Opinion
NOT FOR PUBLICATION
Argued and Submitted at Honolulu, Hawaii, January 19, 2007
Appeal from the United States Bankruptcy Court for the District of Hawaii. Honorable Robert J. Faris, Chief Bankruptcy Judge, Presiding. Bk. No. 01-04646.
Before: BRANDT, KLEIN, and MONTALI, Bankruptcy Judges.
MEMORANDUM
The bankruptcy court denied the objection of Countrywide Home Loans (" Countrywide") to the standing chapter 13 trustee's final report and account. Countrywide appealed. We AFFIRM.
Absent contrary indication, all " Code, " chapter and section references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330 prior to its amendment by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23, as the case from which this appeal arises was filed before its effective date (generally 17 October 2005). All " Rule" references are to the Federal Rules of Bankruptcy Procedure, all " FRCP" references are to the Federal Rules of Civil Procedure.
I. FACTS
Leonora Reavis (" Debtor") filed an individual chapter 13 petition on 29 November 2001. Appellee Howard Hu (" Trustee"), the standing chapter 13 trustee for the District of Hawai'i, was appointed trustee.
Reavis scheduled her fee simple interest in property located in Waianae, Hawai'i (the " Property"), which she valued at $209,000. She also scheduled two mortgages against the Property, both held by LLP Mortgage Ltd.: an undisputed first mortgage in the amount of $80,478.99, and a disputed second mortgage in the amount of $312,000. Beal Bank was apparently the original lender, and Countrywide is servicing agent on both; for convenience we will refer to the creditor as " Countrywide."
On the petition date, Reavis also filed a plan which provided for monthly payment of $2779.32 to the Trustee for 60 months (" Plan"). It proposed to pay the first mortgage outside the plan, but the second mortgage, listed as a class 2 secured claim of $312,000 with collateral having a market value of $125,261.16, was to be paid under the Plan. Section V, paragraph H.1. provided in part: " LLP'S CLASS 2 CLAIM SHALL BE TREATED AS A SECURED CLAIM FOR $125,261.16 . . . ."
The last sentence of Section II, paragraph G of the plan provided:
Order of Distribution . . . Unless a claim objection is sustained or a motion to value collateral . . . is granted, . . . distributions on account of claims in Classes 1, 2, 5, 6 and 7 will be based upon the classification and amount stated in each claim holder's proof of claim rather than any classification or amount stated in this plan.
(Emphasis added). Section II, paragraph B, provided for distributions to secured creditors whose claims are modified by the plan:
They will be paid the full amount of their claims as stated on the creditor's timely filed proof of claim, or the market value of their collateral, whichever is less . . .
(Emphasis added).
The Plan was accompanied by Reavis' motion to value the collateral at $209,000. On 1 February, LLP filed objections to plan confirmation and to the valuation motion. On 6 February 2002, before the confirmation and valuation hearing, Countrywide filed a proof of claim on the second mortgage for $100,500, appending copies of a note and security documents. It also filed a proof of claim for the first mortgage, which is not at issue in this appeal.
One day before the valuation hearing, Countrywide withdrew both objections. The bankruptcy court found the collateral's value to be $214,500, Transcript, 21 March 2002, and confirmed the plan in a single order (the " Confirmation Order"). Neither LLP nor Countrywide filed an amended proof of claim.
On 8 June 2006, more than four years later, the Trustee filed and served his final report and account under § 1302(b)(1) and Rule 5009, reflecting that he had paid $100,500 principal and $8,258.43 interest on the second mortgage, and that the estate had been fully administered. The debtor's discharge was issued on the same day.
Countrywide objected to the Trustee's final report, arguing that the payout amount on the second mortgage should have been determined by the confirmed Plan, not the amount indicated on its proof of claim. Thus, it argued, full payment of its claim should have been $125,261.16, not $100,500. It sought resolution of the issue before Trustee's discharge from his duties.
Countrywide's calculations appear to be based on a market value of $209,000: deducting the first mortgage and payment on the tax lien, yields $125,261.16. The combined total for the first and the second secured claims listed in paragraph 2 of the Confirmation Order is $214,500; subtracting the first ($80,478.99), less the statutory lien for city and county real property taxes ($3259.85), would yield $130,761.16.
The Trustee defended his final report, asserting that he properly relied on the proof of claim, as this claim was deemed allowed under § 502(a), and that the confirmation order should be given preclusive effect. Reavis did not file anything, but her counsel appeared at the hearing to support the Trustee's position, noting that the debtor had been discharged.
After hearing argument, the bankruptcy court denied Countrywide's objection and approved the final report, holding:
[T]he trustee is entitled to rely on the amount stated in the face of the proof of claim. Perhaps unless that amount is left blank or somehow facially absurd . . . . So I think the trustee did the appropriate thing in paying based on the proof of claim.
The language of paragraph G . . . has to be read in harmony with the other provision dealing specifically with secured claims. The language in paragraph G . . . means that if there's a motion to strip down a lien, the claim is the stripped down value, not a higher amount reflected in a proof of claim. On the other hand, if . . . the claimed amount is lower than the value of the collateral, then the other provision of the plan says it's the claim amount.
. . .
I should also add that we're at the back end of the case here. The plan has [been] fully performed and everybody has relied on the proof of claim in executing the plan. I think it'd be inappropriate to make a change at this point.
Transcript, 20 July 2006 at 7-8 (emphasis added).
In addition to approving the final account, the order on appeal directed that:
1. A final decree be entered discharging the Trustee, releasing the Trustee and the Trustee's surety from any and all liability on account of this case . . . [and]
2. The Trustee is discharged and relieved of his trust and all further duties as the Trustee.
Order Approving Standing Trustee's Final Account in Estate Paid in Full, Denying Objection thereto filed by Countrywide Home Loans . . . and Directing Entry of Final Decree Discharging Standing Trustee, Cancelling Surety Bond, and Closing Case, 15 August 2006 (the " Final Order").
Countrywide appealed, seeking that we reverse the Final Order.
II. JURISDICTION
The bankruptcy court had jurisdiction via 28 U.S.C. § 1334(b) and § 157(b)(1) and (2)(A) and (B). We have jurisdiction over this appeal under 28 U.S.C. § 158(a)(1) and (c).
III. ISSUE
Whether the bankruptcy court properly overruled Countrywide's objection to Trustee's final report concerning the payment amount of Countrywide's secured claim.
IV. STANDARDS OF REVIEW
A. We review de novo conclusions of law and questions of statutory interpretation, including construction of the Code, and findings of fact for clear error. Rule 8013; In re Mednet, 251 B.R. 103, 106 (9th Cir. BAP 2000).
B. Whether a contract is ambiguous is a matter of law, In re Miller, 253 B.R. 455, 458 (Bankr. N.D. Cal. 2000), aff'd, 284 B.R. 121 (N.D. Cal. 2002), which we review de novo.
C. Interpretation of the contractual terms of a Chapter 13 plan is generally a factual issue which we review for clear error. In re Brawders, 503 F.3d 856, 325 B.R. 405, 410 (9th Cir. BAP 2005); In re Yett, 306 B.R. 287, 290 (9th Cir. BAP 2004).
D. Whether compliance with a given statute or rule has been established is generally a question of fact which we review for clear error. In re Heath, 331 B.R. 424, 428-429 (9th Cir. BAP 2005).
V. DISCUSSION
Under § 1327(a), " the provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor has objected to, has accepted, or has rejected the plan." A chapter 13 plan confirmation order binds creditors and debtor, and has preclusive effect. In re Pardee, 193 F.3d 1083, 1087 (9th Cir. 1999); In re Summerville, 361 B.R. 133, 2007 WL 601230 (9th Cir. BAP February 7, 2007).
The issue presented here is one of plan interpretation. The first step in Trustee's reasoning is that § 502(a) applies, which provides:
[a] claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest . . . objects.
Thus, absent an objection, Countrywide's proof of claim for $100,500 was deemed allowed. There was no objection.
Next, the Trustee argues that this figure prevails in the distribution scheme under the Plan. He argues that where the court has granted a motion to value collateral, as here, the last sentence in section V, paragraph G of the Plan, quoted above, provides that class 2 claimants get the full amount of their claims, as determined by their proofs of claim, or the market value of the collateral, whichever is less. Thus, here, the lower claim amount of $100,500 controls.
He also argues that his notice of claims and intent to make distributions filed 8 July 2002 showed the allowed claim as $100,500, but that notice was served only on the debtor and her attorney.
Countrywide counters that section II, paragraph H.1 of the plan expressly states that the claim amount is $125,261.16. It advocates what it considers a literal reading of section II, paragraph G, quoted above. Apparently focusing on the clause, " [u]nless a claim objection is sustained or a motion to value collateral . . . is granted, " its position is that because the court granted the motion to value collateral, the distribution should be based on the amount in the Plan, not by reference to the proof of claim.
Countrywide does not explain why the bankruptcy court's interpretation, that the proof of claim amount governs where the claimed amount is lower than the value of the collateral, is erroneous, and it ignores provisions of section II, paragraph B for class 2 secured claims, which states that they will be paid the lesser of the amount stated on the proof of claim or the market value of the collateral.
Countrywide's argument would be stronger if the Confirmation Order stated that its claim was allowed in the amount stated, rather than that its claim would be " treated as a secured claim in the amount of $125,261.16 . . ." (emphasis added). Conversely, the issue likely would never have arisen if the form plan (and thus the Plan) explicitly provided in paragraph G of Section II, as it does in the class 2 provision of paragraph B, that secured creditors get " whichever is less, " claim amount or collateral value, or if it explicitly referred to paragraph B. Countrywide simply reiterates that plan terms prevail, which begs the question here, and it never articulates how the collateral's value becomes the claim amount when the claim states a lesser amount, or why it should. Nor does Countrywide address the effect of § 502(a), which provides that a " claim . . . is deemed allowed . . . unless a party in interest . . . objects, " except to assert that the proof of claim was " superceded" by the plan confirmation order. Nor has it explained why it did not file an amended proof of claim to coincide with the Plan.
Finally, Countrywide provides no argument or authority for the proposition, necessary to sustain its argument, that the trustee may properly pay a creditor more than that creditor's allowed claim plus interest.
VI. CONCLUSION
The bankruptcy court did not clearly err in interpreting the Plan. We AFFIRM.