MEMORANDUM OPINION

Robert E. Nugent, United States Chief Bankruptcy Judge.

Is the chapter 13 Trustee barred from avoiding a secured creditor's liens post-confirmation when she did not object to confirmation? Does it matter whether the Trustee signed an Agreed Order providing for the creditor's claims to be treated as secured or that she did so before the claims bar date and didn't have an opportunity to see, far less object to, the creditor's claim before confirmation? And if the orders bar her efforts, does § 502(j) reconsideration of the claims leave the trustee another source of relief?

Section 1327(a) binds the debtor and each creditor to a confirmed plan's provisions whether the plan treats the claim or not and whether the creditor objects, accepts, or rejects it.1 Section 502(j) provides for the reconsideration of a claim that has been allowed or disallowed, upon a showing of cause and based upon the equities of the case.2 Even though the plan was confirmed before the claims bar date, the Trustee signed an agreed order providing for the secured creditor's treatment and recommended that the debtor's plan be confirmed. That treatment binds her under § 1327(a) and effectively bars the Trustee's adversary proceeding to avoid the creditor's lien under § 544(b).3 Even § 502(j) does not save the Trustee because she did not show cause why the secured creditor's claims should be reconsidered.

Finally, even if confirmation did not bar the complaint or if she had demonstrated cause to reconsider, her cause of action fails on the merits. Although the debtor did not execute a form security agreement that contained words of grant, reading all of the documents between the debtor and the creditor as a composite transaction makes it clear that the parties intended that the creditor would sell the debtor the trucks while retaining a purchase money security interest in them. The creditor's liens attached to the collateral under KAN. STAT. ANN. § 84-9-203 (2014 Supp.).4

Jurisdiction

This adversary proceeding is a core proceeding over which the Court may exercise subject matter jurisdiction under 28 U.S.C. § 1334 and § 157(a) and (b)(1).5

Facts

The debtor Laura Brannan is an over-the-road trucker who was formerly employed by M. Bruenger & Co. (MBC), a Wichita trucking concern. For a long time, MBC has made a practice of locating and selling semi-tractors (trucks) to its drivers. The drivers purchase the trucks and drive loads provided by MBC. MBC deducts the drivers' weekly installment payment from their pay or fees and purportedly retains a security interest in the trucks until the sale price is paid in full. The idea is to incentivize the drivers by giving them ownership of their unit while making them independent contractors of MBC as opposed to its employees. MBC sold two semi-tractors to Ms. Brannan utilizing this financing program.

In Ms. Brannan's case, MBC documented its two transactions by the parties executing a series of documents, beginning with a Weekly Installment Agreement.6 That agreement described the truck being sold, the purchase price, the date of sale, and the weekly installment payment. Both Brannan and a representative of MBC signed it. MBC then made a Bill of Sale over to the buyer, again describing the truck by vehicle identification number, make, and year, and showing the purchase price.7 MBC next assigned to the buyer its certificate of title for the truck, its representative executing the assignment section on the title's reverse side, assigning the truck and title to Brannan.8 In this assignment section, Brannan checked a box indicating that the truck is subject to MBC's lien and signed a statement affirming that lien as the title form requires. As the new owner of the truck, Brannan then obtained a Title and Registration Receipt from the Kansas Division of Vehicles indicating MBC's liens on the trucks.9 MBC followed this process for both of the trucks Brannan purchased — a 2007 Kenworth purchased in October of 2012 and a 2009 Cascadia Freightliner purchased two months later in December.

Ms. Brannan filed her chapter 13 case on November 1, 2013.10 The non-governmental creditor bar date was set for March 4, 2014. She filed an amended chapter 13 plan in December in which she proposed to make 60 monthly payments of $1,437.00.11 Because she had purchased the trucks within a year of filing, her plan provided for treating MBC under the two truck purchase agreements as "one year loan creditors" under § 1325(a)(5)'s hanging paragraph.12 She proposed minimum monthly payments on both trucks and to pay them in full. On December 27, the trustee objected to Brannan's plan for several reasons, but did not question whether MBC's claims were secured claims.13 On January 2, 2014, MBC objected to confirmation, too, noting that the plan did not provide for a third truck, but specifically not objecting to the proposed treatment of the two trucks described above.14

On February 3, the parties presented an Agreed Order that resolved MBC's confirmation objection by providing for the surrender of the unmentioned truck and setting forth an agreement about the values and payment terms concerning the two trucks Brannan sought to retain.15 The Trustee approved this Agreed Order along with counsel for debtor and MBC. The Agreed Order specifies that "Bruenger shall have a general secured claim" as to both vehicle transactions, that "it shall be allowed a general unsecured claim for any deficiency balance," and that "Bruenger shall retain its liens with respect to its secured claims...."16 The amended plan was confirmed and a confirmation order entered on February 19.17 MBC filed its proofs of claim on March 4, 2014.18 After the Trustee reviewed the proofs of claim, she filed this adversary proceeding under § 544 to avoid and preserve what she alleges to be an unattached security interest in each of the trucks. The parties provided pre- and post-trial briefs and the Court held a trial on March 17, 2015.

Analysis

The Trustee claims that MBC's purported security interests in the two trucks never attached because Laura Brannan never "authenticated" a security agreement as is required by KAN. STAT. ANN. § 84-9-203(b), Kansas' version of revised Article 9 of the Uniform Commercial Code. MBC responds that while no form security agreement was made, a reading of all the transaction documents makes clear that the parties intended to and did create security interests that attached to the Freightliner and Kenworth to secure MBC's claims. But MBC also claims that the Trustee's execution of the Agreed Order resolving MBC's objection to confirmation and the Confirmation Order itself bar the Trustee's lien avoidance action.

Section 1327(a) Finality

Section 1327(a) provides that confirmation of the debtors plan is binding on the debtor and every creditor (whose interests the Trustee represents) whether or not the plan treats their claims or they have objected to or accepted the plan.19 In this case, the confirmed plan plainly provides that MBC's claims are secured by the trucks and for those claims to be paid as specified in the Agreed Order. MBC argues that § 1327(a) effectively codifies the doctrine of res judicata as to the allowance and treatment of claims once a plan is confirmed and that, as the United States Supreme Court has held in Espinosa, parties to a plan are stuck with its contents once it's confirmed, even if the applicable plan provisions are contrary to bankruptcy or other law.20 The Trustee responds that § 502(j) carves out an exception to § 1327(a)'s preclusive effect by permitting her to seek reconsideration of MBC's allowed claims for cause.

The Trustee notes that her approval of the Agreed Order and confirmation recommendation both occurred before MBC filed its proofs of claim. She says that without the proofs of claim being filed, there wasn't any way for her to know that MBC's liens were flawed and that she signed the Agreed Order because this Judge requires that she be made privy to and sign off on all orders in chapter 13 cases that affect her duties.21 She also argues that when plans are confirmed in this District, confirmation does not finally allow or disallow claims and that any claim treated in the plan can be disallowed even after confirmation.22

The courts are somewhat divided on whether confirmed plans preclude revisiting the validity of liens or claims. Some hold that they do not. In In re Johnson, when the trustee objected to a creditor's secured claim after plan confirmation, that creditor raised § 1327(a) as a bar to the objection.23 Noting that the district's form plan neither allows nor disallows claims, and that meaningful claim review by the trustee is impossible in a district where plans are routinely confirmed on the date of the debtor's first meeting of creditors, well before the claims bar date, the court sustained the trustee's claim objection. The court explained that the plan in question is a "pot" plan, meaning that the debtor is obligated for a series of fixed payments that will fund a liquidated amount to be distributed to the creditors treated in the plan. Implicit in that sort of plan is the idea that if the trustee successfully objects to a claim (or avoids a secured creditor's lien), part or all of that pot will be distributed differently. In other words, what § 1327(a) makes "final" about a confirmation order is not what a particular creditor will get, but what the debtor will pay.24 According to the Johnson court, holding otherwise would greatly damage the speedy confirmation process by slowing it down while the trustee examined claims before recommending confirmation.

Other courts conclude that the entry of a confirmation order precludes any issue that is fundamental to the order. In In re Reid,25 a chapter 13 trustee sought to avoid a mortgage on the debtor's home after the debtor's plan was confirmed. The plan specifically called for the debtor to cure and maintain mortgage payments and for the creditor to retain its hen. Only then did the trustee file an adversary proceeding to avoid the mortgage. The court began with the familiar rule that an issue is precluded if it has been resolved by a final judgment on the merits in an action involving the identical parties that considered the same or similar cause of action. In Reid, the court concluded that the chapter 13 confirmation order was a final order on the merits, that both the trustee and the creditor were parties to the confirmation process that generated the order, and that the plan had addressed the creditor's claim. All three of the components of res judicata were thus met. The court further noted that even though the trustee is not specifically named in § 1327(a), "it is difficult to imagine how the plan can be final if it is not final as to [the trustee]."26 The Reid opinion cites a number of cases that have so held.

The Eleventh Circuit has also held that confirmation orders are final and preclude actions like the one here. In Hope v. Acorn Financial, Inc., a chapter 13 trustee (who, unlike the trustee here, was fully aware of a defect in the secured creditor's lien) failed to object to confirmation of the debtor's plan, but then sought to avoid the lien as does the trustee here.27 The trustee argued that the absence of a reference to the trustee in § 1327(a) meant that the trustee was not bound by the confirmation order as the debtor and particular creditors are. The panel reasoned that § 1327(a) must be read along with other parts of chapter 13 like § 1325(a)(2) and (c) that require the trustee to make distributions under the confirmed plan and § 1329(a) which authorizes the trustee to request post-confirmation modification of a plan. Quoting the Reid court, the panel stated, "These provisions would be `unnecessary if the confirmed plan did not already bind the trustee as it does the debtor.'"28 Moreover, the panel noted, the role of the trustee is to serve the interests of the creditors as a body.29 Consequently, the trustee would be bound by provisions that bind the creditors. The panel also noted that its decision should be limited to its facts and particularly to the fact that the trustee knew of the lien's flaw, but apparently did not act on that knowledge before confirmation.

The Trustee's complaint here is not based on information that was unavailable to her before confirmation. As the Trustee affirmatively consented to the debtor's and creditor's proposed treatment of the claim as secured and then recommended the amended plan be confirmed, it is hard to understand how she should not be bound by that consent. While it may not be reasonable to expect the trustee to conduct discovery as to every secured claim, it is equally untenable to expose the debtor and secured creditors to the possibility of having to defend their secured status even after the trustee has consented to its treatment as a secured claim. That would seriously undermine the creditors' confidence that the resolution they have reached, and that the court has blessed, will be final and enforceable. As one bankruptcy court noted in addressing a post-confirmation challenge to the validity of a secured claim:

Here, the Trustee went one step further when she approved the Agreed Order. The secured status of MBC was an issue intrinsic to the plan as confirmed. The Trustee's action to avoid that status is barred by the res judicata effect of § 1327(a).

Reconsideration of Allowed Claims, § 502(j)

The Trustee's fallback argument is that § 502(j) authorizes the Court to reconsider an allowed claim for cause even after confirmation.31 The first question is whether the Agreed Order and the Confirmation Order operated to allow MBC's claim as secured. Some courts hold that claims are deemed allowed by a confirmation order that is entered without objection.32

If the Agreed Order and Confirmation Order sufficed to allow MBC's claims, the Trustee could still seek their reconsideration for cause. Another judge in this District has held that the classification of a secured claim may be reconsidered post-confirmation when the creditor's collateral is destroyed.33 Most reconsideration cases involve an unexpected post-confirmation change in circumstances, fraud, or newly discovered evidence as the "cause" for reconsideration.34 There is nothing the Trustee knows now that was unascertainable or concealed by the creditor beforehand. Nor is there a suggestion of misconduct on MBC's part. The Trustee has shown no "cause" to reconsider MBC's claims.35

Composite Documentation Constitutes an Authenticated Security Agreement and Attachment of Lien

Even if there were reason to reconsider MBC's secured claims, the "equities" do not support the Trustee's assertion that MBC's documents failed to create enforceable security interests in the trucks because the law of secured transactions makes clear that they do.36 Many courts have read composite agreements like the ones in this case to create enforceable security interests even in the absence of "magic words" of grant because the agreements' provisions manifested the parties' intent to create security interests in the collateral. A reading of the documents in pari materia makes that clear here. Though the Weekly Payment Agreement lacks words of grant, it shows that the parties intended to enter into a sale agreement. So does the Bill of Sale. While those agreements lack references to the creation or retention of security interests in the trucks, others do not. First, Ms. Brannan signed and acknowledged on the reverse side of the titles (assignment of title) that she was the buyer of the trucks and that they each were subject to MBC's lien.37 Second, she signed an application for title indicating that MBC was a "1st Lienholder."38 Finally, MBC is identified on the Title and Registration Receipts as a lienholder on the trucks.39 The sum of these documents, taken with Mr. Bruenger's credible testimony as to the custom and usages of MBC as to this long-standing financing program satisfy the Court that Brannan granted MBC purchase money security interests in the Freightliner and the Kenworth.

KAN. STAT. ANN. § 84-9-203 requires that a debtor "authenticate" a security agreement in order to create a security interest, but no particular form of a security agreement is required. Instead the agreement must create a security interest as defined in § 84-1-201(b)(35).40 Indeed a "collage" or "composite" group of documents may stand as evidence of such an agreement.41 Kansas contract law recognizes the collage or composite document theory.42 As one treatise on secured transactions has noted, requiring formal words of grant "smack[s] of the antiquated formalism the drafters [of Article Nine] were trying to avoid."43 In this case, these documents, when read together, unequivocally "contemplate[ ] objective indicia of the possibility of an underlying actual agreement," thus serving the purposes of a security agreement.44 They suggest the parties' mutual intention to create or retain a lien and they describe that which is encumbered. If Brannan didn't intend to confer a lien, why did she sign and check the lien box on the assignment of title? And why did she designate MBC as a lienholder when she applied for a title? The documents here indicate at least the "possibility of an underlying agreement" if not much more.45

Conclusion

The Trustee's lien avoidance complaint is barred by the res judicata effect of the Agreed Order on MBC's claims and the confirmed chapter 13 plan under § 1327(a). She did not demonstrate sufficient cause to reconsider MBC's secured claims under § 502(j). And, if she had, her challenge to MBC's secured status would be denied on the merits under the composite document theory because the sale and title documentation for both truck transactions amount to authenticated security agreements that granted MBC enforceable security interests. Its liens attached to the trucks under KAN. STAT. ANN. § 84-9-203.

Judgment shall be entered in favor of MBC on the Trustee's adversary complaint. A Judgment on Decision will issue this day.

SO ORDERED.