[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
December 16, 2002
THOMAS K. KAHN
No. 01-15491 CLERK
________________________
D.C. Docket No. 01-00023 CV-1-DHB
Bkcy. No. 98-12703-BKC
In Re:
RUBY LEE DAVIS,
Debtor.
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SYSTEMS & SERVICES
TECHNOLOGIES, INC., Servicing
Agent for AEGIS Auto Finance,
Plaintiff-Appellant,
versus
RUBY LEE DAVIS,
BARNEE C. BAXTER, Trustee,
UNITED STATES TRUSTEE,
Defendants-Appellees.
__________________________
Appeal from the United States District Court for the
Southern District of Georgia
_________________________
(December 16, 2002)
Before BIRCH and COX, Circuit Judges, and GEORGE*, District Judge.
PER CURIAM:
In this bankruptcy appeal, we must decide whether a trustee in bankruptcy
has the authority to modify a Chapter 13 confirmation plan without an order from
the bankruptcy court. The district court upheld the bankruptcy court’s grant of a
Chapter 13 discharge based upon the trustee’s recommendation because the debtor
complied with the confirmation plan, which was unilaterally amended by the
trustee. Finding the discharge improper, we VACATE the discharge granted by
the bankruptcy court.
I. BACKGROUND
Defendant-appellee, Ruby Lee Davis, filed a United States Bankruptcy Code
Chapter 13 petition in the United States District Court for the Southern District of
Georgia, Augusta Division. Davis listed a 1995 Ford Aspire (the “Collateral”)
valued at $6,000, which partially secured an outstanding consumer loan serviced
*
Honorable Lloyd D. George, United States District Judge for the District of Nevada, sitting by
designation.
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by plaintiff-appellant, Systems & Services Technologies, Inc. (“SST”). Creditor
SST held a properly perfected first priority security interest in the Collateral and
filed a claim with the trustee for $8,298.11.
Prior to plan confirmation, Davis requested that the Collateral be substituted
by a replacement vehicle to be purchased by insurance proceeds from the loss of
the 1995 Ford Aspire. The bankruptcy court entered a substitution order, granting
Davis’s request to substitute a 1996 Ford Aspire for the previously listed Collateral
for the loan held by SST. The substitution order required that Davis remain current
on her monthly payments to the trustee.
Thereafter, the Chapter 13 plan (the “Plan”) was confirmed and provided
that SST held a secured claim in the amount of $6,000, representing the listed
value of the Collateral, and a general unsecured claim in the amount of $2,298.11,
representing the balance of indebtedness in excess of the Collateral’s value.
Pursuant to the Plan, Davis was obligated to make monthly $161 payments to the
trustee. Over a period of almost five months, Davis did not make any Plan
payments to the trustee. SST filed a motion to dismiss, supported by an affidavit
of delinquency with the bankruptcy court, to which Davis responded that she was
unemployed and unable to meet the payments. The bankruptcy court denied SST’s
request for relief from the automatic stay because the substitution order did not
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provide the nature of relief afforded by the filing of an affidavit of delinquency.2
The bankruptcy court subsequently entered a corrected substitution order
that permitted relief from the automatic stay in the event Davis failed to cure or
dispute a delinquency in her payments to the trustee. Shortly thereafter, SST filed
a second affidavit of delinquency. The bankruptcy judge lifted the automatic stay,
which cleared the way for SST to recover and dispose of the Collateral and apply
the proceeds against SST’s secured claim.
Upon the bankruptcy court’s lifting of the automatic stay, the trustee
promptly discontinued payments to SST without direction by any order of the
bankruptcy court, or any motion, notice, or hearing involving the parties. The
Trustee sent a letter to Davis advising her that she paid sufficient funds to fulfill
the Plan. A copy of the letter was sent to the clerk of the court but was not
docketed. As a result, the bankruptcy court granted Davis a discharge, finding that
Davis fulfilled the Plan requirements. Davis had paid a total of $1,851.46 over a
twenty-month period. At the time of discharge, SST had been paid $200.10 on the
principal and $472.91 in interest for its secured claim and nothing on its unsecured
claim.3 SST had not disposed of the Collateral by the time of Davis’s discharge.
2
The Plan was amended by bankruptcy court order to increase Davis’s payments to $180 per
month after the bankruptcy court denied SST’s motion to dismiss.
3
The Plan provided that all unsecured creditors were to be paid 10% of the claim amount.
4
SST later sold the Collateral for $426 as permitted by the lifting of the automatic
stay.
The day after entry of discharge, the trustee filed a final report with the
bankruptcy court. The final report set forth the trustee’s treatment of SST’s claims:
the secured claim was reduced to $673.01 as “paid out” and the unsecured claim
was disallowed entirely. The same day, SST filed a motion to have the discharge
vacated because its claims had not been satisfied in full, nor had the claims been
disallowed by bankruptcy court order; accordingly, SST argued, the grant of
discharge was procedurally improper. The bankruptcy court denied SST’s motion
to vacate, reasoning that SST’s claim was satisfied and that there existed no
misapprehension or mistake of the facts to warrant the vacating of the discharge
pursuant to Federal Rule of Civil Procedure 60(b).4 The bankruptcy court
remarked upon the value of finality in a discharge and found that SST received the
relief they sought in lifting the automatic stay. The district court affirmed the
bankruptcy court, finding no abuse of discretion by the bankruptcy court in
refusing to reopen the case and finding that the bankruptcy court’s determination
of absence of fraud was not clearly erroneous.
4
Federal Rule of Civil Procedure 60(b), made applicable to bankruptcy proceedings by Federal
Rule of Bankruptcy Procedure 9024, allows a party relief “from final judgment, order or
proceeding for [inter alia] mistake, inadvertence, surprise, or excusable neglect.”
5
It is from this final order that SST timely noticed its appeal before us. The
issue before us is procedural in nature. We decide whether the trustee exceeded his
statutory authority by unilaterally altering the claim amounts prior to the discharge
of bankruptcy or without the benefit of a bankruptcy court order.5
II. DISCUSSION
We review de novo the determinations of law by the bankruptcy court and
district court, whether decided initially or in the district court’s appellate capacity.
In re Sublett, 895 F.2d 1381, 1383-84 (11th Cir. 1990). We defer to the factual
determinations by the bankruptcy court unless they are clearly erroneous. Id. at
1383.
A Chapter 13 plan of confirmation has res judicata effect unless it is
subsequently modified by a bankruptcy court order. See 11 U.S.C. §§ 1327, 1329.
The confirmation plan includes, inter alia, the claim amounts that will be paid to
each creditor; therefore, the alteration of an amount to be distributed to a creditor is
a modification of that plan. 11 U.S.C. § 1329(a). Section 1329 sets forth the means
by which a modification may be obtained and provides that the confirmation plan
may be modified upon request by the trustee, debtor, or holder of an unsecured
5
Because the appeal is disposed of on this issue alone, it is unnecessary to address SST’s
argument that the bankruptcy court abused its discretion in refusing to reopen the case pursuant
to Federal Rule of Civil Procedure 60(b).
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claim. Id. The “request” language of § 1329(a) presupposes that such request
must be accepted or denied by order of the bankruptcy court. Absent bankruptcy
court order of modification, the confirmation plan must be executed as originally
approved. § 1327(a). In addition, § 502 provides the statutory framework for
disallowance of a claim and anticipates bankruptcy court approval after objection
by a party in interest. 11 U.S.C. § 502. If no objection to the allowed claim is filed
pursuant to the procedure outlined in Federal Rule of Bankruptcy Procedure 3007,
the bankruptcy court will not have cause to consider or approve the disallowance
of the claim.
It is undisputed that the trustee unilaterally reduced SST’s secured claim to
the value received and disallowed entirely the unsecured claim after the bankruptcy
court lifted the automatic stay. There is nothing in the record that demonstrates
that the trustee took this action pursuant to bankruptcy court order, or requested
such an order. In bypassing the adjudicative process surrounding the Plan
modification and disallowance of the claims, the trustee denied SST, as both a
secured and unsecured creditor, any opportunity to object to the modification or
disallowance. Absent a request by a proper party (i.e., the trustee) and
consideration and approval by the bankruptcy court, the trustee’s modification of
the Plan was invalid. Because the Plan modification was ineffective, Davis did not
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fulfill the payments as required by the Plan and the Chapter 13 discharge was
improper.6
III. CONCLUSION
In this bankruptcy appeal, creditor SST, which held secured and unsecured
claims in the confirmation plan, appeals the trustee’s unilateral modification and
disallowance of the claims without an order from the bankruptcy court as
exceeding the trustee’s statutory authority. We reverse the grant of discharge
afforded Davis by the bankruptcy court because the trustee acted unilaterally and
did not properly request a plan modification or claim disallowance, which would
have invoked the requisite adjudication by the bankruptcy court. Accordingly, the
grant of discharge by the bankruptcy court is VACATED, and the case is
REMANDED for further proceedings consistent with this opinion.
6
We do not decide the relative merit of the trustee’s treatment of the claims outside the realm of
procedural propriety. The ultimate disposition of the Plan and STT’s claims under it will
necessarily be determined by the bankruptcy court on remand.
8