In re Carr

1

In re: Larry Carr, Debtor.

No. 20-10297

United States Bankruptcy Court, D. Vermont

April 21, 2023

Chapter 13

Alec Slater, Esq Burlington, Vermont For Debtor

Brian P. Monaghan, Esq. Burlington, Vermont For Town of Richford

Jan M Sensenich, Esq. Norwich, Vermont Chapter 13 Trustee

MEMORANDUM OF DECISION

Hon Heather Z. Cooper, Vermont United States Bankruptcy Judge

In this contested matter, the Court must determine whether an order terminating the automatic stay issued before the order confirming the Plan provides an exception to the rule that the parties are bound by confirmation. The Debtor asserts that the pre-confirmation termination of the stay did not authorize the Town of Richford's post-confirmation tax sale of the Debtor's property because the Plan provides treatment of the Town of Richford's claim and the Town of Richford did not object to the Plan. Meanwhile, after purporting to take ownership of the Debtor's property at tax sale, the Town of Richford has continued to accept payments under the Plan.

The Town of Richford asserts that it levied on the Debtor's property, initiating a non-bankruptcy remedy for delinquent real estate taxes, after termination of the automatic stay but prior to confirmation. Because the Debtor received notice and did not challenge the tax sale prior to confirmation, the Town of Richford argues that the termination of the stay transcends confirmation, despite the tax sale occurring after confirmation. The Town of Richford further asserts that the Debtor's delay in bringing this matter before the Court is tantamount to waiver.

For the reasons set forth below, the Court finds that an order terminating the automatic stay prior to confirmation does not provide an exception to the rule that the parties are bound by confirmation. The Court concludes that the Town of Richford's post-confirmation tax sale of the Debtor's property and acceptance of a Collector's Deed violate the confirmation order and that the Debtor must be made whole. The continued acceptance of plan payments estops the Town of Richford from asserting otherwise.

JURISDICTION

This Court has jurisdiction over this matter pursuant to 28 U.S.C §§ 157 and 1334, and the Amended Order of Reference entered on June 22, 2012. This is a core proceeding arising under Title 11 of the United States Code as defined in 28 U.S.C. § 157(b)(2)(A) and (O), over which the Court has authority to enter a final judgment.

BACKGROUND

On September 21, 2020, Larry Carr (the "Debtor") filed a voluntary petition for relief under Chapter 13 of Bankruptcy Code (the "Petition Date") (doc. #1). As of the Petition Date, the Debtor owned real property located at 60 Noyes Street in Richford, Vermont (the "Property"). On November 23, 2020, through counsel the Town of Richford, which was owed past due real estate taxes on the Property, filed a notice of appearance and request for notice. On November 30, 2020, the Town of Richford filed a motion seeking a declaration pursuant to § 362(c), that the stay had lapsed (doc. #31).^[1] After considering the arguments of counsel for the Debtor and the Town of Richford, the Court granted the motion, determining the automatic stay had terminated, as to all creditors, by operation of law under § 362(c), and entered an Order memorializing that ruling on January 6, 2021 (doc. # 44).^[2]

On June 23, 2021, the Town of Richford executed a Notice of Tax Sale of the Property, noticing a sale for August 19, 2021. It is undisputed that the Debtor received the Notice of Tax Sale.

Thereafter, but prior to the tax sale, the Debtor confirmed his Chapter 13 Plan on July 30, 2021 (doc. #75). The confirmed Plan was subsequently modified by Order of this Court on August 30, 2022 (doc. # 91) but the treatment of the Town of Richford's claim was not modified. The confirmed Plan, as modified, will be referred to as the "Plan." The record establishes that the Town of Richford received notice of the Plan, the confirmation hearing on the Plan, the objection deadlines, as well as the motion to modify. The Plan provides treatment of the Town of Richford's claim. The Plan provides payments to cure the Debtor's real estate tax arrearages, plus the judgment rate of interest of 12%, over the life of the Plan (docs. ## 75 and 89). The Town of Richford did not object to the Plan.

As noticed, the Town of Richford conducted a tax sale on August 19, 2021, for the Property and was the sole bidder for $25,663.11. While the Debtor received notice of the tax sale, he was paying his real estate tax arrearages under the Plan and believed the Plan controlled. Despite taking an ownership interest as the high bidder at the tax sale, the Town of Richford acknowledges that it has been receiving payments under the Plan and has retained those payments. The Town of Richford has returned no payments to the Chapter 13 Trustee.

In August 2022, the Debtor applied to the State of Vermont Housing Assistance Program for a grant to pay his delinquent real estate taxes and was approved for $10,000 of grant funds. That approval was subsequently revoked. The Town of Richford contends that the approval was revoked because the Property was not eligible as his primary residence. The Debtor contends that the approval was revoked because of representations made by the Town of Richford to VHAP that the Debtor did not own the Property.^[3]

On January 30, 2023, VHAP formally denied the Debtor's grant, subject to a 45-day appeal period. The Debtor did not appeal that determination and on February 15, 2023, the Town Delinquent Tax Collector issued a Collector's Deed to the Town of Richford. That same day, the Town of Richford sent a letter to the Debtor requiring that he vacate the Property by February 20, 2023, including all his possessions.^[4] The letter stated that the Town of Richford would change the locks on February 21, 2023 (doc.# 96).

On February 17, 2023, the Debtor filed an emergency motion with the Court to impose the automatic stay, which was ultimately re-filed and noticed on March 3, 2023 after the Town of Richford agreed to a temporary stay until the contested matter could be heard by the Court. The Debtor requests the Court enter an order enjoining the Town of Richford from ejecting the Debtor, voiding the tax sale, and vesting title in the Property in the Debtor. The Town of Richford filed a response in due course. The Town of Richford argues that because the automatic stay terminated in this case because of successive filings, it is permitted to exercise post-petition remedies notwithstanding the fact that the Debtor confirmed the Plan.^[5]

The Court held a hearing on March 28, 2023, at which Alec Slater appeared on behalf of the Debtor, Brian Monaghan appeared for the Town of Richford and Jan Sensenich participated in his capacity as Chapter 13 Trustee. Although Debtor's counsel styled the motion as one to "Impose Automatic Stay," at the hearing Debtor's counsel agreed that it could be treated as one to enforce the Confirmation Order.

The Trustee reported that as of the hearing date on March 28, 2023, the Debtor was in arrears on Plan payments. No Notice of Delinquency or Motion to Dismiss has been filed. There is nothing before the Court indicating how far behind the Debtor was in plan payments as of March 28, 2023, or when the Debtor fell behind. It is undisputed that when the Plan payments have been made, the Town of Richford has received and accepted payments under the Plan, and has not returned any funds received to the Chapter 13 Trustee. After hearing arguments of counsel, the Court took the matter under advisement.

DISCUSSION

A. The Provisions of the Plan bind the Town of Richford.

Section 1327(a) of the Code is unequivocal: "The provisions of a confirmed plan bind the debtor and each creditor, . . . whether or not such creditor has objected to, has accepted, or has rejected the plan." § 1327(a); Celli v. First National Bank of Northern New York (In re Layo), 460 F.3d 289, 293 (2d Cir. 2006). "Under § 1327, a confirmation order is res judicata as to all issues which were decided, or could have been decided, at the hearing on confirmation." In re Whelton, 299 B.R. 306, 314 (Bankr. D. Vt. 2003).

Once a plan is confirmed, the plan binds the debtor and its creditors regardless of whether the stay has been vacated prior to confirmation, so long as the debtor remains current under the plan." In re Lemma, 394 B.R. 315, 324 (Bankr. E.D.N.Y. 2008).^[6] As the Lemma court also notes, most courts post-BAPCPA have held that pre-confirmation termination of the stay by § 362(c)(3) does not divest the debtor of the ability to bind creditors under a confirmed plan. Id. at 323-24 (citing Kurtzahn v. The Sheriff of Benton County, Minn. (In re Kurtzahn), 342 B.R. 581 (Bankr. D. Minn. 2006); In re Fleming, 349 B.R. 444 (Bankr. D.S.C. 2006)); See also In re Murphy, 346 B.R. 79, 83 (Bankr. S.D.N.Y. 2006) ("Because confirmation of a chapter 13 plan will 'bind each creditor' it follows that termination of the automatic stay as to all creditors under Section 362(c) does not automatically relieve all creditors, for all purposes, from the binding effect of a subsequently confirmed chapter 13 plan."). Thus, "the creditor must preserve its rights after the stay is vacated by objecting to the plan or by completing the liquidation of the collateral pre-confirmation, or else be bound to accept the treatment afforded under the confirmed plan." In re Lemma, 394 B.R. at 324.

One of the primary purposes of a Chapter 13 plan is to conclusively set forth the treatment of claims. See § 1322(a)-(b); see generally In re Loper, 222 B.R. 431, 435 (D. Vt. 1998) ("In Chapter 13 [cases], the debtor is allowed to adjust the amount and the timing of the repayment of his/her...