Memorandum of Decision Re: Res Judicata Effect of Chapter 13 Plan

NORTHERN DISTRICT OF CALIFORNIA
In re FRANK E. PAGANO,                                                          No. 98-11035      Debtor(s). ______________________________________/
Memorandum on Motion for Entry of Discharge
     Debtor Frank Pagano filed a Chapter 13 petition on March 25, 1998. He proposed a pro-tanto ("pot") plan whereby he would pay $100 per month for 36 months. The plan was confirmed on July 1, 1998.      On August 21, 1998, the California Uninsured Employers' Fund ("UEF") filed a priority claim for $157,910.00 based on a Workers Compensation Award dated January 22, 1998. Although the UEF had been duly listed as a creditor, it had not objected to Pagano's plan even though the plan could not come close to satisfying its priority claim. Section 1322(a)(2) of the Bankruptcy Code provides that a Chapter 13 plan shall provide for the payment in full of all priority claims.      On November 3, 2000, the court overruled Pagano's objection to the UEF claim. (1) It made no order on the effect of the ruling on Pagano's confirmed plan.      Pagano has now made all the payments required of him by his confirmed plan. He now seeks entry of his Chapter 13 discharge pursuant to § 1328(a) of the Code which provides, in pertinent part:
(a) As soon as practicable after completion by the debtor of all payments under the plan . . . the court shall grant the debtor a discharge . . . .
     The UEF objects on the grounds that its priority claim has not been paid in full, even though it stood by silently while the plan was confirmed and never, during the three-year life of the plan, sought revocation of confirmation or dismissal of the case.      Had the UEF opposed confirmation, the court would not have confirmed the plan. However, once a plan is confirmed it is binding even if it contains improper terms. In re Ivory, 70 F.3d 73, 75 (9th Cir. 1995); In re Pardee, 193 F.3d 1083, 1086 (9th Cir.1999). Had the UEF sought timely revocation of confirmation or made a motion to dismiss the case before Pagano completed his payments, the court would have considered the matter and might have granted relief. However, the UEF did neither. It took no action beyond the filing of its claim, even though it knew that Pagano's payments could never satisfy more than a small percentage of the claim.      The UEF cites in support of its position In re Goude, 201 B.R. 275 (Bankr.D.Ore.1996). In that case, the court held that the debtors were not entitled to a discharge even though they had made all of their Chapter 13 plan payments because they had not paid all priority claims in full. That was the same result as the Seventh Circuit reached in In re Escobido, 28 F.3d 34 (7th Cir. 1994). However, Escobido was specifically rejected by both the BAP and the Ninth Circuit in Pardee. 218 B.R. at 926; 193 F.3d at 1086-7. The rule in Goude is not good law in this circuit in light of Pardee.      For the foregoing reasons, Pagano's motion for entry of his discharge will be granted. Counsel for Pagano shall submit an appropriate form of order.
Dated: January 15, 2001                                                  ___________________________                                                                                         Alan Jaroslovsky                                                                                        U.S. Bankruptcy Judge

1. A subsequent contrary ruling by Bankruptcy Judge Newsome has caused this court to question the correctness of that ruling. However, the court need not revisit the issue in light of Pagano's completion of his pla