In re Garrett, 7288.

• Decision Date: 30 March 1962
• Docket Number: No. 7288.,7288.
• Citation: 203 F. Supp. 459
• Parties: In the Matter of John L. GARRETT, Debtor.
• Court: U.S. District Court — Northern District of Alabama

203 F. Supp. 459

In the Matter of John L. GARRETT, Debtor.

No. 7288.

United States District Court N. D. Alabama, E. D.

March 30, 1962.

J. J. Cockrell, Birmingham, Ala., for John L. Garrett, debtor.

R. A. Norred, Birmingham, Ala., for Mid-State Homes, Inc., creditor.

ALLGOOD, District Judge.

This case has been submitted to the court for decision upon the Petition for Review of an order made by the Referee in this case. The debtor filed his original petition under the provisions of Chapter XIII of the Bankruptcy Act, 11 U.S.C.A. § 1001 et seq. and scheduled as one of his creditors the petitioner for review, Mid-State Homes, Inc. He also scheduled as an asset a house and lot, subject to a mortgage owned by Mid-State Homes. Prior to the initial meeting of creditors in the case, upon application by the debtor's attorney, upon notice that Mid-State Homes was about to proceed with the foreclosure of its mortgage, the Referee entered an order enjoining and prohibiting Mid-State Homes, Inc., from proceeding with its foreclosure and sale under the terms of said mortgage, subject to further orders of the court. At the initial meeting of creditors a Wage Earner's Plan was presented and confirmed by order of the Referee, one of the provisions of which was as follows:

"Mid State Homes be, and hereby is, given a preferred status and is to receive from the proceeds paid in, after the costs and expenses have been deducted, the equivalent of $60.20 each month until the balance due them has been paid in full."

The injunction from proceeding with the foreclosure was left in force and effect. The payment of $60.20 referred to in the confirmation is the full regular monthly payment provided by the mortgage note due from debtor to Mid-State Homes, Inc. Thereafter Mid-State Homes, Inc., filed a Proof of Claim in the proceedings in which one provision was that "the undersigned claimant hereby dissents from the extension proposal of the said debtor". At the same time, the said claimant filed the present Petition for Review. This Petition for Review alleges that the mortgage debt was in default and alleges that the confirmation order was in error in that:

"1: That Your Honor was without jurisdiction to entertain and consider a proposal filed under Chapter 13 of the Act for an arrangement modifying or altering the rights of creditors who hold debts secured by real property, and,

"2: Petitioner, an adverse interest of record, did in fact oppose the debtor's proposal, and

"3: Said proposal or arrangement was confirmed without the acceptance of any creditors in petitioner's class, i. e., creditors holding debts secured by real property, as required by Section 468 of the Act."

The Referee has certified this Petition for Review to this court, including in the Certificate of Review a finding of fact that the debtor owns an equity of redemption in the real estate subject to the mortgage of the petitioner for review of substantial value above and beyond the balance due upon the mortgage debt. Further, the debtor had tendered to the petitioning creditor the full sum of all arrearage payments in cash at the time of the confirmation of the plan. The debtor has continued to make full payments required by his proposal to the Trustee in this case and these sums are in his hands available to the mortgagee.

The reference by the petitioner for review to § 468 of the Bankruptcy Act is irrelevant, inasmuch as § 468 of the Bankruptcy Act is a part of Chapter XII of the Bankruptcy Act, 11 U.S.C.A. § 801 et seq., and § 401 of the Bankruptcy Act, which is the first section of Chapter XII, provides that the provisions of Chapter XII of the Act shall apply exclusively to proceedings under Chapter XII. Inasmuch as the present case is a proceeding under Chapter XIII of the Act, § 468 can have no application to this case.

The more basic question is a question of jurisdiction over a dissenting creditor who holds a debt secured by real property, raised generally by the other two grounds of objection stated by the Petition for Review.

It is true that, for the purposes of Chapter XIII, § 606 defines the phrase "claims" to exclude claims secured by estates in real property. And the phrase "creditor" is defined to mean the holder of a claim. It is, therefore, clear that in the absence of consent, Mid-State Homes, Inc., being a creditor whose claim is secured by an estate in real property, is not a creditor or claimant for the purposes of Chapter XIII. It would seem to be the clear intent of the statute to allow a creditor fully secured by real estate to be excluded from a Wage Earner's Plan under Chapter XIII. The logic behind this statutory provision and this interpretation of the statute is that usually debts secured by real estate are financed on such terms and with such payments as not conveniently to be made a part of the normal Wage Earner's Plan to pay other kinds of indebtedness. Normally, the payments will either be so small as to not permit any reduction in payments or will be so well secured that in case of difficulty the debtor is able to refinance the debt...