UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

In re MICHAEL AND DANIELLE MCGEE,

Debtors,

 /

CITY OF FLINT,

Plaintiff/Appellant,

v.

CARL L. BEKOFSKE,

Defendant/Appellee.

 /

Case No. 08-14362

Honorable Patrick J. Duggan

Bankruptcy No. 08-30349

Adversary Proceeding No. 08-03073

OPINION AND ORDER 

At a session of said Court, held in the U.S.

District Courthouse, Eastern District

of Michigan, on March 18, 2009.

PRESENT: THE HONORABLE PATRICK J. DUGGAN

 U.S. DISTRICT COURT JUDGE

This matter is before the Court as an appeal from the United States Bankruptcy

Court for the Eastern District of Michigan. Plaintiff-Appellant, the City of Flint (“City”),

appeals the Honorable Daniel S. Opperman’s October 1, 2008 decision denying the City’s

motion for summary disposition in an adversary proceeding filed in the Chapter 13

bankruptcy proceeding of Debtors Michael and Danielle McGee. The matter has been

fully briefed and, on March 17, 2009, this Court issued a notice informing the parties that

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it is dispensing with oral argument with respect to the matter pursuant to Eastern District

of Michigan Local Rule 7.1(e)(2). 

I. Standard of Review

The bankruptcy court’s findings of fact are reviewed under the clearly erroneous

standard. In re Eastown Auto Co., 215 B.R. 960, 963 (B.A.P. 6th Cir. 1998) (citing Fed.

R. Bankr. P. 8013). The bankruptcy court’s conclusions of law are reviewed de novo. 

Id. at 964 (citing Nicholson v. Isaacman, 23 F.3d 629 (6th Cir. 1994)). The parties to this

matter agree that there are no disputed issues of fact and that the Court only is confronted

with a question of law. Therefore, the bankruptcy court’s findings are presumed to be

correct and are incorporated in the following factual background section.

II. Factual and Procedural Background

On January 31, 2008, Michael and Danielle McGee (“Debtors”) filed their

voluntary petition under Chapter 13 of the Bankruptcy Code in the United States

Bankruptcy Court for the Eastern District of Michigan. In their schedules, the Debtors

indicated that they did not have any interest in any real property or any creditors holding

secured claims. On their list of unsecured creditors, Debtors listed the City as an

unsecured creditor for “service” for $104.00. With the filing of their petition, Debtors

also filed a proposed Chapter 13 plan.

The proposed (and subsequently confirmed) plan contained the following

language:

The assisted person has stated the value of the collateral as

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listed above. If a secured creditor claimed a different value,

interest rate, or monthly payment, then the creditor MUST

TIMELY OBJECT TO THE CONFIRMATION OF

THIS PLAN, AND THE VALUE AND/OR INTEREST

RATE DISPUTE WILL BE LITIGATED AND

DECIDED AS PART OF THE CONFIRMATION

HEARING. Failure to timely object to the confirmation of

this plan shall be deemed to be an acceptance of this plan’s

statement of claim terms. This is notice that the confirmation

hearing shall include a hearing on all terms of your secured

claim.

(A.R. 9 at 4 (emphasis in original).) The plan continued with respect to the classification

of claims:

Although in your opinion, your claim is a secured claim, it

may nonetheless be classified as an unsecured claim, and be

treated as such. IT IS THE ASSISTED PERSON’S

INTENT TO PROVIDE FOR EVERY CLAIM UNLESS

SPECIFICALLY STATED OTHERWISE. UNLESS

YOUR CLAIM IS SET FORTH SPECIFICALLY IN

THIS PLAN AS A SECURED CLAIM, THE ASSISTED

PERSON IS PURPOSEFULLY CLASSIFYING YOUR

CLAIM AS UNSECURED DESPITE YOUR BELIEF

THAT IT IS A SECURED CLAIM. ACCORDINGLY,

YOU MUST EITHER TIMELY OBJECT TO

CONFIRMATION OF THIS PLAN OR BEE [SIC]

DEEMED TO HAVE ACCEPTED THIS PLAN’S

TREATMENT OF YOUR CLAIM AS PROVIDED

HEREIN.

(Id. (emphasis in original).) The Debtors’ proposed plan listed no secured creditors. (Id.

at 3-4.)

The proposed plan was served on all creditors, including the City, on January 31,

2008. (In re McGee, Case No. 08-30349, Doc. 9.) A confirmation hearing was scheduled

for April 15, 2008, and notice of the hearing and any other relevant dates in the Debtors’

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Chapter 13 matter were sent to all interested parties, including the City. (Id. Docs. 13 and

14.) The City did not file an objection to the plan but instead, on March 25, 2008, filed a

proof of claim identifying a secured claim in the amount of $169.87 for a water bill, an

unsecured claim in the amount of $446.54 for income tax, and an administrative claim in

the amount of $100 for continued water service. (A.R. 7.) On April 25, 2008, United

States Bankruptcy Court Judge Opperman issued an order confirming the plan. (Id. 12.)

On May 1, 2008, the City filed a “Motion to Correctly List City of Flint Claim” in

the Chapter 13 proceeding. (Id. 10.) In this motion, the City asked the bankruptcy court

to list its water claim of $169.87 as a secured claim. The Trustee responded to the motion

on May 13, 2008, indicating that, although the City’s proof of claim listed $169.87 as

secured debt, he was paying the City as an unsecured claim based on the Debtor’s

confirmed plan. (Id. 11.)

In the meantime, the City commenced an adversary proceeding against the Trustee

on May 1, 2008, seeking a declaratory judgment that the Trustee erred in designating the

City as an unsecured creditor. (A.R. 1.) The City thereafter filed a motion for summary

judgment, to which the Trustee responded. (Id. 3-6.) Judge Opperman conducted a

hearing with respect to the City’s motion on September 30, 2008, and denied the motion

on the record. (Id. 13.) The City subsequently filed the pending appeal.

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III. Argument and Analysis

In this appeal, the City contends that the bankruptcy court erred in relying on the

Chapter 13 plan to designate its water claim as unsecured. The City maintains that its

water claim is secured and that its proof of claim identifying the claim as secured

constituted prima facie evidence of that fact. The City argues that an interested party

disputing that its claim was secured had to file a timely written objection to its proof of

claim. As the City notes, no objections to its claim were filed. The City further argues

that the statements in the Chapter 13 plan indicating that its claim would be treated as

unsecured and that the City had to object to the plan if it disagreed, failed to afford it due

process.

The Trustee responds that the confirmation process for the Debtors’ Chapter 13

plan, not the claims process, controls how a claim of a creditor is treated under the plan.

Thus, if an interested party objects to the treatment of its claim in the plan, it must file a

timely objection to confirmation or be deemed to have consented to confirmation of the

plan. The Trustee argues that because the City failed to file an objection to confirmation,

it is deemed to have accepted the plan. With respect to the City’s due process argument,

the Trustee answers that the bankruptcy court clerk served the City with a copy of the

Chapter 13 plan and a “Notice of Chapter 13 Bankruptcy Case, Meeting of Creditors, and

Deadlines”– known as a B9I form– listing the relevant dates in the matter and informing

interested parties that they “may object to confirmation of the plan and appear at the

confirmation hearing.” This, the Trustee maintains, complies with the federal and local

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bankruptcy rules and satisfies the requirements of the Due Process Clause.

Judge Opperman did not err in concluding that the confirmed Chapter 13 plan was

binding on the parties, specifically its classification of the City’s claim as wholly

unsecured. 11 U.S.C. § 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.” Thus an order confirming a Chapter 13 plan is deemed to “‘bar relitigation of any

issues raised or that could have been raised in the confirmation proceedings.’” In re

Welch, No. 97-5080, 1998 WL 773999, at *3 (6th Cir. Oct. 11, 1998) (unpublished

opinion) (quoting In re Chattanooga Wholesale Antiques, Inc., 930 F.2d 458, 463 (6th

Cir. 1991)). As the City failed to object to the Debtors’ Chapter 13 plan, which classified

its claim as unsecured, and the plan was confirmed, that determination now is binding.

The City’s filing of its proof of claim does not alter this result. Absent an

objection to the claim, the City’s proof of claim only provided prima facie evidence of the

amount of its claim and the validity of the claim:

The claims allowance process gives prima facie proof only to

the amount of the entire claim, which may be fully secured,

undersecured, or entirely unsecured. The claims allowance

process also mandates that the entire claim is valid and that

any security interest is valid. However, the claims allowance

process does not determine the amount of the secured portion

of a claim under § 506(a).

In re Hudson, 260 B.R. 421, 436 (W.D. Mich. 2001) (citations omitted) (emphasis in

original); see also In re Hill, 304 B.R. 800, 804 (S.D. Ohio 2003) (concluding that the

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terms of a confirmed Chapter 13 plan classifying the debtors’ second mortgage as wholly

unsecured was binding on the bank, despite the bank’s filing of a proof of claim asserting

a security interest in the debtors’ principal residence). Thus the City’s proof of claim, to

which there was no objection, only established the validity of its claim in the total amount

of $716.41. It did not establish that a portion of the claim was secured.

With respect to the City’s due process argument, the City maintains that the United

States Bankruptcy Court for the Eastern District of Michigan does not serve creditors

with copies of the Chapter 13 plans in many cases. (Reply at 1.) The City acknowledges,

however, that it was served with a copy of the plan in this case. Thus the only due

process concern presented in this case is whether service of the plan and the B9I form was

adequate to provide the City with notice of the pendency of the action and an opportunity

to present its objections. See Mullane v. Central Hanover Bank & Trust Co., 339 U.S.

306, 314-15, 70 S. Ct. 652, 657 (1950). As the notice provided in the bankruptcy

proceedings was in accordance with the Bankruptcy Rules, the Court concludes that it

provided adequate and timely notice to satisfy the City’s right to due process. See In re

Hudson, 260 B.R. 421, 439-443 (W.D. Mich. 2001) (discussing the notice requirements

under the Bankruptcy Rules and concluding that compliance with those rules results in

adequate notice).

IV. Conclusion

For the above reasons, the Court holds that the Judge Opperman did not err in

concluding that the City’s claim was unsecured based on the provisions of the Debtors’

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confirmed Chapter 13 plan. Thus the Court affirms the bankruptcy court’s decision.

SO ORDERED.

s/PATRICK J. DUGGAN

UNITED STATES DISTRICT JUDGE

Copies to:

Douglas M. Philpott, Esq.

Carl L. Bekofske, Esq.

Hon. Daniel S. Opperman

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