Meredith v. BMW Fin. Servs. NA, LLC (In re Burnsed), Number 19-41654-EJC
| Decision Date | 15 July 2021 |
| Docket Number | Number 19-41654-EJC |
| Parties | In re: ALAN R. BURNSED and BEVERLY AMBER BURNSED, Debtors. O. BYRON MEREDITH, III, Chapter 13 Trustee, Movant, v. BMW FINANCIAL SERVICES NA, LLC, Respondent. |
| Court | U.S. Bankruptcy Court — Southern District of Georgia |
Before the Court is the Objection to Claim (the "Claim Objection") filed by O. Bryon Meredith, III, the Chapter 13 Trustee. (Dckt. 95). The Debtors in this case, Alan R. Burnsed and Beverly Amber Burnsed, initially proposed to retain their motor vehicle, which was purchased within 910 days before the petition date, and to pay the claim in full with interest. After confirmation, the Debtors sought to modify their plan to surrender the vehicle to the creditor, BMW Bank of North America ("BMW"). The plan modification form, use of which is mandatory in this district pursuant to the Court's General Order Number 2017-4, states that the collateral "is surrendered to the creditor to satisfy the secured claim to the extent shown below" and that "[a]ny allowed deficiency balance resulting from a creditor's disposition of the collateral will be treated as an unsecured claim" if the creditor timely amends its proof of claim. (Dckt. 84, p. 2). The local form plan goes on to provide space for debtors to include case-specific details, including the name of the creditor, a description of the collateral, and the amount of the claim satisfied. Under this last category, the Debtors indicated that the amount of BMW's claim satisfied was "Full Satisfaction." (Dckt. 84, p. 2).
No party in interest objected to the modification, which was confirmed by the Court. BMW subsequently repossessed and sold the vehicle. When BMW filed an amended proof of claim for the deficiency balance, the Chapter 13 Trustee objected, arguing that under the terms of the modified plan, the vehicle's surrender was in full satisfaction of the debt. BMW disputes this reading of the modified plan on grounds that it violates binding Eleventh Circuit case law, but the Chapter 13 Trustee contends that BMW has waived this argument by failing to object to confirmation of the modification. For the reasons set forth below, the Court rejects the Chapter 13 Trustee's argument and finds that the modified plan permits BMW to file itsdeficiency claim. Accordingly, the Court will overrule the Chapter 13 Trustee's Claim Objection.
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a), and the Standing Order of Reference signed by then Chief Judge Anthony A. Alaimo on July 13, 1984. This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(B).
The facts in this case are undisputed. On November 19, 2019, the Debtors filed a Chapter 13 petition. (Dckt. 1). In their schedules, the Debtors listed a 2018 BMW X5 valued at $69,396.00. (Dckt. 1, pp. 11, 19).1 The motor vehicle secured the claim of BMW, which filed its proof of claim in the amount of $68,607.64 on December 5, 2019. (Claim No. 7-1).
The Debtors amended their Chapter 13 plan, originally filed on the petition date, three times prior to confirmation. (Dckt. 4, 14, 43, 55). Each iteration of the plan indicated that the vehicle securing BMW's claim was purchased within 910 days before the petition date and was subject to the so-called "hanging paragraph" of 11 U.S.C. § 1325(a). The Debtors proposed to retain the vehicle and to payBMW's claim in full. In their third amended plan, which resolved a number of objections raised by the Chapter 13 Trustee and the United States Trustee (dckt. 24, 26, 46, 47), the Debtors proposed to make monthly payments of $1,375.00 to BMW at 4.50% interest. (Dckt. 55, p. 2). The Debtors also proposed to pay a 100% dividend to unsecured creditors. (Dckt. 55, p. 3, ¶ 4(h)). On September 2, 2020, the Court confirmed the Debtors' third amended plan. (Dckt. 69).
On November 5, 2020, the Debtors filed a Modification to Chapter 13 Plan After Confirmation (the "Modified Plan"). (Dckt. 84). Under the terms of the Modified Plan, which did not change the proposed 100% dividend to unsecured creditors, the Debtors proposed to surrender the vehicle to BMW and, additionally, to suspend payments to Santander Consumer USA, Inc. ("Santander") due to the pending sale of a 2015 Jeep Wrangler, which would pay off the $12,234.00 debt to Santander.2 Consequently, total plan payments would decrease from $3,800.00 per month to $2,675.00 per month for the remainder of the 60-month term of the plan. (Dckt. 84, p. 2). Importantly, the provision regarding the surrender of the BMW vehicle states as follows:
(Dckt. 84, p. 2). As the basis for this proposed modification, the Debtors represented that they could no longer afford their plan payments and thus sought to surrender the vehicle to BMW. (Dckt. 84, p. 2). Apart from the surrender of the BMW vehicle, the suspension of disbursements to Santander, and the reduction in the amount of monthly plan payments, the other provisions of the confirmed plan "remain[ed] in full force and effect." (Dckt. 84, p. 2).
No party in interest objected to the Modified Plan, and on December 3, 2020, the Chapter 13 Trustee moved to confirm it. (Dckt. 90). Pursuant to the Court's negative notice procedures,3 an Order Confirming Modified Plan was entered onDecember 15, 2020 without a hearing. (Dckt. 93). In accordance with the terms of the Modified Plan, the Debtors surrendered the motor vehicle to BMW, which subsequently sold the vehicle on January 25, 2021. (Claim No. 7-2, Part 2, p. 14). On March 3, 2021, well within the 180 days contemplated by the Modified Plan, BMW amended its proof of claim to reflect a $26,809.30 unsecured deficiency claim. (Claim No. 7-2).
On March 12, 2021, the Chapter 13 Trustee filed the instant Claim Objection requesting that BMW's amended claim be disallowed "on the grounds that the confirmed/modified plan provided for the collateral to be surrendered to the Creditor in full satisfaction of the claim." (Dckt. 95, p. 2). The Chapter 13 Trustee further asserted that "[t]he plan did not propose any payments to this creditor from the amounts paid to the Chapter 13 Trustee, and there appears to be no order granting leave to file the deficiency claim." (Dckt. 95, p. 2).
This matter came on for hearing on May 4, 2021. At the hearing, the Court heard argument from BMW's counsel and from counsel for the Chapter 13 Trustee, as well as from Debtors' counsel. All the parties agreed that BMW's collateral was a 910 vehicle within the meaning of the hanging paragraph. They also concurred that BMW's post-surrender sale of the vehicle was commercially reasonable.4 TheChapter 13 Trustee, however, asserted that BMW was not entitled to a deficiency claim because the language in the Modified Plan provided for the surrender of the vehicle in full satisfaction of BMW's claim. When BMW pointed out that this interpretation of the Modified Plan would violate binding Eleventh Circuit case law, the Chapter 13 Trustee replied that BMW failed to object to confirmation of the Modified Plan and, under principles of res judicata, is now foreclosed from objecting to any improper plan provisions. The Debtors agreed with the Chapter 13 Trustee's arguments. At the conclusion of the hearing, the Court took the matter under advisement and directed the parties to brief the legal issues. The Chapter 13 Trustee filed his brief on June 3, 2021, and BMW filed its brief on June 22, 2021. (Dckt. 100, 101). No brief was filed by the Debtors. The Court has reviewed the parties' briefs, and this matter is now ripe for ruling.
"Chapter 13 of the Bankruptcy Code provides a reorganization remedy for consumer debtors and proprietors with relatively small debts." Johnson v. Home State Bank, 501 U.S. 78, 82 (1991). It "allows a debtor to retain his property if he proposes, and gains court confirmation of, a plan to repay his debts over a three- to five-year period." Harris v. Viegelahn, 575 U.S. 510, 514 (2015). To attain confirmation of a Chapter 13 plan, a debtor must satisfy the requirements of 11U.S.C. § 1325(a). Pertinent to this case, § 1325(a)(5) provides that a plan's proposed treatment of a secured claim can be confirmed if one of three conditions is satisfied:
The secured creditor accepts the plan, see 11 U.S.C. § 1325(A); the debtor surrenders the property securing the claim to the creditor, see § 1325(a)(5)(C); or the debtor invokes the so-called "cram down" power, see § 1325(a)(5)(B). Under the cram down option, the debtor is permitted to keep the property over the objection of the creditor, the creditor retains a lien securing the claim, see § 1325(a)(5)(B)(i), and the debtor is required to provide the creditor with payments, over the life of the plan, that will total the present value of the allowed secured claim, i.e., the present value of the collateral, see § 1325(a)(5)(B)(ii).
Assoc's. Com. Corp. v. Rash, 520 U.S. 953, 956-57 (1997). See also Santander...
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