Court Opinion

ID: 154174
Source: CourtListenerOpinion
Date Created: 2010-08-14 03:52:29+00
Date Added: 2024-06-11T09:57:42.379349
License: Public Domain

UNITED STATES COURT OF APPEALS
Filed 11/14/96
                                         TENTH CIRCUIT

 In re: DARWIN JOHN MORETTI and
 MORITA MORETTI,

                  Debtors.
 -----------------------------------------
 LUMBERMEN’S INVESTMENT                                      No. 95-6323
 CORPORATION,                                              W.D. Oklahoma
                                                      (D.C. No. CIV-94-1945-T)
                 Appellant,
           v.
 DARWIN JOHN MORETTI and
 MORITA MORETTI,

                 Appellees.

                                   ORDER AND JUDGMENT*

Before ANDERSON, HENRY, and MURPHY, Circuit Judges.

       This case is before us a second time on challenges by appellant Lumbermen’s

Investment Corporation to the treatment, in a chapter 13 bankruptcy proceeding, of its

mortgage on the home of debtors Darwin John and Morita Moretti. In a previous appeal

       *
        This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. The court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
by Lumbermen’s we upheld the confirmation of the debtors’ chapter 13 plan, including

the bifurcation of Lumbermen’s mortgage into secured and unsecured claims. Moretti v.

Lumbermen’s Investment Corp. (In re Moretti), No. 90-6292 (10th Cir. Mar. 1, 1991)

(citing Hart v. Eastland Mortgage Co. (In re Hart), 923 F.2d 1410 (10th Cir. 1991),

overruled by Independence One Mortgage Corp. v. Wicks (In re Wicks), 5 F.3d 1372,

1373 (10th Cir. 1993)). Two years later, in 1993, the Supreme Court issued its opinion in

Nobelman v. American Sav. Bank, 508 U.S. 324, 332 (1993), declaring the law on

bifurcation to be different than as previously pronounced by this court, and the law in this

circuit prior to Nobelman.

       Citing Nobelman, Lumbermen’s, in March 1994, commenced an adversary

proceeding in the Moretti bankruptcy seeking a declaratory judgment that its original

mortgage lien is valid and enforceable in full or, to be more precise, that the unsecured

portion of the mortgage debt was never voided by the court and remains a valid lien

against the Moretti residence. In the declaratory judgment action, the bankruptcy court

granted summary judgment in favor of the Morettis, finding that Nobelman did not apply

retroactively to this case, the portion of LIC’s lien in excess of the stipulated value was

rendered void by operation of § 506(d)1 when the Chapter 13 plan was confirmed, and,

accordingly, the lien issue was no longer open. The district court affirmed the bankruptcy

       1
        11 U.S.C. § 506(d) provides in relevant part, that “[t]o the extent that a lien secures
a claim against the debtor that is not an allowed secured claim, such lien is void . . . .”

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court’s grant of summary judgment in favor of the Morettis, and LIC brought this appeal.

We affirm.

                                          Discussion

       We review the grant of summary judgment by the bankruptcy court de novo,

applying the same legal standards as those applied by the bankruptcy and district courts.

Hollytex Carpet Mills, Inc. v. Oklahoma Employment Sec. Comm’n (In re Hollytex

Carpet Mills, Inc.), 73 F.3d 1516, 1518 (10th Cir. 1996); CCF, Inc. v. First Nat’l Bank &

Trust Co. of Okmulgee (In re Slamans), 69 F.3d 468, 472 (10th Cir. 1995).

       The relevant facts, which are undisputed, are fully set forth in the district court’s

able opinion, see Lumbermen’s Investment Corp. v. Moretti (In re Moretti), Ch. 13 Case

No. 89-01983-LN, Adv. No. 94-1082-LN (W.D. Okla. Aug. 14, 1994), and we refer to

them only as necessary to our analysis and disposition. LIC argues that the issue of lien

voidance is open on direct review because the bankruptcy court never specifically

determined the status of its lien. Br. of Appellant at 20. LIC further argues that because

the issue is open on direct review, this court should prevent voidance of the lien by

applying Nobelman retroactively in accordance with the principles in Harper v. Virginia

Department of Taxation, 509 U.S. 86, 96 (1993) (holding that when Supreme Court

applies a rule of law to parties before it, the rule must be given full retroactive effect in all

cases still open on direct review). We disagree.

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       Paragraph III(2)(a) of the Morettis’ confirmed Chapter 13 Plan provides:

       Lumbermen’s Investment Corp. has a first mortgage lien on the home and
       principal residence of the Debtors. The total amount of the debt is
       $70,000.00, $36,500.00 of which is secured by the aforesaid collateral.
       Lumbermen’s Investment Corp. shall be paid $36,500.00, and shall be paid
       at the contract rate of interest estimated at 9.5% in two (2) monthly
       installments of $598.05, beginning with the first (1st) monthly payment
       under the plan, then in fifty-six (56) monthly installments of $795.68,
       beginning with the 2.1 monthly payment under the plan.

App. to Appellant’s Opening Br. at Tab 13.

       As the Morettis correctly argue, LIC’s lien was released by an unappealed final

order of the bankruptcy court, and LIC is bound by that order. Paragraph 5 of the

bankruptcy court’s Order Confirming the Chapter 13 Plan provides:

       Confirmation of the plan vests all of the property of the estate in the
       Debtors free and clear of any claim or interest of any creditor provided for
       by the plan, except the holder of an allowed secured claim shall retain the
       lien securing such claim until the secured value of the allowed secured
       claim shall have been paid at which time the lien shall be released.

Id. at Tab 14 (emphasis added).

       It is undisputed that the Morettis have made all the payments under the Chapter 13

plan, including the requisite payments to LIC on the secured portion of its debt stated in

the plan, and received their discharge. It is also undisputed that LIC participated in the

plan confirmation proceedings, and did not appeal the confirmation order.

       The bankruptcy code provides that “[t]he 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

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plan.” 11 U.S.C. § 1327(a) (1993). With regard to those bound by a bankruptcy plan, a

confirmed plan functions as a judgment. Paul v. Monts, 906 F.2d 1468, 1471 n.3 (10th

Cir. 1990). When the Morettis completed their payments under the plan, paragraph 5 of

the confirmation order released LIC’s lien, and the plan is res judicata as to LIC and the

Morettis. Laing v. Johnson (In re Laing), 31 F.3d 1050, 1051 (10th Cir. 1994) (holding

confirmed Chapter 11 plan binding as final judgment on the merits); Republic Supply Co.

v. Shoaf, 815 F.2d 1046, 1051 (5th Cir. 1987) (holding bankruptcy court’s order entitled

to res judicata effect).

       Res judicata bars LIC from raising issues which could have been raised during the

bankruptcy proceedings. Frandsen v. Westinghouse Corp., 46 F.3d 975, 978 (10th Cir.

1995). Because the lien was released by the confirmed and completed Chapter 13 plan,

and all of the issues LIC raises on appeal pertain to the continued validity of the lien,

these issues are not open on direct review, and the Morettis are entitled to summary

judgment in their favor.

       LIC argues for the first time in its reply brief that its due process rights have been

violated. Reply Br. of Appellant at 2-3. Despite the fact that we have no obligation to

consider arguments raised for the first time in the reply brief, see Zimmerman v. Sloss

Equipment, Inc., 72 F.3d 822, 830 (10th Cir. 1995); Headrick v. Rockwell Int’l Corp., 24

F.3d 1272, 1277-78 (10th Cir. 1994)--especially, as in this case, when such arguments are

                                             -5-
not developed, see Murrell v. Shalala, 43 F.3d 1388, 1389 n.2 (10th Cir. 1994)--we have

considered LIC’s due process arguments and find them without merit.

      For the foregoing reasons, we AFFIRM the judgment of the district court.

                                                ENTERED FOR THE COURT

                                                Stephen H. Anderson
                                                Circuit Judge

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