Johnny L. Vincent v. Fairbanks Capital ( 2003 )

United States Bankruptcy Appellate Panel
FOR THE EIGHTH CIRCUIT
No. 03-6025EA
__________
In re: *
*
Johnny L. Vincent, *
*
Debtor. *
*
*
Johnny L. Vincent, *
* Appeal from the United
Debtor - Appellant. * States Bankruptcy Court
* for the Eastern District of
v. * Arkansas
*
Fairbanks Capital Corporation, *
*
Creditor - Appellee. *
*
Submitted: October 29, 2003
Filed: December 1, 2003 (Corrected 12/11/03)
Before SCHERMER, DREHER, and FEDERMAN, Bankruptcy Judges.
DREHER, Bankruptcy Judge.
This is an appeal from the bankruptcy court's1 order which sustained an
objection to Debtor's modification of a Chapter 13 plan. For the reasons stated below
we dismiss the appeal for lack of jurisdiction.
PROCEDURAL HISTORY AND FACTS
On October 8, 1998, Debtor, Johnny Vincent ("Debtor"), filed a petition for
bankruptcy relief under Chapter 13. Debtor scheduled his home as an asset in his
bankruptcy case and valued it at $28,500. Debtor also scheduled IMC Mortgage
("IMC") as a secured creditor holding a lien in the home to secure a claim of $22,700.
IMC's claim was secured solely by Debtor's principal residence. The last payment on
the mortgage is due on May 18, 2010. Therefore, the debt to IMC is a long-term
claim as provided by 11 U.S.C. § 1322(c), not subject to modification under 11
U.S.C. § 1322(b)(2).
A plan of reorganization was attached to the original petition which provided
for payments to be made in the sum of $930.00 monthly for a period of 60 months.
The plan listed no long-term debts. Instead, the obligation to IMC was listed as a
secured claim which would not extend beyond the length of the plan. The plan
proposed to pay IMC's secured claim by paying the $22,700 value of the collateral
in full over the life of the plan at the rate of $378.33 per month without payment of
any interest. Thus, the plan misclassified the IMC debt.
On March 15, 1999, IMC filed a motion to modify the plan. The bankruptcy
court construed the motion as an objection to confirmation. In its objection, IMC
asserted that its claim was a long term debt not subject to modification. IMC also
1
The Honorable James G. Mixon, United States Bankruptcy Judge for the
Eastern and Western Districts of Arkansas.
2
filed a motion for adequate protection requesting immediate payment from either the
Debtor or the Chapter 13 Trustee.
In response to the objection, Debtor modified his plan to pay IMC's claim of
$23,309.09 plus an arrearage of $544.00. The modified plan still did not provide to
pay interest on IMC’s claim. On May 4, 1999, an order submitted by IMC's counsel
was entered withdrawing its motion and reciting that Debtor had modified his plan
to pay IMC's pre-petition arrearage claim at the rate of $46.00 per month and the
ongoing mortgage payment at $477.65 a month. Thereafter, IMC's claim of
$23,309.09, which did not include a claim for interest,2 was allowed by order dated
May 12, 1999. On June 4, 1999, the bankruptcy court issued an order confirming
Debtor’s modified plan.
Two years later, on May 22, 2001, IMC, having discovered its error, filed an
amended secured claim in the amount of $30,449.06. In response, the Chapter 13
Trustee filed a motion to allow the claim in that amount. The bankruptcy court
entered an order on that date which provided that: "the above claim be allowed as has
been recommended by the Trustee and payable as provided by the Debtor's plan and
other orders of this Court or paid in full if not otherwise provided in the plan of the
Debtor." The order further provided that Debtor had thirty days in which to file a
written application for modification of the order or to modify the plan to pay less than
the full amount of the allowed claim. Debtor timely filed an objection to the claim,
arguing that the claim was untimely and inconsistent with the previously filed claim.
In response, Fairbanks Capital Corporation, successor to IMC ("Fairbanks"),3 filed
2
A claim for unmatured interest will be disallowed if objected to by a party
in interest. 11 U.S.C. § 502(b)(2)
3
Debtor’s obligation on his mortgage passed through the hands of four
separate mortgage companies. The original mortgage with The Money Store was
assigned to IMC, which assigned it to Citibank, which assigned it to Fairbanks.
3
a motion to compel Debtor to comply with discovery requests. The motion was
granted by agreement and an order was entered on October 9, 2001 which provided,
in part, that Debtor would have until October 12, 2001, to comply with discovery
requests in the absence of which Fairbanks would be entitled to submit an ex parte
order overruling Debtor's objection.
Debtor failed to respond to discovery. Fairbanks then filed a motion seeking
the ex parte order overruling the Debtor's objection to the claim. Accordingly, an
order overruling the Debtor's objection was entered on October 23, 2001, putting into
effect the May 24, 2001 order which had allowed the amended claim. Debtor did not
appeal from that order. Moreover, the Chapter 13 Trustee did not change the amount
of the payments being made to Fairbanks. At least in the understanding of the
Trustee, while the amended claim had been allowed, the confirmed plan had never
been modified to change the treatment of Fairbanks' claim.
Soon thereafter, Debtor lost his job and was entitled to a lump sum severance
payment. He wished to complete his obligations under the confirmed Chapter 13
Plan. At Debtor’s request the Chapter 13 Trustee informed Debtor what he would
need to pay in order to complete his payments under the Plan. On April 24, 2002,
Debtor filed a Modification to Close and a Notice of Opportunity to Object to Closure
of Plan in which he proposed to pay a lump sum of $17,336.56 to be used to pay the
full unpaid balance of Fairbanks’ original claim as directed by the Chapter 13
Trustee.4 Fairbanks objected on the grounds that the modification should not be
allowed because Debtor was not proposing to pay Fairbanks allowed claim of
$30,449.06 in full. Fairbanks sought an order sustaining its objection to the modified
plan and either requiring Debtor to pay the full amount of the allowed claim in full
4
We are hampered in our review by a common problem, the failure to
provide us with a complete record. Neither appellant nor appellee has included in
the Appendices the motion which was the genesis of the order from which this
appeal is taken.
4
over the remaining life of the plan or that Debtor be ordered to modify his plan to
provide for the secured claim of Fairbanks in the sum of $30,449.06 to be treated as
a long term debt not subject to modification and paid at the rate of $523.65 per
month. After related proceedings not relevant to this decision, the bankruptcy court
issued its order dated April 24, 2003, in which the bankruptcy court sustained the
objection of Fairbanks to plan modification but did not require the Debtor to modify
his Plan.
In its ruling, the bankruptcy court held that IMC had erred in the proceedings
leading up to the confirmation of the modified plan and further erred when it filed the
amended claim which provided for interest on its claim. The debt to IMC/Fairbanks
was a debt on Debtor’s principal residence which was not due within the term of the
plan. Section 1322(b)(2) of the Bankruptcy Code does not allow for modification of
such claims in the context of a Chapter 13 Plan. Nonetheless, the modified plan
patently did not provide for the payment of interest on the claim and IMC/Fairbanks
failed to object. Having done so, the plan was confirmed and the confirmed plan
bound Fairbanks to payments terms provided in the confirmed plan. The bankruptcy
court further held that when IMC/Fairbanks filed the amended claim, Debtor’s
objection should have been sustained because the treatment of IMC/Fairbanks’ claim
had already been determined by the final order confirming the plan which was res
judicata on that issue. However, Debtor had failed to file an appeal from the order
allowing the claim in the sum of $30,449.06. The bankruptcy court then went on to
construe its May 21, 2001 Order as having modified the Chapter 13 Plan to require
Debtor to make full payment of Fairbanks’ claim in the sum of $30,449.06, which
sum would not be discharged without full payment and, therefore, sustained
Fairbanks’ objection to modification of the plan.
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DECISION
This court has an independent obligation to determine its own jurisdiction.
See Lewis v. United States, 992 F.2d 767, 771 (8th Cir.1993); Crockett v.
Lineberger, 205 B.R. 580, 581 n.3 (B.A.P. 8th Cir. 1997). As we previously
discussed in Safeco Ins. Co. v. Farmland Indus. Inc. (In re Farmland Industries,
Inc.), 296 B.R. 793 (B.A.P. 8th Cir. 2003):
The Eighth Circuit has adopted a three factor test to determine
whether a bankruptcy court order is final for purposes of 28 U.S.C. §
158(d), considering "the extent to which (1) the order leaves the
bankruptcy court nothing to do but execute the order, (2) delay in
obtaining review would prevent the aggrieved party from obtaining
effective relief, and (3) a later reversal on that issue would require
recommencement of the entire proceeding." The Eighth Circuit
Bankruptcy Appellate Panel has applied this test for determining
finality under 28 U.S.C. § 158(a)(1).5
Id. at 800. (internal citations omitted)
5
Title 28 Section 158 addresses the procedure for appeals from bankruptcy
courts and states in relevant part:
(a) The district courts of the United States shall have jurisdiction to
hear appeals
(1) from final judgments, orders, and decrees;
****
(3) with leave of the court, from other interlocutory orders and
decrees; ...
****
(d) The courts of appeals shall have jurisdiction of appeals from all
final decisions, judgments, orders, and decrees entered under
subsection (a) ... of this section.
28 U.S.C. § 158.
6
[An] order, although not a final judgment on the merits on all claims
and to all parties, may be reviewed as a final collateral order if it
meets the test set out in Cohen v. Beneficial Indus. Loan Corp., 337
U.S. 541 (1949). Three requirements must be met; (1) the order must
conclusively determine the disputed question, (2) the order must
resolve an important question completely separate from the merits of
the action, and (3) the order must be effectively unreviewable on
appeal from final judgment.
Id. (citing National City Bank v. Coopers and Lybrand, 802 F.2d 990, 993 n.2 (8th
Cir.1986); Moxley v. Comer (In re Comer), 716 F.2d 168, 172 (3rd Cir.1983)
(holding that an order is final when its subject matter is not one that can wait final
resolution of the bankruptcy proceeding, the particular controversy will not return to
the court, and effective review of the order cannot await final disposition of the case
in the bankruptcy court); and Bayer v. Nicola (In re Bestmann), 720 F.2d 484, 486
(8th Cir.1983)(the essence of the test to determine finality of a bankruptcy order is
whether the particular controversy with which the order deals may be reviewed at a
subsequent time, or whether effective review cannot await a final or later disposition
of the dispute in the bankruptcy court)).
In the alternative, under 28 U.S.C. § 158(a)(3), parties who wish to challenge
an interlocutory order must seek leave from the bankruptcy court by filing a motion
for leave to appeal. FED. R. BANKR. P. 8003(a). And courts will occasionally
construe notices of appeal as motions for leave to appeal. FED. R. BANKR. P. 8003(c);
Moix-McNutt v. Coop (In re Moix-McNutt), 215 B.R. 405, 407 (B.A.P. 8th Cir.
1997). Debtor did not seek leave to appeal in this case and circumstances that
justified the court in Moix-McNutt to construe the notice of appeal as a motion for
7
leave to appeal do not exist in this case. Id.6 As a result, we decline to construe the
notice of appeal as a motion for leave to appeal.
Although in this instance Debtor confirmed a plan, the denial of the
modification of a confirmed plan bestows no more finality on the bankruptcy court’s
order than the denial of confirmation of a plan. As in Lewis, the bankruptcy court did
not dismiss Debtor’s petition after sustaining Fairbanks’ objection, and thereby did
not preclude Debtor from making further modification proposals including providing
Fairbanks’ debt be paid pursuant to § 1322(b)(5), a proposal that Fairbanks offered
to accept during oral argument.7 See Lewis, 992 F.2d at 773.
In addition, many other options remain for Debtor after the denial of a motion
to modify. Debtor could request a hardship discharge pursuant to section 1328(b),
convert the case as allowed by section 1307(a), complete payments under the terms
of the confirmed plan, or, failing all of the above, the bankruptcy court could dismiss
or convert the case. See 11 U.S.C. §§ 1325(a)(5), 1328(b), 1307(a), (b), and (c).
Consequently, the bankruptcy court is left with many possibilities after the denial of
a motion to modify beyond the mere execution of its order denying modification and
“has remaining tasks that are not purely mechanical or ministerial, such as
considering any amended plan that may be proposed, or determining how to dispose
of the case if no confirmable amended plan is proposed.” Pleasant Woods Ass’n. Ltd.
6
In Moix-McNutt the claim by Debtor of prejudice by the bankruptcy court
created a unique procedural posture in the case that warranted immediate judicial
review.
7
Since Debtor may be able to modify his plan to satisfy the objection of
Fairbanks and the concerns of the bankruptcy court without making additional
payments to the Trustee, allowing Debtor to further modify the plan would not
require the bankruptcy court to approve a plan that provides for payments for a
“period that is longer than five years.” 11 U.S.C. § 1322(d).
8
P’ship v. Simmons First Nat’l Bank (In re Pleasant Woods Associates Ltd.
Partnership), 2 F.3d 837, 838 (8th Cir. 1993)
Even so, all that is needed is a final order of dismissal or modification and then
either party may appeal the final disposition. Lewis, 992 at 773. A later reversal will
not compel extensive relitigation. The facts are not in dispute, entry of a final order
could be a “swift undertaking” and we are obligated to avoid “piecemeal
adjudication.” Id. “Once again, as happens all too often, bankruptcy practitioners
have briefed and argued an appeal to this court paying no attention to our controlling
jurisdictional precedents.” Groves v. LaBarge (In re Groves), 39 F.3d 212, 214(8th
Cir. 1994); see also Lurie v. Blackwell (In re Popkin & Stern), 105 F.3d 1248, 1250-
51(8th Cir. 1997)(“The lesson here for litigants is to examine jurisdiction before, not
after, appealing.”).
We must conclude that an order denying modification of a plan is no more final
than an order denying confirmation of a plan and that Debtor will not be denied an
effective appeal pending a final disposition of the case by the bankruptcy court.
Therefore, we dismiss this appeal for lack of jurisdiction.
ACCORDINGLY, this appeal is DISMISSED.
A true copy.
Attest:
CLERK, U.S. BANKRUPTCY APPELLATE PANEL
FOR THE EIGHTH CIRCUIT
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