Source: http://www.ksb.uscourts.gov/index.php?view=category&id=52%3Ajudge-berger-opinions&option=com_content&Itemid=50
Timestamp: 2013-12-10 19:49:55
Document Index: 606523573

Matched Legal Cases: ['§ 553', '§ 553', '§ 13302', '§101', '§157', '§1334', '§1144', '§1230', '§1330', '§1330', '§1330', '§1330', '§1330', '§1330', '§1330', '§1330', '§1330', '§1330', '§1330', '§1', '§1327', '§1330', '§1325', '§1330', '§1330', '§1330', '§1330', '§1330', '§1330', '§1330', '§1330']

Category: Judge Berger	Published on 21 October 2013	Written by Judge Berger	Hits: 219	Rajala, Chapter 7 Trustee v. Liberty Bank, 13-06015 (Bankr. D. Kan. Oct. 16, 2013) Doc. # 18
12-06078 Redmond v. IGT (Doc. # 20)
Category: Judge Berger	Published on 10 October 2013	Written by Judge Berger	Hits: 127	Redmond v. IGT, 12-06078 (Bankr. D. Kan. Sep. 25, 2013) Doc. # 20
The relief described hereinbelow is SO ORDERED. SIGNED this 24th day of September, 2013.
GMJ GLOBAL LOGISTICS, INC., et al., Case No. 12-20078 Debtor,
CHRISTOPHER J. REDMOND,
CHAPTER 11 TRUSTEE OF DEBTOR
SPORTS ASSOCIATED TRANSPORTATION, INC., Plaintiff,
v. Adv. No. 12-06078 IGT, INC., Defendant.
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT IGT’S MOTION FOR SUMMARY JUDGMENT
This matter comes before the Court on Defendant IGT’s Motion for Summary Judgment.1 After reviewing the pleadings and considering the oral arguments heard on August 7, 2013, the
1 Doc. 7.
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 1 of 12
Court is prepared to rule.
The Trustee sued Defendant to recover $87,339.49 that IGT owes Sports Associated Transportation (Debtor).2 IGT responded with its counterclaim against Debtor for $408,788.32 and requested that this Court set-off the debts pursuant to 11 U.S.C. § 553. IGT also asserted the doctrine of recoupment. IGT timely filed the Motion for Summary Judgment presently before this Court. For the reasons set forth below, the Motion is granted. Judgment shall be entered in favor of Defendant IGT.
Defendant IGT manufactures and distributes gambling devices and related products. IGT’s manufacturing facility is located in Reno, Nevada. IGT’s business model requires the shipment of its products from its manufacturing facility to its customers and, in certain cases, those products are returned to IGT. To accomplish this task, IGT entered into a Confidential Transportation Agreement (Agreement)3 with Debtor in 2002. Pursuant to paragraph 2(b) of the Agreement, Debtor agreed to “promptly and efficiently receive, transport and deliver safely and with reasonable dispatch and without delay, the goods entrusted to it hereunder . . . .” In addition to agreeing to transport IGT’s goods, Debtor also agreed “not to interline or use other motor carriers, or brokers, or to use ‘substituted services’ by rail for SHIPPER’S [IGT’s] goods without prior written agreement of SHIPPER.”4 Throughout the Agreement, Debtor was referred to as “CARRIER.” Under the Agreement, Debtor is the carrier and not a broker.
2 Sports Associated Transportation is one of 11 debtors in this administratively consolidated case. 3 Doc. 7, Ex. A ¶ 2(b) at 2.4 Doc. 7, Ex. A ¶ 2(e) at 2.
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 2 of 12
Despite this explicit agreement, Debtor in fact acted as a broker. Throughout the course of the contract, Debtor contracted with various carriers to transport IGT’s products.5 The carriers would then send their invoices to Debtor, who would add a broker’s fee and forward the invoices to IGT.
A third key provision of the Agreement covered indemnification. The provision states: CARRIER shall at all times indemnify, defend and hold harmless SHIPPER, its agents and employees against and from any and all settlements, losses, damages, costs, counsel fees and all other expenses relating to or arising from any and all claims of every nature or character (including, but without limitations, claims for bodily injury, death and damage to property, clean-up costs from commodity spills and damage to the environment) asserted against SHIPPER (a) by any agent or employee of CARRIER or (b) by any other person. The provisions of this paragraph shall survive cancellation, termination, or expiration of this Agreement.6 By virtue of this provision, IGT seeks indemnification from Debtor.
Although Debtor operated as a broker instead of a carrier, the parties otherwise performed in accordance with the contract from 2002 until sometime in 2011. According to IGT, in the fall of 2011 various motor carriers (Carriers) contacted IGT seeking payment for freight charges that Debtor had failed to pay. Debtor had failed to pay these Carriers even though IGT had already paid Debtor. Once IGT learned that Debtor was not paying the Carriers, IGT stopped paying Debtor. Even though Debtor had stopped paying most of the carriers at this time, it still paid a few of them.7 The Trustee initiated this adversary proceeding to recover the
5 Debtor asserts that in some cases it did act as a carrier pursuant to the contract. Regardless, the shipments for which Debtor may have been the carrier are not at issue here.
6 Doc. 7, Ex. A ¶ 5 at 4.
7 It is not clear whether Debtor paid these Carriers; however, because IGT does not contest for purposes of this motion that Debtor did pay the Carriers, the Court will treat the claim as if Debtor is owed $87,339.49. If Debtor did not pay the Carriers, which seems likely based on the evidence, Debtor would only be entitled to the broker’s fee and not the entire amount of the invoice. By not contesting the amount of the debt, IGT is giving up a potentially legitimate claim against the estate.
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 3 of 12
$87,339.49 from the outstanding invoices that IGT did not pay.
As to the shipments for which Debtor did not pay the Carriers, those Carriers turned to IGT for payment. The Carriers’ claims against IGT totaled $693,743.92. IGT paid $408,788.32 to settle them. Because IGT had to pay the cost of these shipments twice, once to Debtor and once to the Carriers directly, IGT has a claim against the estate for $408,788.32 for breach of contract and for indemnification. IGT concedes that it owes the Debtor $87,339.49 and asks this Court to set off that amount against IGT’s claim.
Debtor does not dispute that it did not pay the above carrier charges even though IGT provided Debtor the funds to pay them. Instead, Debtor alleges that IGT had no obligation to pay the Carriers directly and therefore Debtor is not required to indemnify IGT.
A. Summary Judgment Standard Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.8 The moving party bears the initial burden of demonstrating, by reference to pleadings, depositions, answers to interrogatories, admissions, and affidavits, the absence of genuine issues of material fact.9 In making this determination, the Court draws all reasonable inferences in favor of the non-moving party.10 Once a properly supported summary judgment motion is filed, the opposing party “must respond with specific facts showing the existence of a genuine factual issue to be tried” and
8 Fed. R. Bankr. P. 7056; Fed. R. Civ. P. 56.
9 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
10 See Taylor v. Roswell Independent School Dist., 713 F.3d 25, 34 (10th Cir. 2013) (quoting Witt v. Roadway Exp., 136 F.3d 1424, 1429 (10th Cir. 1998) (citation omitted)).
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 4 of 12
“may not rest on the allegations contained in his complaint.”11
Defendant IGT moved for summary judgment. For the reasons set forth below, IGT has satisfied its burden as required by Fed. R. Civ. P. 56 and Fed. R. Bankr. P. 7056.
B. Debtor’s Claims Against IGT Debtor asserts that IGT owes it $87,339.49 pursuant to the Agreement. This claim arises from IGT’s refusal to pay the invoices sent by Debtor to IGT. IGT does not contest for purposes of this motion that Debtor paid the invoiced charges directly to the Carriers. Because the Agreement required IGT to pay the Debtor, the Court finds that IGT owes Debtor $87,339.49.
C. IGT’s Claims Against Debtor IGT asserts that it has a claim against the estate for $408,788.32. The issue is whether IGT was required to settle the claims with the Carriers or whether only the Debtor was liable to the Carriers and therefore the claim should be disallowed. Both parties agree that the majority view, as outlined in Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co., 12 generally places liability on the shipper in cases such as this one. However, Debtor argues that the facts here present an exception to the general rule, and therefore IGT has a legal defense that precludes IGT from being liable to the Carriers. Debtor claims that because IGT signed the non-recourse provision on at least some of the bills of lading, IGT is not entitled to claim the entire $408,788.32 against the estate. The Court finds that Illinios Steel Co. v. Baltimore & O. R. Co.13 precludes this defense and that IGT was liable to the Carriers. Summary judgment in favor of
11 Otteson v. U.S., 622 F.2d 516, 519 (10th Cir. 1980) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157-59 (1970)).
12 513 F.3d 949 (9th Cir. 2008).
13 320 U.S. 508 (1944).
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 5 of 12
IGT is appropriate on this issue.
1. Shipping Contracts Shipping contracts often involve two agreements that operate in tandem. These are the shipping agreement and the bill of lading. The shipping agreement governs the rights and obligations between a shipper and a carrier over the course of multiple transactions. The bill of lading, on the other hand, only controls the shipment of the goods described on its face. The bill of lading “is the basic transportation contract between the shipper-consignor and the carrier; its terms and conditions bind the shipper and all connecting carriers.”14 Although it is often the case that the shipper and carrier are the parties to both the shipping agreement and the bill of lading, when there is a third party broker involved, the coordination of these agreements is less clear. In this case, the dispute is between IGT and the Carriers, so the shipping agreement has only a minor role, which the Court will discuss in section C.3, infra.
2. The Bill of Lading The Trustee’s argument arises from two conflicting provisions within the bills of lading signed by IGT and the Carriers. These are the “prepaid” and “nonrecourse”15 provisions. A bill of lading marked “prepaid” signifies that the charges for transportation service rendered at the request of a consignor (shipper) will be paid by the consignor. All of the shipments from IGT to its customers were prepaid shipments. The alternative provision is a collect shipment. In a
14 Oak Harbor, 513 F.3d at 953 (quoting S. Pac. Transp. Co. v. Commercial Metals Co., 456 U.S. 336, 342 (1982)).
15 The “Straight Bill of Lading” signed by IGT (Doc. 10, Ex. 2) provides, “Subject to section 7 of the conditions, if this shipment is to be delivered to the consignee without recourse on the consignor, the consignor shall sign the following statement: The carrier shall not make delivery of this shipment without payment and other lawful charges.” IGT presented an alternative bill of lading with more favorable language for IGT. However, since IGT is unable to show that its bill of lading was actually used in any of the shipments, the Court will only look to the language from the bill of lading provided by Debtor. IGT would prevail regardless of which language was used.
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 6 of 12
collect shipment, the consignee (the person receiving the shipment) is primarily liable for payment at the time of delivery. The default conditions of a standard bill of lading are summarized as follows:
The bill of lading provides that the owner or consignee shall pay the freight and all other lawful charges upon the transported property and that the consignor remains liable to the carrier for all lawful charges. The bill of lading, however, also contains “nonrecourse” and “prepaid” provisions that, if marked by the parties, release the consignor and consignee from liability for the freight charges. If the nonrecourse clause is signed by the consignor and no provision is made for the payment of freight, delivery of the shipment to the consignee relieves the consignor of liability. Similarly, when the prepaid provision on the bill of lading has been marked and the consignee has already paid its bill to the consignor, the consignee is not liable to the carrier for payment of the freight charges.16
Here, the shipment charges that IGT settled with the Carriers were for prepaid shipments. On some of these shipments, the nonrecourse provision was also signed by IGT. According to the Trustee, by signing the nonrecourse provision, IGT insulated itself from liability once the Carriers delivered the shipments. The issue is what happens when both the prepaid and nonrecourse provisions are checked on the same bill of lading. IGT argues that the nonrecourse provision only applies to collect shipments and that it would be “logically irrelevant” to uphold a signed nonrecourse provision in a prepaid shipment. However, both the Illinois Steel case and the fact that IGT signed the nonrecourse provision on prepaid bills of lading indicate that the two provisions should be read together.
In Illinois Steel, the Supreme Court considered the relationship between the prepaid and nonrecourse provisions on a bill of lading. In that case, the shipper prepaid the freight charges, but also signed the section 7 nonrecourse box. The carrier argued, just as IGT does here, that
16 C.A.R. Transp. Brokerage Co., Inc. v. Darden Restaurants, Inc., 213 F.3d 474, 478-79 (9th Cir. 2000) (citations omitted).
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 7 of 12
“liability was imposed [by the lower court] on the consignor only because the prepayment clause was so in conflict with the non-recourse clause as to nullify the latter and thus revive the obligation which, in the absence of that clause, rests on the consignor to pay all lawful charges” on the shipments.17
The Supreme Court disagreed and said, “[W]e must assume that both clauses were intended by the parties to have some effect, and hence, unless unavoidably in conflict, they must, so far as they reasonably may, be reconciled so that each will have some scope for operation.”18 To reconcile the two clauses, the Court held that the non-recourse provision only applied to the charges beyond those already agreed upon by the parties.
The words of [section] 7 of the conditions of the bill of lading are to the effect that if the consignor stipulates that the carrier shall not deliver “without requiring payment of such charges” and the carrier makes delivery, the consignor “shall not be liable for such charges.” In this context, “such charges” are the lawful charges which the consignor has not paid or stipulated to pay in advance.19
Here, there are no additional charges; instead, the dispute is over the shipper’s liability for the charges that it had agreed to pay. If the cost of the shipments had exceeded the agreed upon amount, then the nonrecourse provision would apply and prevent the Carriers from seeking payment from IGT of additional charges. Since there were no such additional charges, the prepaid clause required IGT to pay the agreed amount.20
17 Illinois Steel, 320 U.S. at 513.
18 Id. at 513-14.
19 Id. at 514.
20 See also Jones Motor Co., Inc. v. Teledyne, Inc., 732 F. Supp. 490, 492 (D. Del. 1990) (“In other words, the prepayment clause renders the shipper liable for the original transportation charges. The non-recourse clause operates to shield the shipper from liability for the additional charges but not for the original charges it agreed to prepay.”). But see Gaines Motor Lines, Inc. v. Klaussner Furniture Indus., Inc., 2011 WL 1230811, at *1
(M.D.N.C. 2011) (granting summary judgment in favor of shipper because non-recourse clause meant the carriers could only turn to the broker for payment). - 8
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 8 of 12
3. The Shipping Agreement The second issue is whether the Debtor’s role as broker renders the Illinois Steel analysis inapplicable to IGT. In Illinois Steel, the prepayment of the shipment occurred before the carrier delivered the shipment. Here, not only was the “prepayment” made by guarantee, but IGT as the consigner did not have a separate contract with the Carriers. Instead, the “shipping agreement” was between the Debtor and the Carriers. Although the law in this area is not settled, this Court finds that the correct analysis requires the shipper to remain liable.
To support their respective positions, the parties both cite Oak Harbor Freight Lines, Inc.
v. Sears Roebuck & Co.21 In Oak Harbor, the Ninth Circuit considered whether the shipper, Sears, was liable to the carrier even though it did not have an express agreement with the carrier outside the prepaid bill of lading. As in the case sub judice, Sears entered into a contract with a broker. The broker then contracted with carriers to ship Sears’ products. Sears argued that when a bill of lading is marked prepaid, but no payment is actually made at the time of the shipment and the broker fails to pay, the carrier may pursue only the broker for breach of the shipping agreement.22 In other words, by using a broker, Sears argued that it was insulated from liability to the carrier. This argument did not prevail. In Oak Harbor, the Ninth Circuit Court held that “a shipper should bear the risk when it chooses to pay for freight charges through a broker rather than directly to the carrier.”23 The
21 513 F.3d 949 (9th Cir. 2008).
22 Id. at 953. Sears paid the broker for freight charges within approximately five days after receipt of a bill from the broker.
23 Id. at 959 (citing Hawkspere Shipping Co. Ltd. v. Intamex, S.A., 330 F.3d 225, 237-38 (4th Cir. 2003); Strachan Shipping Co. v. Dresser Indus., Inc., 701 F.2d 483, 489-90 (5th Cir. 1983); Nat’l Shipping Co. of Saudi Arabia v. Omni Lines, Inc., 106 F.3d 1544, 1546-47 (11th Cir. 1997)).
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 9 of 12
court reasoned, and this Court agrees, that this result best “comports with economic reality.”24 The court noted: A freight forwarder provides a service. He sells his expertise and experience in booking and preparing cargo for shipment. He depends upon the fees paid by both shipper and carrier. He has few assets, and he books amounts of
cargo far exceeding his net worth. Carriers must expect payment will come from
the shipper, although it may pass through the forwarder’s hands.25
Additionally, the Oak Harbor court noted that “the shipper, and not the carrier, is in the best position to avoid liability for double payment by dealing with a reputable freight forwarder, by contracting with the carrier to eliminate the shipper’s liability, or by simply paying the carrier directly.”26 This Court finds these arguments persuasive. Just because IGT checked the “prepaid” box on the bills of lading, IGT cannot escape liability simply by contracting with a broker.
Debtor argues that the nonrecourse provision in the bill of lading provides an exception to the general rules of liability outlined in Illinois Steel and Oak Harbor. In Oak Harbor, the court implied that the result would have been different had Sears signed the Section 7 box on the bills of lading.27 However, this is only dicta. This Court will not speculate as to what the Oak Harbor court might have found had the facts been different, especially in light of this Court’s interpretation of the Illinois Steel decision.
Because the statements in Oak Harbor are dicta, this Court does not find an exception to
24 513 F.3d at 959 (quoting Strachan Shipping Co. v. Dresser Indus., Inc., 701 F.2d 483, 490 (5th Cir. 1983)).
27 Id. at 960 (stating that “Sears generated the bills of lading and failed to protect itself with a ‘nonrecourse’ designation.”).
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 10 of 12
the rule that the shipper remains liable, even though it contracted through a broker and signed the nonrecourse clause. Moreover, the Agreement between IGT and Debtor listed Debtor as the carrier. Debtor breached the Agreement by acting as a broker. Debtor is estopped from now claiming that IGT’s claim should fail because it contracted through a broker. IGT was correct when it paid the Carriers.
D. Set-Off IGT argues that the claim by Debtor should be set off against the larger claim by IGT. The Court agrees. Section 553 of the Bankruptcy Code provides: Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the
case under this title against a claim of such creditor against the debtor that arose
before the commencement of the case . . . .
Based on the Court’s findings, the claims by Debtor against IGT and the claims by IGT against Debtor arose before the commencement of the case and were mutual debts preserved and subject to setoff under § 553. Therefore, IGT is entitled to set off the claims by Debtor against IGT’s claims. IGT’s allowed claim against the estate is the difference between $408,788.32 and $87,339.49, or $321,448.83. Post-setoff, IGT has no liability to the estate. Since the issue of setoff is resolved in IGT’s favor, the Court does not address IGT’s other argument under the doctrine of recoupment.
E. Conclusion For the reasons stated above, the Defendant’s Motion for Summary Judgment is GRANTED. A separate order of judgment shall be entered in favor of Defendant. ###
13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 11 of 12
U.S. BANKRUPTCY JUDGE DISTRICT OF KANSAS - 12 13.09.24 Redmond v IGT SJ Order.wpd Case 12-06078 Doc# 20 Filed 09/24/13 Page 12 of 12
12-23111 Lane (Doc. # 33)
Category: Judge Berger	Published on 25 June 2013	Written by Judge Berger	Hits: 509	In Re Lane, 12-23111 (Bankr. D. Kan. Jun. 20, 2013) Doc. # 33
DANNY L. LANE and Case No. 12-23111 TERRI L. LANE, Debtors,
MEMORANDUM OPINION AND ORDER DENYING STOCKGROWERS STATE BANK’S MOTION TO RECONSIDER ORDER OF CONFIRMATION
Comes now before the Court the Motion of Stockgrowers State Bank to Reconsider the Order Confirming the Chapter 13 Plan; or In the Alternative to Set Aside the Order Confirming the Chapter 13 Plan.1
Upon review of the pleadings, the Court’s file, and the arguments of counsel, the Court finds that a complaint to revoke an order of confirmation filed under 11 U.S.C. § 13302 is the
1 Doc. No. 20.
2 The Bankruptcy Code, 11 U.S.C. §§101-1330 (2000) [hereinafter the Code]. Any reference herein to a section of law, without more, is to a section of the Bankruptcy Code.
13.06.19 Lane Mtn to Reconsider Confirmation Order.wpd Case 12-23111 Doc# 33 Filed 06/20/13 Page 1 of 7
only method for a creditor to obtain relief from a Chapter 13 plan confirmation order. A creditor cannot seek relief from a confirmation order under Fed. R. Bankr. P. 9023 and 9024,3 which incorporate Fed. R. Civ. P. 59 and 60, respectively.
This matter constitutes a core proceeding4 and the Court has jurisdiction to decide the matter in controversy.5
1. On November 16, 2012, Debtors filed their voluntary Chapter 13 petition. 2. Stockgrowers State Bank (SSB) is a secured creditor by virtue of a security agreement and Promissory Note No. *5366 which had a payoff in the amount of approximately $18,813.35 as of the petition filing date. In Schedule D (Creditors Holding Secured Claims) the collateral value of the secured property, a 1999 Chevrolet pickup truck and a 2006 Ford pickup truck, totalled $18,986.87. 3. An order confirming Debtors’ Chapter 13 plan was docketed on January 17, 2013. The plan proposed to pay Note No. *5366 as a secured claim in the amount of $4,500.00 and to treat the balance of the claim as general unsecured. 4. SSB filed its motion to reconsider or set aside the Order Confirming Chapter 13 Plan on January 31, 2013, under Rules 9023 and 9024. 3 Any reference herein to a Rule, without more, is to the Federal Rules of Bankruptcy Procedure. 4 11 U.S.C. §157(b). 5 28 U.S.C. §1334.
13.06.19 Lane Mtn to Reconsider Confirmation Order.wpd Case 12-23111 Doc# 33 Filed 06/20/13 Page 2 of 7
Section 1330 provides the only method for revocation of an order confirming a Chapter 13 plan.
SSB filed its motion to reconsider or, in the alternative, to set aside the order confirming the Chapter 13 plan within 180 days after the confirmation order was entered. SSB’s grounds to reconsider or to set aside the order are: (1) the value of SSB’s personal property collateral in Debtors’ sworn bankruptcy schedule is inconsistent with and contrary to the information on value in Debtors’ plan6; (2) the conversation between SSB’s branch president and Debtors’ bankruptcy counsel regarding the proposed treatment of Note No. *5366 resulted in SSB’s confusion as to the timing and procedure for SSB to formally challenge the value of its collateral.7 The Chapter 13 plan was filed by the Debtors on November 21, 2012. Between the filing of the plan and entry of the confirmation order on January 17, 2013, the confirmation hearing was held on December 19, 2012. SSB had sufficient time to file an objection to the plan during these two months.
SSB does not allege that it did not receive notice of the proposed Chapter 13 plan. Its branch president spoke on the telephone to Debtors’ counsel in late November 2012. SSB had knowledge and notice of the plan. SSB’s alleged confusion on the timing and procedure to object to the plan does not constitute grounds for the Court to apply Rules 9023 and 9024 to reconsider or set aside the confirmation order.
Rules 9023 and 9024 incorporate Fed. R. Civ. P. 59 and 60, respectively. Rule 9023
6 SSB’s Motion to reconsider, Doc. No. 20 ¶7 at 3. 7 SSB’s Motion ¶7 at 3.
13.06.19 Lane Mtn to Reconsider Confirmation Order.wpd Case 12-23111 Doc# 33 Filed 06/20/13 Page 3 of 7
provides that “[E]xcept as provided in this rule and Rule 3008, Fed. R. Civ. P. 59 applies in cases under the Code. A motion for a new trial or to alter or amend a judgment shall be filed, and a court may on its own order a new trial, no later than 14 days after entry of judgment.” Under Fed. R. Civ. P. 59, a court may, on motion, grant a new trial on all or some of the issues. Rule 9024 provides that “Fed. R. Civ. P. 60 applies in cases under the Code except … (3) a complaint to revoke an order confirming a plan may be filed only within the time allowed by §1144, §1230, or §1330.” SSB’s motion is somewhat nebulous as to the specific statutory provisions under which it seeks relief: Reference is made to Fed. R. Civ. P. 60 but sans specific reference to a subsection thereof. SSB’s general assertion is that it is entitled to relief from the confirmation order on the basis of mistake, inadvertence, or excusable neglect. In the alternative, SSB asserts a motion to reconsider the confirmation order under Fed. R. Civ. P. 59(e). As detailed herein, Fed. R. Civ. P. 59 and 60 may not be employed to reconsider or set aside an order confirming a Chapter 13 plan.
The court may only revoke the order of confirmation of a Chapter 13 plan under §1330. Section 1330 provides that:
(a) On request of a party in interest at any time within 180 days after the date of the entry of an order of confirmation under section 1325 of this title, and after notice and a hearing, the court may revoke such order if such order was procured by fraud. In Mason v. Young (In re Young),8 the Bankruptcy Appellate Panel for the Tenth Circuit
considered whether a party may obtain relief from an order confirming a Chapter 13 bankruptcy
8 237 B.R. 791 (B.A.P. 10th Cir. 1999). - 4
13.06.19 Lane Mtn to Reconsider Confirmation Order.wpd Case 12-23111 Doc# 33 Filed 06/20/13 Page 4 of 7
plan by methods other than §1330. In Young, the court found that the plain language of both §1330 and Fed. R. Civ. P. 9024 establishes that complaints for revocation of confirmation orders of Chapter 13 plans must be grounded in fraud and brought within 180 days after confirmation.9 More importantly, the court ruled that §1330 provides the only method to vacate a Chapter 13 plan confirmation order.10 This conclusion is equally compelling as to Rule 9023.11
The Young court so ruled because of two primary considerations: First is the favored finality of Chapter 13 plan confirmation, and second is the narrow drafting of §1330. Rule 9024 does not afford relief to SSB under Fed. R. Civ. P. 60(b) because §1330(a) “trumps” the rule by substantively limiting the extent to which a court may reconsider the confirmation of a Chapter 13 plan.12 As the Young court noted, when a party brings a motion under 60(b), the party is basically requesting revocation of a confirmed plan.13 In these circumstances, §1330 operates as both a substantive limitation and a time limitation. The Young court went on to observe:
The plain language of both §1330 and Rule 9024 indicate [sic] that motions for
revocation of a confirmed Chapter 13 plan must be grounded in allegations of
fraud and brought within 180 days.14
In Young, the court cited Branchburg Plaza Assocs., L.P. v. Fesq (In re Fesq).15 In Fesq, the secured creditor tried to vacate confirmation of the plan because the debtor’s plan did not pay the secured creditor’s claim in full. The Third Circuit held that §1330 should be read as both a
9 Id. at 802. Although the Young decision refers to motions for revocation, revocation of a confirmation order under §1330 should be filed as an adversary proceeding. See Rule 7001(5).
10 Id. at 803.
11 Keith M. Lundin & William H. Brown, CHAPTER 13 BANKRUPTCY,4TH EDITION, §1.1, at ¶223.1, Sec. Rev. April 14, 2009, www.Ch13online.com.
12 In re Smith, 2009 WL 243396, at *13.
13 237 B.R. 791, 802 (B.A.P. 10th Cir. 1999).
15 153 F.3d 113 (3rd Cir. 1998). - 5
13.06.19 Lane Mtn to Reconsider Confirmation Order.wpd Case 12-23111 Doc# 33 Filed 06/20/13 Page 5 of 7
time and a substantive limitation to revoke Chapter 13 confirmation orders.16 Once a debtor’s plan is confirmed, it becomes final under §1327(b)17 and is binding on the debtor and creditors. Absent a showing of fraud under §1330, it cannot be challenged under §1325(a)(5)(B)(ii) for failure to pay the creditor the present value of its claim.18 Thus, the confirmation of a Chapter 13 plan may not be revoked under §1330 unless the confirmation was procured by fraud and a party in interest seeks the revocation within 180 days of the confirmation date.19
Section 1330 provides the only method for a party in interest to seek revocation of an order of confirmation. Pursuant to Rule 7001(5), revocation should be sought via an adversary proceeding and initiated by the filing of a complaint. The court may only revoke a confirmation order if it is procured by fraud perpetrated by the debtor. Revocation is not proper for mistake, inadvertence, or an improper valuation of collateral.20 The only method to seek revocation of an order of confirmation is §1330, which may not be overcome by Rules 9023 and 9024 which provide that Federal Rules of Civil Procedure 59 and 60 generally apply to bankruptcy cases. With regard to statutory construction, the specific, in this case §1330, governs the general, which
16 Young, 237 B.R. at 802; Fesq, 153 F.3d at 119-120.
17 See United Student Aid Funds, Inc., v. Espinosa, --- U.S. ---, 130 S. Ct. 1367, 1380. Even if the bankruptcy court commits “legal error” in confirming the Chapter 13 plan, the creditor is bound by the plan. It is indeed imprudent “for litigants to sleep on their rights” because a Rule 60(b) motion will not provide relief from the binding effect of plan confirmation, although Espinosa noted that the “Courts of Appeals disagree as to whether a Rule 60(b)(4) motion should be treated as a ‘complaint to revoke’ a plan subject to §1330’s time limit and substantive limitation to motions based on fraud.” Id. at 1376-77 n.9. The Espinosa court did not resolve this split of authority since the issue was not raised by the parties below. It appears that if such a motion were treated as a complaint under §1330, it would still need to adhere to that section’s requirements for revocation. Regardless, SSB did not file a Fed. R. Civ. P. 60(b)(4) motion alleging that the confirmation order is void.
18 Fesq, 153 F.3d at 119.
19 Id. at 115. Post-Espinosa, Fesq remains good law. See In re Rodriguez, 2013 WL 1716110 (3rd Cir. April 22, 2013).
20 See 8 COLLIER ON BANKRUPTCY ¶1330.01 (Alan N. Resnick & Henry J. Sommer, eds., 16th ed. 2010).
13.06.19 Lane Mtn to Reconsider Confirmation Order.wpd Case 12-23111 Doc# 33 Filed 06/20/13 Page 6 of 7
are Rules 9023 and 9024.21 Section 1330 deliberately targets the specific problem of procurement of an order of confirmation by fraud with a specific solution. It is the Code that establishes substantive rights and it is the function of the Rules to govern the procedures to protect those rights.22 It is axiomatic that the Code trumps the Rules. Assuming adequate notice of the Debtors’ plan as contemplated under Espinosa, §1330 and an attendant adversary proceeding is the only means for a party in interest to obtain relief from a Chapter 13 order of plan confirmation.
IN CONCLUSION, §1330 provides the only method to revoke or obtain relief from an order of confirmation of Chapter 13 plans. This request for relief must be brought by an adversary proceeding and not by a motion. SSB has not filed an adversary proceeding under §1330 nor has it alleged that the confirmation order was procured by fraud. SSB’s motion is denied.
U.S. BANKRUPTCY JUDGE DISTRICT OF KANSAS 21 RADLax Gateway Hotel, LLC, v. Amalgamated Bank, 132 S. Ct. 2065, 2071 (2012). 22 Young, 237 B.R. at 802.
13.06.19 Lane Mtn to Reconsider Confirmation Order.wpd Case 12-23111 Doc# 33 Filed 06/20/13 Page 7 of 7
Category: Judge Berger	Published on 03 September 2013	Written by Judge Berger	Hits: 299	Rajala, Chapter 7 Trustee v. Buerge, 13-06014 (Bankr. D. Kan. Aug. 14, 2013) Doc. # 20
Category: Judge Berger	Published on 24 June 2013	Written by Judge Berger	Hits: 584	In Re Roberts, 11-23478 (Bankr. D. Kan. Jun. 21, 2013) Doc. # 107
09-24265 Van Nostrand (Doc. # 137)
12-20662 Cunningham (Doc. # 31)
11-20325 Buerge (Doc. # 243)
Login CM/ECF and PACER Search...	We have 35 guests and no members online