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Click here for the full text of this decision FACTS:In May 1996 Elixir Industries Inc. properly filed and recorded a judgment lien in the mortgage records of Natchitoches Parish, La., in the amount of $40,961.53 (plus costs and interest) on property owned by the bankrupt, Ahern Enterprises Inc. The property subject to the lien included Ahern’s manufacturing facility in Campti, La. The manufacturing facility property was subject to a previous recorded mortgage held by City Bank that exceeded the value of the property. On July 31, 1996, Ahern filed for Chapter 11 protection. On Nov. 21, 1996, Elixir filed a proof of claim in the amount of $53,406.02 as an unsecured priority claim. Ahern, as debtor in possession, objected to the proof of claim and argued that Elixir only had a general unsecured debt, because there was no unencumbered property to which the lien could attach. Following a hearing on April 7, 1998, the bankruptcy court entered an order sustaining Ahern’s objection, because Elixir’s lien was junior to that of City Bank. The bankruptcy court reduced Elixir’s claim to a general unsecured claim in the amount of $40,961.53, the principal amount of Elixir’s judgment. On Sept. 26, 1997, City Bank filed a motion for Authority to Execute Dation En Paiement and to Cancel Indebtedness, which sought to cancel all judgment liens on two parcels of Ahern property that were pledged to the bank as collateral. The motion, however, did not include the manufacturing facility property. The bankruptcy court granted the motion on Oct. 22, 1997, and issued an order requiring the Natchitoches Parish clerk to cancel all judgments affecting these two parcels. The order did not address the manufacturing facility property. Ahern’s Chapter 11 plan was confirmed by the bankruptcy court on May 30, 1997. On Nov. 10, 1997, Ahern voluntarily converted its Chapter 11 plan into a request for relief under Chapter 7. In February 1998, City Bank and the Chapter 7 trustee filed a joint motion requesting court approval to sell the manufacturing facility property to the bank, as senior lien holder, in satisfaction of a portion of Ahern’s debts. The bankruptcy court approved the sale on March 12, 1998, and credited $693,000 against City Bank’s claim, leaving it with an unsecured claim of $471,366.58. The trustee transferred the deed for the property to City Bank on March 22, 1998. City Bank sold the manufacturing facility property to a third party on March 30. No title check was performed to discover that Elixir’s judgment lien, as well as three additional liens, remained on the property. The third party later defaulted and City Bank foreclosed on the property. In 2005, as it contemplated selling the property again, City Bank determined that Elixir’s lien (as well as the three others) had not been cancelled. On April 29, City Bank filed a complaint for declaratory relief in district court, seeking a ruling that the liens had been voided during Ahern’s bankruptcy case. Elixir counterclaimed, requesting a declaration that the lien was still valid. After cross-motions for summary judgment, the bankruptcy court found in favor of City Bank. The court concluded that its April 1998 order sustaining Ahern’s objection to Elixir’s proof of claim had extinguished the lien. Elixir appealed to the district court, which affirmed, asserting multiple reasons. The district court held that: 1. the bankruptcy court’s April 1998 order sustaining Ahern’s objection voided Elixir’s lien; 2. the bankruptcy court’s confirmation and the substantial consummation of Ahern’s Chapter 11 plan was sufficient to void Elixir’s lien; and 3. conversion to Chapter 7 did not reinstate Elixir’s lien. Elixir appealed to the 5th Circuit. HOLDING:Affirmed. Title 11 U.S.C. �1141(c), the court stated, provides, with immaterial exceptions, that “except as otherwise provided in the plan or in the order confirming the plan, after 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 debtor.” The court held first that under �1141(c), the confirmation of a Chapter 11 plan voided liens on property dealt with by the plan unless they were specifically preserved if the lien holder participated in the reorganization. Elixir’s judgment lien, the court stated, was voided because the bankruptcy court confirmed Ahern’s Chapter 11 plan without Elixir’s objection; because the property subject to Elixir’s lien was dealt with by the plan; because Elixir participated in the reorganization proceedings; and finally because the plan did not preserve Elixir’s lien. In sum, the court found that Elixir chose to participate in the reorganization in hopes of receiving a payout as an unsecured creditor, because there was no equity to which its lien could attach. Elixir, the court stated, could have objected and asserted its position that the lien was preserved by appealing the order confirming the plan of reorganization. Having participated without objection, the court stated, in a reorganization in which the confirmed plan dealt with the land and building subject to its lien, Elixir cannot now claim that the lien survived. OPINION:Jolly, J.; Garwood, Jolly and Stewart, JJ.

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