[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR TH E ELEV ENTH C IRCUIT
U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
MAY 22, 2003
No. 02-11221 THOMAS K. KAHN
________________________ CLERK
D. C. Docket Nos. 00-00995-CV-KMM
96-17616-BKC-AJ
IN RE : CAR MEN BAT EMA N,
Debto r,
-------------------------------------
UNI VER SAL AMERIC AN M ORT GAG E CO MPA NY,
Plaintiff- Appe llant,
versus
CAR MEN BAT EMA N,
Defen dant-A ppellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(May 22, 2003)
Before BIRC H, DUB INA and K RAVIT CH, Circuit Judges.
BIRCH, Circuit Judge:
In this bankruptcy appeal, we decide that a secured creditor cannot
collaterally attack a confirmed Chapter 13 plan, even though the plan conflicted
with the mandatory provisions of the bankruptcy code, when the secured creditor
failed to o bject to the plan’s co nfirmatio n or app eal the con firmation order. W e
also hold that a secured creditor’s claim for mortgage arrearage survives the
confirmed plan to the extent it is not satisfied in full by payments under the plan, or
otherwise satisfied under the terms § 132 5(a)(5), because to permit otherw ise
would deny the effect of 1 1 U.S .C. § 13 22(b)( 2), wh ich, in effe ct, prohib its
modific ations of secured claims fo r mortg ages on a debtor ’s princip al residen ce.
The bank ruptcy court co nfirmed the p lan at issue and, after the plan’s
confirmation, granted the debtor’s objection to the creditor’s allowed claim,
thereby reducing the secured claim for mortgage arrearage to the amount provided
for in the confirmed plan, but denied the creditor’s motion to dismiss the Chapter
13 bankruptcy. The district court affirmed the bankruptcy court. For the following
reasons , we A FFIR M in p art and R EVE RSE in part.
2
I. BACKGROUND
On 26 Novem ber 1996, Debtor-Appellee Carmen Bateman filed a Chapter
13 bankruptcy petition and confirmation plan in the United States Bankruptcy
Court for the Southern District of Florida. On 18 December 1996, Creditor-
Appellant Universal American Mortgage Company (“Universal”) timely filed
proof of a secured claim, pursuant to 11 U.S.C. § 502, in the amount of
$49,178.80.1 The claim was for arrearage on a first mortgage that was secured by
Bateman’s p rincipal residence . Bateman d id not file an ob jection to Un iversal’s
proof of claim. On 5 February 1997, the first creditors’ meeting was held;
Universal did not attend. On 13 February 1997, Bateman filed an amended
confirm ation plan (the “Plan ”). The in itial plan an d the am ended p lan both
provid ed for p ayment to Unive rsal of $2 1,600.0 0. The confirmation hearing was
set for 19 February 1997; Universal did not attend.
On 14 March 1997 , the bankruptcy court entered the Confirmation Order,
which contained the $21,600.00 amount to be paid to Universal over the course of
1
Universal filed the claim with the bankruptcy court file and did not serve the claim on
the other parties. Bateman would have us give credence to this fact, as did the bankruptcy court
and the district court, to indicate that Universal was attempting to sidestep procedure and fair
dealing. Universal comported with the procedural requirements that existed in 1996; however,
in December 1998, the local bankruptcy rules were amended to require service of a proof of
claim on the parties, ostensibly to serve the interest of heightened communication between
parties. M.D. Fla. Bankr. R. 3002-1(E). At the time of the pendency of the Chapter 13 case,
Universal was under no obligation other than to file the proof of claim, as it did.
3
the Chapter 13 plan. Universal d id not at any time o bject to the Plan’s
confirmation. Universal did not appeal the Confirmation Order to the district
court, even though the plan erroneously provided for the payment of the “disputed”
amount contrary to its timely filed proof of claim.2
Over a year after the Plan was confirmed, the bankruptcy trustee noted that
Universal’s filed proof of claim did not match the Plan amount. The trustee
contacted Batema n and th ereafter, o n 7 M ay 1998 , Batema n filed an objection to
Universal’s proof of claim, to which Universal responded. On 13 July 1998,
Unive rsal filed a m otion to d ismiss the bankru ptcy beca use the P lan failed to
comply with the bankruptcy code.
The bank ruptcy court su stained Batem an’s objection an d denied U niversal’s
motion to dismiss, holding in part that “[a]s a matter of substance the Chapter 13
plan pro vided an objection to the claim which placed a d uty on [U niversal] to
2
The Plan provision stated:
1. Universal Amer. Mtg. Arrearage $21,600.00** thru Nov. 1996
...
**This figure is disputed.
If CREDTIOR [sic] CAN SHOW THAT MORE THAN $21,600.00 IS IN
ARREARS THEN Interest should be reset from 10.5% to 9% on the outstanding
principal sum owing at the time the Petition in the bankruptcy was filed. A
reduction in the interest rate on the promisory [sic] note does not modify rights
under the mortgage. The reduction in interest is equitable and will allow debtor
to obtain a second mortgage in the 60th month and pay off any arrears which have
not been paid in full.
R1-2-B1; R1-2-B3; R1-2-B6.
4
pursue the matter if the $21,600.00 w as not acceptable.” R1-2-B20 a t 2. Because
Universal did not object to the Plan as confirmed, the bankruptcy court gave the
Plan res judicata effect and found that Universal was bound to the $21,600.00
amoun t for its claim . In doin g so, the b ankrup tcy obser ved that:
“The binding effect on the confirmation order establishes the
rights of the debtor and creditors as those which are provided in the
plan. It is therefore incumbent upon creditors with notice of the
Chapter 13 case to review the plan and object to the plan if they
believe it to be improper, they may ignore the confirmation hearing
only at the ir peril . . .
. . . A creditor that had the opportunity to object that the plan did not
meet the standards for confirmation, which provide the protections
Congress deemed appropriate for the various types of creditors may
not later assert any interest other than that provided for it by the
confirm ed plan.”
Id. at 3 (quo ting Co llier on B ankrup tcy, ¶ 132 7.01[1 ][a] (15th rev. ed. 1 993)).
Noting that Un iversal
is a successful, organized, mortgage lender and servicer, it elected not
to retain an attorney, filed its claim, ignored the Chapter 13 plan,
corrected Chapter 13 plan, failed to attend the creditors meeting, the
confirmation hearing, and had the right to timely proceed after the
Order of Confirmation. Creditor[s,] especially lending institutions
like the mortgagee, must follow the administration of the bankruptcy
estate to determine what aspects of the proceeding that they may want
to challenge.
Id. at 3-4.
The bank ruptcy court h eld that Univ ersal’s
5
lien passes through the bankruptcy proceeding, however the amount
of the arrearage is res judicata. Upon successful completion of the
Chapter 13 plan or upon earlier payment of the arrears in the sum of
$21,600.00, the mortgagees must as a matter of law provide that the
mortgagor is current in her mortgage account. Her principal sum
owed on the m ortgage , the date th e sum o f $21,6 00.00 h as been p aid
to the mortgagee must be the same as if no delinquency had ever
occurred. The mortgagee may not seek at any future time to charge
back against the debtor or any successor any portion of the difference
between the $21,600.00 and the claimed amount of $49,178.80. The
mortgagee waived its rights to contest the amount of the arrearage and
is bound by the confirmed plan.
Id. at 4.
Unive rsal filed a m otion to r econsid er, whic h the ban kruptcy court de nied.
Universal appealed to the United States District Court for the Southern District of
Florida, which affirmed the bankruptcy court on the basis that Universal was
precluded from collaterally attacking the Plan, and was bound to the amount
provided for in the Plan on the grounds of res judicata, because it failed to object
previously to the Plan. Universal timely appealed the district court’s order, which
is now proper ly before us.
II. DISCUSSION
Universal’s ap peal before u s challenges, first, the b ankruptcy co urt’s
sustainment of Bateman’s objection and ruling that Universal was bound by the
claim amount provided for in the Plan, despite the fact that Bateman did not file an
objection to counter Universal’s proof of claim prior to confirmation. Second,
6
Universal u rges us to find error in the ban kruptcy cou rt’s denial of U niversal’s
motion to dismiss the bankruptcy because it did not comply with 11 U.S.C. § 1325,
which it argues requires that a secured claim m ust be provided for in full as a
prerequisite to plan confirmation. Thus, Universal seeks both to avoid the res
judicata effect of the Plan’s confirmation as to its claim and to unravel the
bankru ptcy altog ether as in validly co nfirmed . Batema n argue s that the P lan is
conclusive as to the treatment of Universal’s claim and it cannot be dismissed for
such treatment, whether improper or not, at this late stage when Universal neither
objected to nor appealed from the Plan’s confirmation. We deny both of
Universal’s requests, but nevertheless hold that Universal’s secured claim for the
mortga ge arrear age rem ains intact.
This appeal pits the procedural requirements and substantive provisions of
11 U.S.C. §§ 502(a), 1322, and 1325 of the bankruptcy code, against the res
judicata effect of a confirm ed plan u nder 11 U.S.C . § 1327 . 3 We now undertake
3
Title 11, United States Code § 502(a) provides: “A claim or interested, proof of which
is filed under section 501 of this title, is deemed allowed, unless a party in interest . . . objects.”
Section 1322 provides, in relevant part:
(b) Subject to subsections (a) and (c) of this section, the plan may –
...
(2) modify the rights of holders of secured claims, other than a claim
secured only by a security interest in real property that is the debtor’s
principal residence . . .;
...
7
to harm onize the se prov isions an d decide an issue o f first imp ression in this
circuit. 4 “[D]eterminations of law, whether made by the bankruptcy court or by the
(5) notwithstanding paragraph (2) of this subsection, provide for the
curing of any default within a reasonable time and maintenance of
payments while the case is pending on any unsecured claim or secured
claim on which the last payment is due after the date on which the final
payment under the plan is due;
...
(10) include any other appropriate provision not inconsistent with this
title.
11 U.S.C. § 1322 (emphasis added).
Title 11 United States Code § 1325 provides, in pertinent part:
(a) Except as provided in subsection (b), the court shall confirm a plan if –
(1) the plan complies with the provisions of this chapter and with the
applicable provisions of this title;
...
(3) the plan has been proposed in good faith and not by any means
forbidden by law;
...
(5) with respect to each allowed secured claim provided for by the plan –
(A) the holder of such claim has accepted the plan;
(B)(i) the plan provides that the holder of such claim retain the lien
securing such claim; and
(ii) the value, as of the effective date of the plan, of property to be
distributed under the plan on account of such claim is not less than
the allowed amount of such claim; or
(C) the debtor surrenders the property securing such claim to such
holder; and
(6) the debtor will be able to make all payments under the plan and to
comply with the plan.
11 U.S.C. § 1325(a). Subsection (b) pertains to unsecured creditors’ claims and is not pertinent
to the facts here.
4
Although Universal does not argue that the Plan did not conform to § 1322, which
provides for the mandatory provisions of a confirmed plan, we will address the effect of §
1322(b)(2), prohibiting the modification of Universal’s secured mortgage claim. As discussed
infra, whether the Plan was confirmed in violation of § 1322 or § 1325 is irrelevant to the
disposition of this case, because the res judicata effect of § 1327 prohibits the collateral attack of
8
district court, [are rev iewed] de novo.” Equitab le Life A ssuranc e Soc’y v . Sublett
(In re S ublett), 895 F.2d 1381, 1383 (11th Cir. 1990).
The issues before us present questions of statutory interpretation and
evaluation of the interlocking nature of the bankruptcy code. Provisions within a
statute are r ead to be consisten t when ever po ssible. See Clark v. Uebersee Finanz-
Korporation, 332 U.S. 480, 488, 68 S. Ct. 174, 178 (1947). If the two provisions
may no t be harm onized, th en the m ore spec ific will co ntrol ov er the gen eral.
Green v. Bock Laundry Mach. Co., 490 U.S. 504, 524, 109 S. Ct. 1981, 1992
(1989). With these principles in mind, we navigate the intricacies of the
bankruptcy code and bankruptcy procedure to decide Universal’s appeal and
whether Universal’s claim survived Bateman’s confirmed Chapter 13 Plan.
Before we reach the issue whether the bankruptcy court properly granted
Bateman’s objection to Universal’s proof of claim, we will review the confirmation
and claim s proces s to give th e issue co ntext in th e bankr uptcy law and pro cedure.
In general terms, when a de btor initiates a Chapter 13 bankruptcy, he or she f iles a
petition and, in many instances simultaneously, a proposed plan. The plan contains
the treatm ent to be a fforded each cred itor, includ ing wh ether and how m uch each is
a confirmed plan. Stoll v. Gottlieb, 305 U.S. 165, 172, 59 S. Ct. 134, 137-38 (1938). We decide
this case within the context of the special treatment afforded mortgage lenders by § 1322(b)(2)
and do not express an opinion as to the result with regard to a general secured creditor.
9
to receive during the course of the plan’s term. D uring the petition’s pendency,
before a Chapter 13 plan is confirmed, debtor and creditor alike have an
opportunity to file claims and litigate any dispute regarding the validity and the
amoun t of such claims. See generally 11 U.S.C. § 501. This is facilitated through
filings and scheduled conferences and hearings. Upon satisfaction of the plan and
comple tion of th e plan’s ter m, the de btor is dis charged of his or her deb ts and, in
theory, fa ces a futu re of solv ency. See 11 U.S.C. §1328. The general bankruptcy
statutory p rovision s, 11 U .S.C. §§ 1 to 560 , and the s pecifics o f Chap ter 13 (D ebts
of Individuals), 11 U.S.C. §§ 1301 to 1330, define the rights and duties of debtors
and cred itors, wh ereas the F ederal R ules of B ankrup tcy Proc edure d ictate how to
navigate the proc ess. With in this fram ework , the issue h ere requ ires us to
harmonize these interrelated provisions.
A. The Bankruptcy Court’s Sustainmen t of Debtor’s (Constructive)
Objection
Title 11, United States Code § 1322 sets forth the mandatory contents of a
Chapter 13 plan. Generally, the holder of a secured claim is entitled to protection
under the bankruptcy code to the extent of the collateral’s value securing the claim.
11 U.S.C. § 506(a). However, § 1322(b)(2) specially prohibits any modification of
a homestead mortgagee’s rights in the Chapter 13 plan. Because of the protection
afforded to mortgagees by § 1322(b)(2), the protected security interest is not
10
compr omised even if th e interest is u ndersec ured by the value of the pr operty.
Nobleman v. Am. Savs. Bank, 508 U .S. 324 , 339, 11 3 S. Ct. 2 106, 21 10 (19 93).
Thus, even if the residential mortgage is undersecured, the plan is prohibited from
reducing the mortgagee’s secured claim.5 “At first blush it seems somewhat
strange that the B ankruptcy C ode shou ld provide less protection to an individual’s
interest in retaining possession of his or her home than of other assets. The
anoma ly is, how ever, exp lained by the legislativ e history in dicating th at favora ble
treatment of residential mortgagees was intended to encourage the flow of capital
into the home lending market.” Id. at 332, 1 13 S. C t. at 2111 -12 (S tevens, J.,
concurring). “This is not to say, of course, that the contractual rights of a home
mortgage lender are unaffected by the mortgagor’s Chapter 13 bankruptcy. The
lender’s power to enforce its rights – and, in particular, its right to foreclose on the
proper ty in the ev ent of de fault – is ch ecked b y the Ban kruptcy Code’s automa tic
5
Often a debtor will be in default under the mortgage prior to filing a Chapter 13
petition, resulting in a mortgagee’s secured claim for arrearage. Under 1322(b)(5), the debtor
can “cure” such arrears of a mortgage without improperly “modifying” the secured creditor’s
rights in violation of § 1322(b)(2). In re Hoggle, 12 F.3d 1008, 1010 n.3 (11th Cir. 1994)
(holding that a confirmed plan can be modified to cure pre- or post-petition defaults, so long as it
meets the requirements of § 1322(b)(5)) (citing 5 Collier on Bankruptcy, ¶ 1322.09[1], at 1322-
19 (15th rev. ed. 1993)). The effect of 1322(b)(2) and (5) is to potentially split the treatment of
mortgagee’s secured claim by the plan - one secured claim for the mortgage going forward and
one secured claim for the arrearage - but it does not compromise the amount of the aggregate
secured claim or the rights of the secured creditor to recover the arrearage. Nobleman, 508 U.S.
at 331-32, 113 S. Ct. at 2111.
11
stay provision.” Id. at 330, 1 13 S. C t. at 2110 (citing 11 U.S.C . § 362) ; see also 11
U.S.C. § 1301.
Inclusion of creditors for disbursements under a Chapter 13 plan is not an
automatic process. If the debtor wants to be discharged of certain liabilities, then
the debto r must list th e claim am ounts an d their pr oposed treatmen t under th e plan.
Correspondingly, if a creditor wants to ensure it will be provided for in the
confirmed plan, it will file a proof of claim. 11 U.S.C. § 502. “Although the filing
of a proof of claim may be a prerequisite to the allowance of certain claims, no
creditor is required to file a proof of claim . . . [but one] should be filed only when
some purpose would be served.” Simm ons v. S avell, 765 F.2d 547, 551 (5th Cir.
1985) (citations o mitted). A n unsec ured cre ditor is req uired to f ile a proo f claim
for its claim to be allow ed, but filin g is not m andator y for a sec ured cre ditor. See
Fed. R. Bankr. P. 3002(a). In fact, a secured creditor need not do anything during
the cour se of the b ankrup tcy proce eding b ecause it w ill always b e able to lo ok to
the und erlying co llateral to satis fy its lien. In re Folendore, 862 F.2d 1537, 1539
(11th Cir. 1989) (“Because an unchallenged lien survives the discharge of the
debtor in bankruptcy, a lienholder need not file a proof of claim under section
501.”); see also Long v. Bullard, 117 U.S. 617, 620-21, 6 S. Ct. 917, 918 (1886)
12
(holding that a secured creditor can ignore a bankruptcy proceeding because it can
always lo ok to the lien to satisf y its claim).
If the secured creditor wants to receive payments under the confirmed plan,
it must file th e proof of claim in a timely m anner. See In re Baldridge, 232 B.R.
394, 395-96 (Bankr. N.D. Ind. 1999). The debtor also has an interest in ensuring
that a proof of claim is filed, if the secured creditor neglects to do so, because the
debtor is the party s eeking th e protectio n of the b ankrup tcy court a nd the ultimate
benefit of the discharge of his or her liabilities. Under § 502(a), “[a] claim or
interest, proof of which is filed under section 501of [Title 11], is deemed allowed,
unless a party in interest . . . objects.” A proof of claim filed pursuant to Federal
Rule of Bankruptcy Procedure 3001 “shall constitute prima facie evidence of the
validity an d amou nt of the c laim.” Fe d. R. Ba nkr. P. 3 001(f) .
The prima facie evidence of a proof claim can be rebutted if the debtor files
an objection pursuant to Federal Rule of Bankruptcy Procedure 3007. If an
objection is made as to the amount or validity of the claim, the bankruptcy court
will conduct a hearing to determine such, and, if appropriate, will disallow the
claim. 11 U.S.C . § 502( b). Alth ough § 502(a) does no t provid e for a tim e limit to
file an objection, it must be filed prior to plan con firmation . In re Justice Oaks II,
13
Ltd., 898 F .2d 154 4, 1553 (11th C ir. 1990 ); In re Starling, 251 B.R. 908, 909-10
(Bank r. S.D. F la. 2000 ).
Unive rsal timely f iled a pro of of claim before th e Plan’s c onfirm ation.
Accordingly, unless Bateman, or any other party in interest, objected to the proof
of claim, it is “deemed allowed” and is “prima facie evidence of the validity and
amoun t” of the m ortgage arrearag e. § 502 (a); Fed . R. Ban kr. P. 30 01(f). It is
undisp uted that B ateman d id not file a n objectio n to Un iversal’s p roof of claim
prior to confirmation of the Plan. Instead, it was not until the trustee notified
Bateman of the discrepancy between the Plan and Universal’s proof of claim over
one year after the Plan’s confirm ation that she filed an objection to U niversal’s
proof of claim.6
The bankruptcy court decided ex post facto, however, that “[a]s a matter of
substance the Chapter 13 plan provided an objection to the claim which placed a
duty on the mortgagee to pursue the matter if the $21,600.00 was not acceptable.”
6
We will not lecture on the various roles and responsibilities delegated to and required
of each party in interest participating in a Chapter 13 plan confirmation; however, we deem it
necessary to urge all parties to carefully execute their responsibilities such that every confirmed
plan will result in a synthesis of the interests of all participants in a consistent manner. The
interest of one party is not to the exclusion of all others; rather, every party, most importantly the
debtor who is seeking the protection of the bankruptcy court, benefits from a confirmed plan that
includes accurate and thorough treatment of all claims. Moreover, it is the independent duty of
the bankruptcy court to ensure that the proposed plan comports with the requirements of the
bankruptcy code. See In re Gurst, 76 B.R 985, 989 (Bankr. E.D. Pa. 1987); In re Harris, 62 B.R.
391, 393 n.1 (Bankr. E.D. Mich. 1986); In re Bowles, 48 B.R. 502, 505 (Bankr. E.D. Va. 1985).
14
R1-2- B20 at 2 . We dis agree. See In re W hite, 908 F.2d 691, 694-95 (11th Cir.
1990) (per cur iam) (ref using to permit a b ankrup tcy court to determin e the valid ity
of a lien in connec tion with fixing v aluation f or purp oses of c onfirm ation w hen it
did not follow procedure pursuant to Rule 3007).
Universal properly filed its proof of claim. In fact, because U niversal has a
secured claim, that act was not even necessary or required. Indeed, Universal
decided that it would pursue treatment under the plan for its secured claim for
arrearag e, therefo re, it filed the proof o f claim. U niversal w as not the only par ty
with an interest in ensuring that a proof of claim was filed and provided for in the
Plan. B ateman h ad every incentive to prov ide for th e secured mortga ge claim in
her Chapter 13 plan; otherwise, the claim would have survived beyond the
confirmed plan and the debtor would no longer have enjoyed the protection
afforded by the automatic stay and periodic payments, and could possibly face
foreclosure on her property. If Bateman disagreed with the amount of the claim,
Rule 30 07 pro vided th e proced ures by w hich she could re solve the dispute.
Bateman fa iled to file a timely objectio n and the am ount in U niversal’s
proof of claim was “deemed allowed” under § 502. Instead, she listed a lower
amount as “disputed” on her proposed plan, without more, and the Plan passed
through the confirmation process uncorrected. Given the “deemed allowed”
15
language of § 502, the explicit procedures set forth in Rule 3007 to effect a proper
disallowance, the existence of a secured home mortgage claim, and the failure by
the debto r here, no t the credito r, to follow the prop er proce dures, w e refuse to
permit an inconsistent plan provision to constitute a constructive objection by
reason of the Plan’s notation of dispute alone, especially where a bankruptcy court
does no t conside r an obje ction un til over a ye ar after the Plan’s co nfirmatio n. See
In re Starling, 251 B.R. at 910 (“To allow the Debtor to object, months after the
plan has been confirmed, would contradict the ‘finality’ objective of the
confirmation process and would overlook the express language of section 1327(a)
of the Bankruptcy Code.”). That the Plan states an amount in conflict with the
proof o f claim de mands a resolutio n of the in consisten cy, but a d ebtor’s p ost-
confirmation objection is not the appropriate vehicle by which to d o so. Because
the bank ruptcy co urt gran ted this ob jection an d held th at Univ ersal wa s boun d to
the amount provided in the Plan and, in addition, that Universal would not be
permitted to reco up the balanc e of the mor tgage arrearag e, the district court’s
affirmance of its ruling in this regard is REVERSED.
B. The Ban kruptcy Co urt’s Denial of U niversal’s Motion to Dismiss
Section 1325(a) requires the bank ruptcy ju dge to co nfirm a p lan if it mee ts
certain requirements, one of which is that the proposed plan conforms with the
16
requirem ents of C hapter 1 3 and th e applicab le provis ions of T itle 11. § 1 325(a) (1).
According to the plain statutory language, § 1322 is a mandatory provision
contem plated by § 1325 (a)(1) an d the con firmed p lan shou ld comp ly with it.
Section 1325(a)(5), in turn, references secured creditors and mandates plan
confirmation if (1) the secured creditor accepts the plan; (2) the plan provides that
the secured creditor retain its lien and be paid the full amount of the allowed claim;
or (3) the debtor surrenders the p roperty securing the claim to the creditor. Thus,
there are three options to the treatment of a secured creditor’s claim that compel
confirm ation of a plan, no ne of w hich w ere prese nt in the fa cts here. F irst,
Universal, b y filing a proof of claim contra ry to the amou nt indicated in B ateman’s
first plan, did not indicate its acceptance of the plan to the detriment of its lien by
declining to further participate in the confirmation proceedings. Confirmation
would have been proper under § 1325(a) if Universal conceded to the treatment of
its claim under the Plan. Universal did not accept the Plan, however; rather, after
receiving the first pla n, it filed a p roof of claim w ith a differ ent, higher amou nt.
Because there was no objection to the proof of claim, Universal did not need to act
further and th e claim was “d eemed allow ed.” We w ill not permit U niversal’s
reliance on the terms of the bankruptcy code, and Universal’s subsequent silence
on the matter, to act as an acceptance under § 1325(a). There is no indication that
Universal accepted the Plan and we will not treat its actions as comprising such. It
17
is also un disputed that neithe r Univ ersal wa s provid ed for in full purs uant to its
allowed claim and § 1325 (a)(5)(B ), nor w as the pro perty sur rendere d to it.
Accordingly, Bateman cannot claim that the Plan’s confirmation was proper at the
outset or was entitled to confirmation because it did not meet the mandatory
provisio ns of § 1 322 an d Univ ersal did n ot accept, n or was it alternative ly
sufficiently provided for, under § 1325(a)(5).7
Universal argues that because the Plan did not meet the requisites of § 1325,
which it maintains are mandatory for confirmation, the Plan cannot be afforded res
judicata effect under § 1327. Title 11, U.S.C. § 1327(a) provides 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.” Thus, § 1327
gives res judicata effect to a confirmed Chapter 13 plan. A leading treatise makes
clear
that the binding effect . . . extends to any issue actually litigated by the
parties and any issue necessarily determined by the confirmation
7
The parties dispute whether the provisions of § 1325 are mandatory to an extent that
would warrant vacating a confirmed plan and dismissing the bankruptcy. Compare In re
Szostek, 886 F.2d 1405, 1411 (3d Cir. 1989) (holding that § 1325(a) is not mandatory, but rather
“sufficient,” whereas § 1322 is mandatory) with In re Nenonen, 232 B.R. 803, 805 (M.D. Fla.
1998) (nothing that § 1325(a) provisions are mandatory in the context of a direct appeal from a
confirmation order). This question, however, appears to be settled by Associates Commerical
Corp. v Rash, 520 U.S. 953, 956, 117 S. Ct. 1879, 1882 (1997): “To qualify for confirmation
under Chapter 13, the [debtors’] plan had to satisfy the requirements set forth in § 1325(a) of the
Code.” Because our decision rests on a different ground, we do not decide that issue.
18
order, including whether the plan complies with sections 1322 and
1325 of the Bankruptcy Code. For example, a creditor may not after
confirmation assert that the plan . . . is otherwise inconsistent with the
Code in violation of section 1322(b)(10) or section 1325(a)(1).
8 Collier on Bankruptcy, ¶ 1327.02[1][c] at 1327-5 (15th rev. ed. 2003) (footnotes
omitted).
We set forth in In re Justice Oaks II, Ltd., and reiter ate here, th at res judicata
refers to “c laim prec lusion” in the sense Batema n seeks to apply the doctrine ,
meaning, “[i]f the later litigation arises from the same cause of action, then the
judgment bars litigation not only of ‘every matter which was actually offered and
received to sustain the demand, but also [of] every [claim] which might have been
presented.’” 898 F.2d 1544, 1549 n.3 (11th Cir. 1990) (quoting Baltimore S.S. Co.
v. Phillips, 274 U.S. 316, 319, 47 S. Ct. 600, 602 (1927)). “Preclusion under §
1327 is somewhat harsher than common law issue preclusion, however. At
comm on law the litigation of an issu e is preclu ded on ly if that issu e was ac tually
litigated and decided and if the determination of that issue was necessary to the
judgment in a previous action between the parties.” In re Starling, 251 B.R. at 910
n.2 (quoting In re Sanders, 243 B .R. 326 , 328 (B ankr. N .D. Oh io 2000 )).
Confirmation of a Chapter 13 plan by a bankruptcy court of competent jurisdiction,
in accordance with the procedural requirements of notice and hearing of
confirmation, “is given the same effect as any district court’s final judgment on the
19
merits.” In re Justice Oaks II, Ltd., 898 F.2d at 1550 (citing Stoll v. Gottlieb, 305
U.S. 165, 170-71, 59 S. Ct. 134, 137 (1938)). 8 Universal’s proof of claim and the
Plan’s listed distribution amount, however improper, was within the definition of
claim preclusion because it very well might have been and, as we have articulated
should have been, presented before the bankruptcy judge prior to the Plan
confirmation. See In re Starling, 251 B .R. at 910 . The P lan was improp erly
confirmed because it conflicted with § 1322's mandatory provisions. Had
Universal objected to or appealed from the Plan’s confirmation, it would have
prevailed without question, given the facts presented to us. Universal, however,
did not do so and § 1327 binds creditors to the provisions of the Plan. The Plan
provided that Universal be paid monthly a certain amount to fulfill the “disputed”
claim. Universal cannot now, years later, urge us to dismiss the Chapter 13
petition an d unrav el the Plan ’s executio n whe n it otherw ise retains its lien in full.
We are persuaded by the reasoning in Simmons that a secured creditor’s lien
survives a contrary plan confirmation. 765 F.2d at 559. In Simmons, the creditor
secured by a statutory construction lien filed a proof of claim with the bankruptcy
court. During the course of the confirmation proceedings, neither the debtor nor
the trustee objected to the proof of claim prior to confirmation. Nevertheless, the
8
Although In re Justice Oaks II, Ltd. applied to a Chapter 11 bankruptcy case, in In re
Clark, 172 B.R. 701, 704 (Bankr. S.D. Ga. 1994), the court applied In re Justice Oaks in the
Chapter 13 context. We also find it appropriate to do so here.
20
Chapte r 13 plan listed the cr editor’s cla im as un secured but disp uted. Th e Fifth
Circuit h eld that the notation in the con firmation plan “can not be d eemed to
constitute . . . an objection.” Id. at 552 (“T he purp ose of filin g an ob jection is to
join issue in a contested matter, thereby placing the parties on notice that litigation
is required to resolve an actual dispute between the parties.”). The court stated that
the plan w as erron eously co nfirmed by the ba nkrup tcy court b ecause, n ot only d id
it not appropriately provide for the creditor’s proof of claim, the plan did not meet
any of the prerequisites under § 1325(a)(5) in that the secured creditor did not
accept the plan, the p lan mad e no pro vision th at it retained its lien, and the plan d id
not propose the surrender o f the property. 9 Id. at 554.
The debtor argued that the effect of the confirmation was to lift the
construction lien from the homestead and vest the interest of the property in the
debtor “free and clear of any ‘claim or interest’ of any creditor.” Id. at 555. The
Fifth Circuit declined that invitation:
After delineating the parameters of the dispute over the meaning of
the terms “claim or interest,” and having observed that the legislative
history o f section 1 327(c) offers n o insight regardin g this issu e, a
leading commentator writes that “[m]atters are further confused by the
fact that there appears to be no sound reason for lifting liens by
operation of law at confirmation under chapter 13.” 5 Collier on
Bankruptcy ¶ 1327.01 [3], at 1327-5. Nor are we able to discern any
9
The issue was not addressed under § 1322(b)(2) because the secured claim was not a
mortgage on a principal residence. The mandatory language of § 1322 makes the analogous
result in Simmons even more compelling.
21
reason for such an effect. Therefore, we agree with the In re
Honaker[, 4 B.R. 415 (Bankr. E.D. Mich. 1980),] court’s conclusion
that “[t]he reading of Section 1327 urged by [the debtor] would have
the Debtor materially improve his financial position, by
unencumbering [secured] assets, through the simple expedient of
passing his prop erty throu gh the es tate. This r esult has little to
recommend it.” [Id.] at 417. . . It would be anomalous indeed were we
to permit [the debtor] a windfall for his mischaracterization of [the
creditor’s] claim in the plan . . . .
Id. at 555-56 (emphasis add ed). Furthermore, the creditor’s
failure to interpose an objection to the plan or to appeal the
confirmation order should not now be permitted to justify avoidance
of a lien securing a claim that was originally deemed an allowed
secured claim as a result of [the debtor’s] failure to object to [the
creditor’s] timely filed proof of secured claim.
Id. at 556. Rejecting the debtor’s argument that § 1327 bound the creditor to the
treatmen t of his claim as prov ided for in the con firmation plan, the Fifth Circuit
held that the creditor’s statutory lien on the debtor’s homestead “remained
unimpaired by the order of confirmation.” Id. at 559. Thus, while the validity of
the confirmation order itself was not before the court on appeal, the court held that
the effect of confirmation under § 1327 did not invalidate the creditor’s lien.
For these reasons, if a lien on a mortgage survives the § 1327 res judicata
effect of a confirmed plan, then so must any corresponding arrearage claim, such
as one U niversal a sserts her e. See In re Hobdy, 130 B.R. 318, 322 (Bankr. App.
9th Cir. 1991) (holding, in an identical fact situation, that the general terms of §
1327(a) could not override the specific § 502(a) claims provision, therefore, the
22
confirm ed plan w as “fatally de fective” an d could not redu ce the arre arage claim ).
In re Hobdy is especially instructiv e to the statu tory con flict we fa ce here:
[T]he p lan that w as confir med he re was f atally defec tive in its
arbitrary reduction of [the creditor’s] secured arrearage claim. We do
not believ e the need for finality of conf irmed p lans exten ds to
circumstances present in this case: where a debtor misuses, whether or
not inten tionally, the plan con firmation process to reduc e a valid
claim without the requisite notice and opportunity to be heard. In any
event, § 502(a) is the statutory provision which specifically governs
questions of claims allowance and, consequently, should control over
the more general policy considerations embodied in § 1327(a).
130 B.R. at 321 (referring to the lack o f due process afforded the cred itor because
it did not have notice of the objection to its proof of claim). The concurrence
interpreted § 1327(a) to bind the parties to the distribution amount under the plan,
but not th e amou nt of the c laim deter mined b y § 502 (a). Id. at 322. Thus, the
debtor could not satisfy the lien until the entire claim amount was paid, whether
pursua nt to the p lan or oth erwise. Id. The concurrence relied, in part, on the
language of § 1322(b)(10) which, by implication, prohibits the confirmation of a
plan inco nsistent w ith Title 11 - one su ch incon sistency b eing “for a plan to
effectively determine the amount of a secured claim,” a result inconsistent with §
502(a) and Ru le 3007 . Id. at 322. Both the majority and the concurring judges
agreed that a proof of claim pursuant to § 502(a) controlled the amount of the
creditor’s allowed claim, even if the plan amount differed, and held that the plan
could not reduce an arrearage claim.
23
The fac ts here co mpel an identical re sult: Unive rsal’s secu red claim is
unaffected by the Plan and survives the bankruptcy unimpaired.10 See In re
Thomas, 883 F.2d 991, 997 (11th Cir. 1989) (holding that a secured creditor’s lien
survived a Chapter 13 discharge even though it had not been provided for in the
plan and the secur ed credito r had no t filed a pro of of claim ).
Nevertheless, because the plan was invalid at the point of its completion, we
are urged by Universal to dismiss the Chapter 13 petition. Universal argues that the
bankruptcy court erred by denying its motion to dismiss the Chapter 13 Plan
because the Plan failed to comply with § 1325 of the bankruptcy code. Bateman
argues that the denial was proper b ecause the Plan, as confirmed, is res judicata
10
Bateman refers us to the decision in In re Duggins, 263 B.R. 233 (Bankr. C.D. Ill.
2001), in support of its argument that the Plan, as confirmed, is res judicata, and therefore,
established Universal’s claim at the $21,600.00 amount. The bankruptcy court in In re Duggins
held that an undersecured creditor was bound to the confirmed plan’s valuation of the underlying
collateral, even though it filed a proof of claim evidencing a higher valuation just before the
plan’s confirmation, because the creditor had adequate notice of the plan’s valuation of the
collateral, and the proof of claim would not be permitted to substitute for a timely objection to
the confirmation plan. Id. at 244.
The case In re Duggins is distinguishable in terms fatal to Bateman’s argument. First, the
secured claim in In re Duggins was for a television set, id. at 235, which is not afforded the same
protection as a mortgage on a principal residence by § 1322(b)(2). Thus, the secured claim was
bifurcated pursuant to § 506(a) and secured only to the extent of the collateral’s value; the
remainder was relegated to unsecured status. Id. at 236 (citing Assocs. Commercial Corp. v.
Rash, 520 U.S. 953, 117 S. Ct. 1879 (1997)). Section 1322(b)(2) prohibits such treatment of
mortgages on principal residences. Second, the dispute centered around the valuation of the
collateral, not the amount of the claim itself. The bankruptcy court concluded that the claims
process did not assign to a collateral valuation the same evidentiary effect of a proof of claim as
to the amount of the claim itself. Id. at 238. The collateral’s valuation was better determined in
the confirmation process, and therefore the creditor was bound by the plan’s valuation. Id.
Because of these distinctions, we do not find the language in In re Duggins to be applicable to
the issue before us.
24
pursuant to § 1327(a) and Universal does not make any allegations of fraud, which
is the only basis to revoke a confirmed plan under § 1330(a).11 Although
Universal’s lien and arrearage claim survives, we will not reverse the district
court’s o rder affir ming th e bankr uptcy co urt’s order denyin g Univ ersal’s mo tion to
dismiss th e bankr uptcy alto gether.
Universal had the opportunity to object to the Plan’s treatment of its claim at
the confirmation hearing or appeal the confirmed plan and, had it done so, the Plan
could n ot have b een pro perly con firmed o ver its ob jection. See § 1325 . Unive rsal,
albeit with in its rights , filed a pro of of claim to be pro vided fo r by the P lan, yet,
chose not to involve itself in the Chapter 13 pro ceedings and bypassed these
oppor tunities to c orrect the discrepa ncy befo re the Pla n was c onfirm ed.
Furthe rmore, U niversal c ontinue d to accep t the paym ents even though it should
have be en appa rent that th ey were less than a dequate to satisfy its a rrearage claim.
Universal arguably had reaso n to remain disengaged from the proceedings because
it assume d its prop erly filed p roof of claim w as sufficie nt to pro tect its interes ts
absent a notice of objection by Bateman. Because it did not vindicate its rights at
the appropriate stages of the Chapter 13 process, however, Universal cannot now
11
Section 1330(a) provides: “On request of a party in interest at any time within 180
days after the date of the entry of an order of confirmation . . . the court may revoke such order if
such order was procured by fraud.” Universal does not argue the presence of fraud.
Accordingly, revocation of the order of confirmation is not permitted under this section.
Furthermore, the motion to dismiss was filed well in excess of 180 days after confirmation.
25
argue for a dismissal of the petition at its near conclusion without assuming some
responsibility for letting the discrepancy go this far unchallenged. Acco rdingly,
we dec line to un ravel thre e years of diligent ex ecution o f the Plan to correc t a
discrepancy that every party in interest --- Bateman, Universal, the trustee, and
even the bankruptcy judge --- should have noticed and rectified before the Plan
was confirmed. Were we to do so, the prejudice afforded Bateman and the other
parties in in terest wo uld far ex ceed the p ossible b enefit to U niversal a t this
juncture. This is so, for the most part because, going forward from the conclusion
of the plan, Universal retains its secured claim for the arrearage. Bateman will not
benefit from a windfall from a p lan that should not have been con firmed in the first
place. Because we decide that Universal’s claim is unimpaired under the
confirm ed plan, it is not ineq uitable an d is, in fact, s ynchronous to give the P lan its
full intended res judicata effect under § 1327. Also, in pragmatic terms, this action
would be disastr ous to B ateman a nd her p ursuit of financial s olvency and w ould
afford Universal little more in remedial terms than it already possesses by nature of
its secured claim un der § 13 22. M oreove r, althoug h Univ ersal wa s not req uired to
“show up” at the Chapter 13 confirmation proceedings or file the proof of claim for
its secured claim, it did inject itself into the proceedings by seeking payment under
the Plan to satisfy its secured claim for arrearage, as it was entitled to do. By
electing to do so, Universal assumed some level of responsibility for ensuring that
26
the Plan accounted for its claim in full, or at least objecting to or appealing from
the confirmation if it did not. By failing to do so, Universal “ignore[d] the
confirmation hearing only at [its] peril.” 8 Collier on Bankruptcy ¶ 1327.02[1][a]
at 1327 -4 (15th rev. ed. 2003). The extent of that peril, however, demands clear
definition within the terms of the bankruptcy provisions, as discussed supra.
Accordingly, the district court’s order affirming the bankruptcy court’s denial of
Universal’s motion to dismiss is AFFIRMED.
However, to the extent that Universal had any rights to act against Bateman
pursuant to the terms of the mortgage, it retains those rights despite the terms of
the Plan . See Cen-Pen Corp. v. Hanson, 58 F.3d 89, 92-93 (4th Cir. 1995) (citing
In re Honaker, 4 B.R. 4 15, 417 (Bank r. E.D. M ich. 198 0)) (refu sing to p ermit a
debtor, by “[t]he simple expedient of passing their residence through the
bankruptcy estate,” to enjoy a “greater interest in the residence than they enjoyed
prior to filing their Chapter 13 petition.”).12
12
We stated in In re Thomas that, although the lien survived, the creditor “lost its right to
recover any deficiency it may have from the estate or from the debtors.” 883 F.2d at 997 (citing,
inter alia, In re Burrell, 85 B.R. 799, 800-01 (Bankr. N.D. Ill. 1988)). In re Thomas involved a
secured interest on a mobile home which is not real property and not subject to the anti-
modification provision of § 1322(b)(2). 8 Collier on Bankruptcy, ¶ 1322.06[1][a][ii] at 1322-
24.1 (15th rev. ed. 2003). Thus, the language in In re Thomas, does not apply here. We also take
this opportunity to distinguish In re Tepper, 279 B.R. 859 (Bankr. M.D. Fla. 2002), which held
that a secured claim for a tax lien as modified under a confirmed plan binds the secured creditor
to the treatment afforded under the plan. Id. at 864. Based upon the language of § 1322(b),
which prohibits the modification of a mortgagee’s interest, we will not extend the reasoning in In
re Tepper to enable a discharge resulting from an explicitly prohibited modification.
27
III. CONCLUSION
We hold that although the parties are bound to the terms of the Plan, as
confirmed, Universal’s secured claim for arrearage survives the Plan and it retains
its rights under the mortgage until Universal’s claim is satisfied in full. If that
satisfaction is not forthcoming, after the automatic stay is lifted, Universal will be
entitled to act in accordance with the rights as provided in the mortgage to satisfy
its claim. Accord ingly, the district cour t’s affirmance of the bankru ptcy court’s
order gran ting Bateman ’s objection is RE VER SED . The district cou rt’s
affirman ce of the b ankrup tcy court’s denial of Unive rsal’s mo tion to dis miss is
AFFIRMED because Universal cannot collaterally attack the Plan and is bound by
its terms p ursuan t to § 132 7.
AFF IRM ED in part and REV ERS ED in part.
28