Opinion
CASE NO. 00-41655-13 CHAPTER 13
April 27 2001
ORDER DENYING OBJECTION TO CLAIM OF PAULA M. TUCKER
This matter is before the Court on the debtors' objection to the priority status of the claim of Paula M. Tucker. The debtors appear by counsel Fred W. Schwinn. The Division of Child Support Enforcement of the Missouri Department of Social Services ("MDCSE") appears on behalf of Ms. Tucker by counsel Don L. Cowan. The Court has reviewed the relevant materials and heard the arguments of counsel, and is now ready to rule.
Debtor Thomas Joseph Coen and Ms. Tucker were divorced in 1986, and Mr. Coen was ordered to make monthly payments to Ms. Tucker for the support of their child. Mr. Coen did not pay nearly all he was ordered to, and by the time the debtors filed a chapter 13 bankruptcy petition on July 31, 2000, he still owed about $28,000 on the obligation. In their bankruptcy schedules, the debtors listed Mr. Coen's child support arrearage as a debt owed to the MDCSE, and also listed the Clerk of Court for Jackson County, Missouri ("Clerk of Court"), as an "assignee or other notification for" the MDCSE. Ms. Tucker was not listed as a creditor, apparently because the debtors believed she had assigned the child support obligation to the MDCSE.
The debtors filed a chapter 13 plan that identified only two priority claims, owed to Kansas and Missouri for income taxes. The plan did not state how these claims were to be treated. The debtors created a special class for the claim of the MDCSE, and said, "This special class, consisting of a non-priority child support arrearage, is to be paid all funds not necessary to satisfy the Administrative, Priority, and Secured class creditors. Any balance remaining on this debt shall not be discharged upon completion of this plan." Although the MDCSE and the Clerk of Court were included on the mailing matrix used to send notices to creditors in this case, Ms. Tucker, the apparent ultimate recipient of any support that Mr. Coen might pay, was not included on the mailing matrix, presumably because she had not been listed on the schedules as a creditor. No objections were filed and the plan was confirmed in September 2000.
The MDCSE filed a proof of claim on behalf of Ms. Tucker before the deadline for non-governmental creditors to do so. The claim form identified Ms. Tucker as the creditor (although her first name was given as "Paul"), and classified the claim as an unsecured priority claim for child support. Attachments filed with the form indicated that MDCSE was providing support enforcement services for Ms. Tucker (and that her first name is actually "Paula"), but that the claim still belonged to her and had not been assigned to the MDCSE. Relying on their belief that the claim had been assigned to the MDCSE, the debtors objected to the asserted priority status of the claim because 11 U.S.C.A. § 507(a)(7) accords priority status to such claims only if they have not been assigned. The debtors have produced no evidence showing that Ms. Tucker's claim has been assigned. Apparently realizing this hole in their argument, they have amended their objection to assert that their plan treated the claim as a non-priority one, the plan was confirmed without objection, and so Ms. Tucker has consented to the plan's proposed treatment of her claim. Relying on the decision in Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), they contend the confirmation order binds Ms. Tucker to the non-priority treatment of her claim.
In Andersen, a chapter 13 debtor proposed a plan providing that she would pay ten percent of all her allowed unsecured claims, including certain student loan claims, and that confirmation of her plan would constitute a finding, pursuant to § 523(a)(8), that excepting the student loan debts from the discharge would impose an undue hardship on her and her dependents, making the balance of the debts dischargeable. 179 F.3d at 1254. The student loan creditor filed an objection to the plan that was denied as untimely, the plan was confirmed, and the creditor failed to appeal either ruling. Id. The debtor completed her plan payments and received a discharge. Id. Then, the successor holder of the student loan debts tried to collect from the debtor. Id. at 1254-55. The debtor reopened her bankruptcy case to seek a determination that the debts had been discharged. Id. at 1255. The bankruptcy court ruled that the debts were not discharged because the debtor had not obtained a formal judicial determination of undue hardship, but the Tenth Circuit Bankruptcy Appellate Panel reversed, and the creditor appealed. Id. The Tenth Circuit said: "[I]n light of [the creditor's predecessor's] repeated failure to timely and properly challenge Andersen's plan during the course of the bankruptcy proceedings, along with the res judicata effect of the confirmed plan and strong policy favoring finality, we hold that the balance of Andersen's student loan debt is discharged pursuant to the confirmed plan and the order of discharge." Id. at 1259.
The Court cannot agree with the debtors that Andersen is controlling here because a number of material differences distinguish this case from that one. In Andersen, the creditor received notice of the debtor's bankruptcy case and plan, but failed to respond in a timely fashion. While Ms. Tucker also failed to respond to the debtors' plan, she was not included in the debtors' schedules or mailing matrix, and so was not sent any notice of the plan. Under the United States Constitution, before a person's rights can be affected by a lawsuit or similar proceeding, due process requires that he or she be given "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank and Trust 339 U.S. 306, 314 (1950) (citations omitted) (ruling applied to the States based on Due Process Clause of Fourteenth Amendment); see also Elmco Properties v. Second Nat'l Fed. Savs. Ass'n, 94 F.3d 914, 918-22 (4th Cir. 1996) (applying Mullane due process holding to action by federal Resolution Trust Corporation, based on Due Process Clause of Fifth Amendment); United States v. Clark, 84 F.3d 378, 380-81 (10th Cir. 1996) (applying Mullane analysis of due process to action by Federal Bureau of Investigation, without mentioning source of due process right).
In Andersen, the debtor's plan properly identified the student loan creditor as the holder of the claim, properly characterized the claim as an unsecured student loan claim that could be discharged on the ground of undue hardship under § 523(a)(8), and informed the creditor that confirmation of the plan would constitute a finding of undue hardship, making the claim dischargeable. Here, since Ms. Tucker's claim had not been assigned, the debtors' plan either: (1) misidentified the holder of the claim as MDCSE and mischaracterized the claim as a non-priority claim; or (2) did not provide any treatment for the claim at all by omitting it from the list of priority claims. Further, since the plan did not say that a child support claim that was entitled to priority would be not be paid in full as required (absent an agreement otherwise) under § 1322(a)(2), or otherwise indicate that a child support claim would be not be treated as a priority claim whether or not it was one, even if Ms. Tucker had been sent notice of the plan, the plan did not provide notice that her claim was being treated in a way that would only be permissible if she agreed to it, or might be deemed to have agreed to if she failed to object to the plan.
The Court concludes that, assuming the debtors' plan could be construed as they ask, due process notice requirements preclude applying that construction to Ms. Tucker's claim because the debtors failed to include her on their schedules and mailing matrix. Furthermore, even if Ms. Tucker had been listed as the holder of the claim and been sent notice of the plan, the plan cannot be construed as the debtors ask because it did not adequately inform her that her claim would be treated as a non-priority claim even though it qualified for priority treatment. The debtors' objection to Ms. Tucker's claim must therefore be denied.
IT IS SO ORDERED.