Barnaba et al v. Joubert
Filing
11
ORDER AND REASONS re 1 Bankruptcy Appeal filed by Jonathan Barnaba, Kishandra Barnaba. IT IS HEREBY ORDERED that this matter is REMANDED to the Bankruptcy Court for the purpose of amending the confirmation order to include the reservation of rights language consistent with the May 30, 2017 Agreed Order and for any additional proceedings consistent with this opinion. Signed by Chief Judge Nannette Jolivette Brown on 8/21/2018. (crt,Crick, S)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
JONATHAN BARNABA, et al.
CIVIL ACTION
VERSUS
CASE NO. 17-869
LINDA M. JOUBERT
JUDGE: NJB
MAGISTRATE JUDGE: KWR
ORDER AND REASONS
Before the Court is Jonathan Barnaba and Kishandra Barnaba’s (collectively, “the
Barnabas”) appeal from the United States Bankruptcy Court’s June 26, 2017 “Order Confirming
Chapter 13 Plan” entered in favor of the debtor Linda M. Joubert (“Joubert”). Considering the
briefs filed by the parties, the record and the applicable law, for the reasons that follow, the Court
will remand this matter to the Bankruptcy Court for the purpose of amending the confirmation
order to include the reservation of rights language consistent with the May 30, 2017 Agreed Order
and for any additional proceedings consistent with this opinion.
I. Background
On January 4, 2017, Joubert filed a voluntary petition for relief under Chapter 13 of the
Bankruptcy Code, resulting in an automatic stay of any litigation involving Joubert pursuant to 11
U.S.C. § 362.1 On February 2, 2017, Joubert filed a Chapter 13 Statement, which listed the
Barnabas as creditors with a total unsecured claim of $8,132.70.2 On February 15, 2017, the
Barnabas filed a proof of claim asserting a total unsecured claim of $2,000,000,3 and Joubert filed
1
Bankruptcy Rec. Doc. 1.
2
Bankruptcy Rec. Doc. 8.
3
Bankruptcy Rec. Doc. 1-1.
an objection disputing the claim amount.4
On February 2, 2017, Joubert filed a proposed Chapter 13 Plan.5 On April 19, 2017, the
Barnabas filed an Objection to the Chapter 13 Plan.6 In the Objection, the Barnabas asserted that
Joubert was a defendant in a personal injury action brought by the Barnabas in the 27th Judicial
District Court for the Parish of St. Landry, arising from a motor-vehicle accident, “which caused
catastrophic injuries to Jonathan Barnaba, including but not limited to, the amputation of Mr.
Barnaba’s left leg.”7 The Barnabas asserted that Joubert had “illegitimately instituted [the
bankruptcy] proceedings to avoid judgment against her.”8 The Barnabas objected to their claim
amount being listed as $8,132.70, asserting that there had not yet been a determination of the claim
amount owed.9
On April 19, 2017, the Barnabas filed a “Motion to Dismiss Bankruptcy Proceeding and/or
in the Alternative to Convert to Chapter 7 and to Lift Automatic Stay.”10 On April 27, 2017, Joubert
filed an opposition to the Barnabas’ motion.11 On May 24, 2017, the Bankruptcy Court held a
hearing on the Barnabas’ motion and on Joubert’s objection to the Barnabas’ claim.12 During the
4
Bankruptcy Rec. Doc. 19.
5
Bankruptcy Rec. Doc. 7.
6
Bankruptcy Rec. Doc. 16.
7
Id. at 1.
8
Id.
9
Id. at 2.
10
Bankruptcy Rec. Doc. 17.
11
Bankruptcy Rec. Doc. 24.
12
Bankruptcy Rec. Doc. 29.
2
hearing, the Bankruptcy Court denied the motion and the parties agreed to submit a proposed order
lifting the bankruptcy stay to allow the Barnabas’ claim against Joubert to be litigated in state
court.13 The Bankruptcy Court ordered that Joubert’s objection to the Barnabas’ claim was
withdrawn without prejudice, and a plan confirmation hearing was set for June 21, 2017.14
On May 31, 2017, the Bankruptcy Court entered the Agreed Order, ordering that: (1) the
Automatic Stay was lifted to allow the Barnabas to proceed with the litigation pending in state
court “for the sole purpose of determining liability and monetary damages”; (2) upon entry of the
judgment the Barnabas would not seek to execute the judgment or seize any assets of the
bankruptcy estate; and (3) the Barnabas would reserve the right “to file an amended proof of claim
and/or object to the plan contingent upon rendition of the Judgment of the 27th Judicial District
Court.”15
On June 21, 2017, the Bankruptcy Court entered a minute entry stating that the Chapter 13
Plan would be confirmed without a formal hearing, which was cancelled due to inclement
weather.16 On June 26, 2017, the Bankruptcy Court entered an “Order Confirming Chapter 13
Plan.”17 Pursuant to the confirmation order, Joubert would make payments in the amount of $200
per month for 36 months.18 Joubert also pledged her tax returns for the years 2016, 2017, and
13
Id.
14
Id.
15
Bankruptcy Rec. Doc. 32.
16
Bankruptcy Rec. Doc. 34.
17
Bankruptcy Rec. Doc. 36.
18
Id. at 1.
3
2018,19 “to be paid to the Trustee to pay administrative expenses first and then, thereafter to the
benefit of the general unsecured creditors.”20
On July 6, 2017, the Barnabas filed a notice of appeal of the Bankruptcy Court’s June 26,
2017 “Order Confirming Chapter 13 Plan.”21 On September 5, 2017, the Barnabas filed an
appellant brief.22 On October 11, 2017, Joubert filed an appellee brief.23 On July 26, 2018, the case
was reassigned to the undersigned Chief United States District Judge.24
II. Issues Raised on Appeal
A.
The Barnabas’ Appellant Brief
The Barnabas raise four issues on appeal: (1) the Bankruptcy Court erred by entering the
confirmation order without a hearing and an opportunity for the Barnabas to be heard; (2) the
Bankruptcy Court’s Order was based upon false representations or misstatements of fact by
Joubert; (3) the Bankruptcy Court erred by entering the confirmation order before the amount of
the debt had been determined; and (4) the debt is not a “consumer debt” within the meaning of
Chapter 13.25
First, the Barnabas contend that the Bankruptcy Court erred in entering the confirmation
19
Id.
20
Bankruptcy Rec. Doc. 7.
21
Rec. Doc. 1.
22
Rec. Doc. 7.
23
Rec. Doc. 9.
24
Rec. Doc. 10.
25
Rec. Doc. 7 at 4.
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order without a hearing and an opportunity for the Barnabas to be heard.26 The Barnabas assert
that creditors are entitled to a hearing and an opportunity to be heard before entry of such an
order.27 Because this procedural prerequisite was not met, the Barnabas argue that the confirmation
order should be vacated.28
Second, the Barnabas assert that the confirmation order was based upon false
representations or misstatements of fact by Joubert.29 The Barnabas cite an Eight Circuit case to
support the assertion that “[a]n adjudication and order of confirmation of plan based upon ex parte,
inaccurate, false misstatements of fact is patently wrong and should be vacated pending the
ascertainment of the true facts.”30 The Barnabas note that “the debt arises out of a personal injury
sustained by Jonathan Barnaba, for which there was and still is a legal action pending.”31
According to the Barnabas, the uncertainty of the debt should have precluded confirmation of the
plan.32 Likewise, because the debt is undetermined, the Barnabas contend that the Bankruptcy
Court could not calculate monthly payments or determine whether the debt could be satisfied
within the term provided by law.33
Third, the Barnabas assert that the Bankruptcy Court erred in entering the confirmation
26
Id. at 6.
27
Id. at 7 (citing 11 U.S.C. § 1325(b)(1)).
28
Id.
29
Id.
30
Id. (citing Hamilton v. Hamilton, 358 F. App’x 762 (8th Cir. 2009)).
31
Id. at 8.
32
Id.
33
Id.
5
order before the amount of the debt was determined.34 According to the Barnabas, Joubert
arbitrarily assigned the debt a value of $8,132.70, even though the amount of the debt has never
been determined.35 The Barnabas assert that the Bankruptcy Court failed to estimate the amount
of the debt prior to confirmation, as the law requires.36 The Barnabas note that Jonathan Barnaba
suffered an amputated leg, total and permanent disability, and substantial medical expenses as a
result of the motor-vehicle accident that is the source of the debt.37 The Barnabas contend that the
monthly payments required to satisfy this plan are “preposterous” considering the amount of the
actual debt.38
Finally, the Barnabas argue that the debt is not a “consumer debt” within the meaning of
Chapter 13 but instead is an unliquidated liability for personal injury.39 Accordingly, the Barnabas
assert that “the pending action by [Joubert] was improperly filed and the automatic stay ordered
by [the Bankruptcy] Court was improvidently granted because liability in damages for a personal
injury has never been held to be ‘consumer debt’ and self-evidently is not.”40
B.
Joubert’s Appellee Brief
Joubert contends that this appeal is premature because the Barnabas’ right to file an
amended proof of claim or objection to the plan was reserved in the Agreed Order entered by the
34
Id.
35
Id. at 8–9.
36
Id. at 9 (citing 11 U.S.C. 502(c)).
37
Id.
38
Id. at 10.
39
Id. at 11.
40
Id.
6
Bankruptcy Court on May 30, 2017.41 After judgment is rendered by the state court in the
underlying personal injury action, Joubert contends that the Barnabas have the right, pursuant to
the Agreed Order, to amend the proof of claim and/or object to the plan.42 Therefore, Joubert
asserts that the Barnabas “have lost no rights as a result of the confirmation order.”43 Accordingly,
Joubert argues that the matter should be remanded to the Bankruptcy Court for the purpose of
amending the confirmation order to include the reservation of rights language consistent with the
May 30, 2017 Order.44
III. Jurisdiction
The Court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a)(1), which
authorizes appellate review of final orders, judgments and decrees of a United States Bankruptcy
Court entered consistent with 28 U.S.C. § 157.45 In appeals from bankruptcy courts, district courts
sit as an appellate court.46
IV. Standard of Review
A district court reviews a bankruptcy court’s conclusions of law de novo, findings of fact
for clear error, and mixed questions of law and fact de novo.47 A district court may affirm, reverse
41
Rec. Doc. 9 at 5.
42
Id. at 6.
43
Id.
44
Id.
45
28 U.S.C. § 158(a)(1).
46
28 U.S.C. § 1334(b).
47
In re Nat’l Gypsum Co., 208 F.3d 498, 504 (5th Cir. 2000).
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or modify a bankruptcy court’s ruling, or remand the case for further proceedings.48
V. Analysis
The Barnabas assert that the Bankruptcy Court erred by entering the confirmation order
without a hearing, the Order was based upon false representations or misstatements of fact by
Joubert, and the Order was entered before the amount of the debt had been determined.49 In
response, Joubert contends that this appeal is premature because the Barnabas’ right to file an
amended proof of claim or objection to the plan after the amount of the debt is determined was
reserved in the Agreed Order entered by the Bankruptcy Court on May 30, 2017.50 Accordingly,
Joubert argues that the matter should be remanded to the Bankruptcy Court for the purpose of
amending the confirmation order to include the reservation of rights language consistent with the
May 30, 2017 Order.51
Chapter 13 of the Bankruptcy Code was created “to address consumer credit loss during
the Great Depression by providing a completely voluntary proceeding for consumers to amortize
their debts out of future earnings.”52 “The term ‘consumer debt’ means debt incurred by an
individual primarily for a personal, family, or household purpose.”53 However, Chapter 13 does
not cover only “consumer debt” as the Barnabas suggest, but also covers other types of secured
48
Fed. R. Bankr. P. 8013.
49
Rec. Doc. 7 at 4.
50
Rec. Doc. 9 at 5.
51
Id. at 6.
52
In re Mesa, 467 F.3d 874, 877 (5th Cir. 2006) (quoting In re Nolan, 232 F.3d 528, 530 (6th Cir. 2000)).
53
11 U.S.C. § 101(8).
8
claims, priority claims, and general unsecured claims.54 Chapter 13 is employed to permit wageearning debtors “to reorganize with a repayment plan as an alternative to seeking a complete
discharge of debts through the Chapter 7 bankruptcy liquidation process.”55
Section 501(a) of the Bankruptcy Code permits a creditor to file a proof of claim in a
Chapter 13 bankruptcy proceeding.56 Although “no creditor is required to file a proof of claim,”57
filing “may prove necessary when the claim incorrectly appears in the debtor’s schedules or when
the schedules list the claim as disputed, contingent or unliquidated.”58 Under Section 502(a) of
the Bankruptcy Code, a proof of claim is deemed allowed, unless “a party in interest” objects.59
Pursuant to Section 502(c) of the Bankruptcy Code, a “contingent” claim must be estimated where
“the fixing” of the claim “would unduly delay the administration of the case.”60
Section 1324 of the Bankruptcy Code provides that the Bankruptcy Court shall hold a
hearing on confirmation of a Chapter 13 plan on notice to all parties in interest to consider whether
the plan should be confirmed.61 If the Chapter 13 trustee recommends confirmation prior to the
hearing, and if there are no objections to confirmation filed by creditors, the Bankruptcy Court
54
See 11 U.S.C. §§ 1322(a)(2) 11 U.S.C. § 1325(a)(5)(B) (requiring that a plan must provide for payment
of a claim secured by property the debtor wants to keep and priority claims in full).
55
Mesa, 467 F.3d at 877.
56
In re Simmons, 765 F.2d 547, 551 (5th Cir. 1985).
57
Id. (citing H.R.Rep. No. 595, 95th Cong., 1st Sess. 351 (1977), reprinted in 1978 U.S. Code Cong. &
Ad.News 5963, 6307).
58
Id. (citing 3 Collier on Bankruptcy ¶ 501.01, at 501-3 (15th ed. 1985)).
59
11 U.S.C. § 502(a).
60
11 U.S.C. § 502(c).
61
11 U.S.C. § 1324.
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may confirm the plan without further proceedings.62 “A confirmed chapter 13 plan is, of course,
binding on all parties.”63 “Under 11 U.S.C. § 1329, however, the plan may be modified by either
the debtor, trustee, or an unsecured creditor.”64 Section 1329(a) states:
(a) At any time after confirmation of the plan but before the completion of payments
under such plan, the plan may be modified, upon request of the debtor, the trustee,
or the holder of an allowed unsecured claim, to–
(1) increase or reduce the amount of payments on claims of a
particular class provided for by the plan;
(2) extend or reduce the time for such payments;
(3) alter the amount of the distribution to a creditor whose claim is
provided for by the plan to the extent necessary to take account of
any payment of such claim other than under the plan; or
(4) reduce amounts to be paid under the plan by the actual amount
expended by the debtor to purchase health insurance for the
debtor. . . .65
In this case, Joubert initially filed a Chapter 13 Statement, which listed the Barnabas as
creditors with a total unsecure claim of $8,132.70.66 In response, the Barnabas filed a proof of
claim asserting a total unsecured claim of $2,000,000,67 and Joubert filed an objection disputing
the claim amount.68 Joubert also filed a proposed Chapter 13 Plan,69 to which the Barnabas
objected.70
62
In re Moore, 319 B.R. 504, 516 (Bankr. S.D. Tex. 2005).
63
Mesa, 467 F.3d at 877 (citing 11 U.S.C. § 1327(a)).
64
Id. (internal citations omitted).
65
11 U.S.C. § 1329(a).
66
Bankruptcy Rec. Doc. 8.
67
Bankruptcy Rec. Doc. 1-1.
68
Bankruptcy Rec. Doc. 19.
69
Bankruptcy Rec. Doc. 7.
70
Bankruptcy Rec. Doc. 16.
10
The Bankruptcy Court held a hearing in this case on May 24, 2017, during which the
Bankruptcy Court denied a motion filed by the Barnabas seeking to dismiss the bankruptcy case
or convert the case to a Chapter 7 bankruptcy.71 During the hearing, the Bankruptcy Court also
ordered that Joubert’s objection to the Barnabas’ claim was withdrawn without prejudice.72 The
parties also agreed to submit an agreed order to the Bankruptcy Court.73
On May 31, 2017, the Bankruptcy Court entered the Agreed Order, ordering that: (1) the
Automatic Stay was lifted to allow the Barnabas to proceed with the litigation pending in state
court “for the sole purpose of determining liability and monetary damages”; (2) upon entry of the
judgment the Barnabas would not seek to execute the judgment or seize any assets of the
bankruptcy estate; and (3) the Barnabas would reserve the right “to file an amended proof of claim
and/or object to the plan contingent upon rendition of the Judgment of the 27th Judicial District
Court.”74
As noted above, a proof of claim is deemed allowed, unless “a party in interest” objects.75
Here, Joubert filed an objection to the Barnabas’ proof of claim, but that objection was withdrawn
without prejudice during the May 24, 2017 hearing. Therefore, because the objection was
withdrawn, it appears that the Barnabas’ proof of claim for $2,000,000 was deemed allowed. The
Barnabas contend that the Bankruptcy Court erred in confirming the plan without a hearing, but in
71
Bankruptcy Rec. Doc. 29.
72
Id.
73
Id.
74
Bankruptcy Rec. Doc. 32.
75
11 U.S.C. § 502(a).
11
the Agreed Order the Barnabas reserved the right to file an amended proof of claim and/or
objection to the plan contingent upon rendition of the Judgment of the 27th Judicial District Court.
At that time, the Barnabas will have the right to move to modify the plan under 11 U.S.C. § 1329,
if necessary. Accordingly, it appears that any objections to the plan were resolved during the May
24, 2017 hearing. Therefore, the Bankruptcy Court did not err in entering the confirmation order
without conducting another formal hearing as to the rights of the parties to amend the plan.
Furthermore, any objection to the claim were reserved during the hearing and in the May 30, 2017
Agreed Order. Accordingly, the Court will remand this case to the Bankruptcy Court for the
purpose of amending the confirmation order to include the reservation of rights language consistent
with the May 30, 2017 Order and for any further proceedings consistent with this opinion.76
VI. Conclusion
For the reasons discussed above, the Court remands this case to the Bankruptcy Court for
the purpose of amending the confirmation order to include the reservation of rights language
consistent with the May 30, 2017 Agreed Order and for any additional proceedings consistent with
this opinion.
Accordingly,
76
Id. at 6.
12
IT IS HEREBY ORDERED that this matter is REMANDED to the Bankruptcy Court
for the purpose of amending the confirmation order to include the reservation of rights language
consistent with the May 30, 2017 Agreed Order and for any additional proceedings consistent with
this opinion.
21st
NEW ORLEANS, LOUISIANA, this ______ day of August, 2018.
________________________________
NANNETTE JOLIVETTE BROWN
CHIEF JUDGE
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
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