In the Matter of: S. WHITE TRANSPORTATION, INCORPORATED, Debtor
S. WHITE TRANSPORTATION, INCORPORATED, Appellant ACCEPTANCE LOAN COMPANY, INCORPORATED, Appellee
Appeal from the United States District Court for the Southern District of Mississippi
Before DENNIS, CLEMENT, and SOUTHWICK, Circuit Judges.
EDITH BROWN CLEMENT,
S. White Transportation, Inc. ("SWT") appeals the district court's holding that a lien on its principal asset held by Acceptance Loan Co. ("Acceptance") survived confirmation of a Chapter 11 bankruptcy reorganization plan. We AFFIRM.
FACTS AND PROCEEDINGS
In 2004, Acceptance perfected a security interest in SWT's principal asset, an office building in Saucier, Mississippi. SWT contested the validity of this claimed lien on various grounds, resulting in years of litigation in Mississippi state courts that remains unresolved. After Acceptance's perfection of its putative interest, three other entities perfected security interests in the same building.
SWT filed a voluntary Chapter 11 bankruptcy petition on May 17, 2010. In its accompanying Schedule D list of secured creditors, SWT acknowledged the three later security interests but only listed Acceptance's lien as "disputed." Acceptance received effective notice of the pendency of SWT's bankruptcy on at least several occasions. However, Acceptance never filed a proof-of-claim in the bankruptcy court and otherwise did not involve itself in any way with the ongoing bankruptcy. On September 14, SWT submitted a reorganization plan (the "Plan") to the bankruptcy court. The Plan noted that Acceptance had never filed a proof-of-claim and that SWT contested the validity of Acceptance's lien. It provided for no recovery for Acceptance. The bankruptcy court confirmed the Plan on December 21.
On January 4, 2011, Acceptance moved the bankruptcy court for a declaratory judgment that its lien had survived the Plan's confirmation or, alternatively, for the bankruptcy court to amend its confirmation order to provide for Acceptance's lien. The bankruptcy court denied Acceptance's motion. It held that the Plan's confirmation voided any lien that Acceptance held and refused to modify the confirmation order. It based its decision on 11 U.S.C. § 1141(c), which provides that property dealt with by a confirmation plan is held "free and clear of all claims and interests." Although this court has held that § 1141(c) only voids liens held by a "lien holder [who] participate[s] in the reorganization, " Elixir Indus., Inc. v. City Bank & Trust Co. (In re Ahern Enters., Inc.), 507 F.3d 817, 822 (5th Cir. 2007), the bankruptcy court held that Acceptance had "participated" within the meaning of this standard by having received notice of the bankruptcy.
Acceptance appealed the bankruptcy court's order to the district court, and the district court reversed, holding that mere notice does not constitute participation within the meaning of In re Ahern Enterprises. SWT appeals.
STANDARD OF REVIEW
When reviewing appeals taken from a district court's review of an appeal from a bankruptcy court, "we perform the identical task as the district court, reviewing the bankruptcy court's findings of fact under the clearly erroneous standard and its conclusions of law de novo." U.S. Abatement Corp. v. Mobil Exploration & Producing U.S. Inc. (In re U.S. Abatement Corp.), 79 F.3d 393, 397 (5th Cir. 1996) (footnote omitted).
It is a longstanding rule in bankruptcy that "[a] secured creditor 'with a loan secured by a lien on the assets of a debtor who becomes bankrupt before the loan is repaid may ignore the bankruptcy proceeding and look to the lien for satisfaction of the debt.'" Sun Fin. Co. v. Howard (In re Howard), 972 F.2d 639, 641 (5th Cir. 1992) (quoting Simmons v. J.T. Savell (In re Simmons), 765 F.2d 547, 556 (5th Cir. 1985)). However, this default rule only applies so long as the lien is not "invalidated by some provision of the Code." In re Simmons, 765 F.2d at 556.
11 U.S.C. § 1141(c) provides that: "[A]fter confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors, equity security holders, and of general partners in the ...