Opinion
Case No. 91-10988-TPA, Related to Document No. 120.
May 3, 2010
MEMORANDUM ORDER
The Chapter 11 Plan in this case was confirmed on October 29, 1993 and a modified Plan was confirmed on March 31, 1994. A Final Decree was entered on July 25, 1994, signifying that the Plan was substantially consummated. The case remained closed and dormant from then until February 4, 2010 when the Debtor filed a Motion to Reopen Chapter 11 Case, which was granted on March 4, 2010. The Debtor then filed a Motion for Modification of Chapter 11 Plan ("Motion"), Document No. 120, the matter presently before the Court. For the reasons set forth below and on the record at the hearing held yesterday, the Motion will be denied.
The Plan requires the Debtor to make a monthly payment of $1,300, the funding of which is derived from a trust fund created by the estate of Debtor's father and of which Debtor is the beneficiary. In the Motion the Debtor is seeking to have the Plan modified to reduce the monthly payment by $74.20, to $1,225.80. The Debtor explains that there are two components accounting for his requested modification. First, the State of Vermont Department of Taxes had been receiving $37.80 each month pursuant to the Plan, but it has advised the Plan's Escrow Agent that the claim has now been paid in full and no further payments are required. Second, the Commonwealth of Pennsylvania and Oil City collectively receive $36.40 each month for tax claims pursuant to the Plan, but the Debtor believes that the statute of limitations has run on these tax claims. The Debtor proposes that the monthly Plan payment be reduced to reflect a stoppage in payment on these two items, leaving the reduced monthly payment he is requesting sufficient to continue unchanged the other monthly disbursements currently being paid under the Plan ($1,160.80 to the Internal Revenue Service and $65.00 to the Escrow Agent).
The Debtor has not supplied any authority for this statute of limitations argument. The Court finds the argument unpersuasive on its face given the binding nature of the confirmed Plan, and the ongoing payments required thereunder. See 11 U.S.C. § 1141(a). Whatever the effect of the statute of limitations vis-a-vis the Commonwealth of Pennsylvania and Oil City tax claims prior to the confirmation of the Plan, once that confirmation occurred the Debtor became bound to make monthly payments on those claims as stated in the Plan. Furthermore, even if there was legal merit to the Debtor's argument it would provide no benefit to him because the money that had been going toward those claims under the Plan would be redirected by the Court to increase the payment on the Internal Revenue Service claim, not diverted to the Debtor's pocket.
Debtor's Motion faces the insurmountable hurdle of 11 U.S.C. § 1127(b), which only permits a confirmed Chapter 11 Plan to be modified "before substantial consummation of such Plan." As indicated above, the Final Decree was entered in this case many years ago and it is beyond dispute that there has been substantial consummation of the Plan. See 11 U.S.C § 1101(2) (definition of "substantial consummation"). Indeed, Debtor does not contest the characterization of the Plan as substantially consummated.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, or BAPCPA, amended the Bankruptcy Code to liberalize the ability to modify a confirmed plan in an individual Chapter 11 case. See 11 U.S.C. § 1127(d) (permitting modification up to the time of completion of payments under the plan). However, given the age of the present case it is clear to the Court that the Debtor cannot rely on that provision, and the Debtor has not argued otherwise. See also, In re Buccolo, 2009 WL 2132435 (D. N.J. 2009) (explaining that the BAPCPA amendments only apply to cases filed after the October 17, 2005 effective date of BAPCPA).
Despite the clear mandate of Section 1127(b), Debtor maintains the Plan can be modified due to "an unforeseen change in circumstances", citing In re Midlands Utility, Inc., 251 B.R 296 (Bankr. S.C. 2000). The court in the Midlands Utility case did recognize the possibility for a substantially consummated Chapter 11 Plan to be modified even in the face of the Section 1127(b) bar. It reached this conclusion by finding that there was an alternative route available to the debtor in the form of a motion for relief from judgment pursuant to Fed.R.Bankr.P 9024, incorporating Fed.R.Civ.P. 60. Under that provision a court may relieve a party from a final judgment or order for various reasons, including mistake, inadvertence, surprise, or "any other reason that justifies relief." See Fed.R.Civ.P. 60(b). The court thus permitted the case to be reopened so that the debtor would have an opportunity to present evidence and arguments as to why the Plan should be modified under the Rule 60 standard.
It can thus readily be seen that the holding in Midlands Utility leaves open the possibility that a Chapter 11 Plan might be modified beyond the time period permitted by the Bankruptcy Code, i.e., beyond the date of substantial consummation. However, that is contrary to the principle that the Federal Rules of Bankruptcy Procedure cannot provide the debtor with a remedy foreclosed by the Bankruptcy Code. See, In re Fesq, 153 F.3d 113 (3d Cir. 1998) (creditor could not pursue a motion to revoke confirmation of Chapter 13 Plan under Rule 60 on grounds other than fraud when 11 U.S.C. § 1330(a) only permits revocation of a confirmed Plan for fraud); In re Rickel Associates, Inc., 260 B.R. 673, 678-80 (Bankr. S.D.N.Y. 2001) (refusing to allow modification of a substantially consummated Chapter 11 Plan pursuant to Rule 60(b), relying on Fesq and criticizing the result in Midlands Utility).
Even if the Court were free to adopt the Midlands Utility approach, the Debtor would face other obstacles to his Motion. His "unforeseen change in circumstances" argument would seem to correspond to the reason of "surprise" under Rule 60, and the Rule specifically provides that a motion based on that reason must be brought within a year after entry of the judgment or order from which relief is sought. Fed.R.Civ.P 60(c)(1). The Motion here was filed well after that deadline. It is also difficult to see how the Debtor can plausibly claim any sort of legitimate surprise or unforeseen change in circumstances here. It was certainly foreseeable that the Vermont claim would eventually be paid off if the Plan continued long enough, and, statute of limitations as a defense is not something new or unforeseen.
For the reasons stated above, the Motion must be denied. The relatively small amount of the proposed change cannot change the result. The money that had been being paid to Vermont each month under the Plan will simply be added to the payment being made to the Internal Revenue Service, raising that monthly payment to $1198.60.
AND NOW , this 23rd day of April, 2010 , the Motion for Modification of Chapter 11 Plan is DENIED. The total monthly Plan payment required from the Debtor shall remain $1300, and the Escrow Agent is directed to increase the monthly payment to the Internal Revenue Service under the Plan to $1198.60 to reflect the cessation of payments to Vermont, retroactive to the month in which payments to Vermont ceased. On or after May 11, 2010, the Clerk shall again note the case "CLOSED" unless the Debtor files a notice of appeal or a motion for reconsideration prior thereto.