FRANK ALLEY, Bankruptcy Judge
A hearing was held on September 24, 2002 on creditor Kendra Park, LLC's motion to set aside the order of discharge entered on June 30, 2002 in Debtor's Chapter 13 bankruptcy case. For the reasons that follow, the motion will be allowed.
Background
The Debtor filed her Chapter 13 case on October 29, 2001. Her schedules disclosed unsecured debts of $898, a secured debt for an automobile loan, and debts to both Wells Fargo Home Mortgage in the amount of $147,380 and Kendra Park, LLC in the amount of $8,800, secured by real property at 3604 Kendra St., Debtor's residence. Kendra Park filed a proof of claim on December 12, 2001 for its claim of $8,978, secured by a second deed of trust on the real property. Kendra Park's proof of claim and the Debtor's confirmed plan valued the collateral at $149,000.
On December 26, Wells Fargo filed a motion for relief from the automatic stay, asking that it be allowed to foreclose on its collateral due to defaults by the Debtor. A hearing was held on that motion on January 16, 2002 and an order entered on January 29 denying the motion on condition that Debtor make up the missed payments by a time certain and continue regular monthly payments. The Debtor's Chapter 13 plan was confirmed on January 31, 2002. It provided a monthly plan payment to the Trustee of $350, who would pay arrearages to Wells Fargo and Kendra Park and to unsecured creditors, and for the maintenance by the Debtor of regular monthly payments to Wells Fargo, Kendra Park, and American General Finance, lienholder on Debtor's vehicle. On April 18, 2002 Wells Fargo filed a Notice of Noncompliance with the terms of the January 29 order and the stay was terminated as to Wells Fargo on April 22. Wells Fargo thereafter foreclosed on its collateral and purchased the property at the foreclosure sale for a credit bid in the amount of its claim, leaving no surplus for the junior lienholder, Kendra Park, LLC.
During this time, the Debtor had been making her regular monthly plan payments to the Trustee who had been paying the unsecured creditors. When all the unsecured claims known to the Trustee had been paid in full, the Trustee informed the court on June 29, 2002 that the case was ready for discharge. An order of discharge was entered by the court on June 30, 2002, and notice made to creditors of such discharge. On August 6, 2002, Kendra Park filed an amended proof of claim, changing its claim from secured to unsecured, reflecting the fact that the collateral formerly securing its claim was purchased by the senior lienholder with a credit bid, leaving it with an unsecured deficiency claim. On August 22, 2002, Kendra Park filed its motion to set aside the order of discharge under FRCP 60(b), on the grounds that it was mistakenly entered.
Discussion
Claim Amendment
The notice of amended claim filed by Kendra Park was entered on August 12, 2002 and, pursuant to its terms, interested parties given until August 27 to object to the amendment. An order striking the document was inadvertently entered, but was set aside by order of the court on August 26. No objection to the claim amendment was received by August 27 or at any time thereafter. Absent any such objections, the amended claim was accepted as filed. The issue of the propriety of the amended claim is therefore not before the court.
Vacatur of Discharge Under Fed.R.Civ.P. 60(b)
A. Amended Claim
In Cisneros v. USA (In re Cisneros), 994 F.2d 1462 (9th Cir. 1993), a creditor filed a motion to reopen a Chapter 13 debtors' case and to vacate the bankruptcy court's previous order of discharge on the grounds of mistake. In that case, the trustee had not received notice of a proof of claim filed by a creditor. The debtor made payments over a period of 16 months and the trustee made payments to all creditors which, as far as she was aware, had filed proofs claim. Neither the trustee nor the debtors inquired whether the creditor had filed a proof of claim, despite the fact that its claim was by far the largest one listed by the debtors in their schedules. At the end of 16 months, the trustee filed a Final Report and Accounting, representing that all creditors who had filed proofs of claim had been paid in full. In reliance on such report, the court entered a "full compliance" discharge under Code § 1328(a). No hearing was held on the matter, and no prior notice made to creditors.
In affirming the Bankruptcy Court and the Bankruptcy Appellate Panel, the Court of Appeals held that the order of discharge was entered under a misapprehension by the court as to the facts of the case. It acknowledged that "the problems that have arisen in [the] case are ultimately attributable to the failure of the Trustee to learn that the [creditor] had filed a proof of claim," but "[h]ad the court been apprised of the actual facts, it would never have entered the order." Cisneros at 1467. "In our view, this is precisely the sort of `mistake' or `inadvertence' that Rule 60(b) was intended to reach. Since `no intervening rights have become vested in reliance on the order,' there is no obstacle to the bankruptcy court's invocation of the rule to correct itself." Id. (internal citation omitted).
While the amended proof of claim had not yet been filed in the instant case at the time the discharge order was entered, the facts are similar enough to those of Cisneros to warrant the same result. At the time the Trustee notified the court that the case was ready for discharge, he was unaware that Kendra Park had, or soon would have, an unsecured deficiency claim. Nor was prior notice given to creditors, with an opportunity to object, that an order of discharge was to be entered in the case. Had the court known that a claim originally treated as fully secured was soon to be amended and changed to unsecured, it would not have entered the order of discharge under the circumstances. A similar result was obtained with facts similar to those ofCisneros in In re Avery, 272 B.R. 718 (Bankr. E.D. Cal. 2002).
It was not disclosed during the hearing on this matter the date that the foreclosure sale occurred which resulted in Kendra Park's deficiency claim. Relief from stay had been granted to Wells Fargo, the senior lienholder, more than two months prior to the date that the Trustee informed the court that the case was ready for discharge, however, so it is probable that the sale had already occurred by that time. I do not mean to insinuate that the Trustee's actions were in any way deficient in this matter, especially given the large number of cases he administers and the fact that Kendra Park's proof of claim had not yet been amended by the time other unsecured creditors had been paid in full.
B. Failure to Make All Payments Under Plan
Code § 1328(a) provides: "As soon as practicable after completion by the debtor of all payments under the plan . . . the court shall grant the debtor a discharge of all debts provided for by the plan. . . ." Paragraph 4 of Debtor's confirmed plan provides that
The debtor shall pay directly to each of the following creditors [including Kendra Park, LLC], whose debts are either fully secured or are secured only by a security interest in real property that is the debtor's
principal residence, the regular payment due postpetition on these claims in accordance with the terms of their respective contracts. . . .
Payments due under ¶ 4 of the Debtor's Plan are "payments under the plan" for purposes of Code § 1328(a). At the time the court entered the Debtor's discharge, Debtor had failed to make all payments under the plan, because the Plan provided that the Debtor would pay to Kendra Park its monthly contractual payments over the life of the Plan. Moreover, Debtor had failed to make regular monthly payments due Kendra Park after Wells Fargo obtained relief from the automatic stay and prior to the entry of the order of discharge. Debtor was therefore not eligible to obtain a discharge under Code § 1328(a) because Debtor was required to continue to make the monthly contractual payments to Kendra Park pursuant to the terms of ¶ 4 of her Plan. The court was thus mistaken in entering Debtor's discharge when it did.
Conclusion
Because the court entered the order of discharge in this case under a mistake of fact, and because no evidence was presented at the hearing on this matter of intervening rights having become vested in reliance on the order, the order granting discharge should be vacated under Fed.R.Civ.P. 60(b). An order consistent with the foregoing will be entered.