In re: Wellman v.

ELECTRONIC CITATION: 2004 FED App. 0008P (6th Cir.)File Name: 04b0008p.06
BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT
In re: MARK RODNEY WELLMAN, )
GINA SUE WELLMAN, )
)
Debtors. )
)
__________________________________ )
)
SALT CREEK VALLEY BANK, )
)
Appellant, )
)
v. ) No. 03-8094
)
MARK RODNEY WELLMAN, )
GINA SUE WELLMAN, )
)
Appellees. )
)
Appeal from the United States Bankruptcy Court
for the Southern District of Ohio at Columbus.
Case No. 03-51439.
Submitted on Briefs: December 21, 2004
Decided and Filed: December 28, 2004
Before: COOK, GREGG, and WHIPPLE, Bankruptcy Appellate Panel Judges.
____________________
COUNSEL
ON BRIEF: James H. Bownas, GAMBLE, HARTSHORN & JOHNSON, Columbus, Ohio,
for Appellant. Robert James Morje, DECKER, VONAU, SEGUIN, LACKEY & VIETS,
Columbus, Ohio, for Appellees.
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OPINION
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JOHN C. COOK, Bankruptcy Appellate Panel Judge. This case requires us to
review the effect of the confirmation of a Chapter 13 plan on the relationship between a
debtor and his creditors. The bankruptcy court held that creditor Salt Creek Valley Bank’s
(“Bank”) motion for relief from stay, which was filed before, but not heard before,
confirmation of the Debtors’ plan, was incompatible with the confirmed plan.
Consequently, the bankruptcy court denied the Bank’s motion. Upon examination of the
record and the briefs, the Panel unanimously agrees that oral argument would not
significantly aid the decisional process in this appeal, and therefore waives oral argument.
Fed. R. Bankr. P. 8012. For the reasons that follow, we AFFIRM the bankruptcy court’s
denial of the Bank’s motion for relief from stay.
I. Issues on Appeal
The central issue in this case is whether the bankruptcy court erred in finding that
confirmation of the Debtors’ plan pretermitted the issues raised in the Bank’s motion for
relief from stay.
II. Jurisdiction and Standard of Review
The Panel has jurisdiction to review the final orders of a bankruptcy court pursuant
to 28 U.S.C. § 158(a)(1). The United States District Court for the Southern District of Ohio
has authorized appeals to the Bankruptcy Appellate Panel.
A bankruptcy court’s findings of fact are reviewed for clear error, and its conclusions
of law are reviewed de novo. Nicholson v. Isaacman (In re Isaacman), 26 F.3d 629, 631
(6th Cir. 1994); Hart v. Molino (In re Molino), 225 B.R. 904, 905 (B.A.P. 6th Cir. 1998). The
question of whether a confirmed plan pretermits a pending motion for relief from stay is a
legal question reviewed de novo.
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III. Facts
The Bank holds a first mortgage on a three-acre parcel of real estate owned by the
Debtors. On February 3, 2003, the Debtors filed their Chapter 13 case. On March 12,
2003, the Debtors filed an amended Chapter 13 plan, and on that same date, the Bank
filed a motion (1) to dismiss the chapter 13 case with prejudice because of repetitive filings,
(2) to enjoin the filing of any further petitions by or against the Debtors for a specified
period, and (3) for related relief. Although not so captioned, the motion was also viewed
by both the Bank and the bankruptcy court as an objection to confirmation of the Chapter
13 plan. The Debtors opposed the motion and, in its reply to the opposition, the Bank
argued, among other things, that the real property securing the Debtors’ obligation to the
Bank was fully encumbered and not necessary to the Debtors’ reorganization.
On June 18, 2003, an agreed order was entered resolving the Bank’s motion to
dismiss and objection to confirmation. The agreed order provided in part as follows:
By agreement of the undersigned parties, and for good
cause shown, the Motion to Dismiss and Objection to
confirmation filed by Salt Creek Valley Bank are resolved as
follows, said agreement being hereby adopted by this Court as
its order on said matters.
In the event that this Chapter 13 case is dismissed for
any reason prior to February 3, 2006, then, as to Salt Creek
Valley Bank or any successor in interest to the claim of Salt
Creek Valley Bank, said dismissal shall be “with prejudice,”
and the 180 day time bar provided by 11 USC 106(g) [sic] shall
be deemed applicable as to the claim of Salt Creek only.
Also, on June 18, the Bank filed a motion for relief from the automatic stay. Before the
motion for relief from stay came on for hearing, however, the Chapter 13 plan was
confirmed on July 30, 2003. Thereafter, on September 11, 2003, the bankruptcy court held
a hearing on the Bank’s motion for relief from stay and at the conclusion of the hearing the
court announced an oral decision overruling the Bank’s motion. The court’s order
overruling the Bank’s motion was filed on September 30, 2003. The Bank has timely
appealed from that order.
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At the hearing on the Bank’s motion for relief from stay, the Debtors stipulated that
they had no equity in the real estate that secured their obligation to the Bank, and the Bank
contended that it should be allowed to foreclose because the real estate was not
necessary to the Debtors’ reorganization. The Debtors argued otherwise, and Mark
Wellman testified that the real estate was necessary because he used it for repairing his
two truck tractors. He testified further that it would cost at least $1,300 per month to rent
garage space suitable for such work. At the time of this hearing, the confirmed Chapter
13 plan provided for payment of the mortgage and, by necessary implication, the Debtors’
retention of the property. As the bankruptcy court found, there was no evidence that the
plan payments were in default.
At the conclusion of the hearing, the court found essentially that the confirmation of
the plan had pretermitted the Bank’s motion to lift stay.
Well, I think what bothers me the most about the request here
is . . . it seems that the time to deal with whether or not that is
necessary or properly part of the plan is at confirmation and
not a month and a half later when, without any evidence that
the plan payments are in default. I mean, it’s the debtor who
has the authority under the Bankruptcy Code to propose the
plan. If the bank felt that the plan was somehow inappropriate,
then perhaps, the bank should have objected to the plan. And
the bank did object to the plan but that was resolved and it was
resolved, as I understood from looking at this a bit, that as long
as the plan continues fine, if the case is dismissed there will be
no more efforts at this, so to speak.
The court then continued in the same vein:
But this an odd posture and not something that I would believe
the Bankruptcy Code would envision that then a month after a
plan is confirmed, without any evidence of default in the plan,
that a creditor could come back and say, well, I guess I didn’t
like that plan after all, I didn’t want to be in it, and so I’m going
to make the argument that you don’t need my collateral even
though I didn’t make that argument, or I didn’t force that
argument to any kind of decision in the context of the
confirmation. That doesn’t seem like the way that should work.
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The bankruptcy court also seemed to be of the opinion that the mortgaged property
might be necessary to the reorganization.
But I’m not going to give relief from stay unless there’s some
reason here and I don’t see the reason. This is all part of
functionally this debtor’s residence. He’s testified as to some
need to use it. There’s also evidence that there’s some
encroachment.
IV. Discussion
The bankruptcy court was correct in deciding that the provisions of the Debtors’
confirmed plan bound the Bank and pretermitted its motion from relief from stay, absent
a post-confirmation default in carrying out the plan. The Bank has cited no case to support
its position that the court should have entertained a motion for relief from stay at that stage
of the proceedings, and in fact the great weight of authority is to the contrary. Section
1327 of the Bankruptcy Code states that the “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. § 1327(a). This binding effect of confirmation has led courts to conclude
that proceedings inconsistent or incompatible with the confirmed plan are improper.
Section 1327 is clear. The provisions of a confirmed plan bind
each creditor whether or not such creditor has objected to, has
accepted, or has rejected the plan. The plans in the present
cases provided for the curing of defaults and for the
maintenance of payments to the appellants throughout the life
of the plan. An order confirming a Chapter 13 plan is res
judicata as to all justifiable issues which were or could have
been decided at the confirmation hearing. See, In re Lewis,
8 B.R. 132, 137 (Bankr. D. Idaho 1981). Section 1327
precludes a creditor from asserting, after confirmation, any
other interest than that provided for it in the confirmed plan.
The issues of adequate protection, lack of equity, and
necessity for a successful rehabilitation of the Chapter 13
debtor were all res judicata as of the confirmation of the plan.
Anaheim Sav. & Loan Ass’n v. Evans (In re Evans), 30 B.R. 530, 531 (B.A.P. 9th Cir.
1983). Once a plan is confirmed, it is treated as the exclusive and transcendent
relationship between the debtor and the creditor. It follows that
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a creditor cannot thereafter assert any other interest than that
provided for him in the confirmed plan and that all of the issues
of adequate protection, lack of equity, the fact that the property
is not necessary for effective reorganization of the debtor’s
affairs, etc., could and should have been raised in objections
to confirmation.
Ford Motor Credit Co. v. Lewis (In re Lewis), 8 B.R. 132, 137 (Bankr. D. Idaho 1981);
accord, Citicorp Homeowners, Inc. v. Willey (In re Willey), 24 B.R. 369, 375 (Bankr. E.D.
Mich. 1982) (quoting In re Lewis with approval). Even where, as here, the motion for relief
from stay is filed before confirmation, bankruptcy courts hold that, unless it pertains to a
post-confirmation failure to make payments, the motion is untimely in view of the
transcendence of the confirmed plan. In re Minzler, 158 B.R. 720, 721 (Bankr. S.D. Ohio
1993); Society Bank v. Botteri (In re Botteri), 108 B.R. 164, 166 (Bankr. S.D. Ohio 1989).
V. Conclusion
We agree with the courts that have concluded that confirmation of a plan is res
judicata as to those issues which were or could have been decided at the confirmation
hearing. When a debtor and creditor have been bound to a confirmed plan, an action by
the creditor seeking relief that is incompatible with the plan is properly overruled. Hence,
the bankruptcy court was correct in determining that the Bank’s motion for relief from stay
had been pretermitted by the confirmation of the plan in question. The order of the
bankruptcy court is therefore AFFIRMED.
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