Simmons, In re
| Decision Date | 19 July 1985 |
| Docket Number | No. 84-4697,84-4697 |
| Citation | 765 F.2d 547 |
| Parties | , Bankr. L. Rep. P 70,674 In re Benjamin Pierce SIMMONS, Bankrupt. Benjamin Pierce SIMMONS, Plaintiff-Appellant, v. J.T. SAVELL, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Stennett, Wilkinson & Ward, James R. Mozingo, Jackson, Miss., for plaintiff-appellant.
Waller & Waller, Bill Waller, Jr., Jackson, Miss., for defendant-appellee.
Appeal from the United States District Court for the Southern District of Mississippi.
Before CLARK, Chief Judge, RANDALL and JOLLY, Circuit Judges.
In this appeal, we are asked to determine the effect of a bankruptcy court's confirmation of a "wage earner plan," under Chapter 13 of the Bankruptcy Code, on a creditor's statutory lien. The debtor instituted the instant adversary action in bankruptcy court, seeking cancellation of the lien notice filed of record by the creditor. The bankruptcy court refused to cancel the lien, holding in part that the lien continued to be valid after confirmation of the plan. The district court affirmed this holding. Because we hold that confirmation of the debtor's Chapter 13 plan did not have the effect of lifting the creditor's statutory lien, we affirm.
Benjamin P. Simmons contracted to have J.T. Savell, a plumber, perform certain work on Simmons' homestead. The work, which included the purchase and installation of plumbing fixtures, was begun on December 26, 1978, and completed on June 8, 1979, with the cost totalling $3,537.75.
On May 1, 1980, Savell filed a notice of construction lien with the Chancery Clerk of the First Judicial District of Hinds County, Mississippi, for the labor and materials furnished on the plumbing contract. Thereafter, on May 14, 1980, Savell filed in state court a Declaration to Enforce Lien on Real Property ("declaration to enforce lien") against Simmons, the Independent Life and Accident Insurance Company (ILA), and the Administrator of the Small Business Administration (SBA), 1 claiming a construction lien in the amount of $3,537.75, together with interest and attorney's fees. The ILA filed an answer in the proceeding, but no further action has been taken in the suit.
On June 9, 1980, Simmons filed a petition for relief in the United States Bankruptcy Court for the Southern District of Mississippi under Chapter 7 of the United States Bankruptcy Code (Code), 11 U.S.C. ch. 7. On July 30, 1980, Savell filed a proof of claim identifying his claim as secured by a construction lien. Savell appended exhibits to the proof of claim, including copies of the original invoice, the lien notice, and the declaration to enforce lien pending in state court. Simmons then petitioned for conversion of his case to one under Chapter 13 of the Code, 11 U.S.C. ch. 13. The bankruptcy court ordered such conversion on September 3, 1980. On September 29, 1980, Simmons filed a petition and plan under Chapter 13. The plan listed the debt to Savell as unsecured but disputed, making reference to the state court action to enforce the lien. The plan proposed a deferred 10% cash payout to unsecured creditors. On November 18, 1980, Savell again filed a proof of claim, which indicated that his claim was secured by a statutory lien and which again incorporated as exhibits copies of the invoice, the lien notice, and the declaration to enforce lien. Again the claim made specific reference to the state court action to enforce the lien. Paragraph 11 of the proof-of-claim form called for Savell as claimant to indicate whether he accepted or rejected the plan. 2 Savell placed an "X" in the box marked "Claimant accepts" but added the following typewritten statement: "Creditor objects to his claim being scheduled as unsecured."
The bankruptcy court, on May 26, 1981, entered an order confirming Simmons' plan. The order recites that no objections to confirmation of the plan were considered and that no one other than the trustee and Simmons' attorney appeared at the confirmation hearing. On July 28, 1981, the trustee filed a motion to allow claims, which listed Savell's claim as unsecured and which provided that the listed claims would be deemed allowed for the purpose of distribution unless objection was made by a party in interest within thirty days. Savell filed no objection to this motion. Savell has received payments under the plan since confirmation, but Savell insists that the checks have not been cashed.
On April 19, 1982, Simmons filed a Motion for Authorization to Sell Real Property, namely, his homestead, which was approved by the trustee and apparently agreed to by all lienholders of record, including Savell. The bankruptcy court entered the order authorizing the sale on April 26, 1982. The order provided, inter alia, that Simmons escrow the sum of $3,322.88 from the sale proceeds pending resolution of the status of Savell's purported construction lien. The property was sold, and the funds escrowed.
On August 2, 1982, Simmons filed the instant adversary action in bankruptcy court, seeking an order that Savell cancel the lien notice and an award of attorney's fees for Savell's wilful failure to cancel the lien. Savell answered and counterclaimed, seeking a judgment that his claim was secured, relief from the automatic stay to enforce his lien, and an award of attorney's fees.
After a hearing, on December 8, 1982, the bankruptcy court refused to cancel Savell's lien and further held that the lien, which was perfected before Simmons filed his original petition in bankruptcy, was valid and enforceable, could not be avoided, and entitled to full satisfaction. In an opinion filed on February 22, 1983, the bankruptcy court reasoned that statutory liens are recognized as secured claims against a debtor in bankruptcy so long as the lien is not subject to avoidance under 11 U.S.C. Sec. 545. Section 545, the court continued, does not describe a situation when a lien "can be avoided because the debt is included in the plan and the creditor fails to object." Further, the court rejected Simmons' theories under 11 U.S.C. Sec. 1327 that Savell's failure to object to the plan constituted a waiver of his rights under the lien or that confirmation of the plan had the effect of vesting the homestead in Simmons free and clear of the lien. Simmons appealed the decision to the United States District Court for the Southern District of Mississippi and applied for a stay of execution of the judgment pending appeal, which was granted on December 29, 1982.
In a memorandum opinion and order dated October 9, 1984, the district court affirmed the bankruptcy court's holding that Savell's construction lien remained valid after confirmation of the Chapter 13 plan. The district court, holding that a perfected construction lien is not enforceable under Mississippi law until judgment is entered pursuant to Miss.Code Ann. Secs. 85-7-141 to -151, reversed the bankruptcy court's determination that the lien was enforceable and remanded the case to the bankruptcy court for the purpose of itself adjudicating the issue of enforceability or directing the parties to proceed with the action pending in state court, the resolution of which would require the adjudication of this issue.
Simmons appeals the decision of the district court regarding the validity of Savell's lien after the confirmation of Simmons' Chapter 13 plan. The district court's decision to remand the issue of enforceability to the bankruptcy court is not appealed by either party.
On appeal, the parties continue to propound the same arguments that have carried them to this pass. Simmons contends that Savell has waived his right to the lien recorded against Simmons' homestead. Simmons emphasizes the central place of the wage earner plan in facilitating Congress' purpose for Chapter 13--viz., encouraging individual debtors to reorganize rather than liquidate by using future income to satisfy at least a portion of their outstanding obligations to creditors. Once Simmons' plan was confirmed, Simmons continues, Savell was bound by the terms of the plan, which listed Savell's claim as unsecured. After all, Savell raised no objection to confirmation and had in fact "accepted" the plan although noting an objection to the classification of his claim as unsecured. Under section 1327, the order of confirmation vests all of the property of the estate in the debtor free and clear of any claim or interest of any creditor provided for by the plan. Construing the terms "claim or interest" to include a lien, Simmons concludes that the confirmation of his Chapter 13 plan effectively vested the homestead in him free of the lien. Further, because Savell's claim was allowed as an unsecured claim under Simmons' plan and because 11 U.S.C. Sec. 506(d) mandates that any lien securing such a claim is void, Simmons asserts that Savell's lien is a dead letter and that Savell should be required to cancel it of record.
Savell responds with three arguments. First, Savell maintains that the Code, particularly section 545, which governs the avoidance of statutory liens, does not authorize the avoidance of a statutory lien simply because the debtor listed the purported lienholder's claim as unsecured and the lienholder did not object to confirmation of the plan. Second, Savell asserts that his proof of secured claim should have been deemed allowed and treated by the plan as such because no objection to the proof of claim was ever filed by the debtor or any party in interest. Finally, notwithstanding Simmons' assertion to the contrary, confirmation of the Chapter 13 plan cannot have the effect of lifting liens on property of the estate. The debtor could not be vested by the act of confirmation with any greater interest in the property of the estate--i.e., property unencumbered by a lien--than had been vested in the estate when the petition in bankruptcy was originally filed.
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