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In re Lewis

argued: January 25, 1989.

IN RE RALPH A. LEWIS, DEBTOR, RALPH A. LEWIS, APPELLANT


On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Docket No. Civil 87-0145).

Stapleton, Mansmann and Garth, Circuit Judges.

Author: Garth

Opinion OF THE COURT

GARTH, Circuit Judge

Debtor/Appellant Ralph A. Lewis appeals from the order of the district court which had affirmed the order of the bankruptcy court. Because the district court erred when it construed certain provisions of Lewis's Chapter 13 plan as waiving Lewis's rights under the Act, we will reverse the district court's order and direct the return of this case to the bankruptcy court for further proceedings.

I.

Lewis filed a petition for bankruptcy under Chapter 13 of the Bankruptcy Code on February 1, 1985. Part of Lewis's estate included his residence at 4929 Duffield Street, Philadelphia, Pennsylvania, which was appraised at $24,000. When he filed his petition, Lewis's residence was subject to the following encumbrances: a $1,000 statutory tax lien in favor of the City of Philadelphia; a purchase money mortgage in the amount of $24,000 in favor of Horizon Financial, F.A.; and a mortgage lien of $4,000 in favor of Philadelphia Neighborhood Housing Services ("PNHS").

On April 17, 1985, Lewis filed his proposed Chapter 13 plan. (A. 47). Among other provisions, para. 8 of Lewis's plan stated:

8. Confirmation of this plan shall constitute a finding that [Horizon] and PNHS are holders of secured claims that are secured by an interest in personal property as well as in real property and that their rights may be modified in accordance with 11 U.S.C. § 1322(b)(2).

(A. 51-52).

On or about May 15, 1985, the bankruptcy court sent to all creditors including PNHS, the standard Order For Meeting of Creditors, combined with the requisite notice and an order providing for an automatic stay. The notice informed the creditors of the dates of various hearings including the date of the confirmation hearing scheduled for June 25, 1985 and the last date for filing proofs of claims, September 4, 1985.

A meeting of creditors was held on June 6, 1985, and on June 25, 1985, a confirmation hearing was held and Lewis's Chapter 13 plan was confirmed. Subsequently, on July 15, 1985, after the plan had been confirmed, PNHS filed a proof of claim for its $4,000 mortgage. On March 6, 1986, Lewis then filed motions under 11 U.S.C. § 506(a), seeking a determination of the value of Horizon's, Philadelphia Department of Public Welfare's and PNHS's interests in his residence. Lewis sought to avoid their respective liens pursuant to 11 U.S.C. § 506(d), to the extent that the liens were not allowed secured claims, within the meaning of § 506(a).

The bankruptcy court invalidated the lien of the Department of Welfare and partially voided the lien of Horizon. However, the bankruptcy court denied Lewis's motion to avoid the PNHS lien.

Lewis appealed to the district court, which affirmed the bankruptcy court on the ground that para. 8 of Lewis's plan constituted a finding that PNHS was the holder of a secured claim in Lewis's residence. Lewis moved for reconsideration, and the district court, while clarifying its ...


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