Nash, In re
| Decision Date | 17 July 1985 |
| Docket Number | No. 84-2539,84-2539 |
| Citation | 765 F.2d 1410 |
| Parties | 13 Collier Bankr.Cas.2d 209, Bankr. L. Rep. P 70,649 In re Wayne M. NASH and Jeanette Nash, Debtors. Wayne M. NASH and Jeanette Nash, Plaintiffs/Appellants, v. Duncan H. KESTER, Trustee and National Semiconductor Federal Credit Union, Defendants/Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Robert M. Allen, San Jose, Cal., for plaintiffs/appellants.
Joseph R. Thompson, San Jose, Cal., Jack D. Berghouse, Santa Clara, Cal., for defendants-appellees.
Appeal from the United States District Court, Northern District of California.
Before HALL and WIGGINS, Circuit Judges, and JAMESON, * District Judge.
I. FACTS.
Plaintiffs Wayne and Jeanette Nash (the "Nashes") filed a voluntary petition for relief under Chapter 13 of the 1978 United States Bankruptcy Code (the "1978 Code") on April 25, 1980. Defendant Duncan Kester (the "Trustee") was appointed the Chapter 13 trustee. Defendant National Semiconductor Federal Credit Union (the "Credit Union"), which had financed the Nashes' purchase of two automobiles, filed a secured claim with the bankruptcy court in the amount of $6,728.50. The Credit Union's secured claim was allowed as part of the Chapter 13 plan confirmed by the bankruptcy court on July 1, 1980. The plan also provided that the Nashes were to make monthly payments to the Trustee in the amount of $220. Because the Nashes subsequently failed to make the required monthly payments, the bankruptcy court issued a Wage Deduction Order in May 1981 requiring Wayne Nash's employer to forward a monthly payroll deduction of $220 to the Trustee.
At the Nashes' request, the bankruptcy court dismissed the Chapter 13 petition on July 22, 1983 (unless otherwise noted, all further events occurred in 1983). On that date, the Trustee had in his possession $907.14 which had previously been received under the Wage Deduction Order. Also on that date, the Nashes' attorney called and told the Credit Union that the Nashes would be returning for resale the two automobiles held as security by the Credit Union.
On July 25, the Trustee received an additional check totalling $50.59 under to the Wage Deduction Order. The Trustee admits receiving a copy of the Chapter 13 dismissal order on approximately August 1. The Nashes filed a second Chapter 13 petition on August 2 and claimed as exempt under 11 U.S.C. Sec. 522(d)(5) the $957.73 in wage deductions held by the Trustee. The Credit Union was listed as an unsecured creditor in the second Chapter 13 debt schedules filed by the Nashes. The Trustee received copies of the second Chapter 13 petition, plan, and schedules on August 4.
The Trustee completed a final report regarding the first Chapter 13 case on August 24. On August 26, the Trustee paid the Credit Union $942.56 as a payment under the first Chapter 13 plan. With the receipt of that payment and the money from the sale of the two cars returned by the Nashes, the Nashes' account balance with the Credit Union was reduced to $1405.96. The remaining cash held by the Trustee ($15.17) was kept by the Trustee for his administrative expenses and compensation. The bankruptcy court approved the Trustee's final report, discharged the Trustee and closed the first Chapter 13 case on September 22.
The second Chapter 13 plan was confirmed on September 26 and the same Trustee was appointed. Under the second plan, the Nashes were to pay the Trustee $295 a month. The Credit Union was listed as an unsecured creditor on the debt schedules. However, the Credit Union failed to file a formal claim in the second case.
The present action was filed by the Nashes on October 11, 1983. The Nashes alleged that the $957.73 in wage deductions had been wrongfully distributed by the Trustee after the first Chapter 13 case had been dismissed. The bankruptcy court granted summary judgment for the Trustee and the Credit Union and denied the Nashes' summary judgment motion. The district court affirmed on appeal and entered judgment for the defendants.
II. STANDARD OF REVIEW.
The bankruptcy court's grant of summary judgment, affirmed by the district court, is subject to de novo review. See In re New England Fish Co., 749 F.2d 1277, 1280 (9th Cir.1984).
III. ANALYSIS.
Both defendants rely upon 11 U.S.C. Sec. 1327(a) in arguing that the Nashes were obligated by res judicata principles to pay the amount of the claims allowed under the first confirmed plan. Section 1327(a) states that "[t]he 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. Sec. 1327(a). Section 1327(a) must be read in conjunction with 11 U.S.C. Sec. 1307(b), which provides that "[o]n request of the debtor at any time ... the court shall dismiss a case under [Chapter 13]." Under Sec. 1307(b), a debtor has an absolute right to dismiss a Chapter 13 petition. See In re Gillion, 36 Bankr. 901, 905 (E.D.Ark.1983); In re Merritt, 39 Bankr. 462, 465 (Bankr.E.D.Pa.1984). A debtor is not barred by res judicata from listing debts in a later Chapter 13 petition that were listed in a previous Chapter 13 case which was dismissed without prejudice and without obtaining a discharge of the debts. See In re Landis, 29 Bankr. 235, 238 (Bankr.D.Kan.1983); 11 U.S.C. Sec. 349(a).
We reject the defendants' contention that the Nashes continued to be bound by the terms of the first confirmed plan after dismissal. The dismissal effectively vacated the first confirmed plan. Cf. In re Doyle, 11 Bankr. 110, 111 (Bankr.E.D.Pa.1981) ().
The only case cited by either defendant in support of the res judicata argument is Levy v. Cohen, 19 Cal.3d 165, 137 Cal.Rptr. 162, 561 P.2d 252, cert. denied, 434 U.S. 833, 98 S.Ct. 119, 54 L.Ed.2d 94 (1977). Levy involved a plan confirmed under Chapter XII of the Bankruptcy Act of 1898 (the "1898 Act"). Id. at 170, 137 Cal.Rptr. at 165, 561 P.2d at 255. The court in Levy held that the plaintiff was barred by res judicata from relitigating a debt discharged in the bankruptcy proceeding, id. at 174, 137 Cal.Rptr. at 168, 561 P.2d at 258, but Levy is distinguishable from the present case. The 1898 Act applicable in Levy provided for the discharge of unsecured debts upon confirmation of a Chapter XII plan. See 11 U.S.C. Sec. 771 (repealed). Under the 1978 Code applicable in this case, the confirmation of a Chapter 13 plan does not discharge any debts. A discharge occurs only if the debtor completes all payments under the plan or if the debtor receives a hardship discharge. See 11 U.S.C. Sec. 1328. Therefore, Levy does not govern the application of res judicata in this case.
The defendants also contend that the Trustee was required to distribute funds to the creditors under the plan until he was discharged as trustee. The Trustee's duties did not end when the Chapter 13 case was dismissed. The Trustee was required to make a final report regarding the administration of the estate, 11 U.S.C. Secs. 704(8) & 1302(b)(1), and he was not discharged until the bankruptcy court approved the final report and closed the case on September 22, 1983. See 11 U.S.C. Sec. 350. Nonetheless, the defendants cite no case law or statutory authority which supports their claim that the Trustee was required to continue making distributions of the estate under the plan after the case had been dismissed. 1 Because the first plan was effectively vacated by the dismissal, the Trustee was not required to continue making payments under the plan.
The property of a Chapter 13 estate includes "earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7 or 11 of this title, whichever occurs first." 11 U.S.C. Sec. 1306(a)(2) (emphasis added). Under Sec. 1306(a)(2), the $50.59 received by the Trustee after dismissal of the first Chapter 13 case never became part of the first Chapter 13 estate. The $50.59 belonged to the Nashes and should not have been distributed to the Credit Union. See In re Richardson, 20 Bankr. 490, 492 (Bankr.W.D.N.Y.1982) ().
The $907.14 received by the Trustee before dismissal was the property of the estate because it was received after commencement of the case but before dismissal. 11 U.S.C. Sec. 1306(a)(2). The $907.14 was submitted to the "supervision and control" of the Trustee. See 11 U.S.C. Sec. 1322(a)(1). However, ownership over all of the property of the estate, including the $907.14, vested in the Nashes once the plan was confirmed. 11 U.S.C. Sec. 1327(b). See 5 Collier, supra note 1, p 1327.01, at 1327-3.
The Nashes' ownership of the $907.14 is further supported by the fact that a Chapter 13 dismissal "revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case under this title." 11 U.S.C. Sec. 349(b)(3). The legislative history of Sec. 349(b) states that "[t]he basic purpose of the subsection is to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case." S.Rep. No. 989, 95th Cong., 2d Sess. 49, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5835. We have previously stated that Sec. 349 "obviously contemplates that on dismissal a bankrupt is reinvested with the estate, subject to...
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