be reconsidered for cause. 11 U.S.C. § 502(j).

A hearing on confirmation of the proposed Chapter 13 plan must be held, with certain exceptions, no earlier than 20 and no more than 45 days after the date of the meeting of creditors. 11 U.S.C. § 1324(b). Normally, in the Middle District of Georgia, several hundred Chapter 13 plans will be scheduled for confirmation hearings on the same day.4 In this Court, on most confirmation hearing days, the trustee will be in the courtroom for one totwo hours prior to the actual hearings negotiating with a multitude of attorneys for debtors and creditors on confirmation issues. During this time, claims may be electronically filed without the knowledge of the trustee. Thus, in most cases, it is not practical, or even possible, for the trustee to review, investigate and file objections to filed claims prior to confirmation.

The bar date for a trustee to commence certain avoidance actions, including an action to avoid a preferential transfer, is, in general, 2 years after the bankruptcy filing. 11 U.S.C. § 546(a)(1)(A). However, the Bankruptcy Code and Rules do not provide a time limit for filing an objection to a claim or a request to reconsider a claim. 11 U.S.C. § 502(a), (j). Thus, the Bankruptcy Code and Rules contemplate that, in a routine case, confirmation of a Chapter 13 plan will occur several weeks before the proof of claims bar date (and thus prior to the subsequent filing of claim objections) and some twenty-one months before the bar date to commence avoidance actions.

In the case at bar, Acorn filed a proof of claim accompanied by a copy of the certificate of title evidencing perfection of its security interest some 42 days prior to the confirmation hearing. From the Tax Commissioner's e-mail, Trustee was aware of the postpetition perfection, and thus the avoidability, of Acorn's lien 30 days prior to the confirmation hearing. Debtor's confirmed Chapter 13 plan provided for "payments to secured creditors whose claims are duly proven and allowed...." No objection to the claim was made prior to the confirmation hearing. Thus, at confirmation, Acorn's secured claim was deemed allowed. 11 U.S.C. § 502(a).

In its motion for summary judgment, Acorn does not dispute that the perfection of itssecurity interest is otherwise avoidable as a preference. 11 U.S.C. § 547(b), (e)(2)(C). Rather, Acorn contends that confirmation of the Chapter 13 plan bars Trustee's avoidance action even though the action was commenced within the time prescribed by 11 U.S.C. § 546(a)(1)(A). Acorn relies upon 11 U.S.C. § 1327(a) which provides:

(a) 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.

In Russo v. Seidler (In re Seidler), 44 F.3d 945 (11th Cir. 1995), the Eleventh Circuit Court of Appeals stated:

The effect of plan confirmation is controlled by section 1327, which may
provide a res judicata effect to the terms of a confirmed plan. This effect, however, is premised on the notion that the bankruptcy court has addressed in the confirmed plan and order only those issues that are properly within the scope of the confirmation hearing. Issues that were not mature for decision and could not be appropriately resolved in either the conformation hearing or in the order confirming the plan are not barred.
In re Linkous, 141 B.R. 890, 898 (W.D. Va. 1992), aff'd, 990 F.2d 160 (4th Cir. 1993) (citation omitted).

44 F.3d at 948. In Wallis v. Justice Oaks II, Ltd, (In re Justice Oaks II, Ltd), 898 F.2d 1544 (11th Cir.) cert. denied 498 U.S. 959, 111 S.Ct. 387, 112 L.Ed 2d 398 (1990), the Eleventh Circuit held that the claim preclusion aspect of res judicata was the proper doctrine under which to analyze an order confirming a plan as it related to the subsequent challenge to the characterization of a secured creditor's claim.

Justice Oaks involved a Chapter 11 case in which the debtor proposed a planpursuant to which one of its creditors, Allegheny, was treated as a secured creditor to receive a portion of the proceeds from the sale of property in which Allegheny held a second lien. The Wallises were treated as unsecured creditors to receive nothing under the plan. The Wallises objected to confirmation of the plan. They contended that Allegheny and other creditors had acted fraudulently in connection with the transactions by which Allegheny obtained its secured claim and the Wallises incurred their unsecured claim. The Wallises argued that the plan was not fair or equitable because Allegheny and others would receive payment while the Wallises received nothing. While the Wallises did not challenge the plan's characterization of Allegheny as a secured creditor in their plan objection, they nevertheless simultaneously filed an adversary proceeding making the same factual allegations and asked the court to equitably subordinate, under 11 U.S.C. § 510, Allegheny's claim to their own claim.

The bankruptcy court overruled the plan objection and confirmed the plan. Subsequently, the court dismissed the adversary proceeding, holding that the nature of Allegheny's claim had been finally determined in the court's order confirming the plan.

On appeal, the Eleventh Circuit agreed. In analyzing the claim...

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