611 F.3d 1158 (9th Cir. 2010), 08-60037, In re Penrod

Docket Nº:08-60037.
Citation:611 F.3d 1158
Opinion Judge:MILLS, District Judge:
Party Name:In re Marlene A. PENROD, Debtor. v. Marlene A. Penrod, Debtor-Appellee. Americredit Financial Services, Inc., Creditor-Appellant,
Attorney:William M. Burke, Costa Mesa, CA, and Randall P. Mroczynski, Cooksey Toolen Gage Duffy & Woog, Costa Mesa, CA, for the creditor-appellant. Kenneth N. Klee, Klee, Tuchin, Bogdanoff & Stern LLP, Los Angeles, CA, and Craig V. Winslow, San Mateo, CA, for the debtor-appellee. Jan T. Chilton, Severson ...
Judge Panel:Before ALFRED T. GOODWIN and WILLIAM A. FLETCHER, Circuit Judges, and RICHARD MILLS, District Judge.[*]
Case Date:July 16, 2010
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1158

611 F.3d 1158 (9th Cir. 2010)

In re Marlene A. PENROD, Debtor.

Americredit Financial Services, Inc., Creditor-Appellant,

v.

Marlene A. Penrod, Debtor-Appellee.

No. 08-60037.

United States Court of Appeals, Ninth Circuit

July 16, 2010

Argued and Submitted Nov. 5, 2009.

Page 1159

William M. Burke, Costa Mesa, CA, and Randall P. Mroczynski, Cooksey Toolen Gage Duffy & Woog, Costa Mesa, CA, for the creditor-appellant.

Kenneth N. Klee, Klee, Tuchin, Bogdanoff & Stern LLP, Los Angeles, CA, and Craig V. Winslow, San Mateo, CA, for the debtor-appellee.

Jan T. Chilton, Severson & Werson, San Francisco, CA, and James J. White, Ann Arbor, MI, for amici curiae American Financial Services Association, National Automobile Dealers Association, and California Bankers Association.

Barkley Clark and Katherine M. Sutcliffe Becker, Stinson Morrison Hecker LLP, Washington, D.C., for amici curiae GMAC LLC, Ford Motor Credit Company LLC, Wells Fargo Bank, N.A., Bank of America, N.A., America Honda Finance Corp., and Toyota Motor Credit Corp.

M. Jonathan Hayes, Northridge, CA, for amici curiae Professors Ingrid M. Hillinger, Michael Hillinger, Adam J. Levitin, and Jean Braucher.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Markell, Klein, and Jury, Bankruptcy Judges. BAP Nos. 07-1360, 07-1368.

Before ALFRED T. GOODWIN and WILLIAM A. FLETCHER, Circuit Judges, and RICHARD MILLS, District Judge.[*]

OPINION

MILLS, District Judge:

The question presented in this case is whether a creditor has a purchase money security interest in the " negative equity" of a vehicle traded in at the time of a new vehicle purchase. Because we answer this question in the negative, we affirm the decision of the Bankruptcy Appellate Panel (" BAP" ).

I. BACKGROUND

In September 2005, Marlene Penrod purchased a 2005 Ford Taurus from a California Ford dealership. According to the figures recited by the BAP, 1 the price of the car, including tax and license, was approximately $25,600. Penrod traded in her 1999 Ford Explorer and paid approximately

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$1,000 down for her new vehicle. She owed over $13,000 on the Explorer and she received $6,000 in credit for the vehicle. Therefore, there was over $7,000 in " negative equity" on the trade-in vehicle.

The dealership paid off the remaining balance on the Explorer and added the negative equity to the amount financed. Penrod financed approximately $31,700 in order to purchase a vehicle that cost approximately $25,600. According to the contract, Penrod was to pay twenty percent interest on the loan. The dealership subsequently assigned the contract to AmeriCredit Financial Services.

523 days after purchasing the Ford Taurus, Penrod filed for bankruptcy protection under Chapter 13. She still owed $25,675 to AmeriCredit, which included the negative equity from the Ford Explorer. In her Chapter 13 plan, Penrod proposed to bifurcate AmeriCredit's claim into secured and unsecured portions. AmeriCredit objected to the plan, claiming it had a purchase money security interest in the entire amount, including the negative equity.

The bankruptcy court held that AmeriCredit did not have a purchase money security interest in the portion of the loan related to the negative equity charges. However, the bankruptcy court acknowledged that AmeriCredit had a purchase money security interest in the remaining balance. In doing so, the bankruptcy court adopted the dual status rule, which allows part of a loan to have non-purchase money status, while the remainder is covered by a purchase money security interest.2

The bankruptcy court decision was affirmed by the BAP in a published opinion. AmeriCredit challenges the BAP's ruling in this appeal.

II. STANDARD OF REVIEW

" We review decisions of the BAP de novo and apply the same standard of review that the BAP applied to the bankruptcy court's ruling.... We also review de novo the bankruptcy court's and the BAP's interpretations of the bankruptcy statute." Boyajian v. New Falls Corp. (In re Boyajian), 564 F.3d 1088, 1090 (9th Cir.2009) (citations omitted).

III. DISCUSSION

A.

AmeriCredit has placed great emphasis on the decisions of the other circuit courts of appeal. In total, over some strong dissents, eight circuits have held that a creditor has a purchase money security interest in the negative equity of a debtor's trade-in vehicle. Nuvell Credit Corp. v. Westfall (In re Westfall), 599 F.3d 498 (6th Cir.2010); In re Howard, 597 F.3d 852 (7th Cir.2010); Reiber v. GMAC, LLC (In re Peaslee), 585 F.3d 53 (2d Cir.2009) (per curiam) (adopting the response to a certified question of a divided New York Court of Appeals, In re Peaslee, 13 N.Y.3d 75, 885 N.Y.S.2d 1, 913 N.E.2d 387 (2009)); Ford Motor Credit Co. v. Dale (In re Dale), 582 F.3d 568 (5th Cir.2009); Ford Motor Credit Co. v. Mierkowski (In re Mierkowski), 580 F.3d 740 (8th Cir.2009); Ford v. Ford Motor Credit Co. (In re Ford), 574 F.3d 1279 (10th Cir.2009);

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In re Price, 562 F.3d 618 (4th Cir.2009); and Graupner v. Nuvell Credit Corp. (In re Graupner), 537 F.3d 1295 (11th Cir.2008).

We...

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