Opinion
Case No. 19-40825-JJR13
2020-05-04
IN RE: Levertise COTTINGHAM, Debtor.
Tameria S. Driskill, Williams Driskill Huffstutler King, LLC, Gadsden, AL, for Debtor.
Tameria S. Driskill, Williams Driskill Huffstutler King, LLC, Gadsden, AL, for Debtor.
OPINION AND ORDER DENYING MOTION TO CONFIRM TERMINATION OR ABSENCE OF STAY
JAMES J. ROBINSON, CHIEF U.S. BANKRUPTCY JUDGE
This chapter 13 case came before the court on January 30, 2020 for a hearing on the Motion to Confirm Termination or Absence of Stay (the "Motion," Doc. 46) filed by TitleMax of Alabama, Inc. ("TitleMax"). The Debtor, Levertise Cottingham, and the standing Chapter 13 Trustee, Linda Baker Gore, opposed the Motion. TitleMax and the Trustee briefed the issues raised in the Motion and the court took the matter under advisement. Having considered the pleadings, the matters of record, the briefs and arguments of the parties, and the relevant statutory and case law, the court is denying the Motion for the reasons stated herein.
This court has jurisdiction to hear this matter pursuant to 28 U.S.C. §§ 157 and 1334, and the General Order of Reference, as amended, entered by the United States District Court for the Northern District of Alabama. This is a core proceeding under 28 U.S.C. § 157(b)(2)(B) and (G), and all parties to this contested matter have appeared and consented to this court's jurisdiction. The court therefore has authority to enter a final order. The court makes the findings and conclusions set forth herein pursuant to Fed. R. Bankr. P. 7052, made applicable to this contested matter by Fed. R. Bankr. P. 9014(c).
I – Facts
The salient facts are not in dispute. On March 8, 2019, the Debtor pawned a 2003 Chevrolet Avalanche (the "Avalanche") to TitleMax that required the repayment of $5,735.76 plus a $573 pawnshop charge by April 7, 2019. The Avalanche remained in the Debtor's possession and TitleMax was listed as lienholder on the Avalanche's certificate of title. Section 5-19A-6 of the Alabama Pawnshop Act, Ala. Code 1975, § 5-19A-1, et seq. , gave the Debtor 30 days from the maturity date of April 7, 2019 to redeem the Avalanche. The Debtor did not redeem the Avalanche and the redemption period expired on May 7, 2019. Nine days later, on May 16, 2019, while still in possession of the Avalanche, the Debtor filed this chapter 13 case.
The Debtor scheduled TitleMax as a secured creditor holding two liens: one against the Avalanche and one against another vehicle also pawned to TitleMax, which is not at issue under the Motion. (Doc. 1 p. 18.) The Debtor also listed both vehicles as assets on his schedules. (Doc. 1 p. 11.) The original chapter 13 plan filed with the petition included TitleMax with two secured claims, one secured by the Avalanche. (Doc. 2.) The plan was served on TitleMax by mail addressed to its local office, which was the same address appearing on the creditor mailing matrix for all notices. TitleMax was also served with notice of the meeting of creditors to be held pursuant to Bankr. Code § 341(a); the date, time, and place for the plan confirmation hearing; and the deadlines to file objections to confirmation and to file proofs of claim. (Doc. 14.)
The address for Title Max's local office is the address on the top of the first page of the pawn ticket and is also the lienholder's address on the Avalanche's certificate of title. (Motion, Ex. A.) While TitleMax mentions in its brief that it did not receive notice at its corporate office (presumably in reliance on paragraph 10 of the pawn ticket that gives the corporate office address for communications), it does not dispute that it received all notices that were mailed to its local office including copies of the proposed plans, notices of the confirmation hearings and objection deadlines, notice of the claim filed by the Debtor for the Avalanche, and a copy of the confirmation order. The court finds the notice given to the local office was adequate in all respects to satisfy due process. See, e.g., In re Iliceto , 706 F. App'x 636, 643 (11th Cir. 2017) ("Due process requires 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. Here, [the interested party] received actual notice of the filing and contents of Espinosa's plan. This more than satisfied [the interested party's] due process rights." (quoting United Student Aid Funds, Inc. v. Espinosa , 559 U.S. 260, 272, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010) (internal citation omitted))).
References to the "Bankr. Code" are to the Bankruptcy Code, 11 U.S.C. § 101, et seq.
An amended plan (Doc. 29) was filed and served on TitleMax on July 22, 2019, with no material changes to TitleMax's treatment. The amended plan proposed to pay TitleMax in full on the claim secured by the Avalanche, with interest over the life of the plan, through payments disbursed by the Trustee. On August 8, 2019, the court conducted the first confirmation hearing as scheduled with no appearance by TitleMax. The court continued the hearing to September 5, 2019 and TitleMax was served with notice of the continuation. (Doc. 31.) Each of the Debtor's proposed plans was on the court's district-wide form and included a warning that any objection to the plan had to be in writing and filed seven days before the confirmation hearing pursuant to Fed. R. Bankr. P. 3015(f). That same cautionary language was included in the court's notice and order continuing the initial confirmation hearing. (Doc. 31.)
The following language appears on the first page of this district's form plan:
To Creditors: Your rights may be affected by this plan. Your claim may be reduced, modified, or eliminated ....
If you oppose the plan's treatment of your claim or any provision of this plan, you or your attorney must file an objection to confirmation at least 7 days before the confirmation hearing, unless otherwise ordered. The Bankruptcy Court may confirm this plan without further notice if no objection to confirmation is made. See Bankruptcy Rule 3015. In addition, a proper proof of claim must be filed in order to be paid under this plan.
(See, e.g. , Doc. 29 p. 1.)
On August 19, 2019, pursuant to Fed. R. Bankr. P. 3004, the Debtor filed two secured claims on behalf of TitleMax, one for each vehicle in the plan. Claim 7 was filed in the amount of $6,308.76 secured by the Avalanche. The claim provided that TitleMax would receive payments and notices at its local office address. The next day, the Clerk's Office served TitleMax with a separate Notice of Filing of Claim for each of the two claims. (Docs. 35 and 36, with 36 being for the Avalanche.) The Clerk's notices informed TitleMax that claims 6 and 7 had been filed on its behalf, stated the amount of each claim, and provided instructions of how TitleMax could file its own claims with a link to the court's website. The docket reveals that TitleMax did nothing to change its notice or payment address, nor to amend the claims filed on its behalf, and in no way disputed the filing of the secured claims.
On September 5, 2019, with no outstanding objections, the court confirmed the Debtor's amended chapter 13 plan. (Doc. 42 is the confirmation order and the confirmed amended plan is Doc. 29.) On September 7, 2019, the court served TitleMax with the confirmation order via mail through the Bankruptcy Noticing Center, thus notifying TitleMax that the plan had been confirmed. (Doc. 44.) TitleMax did not seek reconsideration of the confirmation order nor did it file an appeal.
On September 26, 2019, after the confirmation order became final, the Trustee issued a check to TitleMax that included amounts for the Avalanche as well as the other vehicle in this case. (Ex. 1 to Doc. 59; Dbr-Tr. Ex. 1 admitted at the hearing on the Motion.) The check also included amounts for other confirmed chapter 13 plans in which TitleMax, as a secured creditor, was receiving monthly payments from the Trustee. The amounts paid for each case were itemized on a voucher included with the check. The voucher stated that $123.39 was attributable to claim 7 (the claim for the Avalanche) and separated how much was for principal and how much was for interest. TitleMax negotiated the check on October 11, 2019. Similarly, TitleMax negotiated another check from the Trustee dated November 26, 2019 on December 17, 2019. On December 4, 2019, TitleMax appeared in the case through counsel, (Doc. 45, Notice of Appearance), and on December 16, 2019, TitleMax filed the Motion asking the court to rule that the automatic stay imposed by Bankr. Code § 362(a) did not apply to its rights in the Avalanche. Nonetheless, for a third time, a check dated December 27, 2019, which included amounts for the Avalanche as shown on an accompanying voucher, was negotiated by TitleMax on January 13, 2020. Before filing its Motion, TitleMax never asserted it was the vehicle's owner.
Attached to the Trustee's brief (Doc. 59) were copies of the three checks cashed by TitleMax that included plan payments on the Avalanche. The checks also included payments on claims for other debtors' confirmed plans that were being administered by the Trustee. Likewise, attached to the Trustee's brief were copies of vouchers that accompanied each check. Each voucher identified the individual claims being paid by the accompanying check and listed the amounts to be applied to each claim, including principal and interest. In its supplemental brief (Doc. 58), TitleMax admitted cashing the three postconfirmation checks but stated with respect to each check that "[t]he check itself does not reference the Debtor or the vehicle at issue." (Doc. 58, 6, 7, 9.) Looking at copies of the checks, that statement is certainly true. However, TitleMax never mentioned whether or not it received the vouchers, a coy yet inappropriate response if in fact it did receive the vouchers as proffered by the Trustee. The fact that TitleMax cashed three postpetition checks that included plan payments for the Avalanche is critical and distinguishes the instant case from the authorities cited by TitleMax in support of its Motion. In fact, it is inconceivable that TitleMax received and cashed the three checks not knowing they included payments on the Avalanche while it was able to correctly determine how the checks were to be applied to several other cases. If TitleMax wants the court to believe it did not receive the vouchers with the checks and, therefore, had no readily available means of knowing the checks included payments on the Avalanche, then exactly how did it determine how to apply the funds? Based on the numerous chapter 13 cases filed in this court in which TitleMax is a creditor, it is undisputed that the Trustee makes monthly payments to TitleMax on dozens of claims in exactly the same manner as she did in the instant case.
II - Authorities
(1) - In re Northington
TitleMax argued that under the Alabama Pawnshop Act, and in particular § 5-19A-6, it was the owner of the Avalanche before the petition was filed, not merely a secured creditor, and because pawns are non-recourse, it did not have a claim for payment against the Debtor personally and this court did not have jurisdiction over the Avalanche. Accordingly, TitleMax took the position that it was not bound by the confirmed plan as it otherwise would be under Bankr. Code § 1327(a). TitleMax reasoned that under the holding of TitleMax v. Northington (In re Northington) , 876 F.3d 1302 (11th Cir. 2017), applying Georgia law, if a pawned vehicle "drops out" of the bankruptcy estate postpetition upon the expiration of the redemption period (as extended by Bankr. Code § 108(b)), then it stands to reason that if the redemption period expired prepetition, a chapter 13 plan cannot convert the expired pawn contract into a secured claim.
Bankr. Code § 1327(a) provides, "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."
The bankruptcy court in Northington confirmed a chapter 13 plan that treated the pawnbroker's interest in a pawned vehicle as a secured claim although the redemption period had expired before confirmation, thereby vesting title in the pawnbroker under state law. The pawnbroker did not formally object to the plan, but before the confirmation hearing, asserted its state-law interest in the vehicle by filing a motion to lift the automatic stay. The bankruptcy court did not consider the pawnbroker's lift-stay motion to be a sufficient objection and confirmed the plan. On appeal, the district court affirmed the bankruptcy court, but on further appeal, the Eleventh Circuit reversed.
TitleMax's reliance on Northington ignores a critical difference between that decision and the instant case: The pawnbroker in Northington asserted its state-law rights in the vehicle before the plan was confirmed, while in the instant case, TitleMax remained totally incognito until after plan confirmation and even accepted plan payments. The majority of the panel members in Northington devoted a significant portion of its opinion responding to a dissenting panel member who would have affirmed the bankruptcy court's confirmation order on res judicata grounds. The majority explained why the pawnbroker's preconfirmation motion seeking stay relief enabled it to avoid being bound by the debtor's confirmed plan under the doctrine of res judicata. In fact, it is not possible to read Northington without concluding that if the pawnbroker in that case had not asserted its state-law rights in its preconfirmation stay-relief motion, the bankruptcy court's confirmation order would not have been disturbed.
In Northington , title under state law vested in the pawnbroker after the bankruptcy was filed but several months before confirmation.
(2) - In re Thorpe
TitleMax also cited In re Thorpe , 612 B.R. 463 (Bankr. S.D. Ga. 2019) in support of its Motion. In Thorpe , the bankruptcy court confirmed a plan that treated a matured title pawn as a secured transaction. The redemption period had expired prepetition and the vehicle was thus owned by the movant-pawnbroker under Georgia's pawn statutes when the case was filed. The pawnbroker had notice but took no action to object to confirmation, instead moving for relief from the automatic stay approximately one month after confirmation.
Relying on the Eleventh Circuit's decision in Northington , the bankruptcy court in Thorpe granted the motion for relief and found that because the pawnbroker, and not the debtor, owned the vehicle on the petition date, the plan could not provide for it as a secured claim. The court held it had no jurisdiction over the vehicle because it was not estate property, and the confirmed plan was immaterial and not binding on the pawnbroker. Id. at 468. If in the instant case TitleMax had not accepted three postconfirmation payments from the Trustee for the Avalanche—a significant if not deciding difference— Thorpe would be factually indistinct from the instant case, although it was decided under Georgia's title pawn statutes as opposed to Alabama's. (3) - In re Young
This court would be inclined to deny the Motion even if faced with facts identical to those in Thorpe , because of TitleMax's failure to voice any objection after having received notice of the Debtor's intent to treat its matured title pawn as a secured claim. Indeed, TitleMax often accepts treatment as a secured creditor for its title pawns, apparently when it believes it is financially prudent to do so. TitleMax's acceptance of payments as proposed under the Debtor's confirmed plan would come as no surprise to the Trustee or this court. For example, see the plans in the following cases recently filed in, and confirmed by, this court: 20-40020-JJR13 (petition date January 7, 2020; confirmation March 6, 2020; pawn maturity January 25, 2020); 19-42136-JJR13 (petition date December 23, 2019; confirmation April 3, 2020; pawn maturity October 12, 2019); 19-41981-JJR13 (petition date November 27, 2019; confirmation February 7, 2020; pawn maturity December 13, 2019); 19-41763-JJR13 (petition date October 21, 2019; confirmation January 10, 2020; claim filed by debtor, no response by TitleMax); and 19-41690-JJR13 (petition date October 8, 2019; confirmation January 10, 2020; claim filed by debtor, no response by TitleMax). The court takes judicial notice of the contents of its own electronic files in those cases pursuant to Fed. R. Evid. 201 and the guidance of U.S. v. Rey, 811 F.2d 1453, 1457 n.5 (11th Cir. 1987). TitleMax's acceptance of being treated as a secured claimant at confirmation was consistent with its practice in other cases and was completely at odds with its tardy objection, in the form of the Motion, which it voiced for the first time postconfirmation. While not necessarily bad faith or purposefully misleading, the silent acceptance of confirmation and payments followed by a Motion premised on rights that existed but were not asserted before confirmation is exactly the sort of "gotcha" attempt that the Bankruptcy Code abhors and that the concepts of waiver and the binding res judicata effect of confirmation are designed to prevent. And for good reason, as the consequences for this particular "gotcha" maneuver could be devastating to debtors in many cases.
Consider, there is virtually no meaningful public transportation in the Northern District of Alabama. Saving a debtor's vehicle is the essence of many chapter 13 plans as the loss of the vehicle can be an existential calamity for the debtor and his family in many cases. Without a vehicle, a typical debtor cannot get to his job, take his children to school and for medical care, or carry on the day-to-day essential activities of life. The loss of a home may soon follow the loss of a vehicle because many debtors with rent or mortgage payments cannot keep their jobs if they cannot keep their cars. If TitleMax does not intend to accept being treated as a secured creditor in a chapter 13 plan, after having received notice that the debtor intends to do just that, it must voice its objection before confirmation. Otherwise, the debtor, the trustee, the other creditors, and indeed the court will be misled into confirming a chapter 13 plan whose success depends on paying for a vehicle.
TitleMax also cited In re Young , 281 B.R. 74 (Bankr. S.D. Ala. 2001), in support of its Motion. The Young court held that the pawnbroker was bound by the confirmed plan (as contrasted with the pawnbroker in Northington ) precisely because it failed to object to confirmation despite having notice of the plan's provisions to pay it as a secured creditor. Id. at 81. The Young court distinguished the facts before it from a hypothetical situation where a pawn contract's redemption period had expired prepetition, saying in dicta that the pawned property in the latter situation would not be properly included in a chapter 13 plan because the estate and debtor would have no interest in the pawned goods. Id. at 77-78.
Significantly, Young was decided before Northington , and Young's dicta regarding the prepetition expiration of the redemption period did not address whether the outcome should be different if the pawnbroker not only failed to timely object to the confirmed plan but also accepted payments under that plan before asserting its ownership rights. Regardless, this court does not accept the premise that Young's dicta should be read as an unqualified per se rule that would allow a pawnbroker to ignore notice of a debtor's proposal to treat the pawnbroker's interest in a vehicle as a secured claim, whether or not the redemption period has expired, and go so far as to accept postconfirmation plan payments, without reservation or question, all while silently retaining the ability to later torpedo the confirmed plan by insisting on its state-law rights in the vehicle. The application of Young's dicta to the instant case is even more dubious in light of Northington's implication that a pawnbroker must assert its state-law rights before plan confirmation to avoid becoming bound by a plan that treats those rights as a secured claim.
III - Waiver and Res Judicata
The majority in Northington went to considerable lengths to explain why confirmation should not alter the state-law rights of a pawnbroker who, preconfirmation, declared its ownership in a pawned vehicle, as contrasted with the silent pawnbrokers in Young and in the instant case. Northington discussed the bankruptcy court's findings regarding the sufficiency of the pawnbroker's preconfirmation lift-stay motion, and although the majority of the circuit panel disagreed with the bankruptcy court's finding that the motion was not a sufficient preconfirmation objection, this court, nonetheless, interprets Northington as approving, if not requiring, a bankruptcy court's assessment of the timeliness of a pawnbroker's declaration of its state-law rights to avoid the res judicata effect of a confirmation order. If the bankruptcy court finds the pawnbroker acted timely—preconfirmation—then its rights in the pawned vehicle are preserved and controlled under applicable state law as opposed to any contrary treatment proposed in the debtor's chapter 13 plan:
Our dissenting colleague, who would affirm on res-judicata grounds, is of course quite right to say that TitleMax had "to take some action" in order to preserve its position that the car dropped out of the estate upon the expiration of the redemption period.... We hold, though, that on the unique facts of this case, TitleMax was not required to file an "Objection"—styled as such—but rather adequately preserved its position through its pre-confirmation motion for relief from the automatic stay, which it
briefed and argued to the bankruptcy court.
Northington , 876 F.3d at 1308 (emphasis added). As discussed in more detail below, this court sees no logical reason why Northington's rationale (on the importance of the pawnbroker asserting its position preconfirmation to preserve its state-law rights) should not extend to all cases where the redemption period has expired before plan confirmation, whether the expiration occurred prepetition or postpetition. The controlling issues should be (1) the status of the pawned vehicle under state law at confirmation, and (2) whether the pawnbroker acted timely before confirmation to preserve that status. In the instant case, TitleMax did nothing to preserve its position that its interest in the Avalanche should not be treated as a secured claim in the Debtor's plan because the Avalanche was not part of the bankruptcy estate at confirmation. The court in Northington cited the pawnbroker's failure in Young to speak up preconfirmation—which mirrors the reticence of TitleMax in the instant case—as an illustration of how a pawnbroker can lose its state-law position, and emphasized that the pawnbroker in Northington avoided a waiver of its rights precisely because it did act before confirmation:
Before jumping into the merits, we must first address the bankruptcy court's alternative (but logically antecedent) holding that TitleMax's challenge is procedurally barred on "res judicata" grounds.
The bankruptcy court held that TitleMax "slept on its rights" by "fail[ing] to timely object to confirmation" [of the chapter 13 plan]. Accordingly, the court held that its confirmation order was conclusive under 11 U.S.C. § 1327(a) —which generally binds a debtor and his creditors to the terms of a confirmed plan—and "[t]he doctrine of res judicata."
In the particular circumstances of this case, we cannot agree that TitleMax impermissibly "slept on its rights" and thus forfeited its ability to raise the argument that it presents on appeal. The decision that the bankruptcy court cited for support, In re Young , 281 B.R. 74 (Bankr. S.D. Ala. 2001), provides a useful (and stark) contrast. As in this case, the debtors in Young failed to redeem property that they had pledged to a pawnbroker. And as in this case, the bankruptcy court held a hearing on the debtors' proposed Chapter 13 plan—which listed the pawnbroker as the creditor on the pawn debt—and later entered an order confirming the plan. The pawnbroker in Young , however, did absolutely nothing to preserve its argument that it had rightful title to the pawned property. It didn't "participate in the confirmation [hearing]," nor did it in any way contest the plan's consummation; rather, following confirmation, the pawnbroker simply set out, unilaterally, to sell the pawned property, prompting the debtors to file a motion to enforce the automatic stay. See id. at 76, 80.
Here, by contrast, even before the bankruptcy court held a confirmation hearing, and thus by definition before it entered any confirmation order, TitleMax filed a written motion in which it contended—just as it does here—that at the moment [the debtor] failed to redeem the [car] pursuant to Georgia's pawn statute, the car ceased to be property of the estate. TitleMax then appeared at the hearing, and later filed post-hearing briefs, to reiterate its position. When the bankruptcy court later denied its motion for relief from the automatic stay, thereby bringing the bankruptcy proceeding to a close, TitleMax appealed directly to the district court and then, following
that court's affirmance, directly to this Court.
Northington , 876 F.3d at 1307-08.
In the instant case, and in contrast to the preconfirmation motion filed in Northington , TitleMax indeed "slept on its rights." It took no action to object to confirmation or to object to the claims filed on its behalf prior to confirmation, and after confirmation it accepted payments for the Avalanche claim from the Trustee—all before it ever asserted its right to ownership under the Alabama Pawnshop Act. See U.S. Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010) ; and see In re Bateman , 331 F.3d 821 (11th Cir. 2003) (discussing the binding effect of confirmed plans in the absence of objection).
The Trustee argued that Alabama's and Georgia's pawnshop statutes and case law differ materially regarding the automatic extinguishment of the pledgor's ownership and the automatic vesting of title in the pawnbroker absolutely upon the expiration of the redemptive period. The Trustee asserted that under Alabama law, after the redemption period expires, all the pawnshop owns is the certificate of title, a piece of paper, not the vehicle, contrary to Georgia law, but this court is not ruling on that aspect of the Trustee's argument. See In re Thompson , 609 B.R. 443 (Bankr. M.D. Ala. 2019) (discussing Alabama cases); and see Pattans Ventures, Inc. v. Williams , 959 So. 2d 115, 122-23 (Ala. Civ. App. 2006) (discussing Alabama cases and finding, "The pawnshop merely took possession of a vehicle that legally belonged to it" when it took possession of a vehicle after the 30-day redemption period had expired, because the redemption period under Alabama's statute runs from the maturity date, not from a change of possession, and title is thus forfeited absolutely upon the expiration of the redemption period so calculated even though possession has not yet changed hands under Ala. Code § 5-19A-6 ; thus there was no private remedy available to the pledgor as a result of the pawnshop's violation of the 21-day holding period before sale). TitleMax counters that the statutes are functionally indistinct and cites the language of each in support. If TitleMax is correct, and Georgia and Alabama pawn statutes are functionally the same, it is still bound by the Debtor's confirmed plan for the reasons set forth herein. Nonetheless, at least in dicta, the Eleventh Circuit in Northington agreed with TitleMax regarding the similarities of Georgia's and Alabama's pawn statutes:
In this respect, Georgia's pawn statute seems to operate pretty much the same way that all state pawn laws operate—and, so far as we can tell, pretty much the same way that pawn laws have always been understood to operate. See, e.g., Ala. Code § 5-19A-6 ("Pledged goods not redeemed within 30 days following the originally fix maturity date shall be forfeited to the pawnbroker and absolute right, title, and interest in and to the goods shall vest in the pawnbroker.") ....
876 F.3d at 1311 n.7.
IV - Pre-Versus Postpetition Expiration of Redemption
In Northington, the pawn's redemption period expired postpetition and in the instant case it expired prepetition, but the critical similarity in both cases is that the pawnbrokers' rights were identical when the debtors' plans came before the bankruptcy court for confirmation—both pawnbrokers then owned the vehicles under state law.
Although Boyd isn't quite on point—there, the debtor's state-law redemption period expired before he filed his chapter 13 petition, and, accordingly, the disputed property "was never part of the bankruptcy estate," 11 F.3d at 60 —its logic nonetheless applies. As explained in detail below, TitleMax contends that by the time [the debtor]'s plan was confirmed, the [car] had dropped out of the estate by the "automatic" operation of Georgia's pawn statute. Accordingly, at the pertinent moment of confirmation —by which point TitleMax had clearly asserted its position in its motion for relief from the stay—the creditors in Boyd and this case were identically situated .
Northington , 876 F.3d at 1308-09 n.5 (discussing In re Boyd , 11 F.3d 59 (5th Cir. 1994), emphasis added, internal [ ] omitted). If the determinative fact was whether or not the pawned vehicle was property of the estate on the petition date, there would have been no reason for Northington's majority to first explain why the pawnbroker was able to avoid being bound by the terms of the debtor's confirmed plan under the doctrine of res judicata and Bankr. Code § 1327(a). In Northington, the vehicle "dropped out" of the estate postpetition but before confirmation, while in Thorpe, in Young's hypothetical dicta, and in the instant case, the vehicles never became estate property under state law because the redemption periods expired prepetition. Nonetheless, when the debtors' plans in each of those instances came before the bankruptcy courts for confirmation, each pawnbroker's argument against confirmation would have been the same—the redemption period had expired and the vehicle, under state law, was owned by the pawnbroker—and under the holding in Northington, that argument would be a winner if asserted before confirmation. However, if that winning argument is not asserted before confirmation, the res judicata effect of the confirmation order under Bankr. Code § 1327(a) will allow the pawnbroker's interest in the pawned vehicle to be treated as a secured claim despite a contrary result under state law. The key to avoiding res judicata is the pawnbroker's preconfirmation assertion of its state-law rights in the pawned vehicle. As mentioned above, the majority's decision in Northington was not based on whether the pawn's redemption expired pre- or postpetition; what was dispositive was the timely—preconfirmation—motion seeking stay relief filed by the pawnbroker declaring it was insisting on its state law rights and was not willing to be paid as a secured creditor pursuant to the debtor's plan.
TitleMax argued that it was not a "creditor" because it held no "claim" and therefore this court had no jurisdiction over it or the Avalanche. TitleMax contends it could not be bound by the plan and may assert its state-law status as owner—rather than creditor—postconfirmation regardless of its failure to voice any preconfirmation objection to the plan or claims, and remarkably, even after accepting plan payments from the Trustee. As owner of the vehicle, TitleMax was not entitled to receive plan payments but as a secured creditor, it was—TitleMax is bankruptcy-savvy and knows the difference. Accordingly, TitleMax waived this argument by its complete failure to act until after all parties in interest, the Trustee, and the court were led to believe that Title Max had accepted its treatment under the confirmed plan. The dicta in Young, and the result under Thorpe's application of Northington , do not go so far as to support the notion that a pawnbroker may indolently ignore multiple notices and accept postconfirmation payments, and later emerge from the shadows and ambush the Debtor's chance to save his vehicle.
A plausible argument can be made that TitleMax held a least a contingent claim against the Debtor when he filed his petition. Bankr. Code § 101(10) defines a "creditor" as an "entity that has a claim against the debtor that arose at the time of or before the order for relief ...." And § 101(5) defines "claim" as a "right to payment, whether or not such right is ... liquidated, unliquidated, fixed, contingent, matured, unmatured, ... legal, equitable, secured, or unsecured." TitleMax had the prepetition right to possession of the Avalanche, and the Debtor's failure to surrender possession to TitleMax would give TitleMax a claim for conversion. Damages for conversion are usually equal to the value of the converted property. This was a contingent and unliquidated claim, but a "claim" nonetheless under the Code's definition.
See cases in n. 8, infra, and others filed in the Northern District of Alabama treating TitleMax as a secured creditor.
The fact that the redemption period of the pawn had expired prepetition, assuming that is as crucial as TitleMax believes, was uniquely within TitleMax's purview to bring before this court before plan confirmation, and was not the type of patent "defect" that the court could be expected to raise sua sponte at confirmation under the guidance of Espinosa . If this was an illegal plan as TitleMax contends, because the Avalanche was not estate property (in the absence of TitleMax's waiver), then TitleMax was in the best position to say so before confirmation, and certainly before accepting payments. TitleMax cited no authority, and the court has found none, where a pawnbroker accepted payments under a confirmed plan and then successfully argued it was not bound by that plan but was instead the absolute owner of a pawned vehicle.
V – Extension and Renewal
"The Alabama Pawnshop Act does not prohibit extensions or renewals of an initial maturity date." Gunn v. TitleMax (In re Gunn) , 317 F. App'x 883 (11th Cir. 2008). And there is no good reason why such an extension cannot be effectuated by a pawnbroker's tacit waiver of its ownership rights, which is exactly what TitleMax did in this case when it failed to timely object to confirmation of the Debtor's plan and proceeded to accepted plan payments:
The related concept of waiver is the intentional relinquishment of a known right. Waiver requires (1) the existence at the time of the waiver of a right, privilege, advantage, or benefit which may be waived; (2) the actual or constructive knowledge thereof; and (3) an intention to relinquish such right, privilege, advantage, or benefit. Waiver may be express, or, as in this case, implied from conduct . A party may waive any right which it is legally entitled to, including rights secured by contract. When waiver is implied from conduct, the acts, conduct, or circumstances relied upon to show waiver must make out a clear case. Furthermore, waiver does not arise from forbearance for a reasonable time.
Matter of Garfinkle , 672 F.2d 1340, 1347 (11th Cir. 1982) (internal citations omitted, emphasis added). TitleMax's conduct established a clear waiver of its right to assert absolute ownership and demonstrated its acceptance of being treated instead as a secured creditor. TitleMax (1) had the right under Alabama law to claim ownership of the Avalanche, (2) had actual knowledge of that right when the Debtor's case was filed, and (3) evidenced an intent to relinquish that right in exchange for accepting payments under the confirmed plan when it (i) failed to object to confirmation of the plan despite adequate notice, (ii) failed to withdraw or otherwise object to the secured claims filed on its behalf despite adequate notice, and (iii) accepted three payments from the Trustee. It is unreasonably late now to attempt to return those payments and insist instead on possession of the Avalanche. That argument should have been made before confirmation at best, and at the absolute latest, before accepting payments from the Trustee pursuant to the confirmed plan. See Bankr. Code § 1327(a). See also Hope v. Acorn Fin., Inc., 731 F.3d 1189, 1193-94 (11th Cir. 2013) (discussing In re Bateman , 331 F.3d 821 (11th Cir. 2003) and the binding effect of confirmation on parties in interest, even when the plan would not have been confirmable if a timely objection had been raised).
VI - Conclusion
Although debtors' attorneys lamented and pawnbrokers rejoiced at its issuance, Northington's analysis is a cautionary tale for pawnbrokers as much or more so than it is for debtors—absent the preconfirmation assertion of its ownership rights, the plan in Northington apparently would have bound the pawnbroker to its treatment as a secured creditor regardless of what state law provided to the contrary. The Eleventh Circuit did not give pawnbrokers a free pass to sleep on their state-law rights. Instead, the decision sounds the bell for pawnbrokers to wake up and speak up before confirmation to preserve their state-law rights. This court sees no reason why that warning should not resound with equal volume when a pawnbroker could assert its rights as the prepetition "owner" of a vehicle but fails to do so before the plan is confirmed, and certainly before accepting payments under the confirmed plan.
Under the facts of the instant case, the court concludes that, after receiving multiple notices of the Debtor's intent to treat its interest in the Avalanche as a secured claim and the filing of a secured claim on its behalf, TitleMax waived its right to assert its ownership under state law when it failed to raise the issue of ownership before plan confirmation, and further demonstrated its waiver by accepting payments pursuant to the confirmed plan. As a consequence of its waiver of ownership, TitleMax is properly treated as a secured creditor under the Debtor's confirmed plan, and as such, is bound to the payment of its claim as provided therein, and to the inclusion of the Avalanche in the Debtor's bankruptcy estate by the res judicata effect of the confirmed plan under Bankr. Code § 1327(a). Accordingly, the automatic stay remains in place as to the Avalanche, and the Motion is DENIED.
So done and ordered this 4th day of May 2020.