Opinion
Case Number 03-11034.
March 24, 2004
ORDER
Debtor, Kenneth Bryant ("Debtor"), filed a Chapter 13 bankruptcy case on March 14, 2003. The Respondent, Countrywide Home Loans, Inc. ("Countrywide"), filed a proof of claim asserting secured status on July 9, 2003. Debtor's bankruptcy plan, as amended, was confirmed on August 11, 2003. At confirmation hearing a Trustee's Motion to Confirm Plan, As Amended, was filed. The motion signed by the Debtor, his attorney and the attorney for the Chapter 13 Trustee, amended Debtor's plan to increase payments to $100.00 per month and retained the right for the Debtor to object to Countrywide's proof of claim within thirty (30) days after confirmation. No one on behalf of Countrywide attended the § 341 meeting of creditors or the confirmation hearing. The Debtor filed an objection to Countrywide's claim within the thirty (30) day period, and Countrywide filed a timely response requesting a hearing. A hearing was held and I directed the parties to submit briefs on the following preliminary issues now addressed in this order: (1) was the Debtor's objection to Countrywide's claim timely, (2) was Countrywide prejudiced by Trustee's Motion to Confirm Plan, As Amended, and (3) did Countrywide waive its right to object to the timeliness of Debtor's objection to claim by not raising this contention in its response. I find that the Debtor's objection to Countrywide's claim was timely, Countrywide was not prejudiced by the Trustee's Motion to Confirm Plan, As Amended, and Countrywide did not waive its right to object to the timeliness of the claim objection. This court has jurisdiction to hear this matter under 28 U.S.C. § 157(b)(2)(B) and (L).
The Trustee's Motion to Confirm Plan, as amended was filed on form authorized by General Order Number 1997-2 of this Court, a copy of the general order and motion form are attached to this order and marked collectively as Exhibit 1. The Bankruptcy Court has the power to issue such a general order under Federal Rule of Bankruptcy Procedure ("FRBP") 9029.
A proof of claim is prima facie evidence of the claim's validity and amount. FRBP 3001(f). Such claim is deemed allowed unless a party in interest objects. 11 U.S.C. § 502(a). The procedure for filing an objection to a claim in a bankruptcy case is governed by FRBP 3007. No time limit for filing an objection to a claim is stated in that Rule, nor in 11 U.S.C. § 502(a), nor other provisions of the Bankruptcy Code or the Federal Rules of Bankruptcy Procedure. To the extent any such time limit exists, the court has the power to enlarge time periods under FRBP 9006(b)(1).
FRBP 3007 provides: An objection to the allowance of the claim shall be in writing and filed. A copy of the objection with notice of the hearing thereon shall be mailed or otherwise delivered to the claimant, the debtor or debtor-in-possession and the trustee at least 30 days prior to the hearing. If an objection to a claim is joined with a demand for relief of the kind specified in Rule 7001, it becomes an adversary proceeding.
FRBP 9006(b)(1): . . . the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order . . .
Although there is no time limit established by Rule or Code for filing objections to claims, the doctrine of res judicata does impose limits under narrow circumstances. The Eleventh Circuit Court of Appeals defines res judicata to mean "[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." In re: Justice Oaks II, Ltd., 898 F.2d 1544, 1550 n. 3 (11th Cir. 1990) ("Justice Oaks II"). Justice Oaks II dealt in part with the timeliness of an objection to a claim in a bankruptcy case.Justice Oaks II interpreted and adopted a Fifth Circuit case,In re: Simmons, 765 F.2d 547 (5th Cir. 1985), and found that "when the objection is based on an argument that the plan misclassified the objectionable claim, the objection must be made prior to confirmation of the plan." Justice Oaks II, 898 F.2d at 1553. In In re: Fryer, 172 B.R. 1020 (Bankr. S.D. Ga. 1994), I followed this Eleventh Circuit res judicata precedent, stating: "an objection to the claim of a creditor must be filed by confirmation or it is barred by the res judicata effect of confirmation where the objection to claim is based on a contention that the plan misclassifies the claim." In re: Fryer, 172 B.R. 1020, 1023 (Bankr. S.D. Ga. 1994) ("Fryer") (emphasis in original).
Justice Oaks II did not establish plan confirmation as a deadline for the filing of all objections to claims. Fryer, 172 B.R. at 1023; In re: Sheffield, 281 B.R. 67, 71 (Bankr. S.D. Ala. 2001); In re: Gomez, 250 B.R. 397, 400 (Bankr. M.D. Fla. 1999) ("Gomez"). If that interpretation of Justice Oaks II is allowed, then all objections to claims post confirmation are barred by res judicata. Fryer, 172 B.R. at 1023. "To adopt [this] position would bar . . . reconsideration thereby negating [11 U.S.C.] § 502(j). A court should read together and give effect to all provisions of the Code, as intended by Congress when drafting a statute." Id. at 1024-1025 (footnote added); Gomez, 250 B.R. at 400 ("[T]he Bankruptcy Code should be read as a whole. Each section should be interpreted in light of the remaining sections."). "[A]s many courts have recognized, an absolute bar to objections filed after confirmation of a chapter 13 plan would . . . simply ignore the plain language of § 502(j). The fact that § 502(j) is found in the same section as § 502(a) clearly indicates an intention by Congress to make § 502(j) an exception to the general rule." Gomez, 250 B.R. at 400.
11 U.S.C. § 502(j) provides: A claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case . . .
The Eleventh Circuit Court of Appeals revisited the res judicata issue in 2003 in In re: Bateman, 331 F.3d 821 (11th Cir. 2003) ("Bateman"). Under the circumstances inBateman the court found that objections to the amount or validity of claims must be made before confirmation. Bateman, 331 F.3d at 827. However, the Eleventh Circuit directly citesJustice Oaks II at page 1553 for this proposition. Id. Justice Oaks II only held that objections to claims that were misclassified by the plan had to be made before confirmation.Justice Oaks II, 898 F.2d at 1553. Bateman is not a departure from the Eleventh Circuit's previous res judicata case law and is distinguishable from the facts in this case. In Bateman the court held
. . . the bankruptcy court entered the Confirmation Order, which contained the $21,600.00 amount to be paid to [the secured creditor] over the course of the Chapter 13 plan. [The secured creditor] did not at any time object to the Plan's confirmation. [The secured creditor] 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. Over a year after the plan was confirmed, the bankruptcy trustee noted that [the secured creditor's] filed proof of claim did not match the Plan amount. The trustee contacted Bateman and thereafter . . . Bateman filed an objection to the [secured creditor's] proof of claim to which [the secured creditor] responded. . . . The bankruptcy court sustained Bateman's objection . . . holding in part that `[a]s a matter of substance the Chapter 13 Plan provided an objection to the claim which placed a duty on [the secured creditor] to pursue the matter if the $21,600.00 was not acceptable.' . . . because [the secured creditor] did not object to the Plan as confirmed, the bankruptcy court gave the Plan res judicata effect and found that [the secured creditor] was bound to the $21,600.00 amount for its claim.
Bateman at 823.
In Bateman, unlike in the present case, the creditor was never given an opportunity for hearing on the merits on a claim objection. The Trustee's Motion to Confirm Plan as Amended required the Debtor to file an objection within thirty (30) days of confirmation, provided Countrywide with adequate notice of the claim objection to which Countrywide timely responded joining the issue for resolution on the merits. In the objection the Debtor does not attempt to challenge the status of the allowed claim. What is at issue here, as in Bateman, is the amount of the pre-petition debt proposed to be paid in full under the Debtor's plan to cure the pre-petition default on this long term debt securing the Debtor's home place in order for the Debtor to emerge post discharge having cured the pre-petition default after having made the post petition payments; thereby, emerging from bankruptcy protection current under the terms of his home mortgage loan. Bateman found that in order to reach this end a creditor must be given notice that the amount of the claim is at issue and an opportunity for a hearing on the merits.
Although Debtor filed his objection to Countrywide's proof of claim after confirmation of the plan, the objection was timely. Trustee's Motion to Confirm Plan, As Amended gave the Debtor the right to file an objection to Countrywide's claim within thirty (30) days of confirmation, and the Debtor filed within that time. Debtor's objection to Countrywide's proof of claim is based on the amount of the claim, not on the classification of the claim under the confirmed plan. Debtor does not dispute that Countrywide is a secured creditor of the Debtor. Because the Debtor met the time requirements as put forth in Trustee's Motion to Confirm Plan, As Amended, and the objection is not barred by the res judicata effect of confirmation. The objection was timely.
Countrywide argues that it was prejudiced by the Trustee's use of Trustee's Motion to Confirm Plan, As Amended. Countrywide did not appear at the meeting of creditors nor at the confirmation hearing. Countrywide is correct that it was not required to attend either of these events. However, by filing a proof of claim, Countrywide "inject[ed] itself into the proceedings . . . [and] ignored the confirmation hearings only at its peril."Bateman, 331 F.3d at 833. If Countrywide objected to the use of the Trustee's Motion to Confirm Plan, As Amended, the confirmation hearing was the opportunity for such objection. Countrywide was not prejudiced by the use of Trustee's Motion to Confirm Plan, As Amended, because Countrywide had the opportunity to attend the confirmation hearing and to object to the use of the form or the time limit established in which the Debtor had to object to Countrywide's claim, but did not. Finally, Countrywide will receive a hearing on the merits to determine the amount of the pre-petition arrearage.
Debtor argues that Countrywide waived its right to argue that Debtor's objection was untimely by failing to raise that defense in Countrywide's Response to Objection to Claim. In its response, Countrywide only asked that the court set a hearing on the matter. On the same day that the Debtor filed his Objection to Proof of Claim, Debtor served Notice of Objection to Claim on Countrywide pursuant to FRBP 3007. The Notice of Objection to Claim states in part: "If you have legal grounds to oppose the objection, or if you wish the court to consider your views on the objection, you must file a written request for a hearing with the Clerk . . .". An objection to claim is a contested matter under FRBP 9014. In a contested matter, relief must be requested by motion. Id. Unlike in adversary proceedings, a contested matter does not require the filing of a response unless the court directs otherwise. FRBP 9014(a). In this instance the court directed otherwise by requiring only a written request for hearing to which Countrywide complied. Countrywide, did not waive any defense.
Debtor's objection to Countrywide's claim was timely. Countrywide was not prejudiced by the use of Trustee's Motion to Confirm Plan, As Amended. Countrywide did not waive its right to object to the timeliness of the Debtor's objection. The Clerk will set hearing on the merits of the claim objection.
SO ORDERED.