Lumbermen's Invest. v. Moretti ( 1996 )

UNITED STATES COURT OF APPEALS
Filed 11/14/96
TENTH CIRCUIT
In re: DARWIN JOHN MORETTI and
MORITA MORETTI,
Debtors.
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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This order and judgment is not binding precedent, except under the doctrines of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
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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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