Nobleman, Matter of
| Citation | 968 F.2d 483 |
| Decision Date | 13 August 1992 |
| Docket Number | No. 91-1796,91-1796 |
| Parties | , 27 Collier Bankr.Cas.2d 976, 23 Bankr.Ct.Dec. 584 In the Matter of Leonard NOBLEMAN and Harriet Nobleman, Debtors. * Leonard NOBLEMAN and Harriet Nobleman, Appellants, v. AMERICAN SAVINGS BANK and Tim Truman, Standing Chapter 13 Trustee, Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Philip Palmer, Jr., Dallas, Tex., for debtors, appellants Leonard and Harriet Nobleman.
Terre M. Vardaman, Jackson, Miss., for amicus curiae Harold J. Barkley.
Michael J. Schroeder, David M. Odens, Settle & Pou, Dallas, Tex., for appellee American Sav. Bank.
Charles Kennon, Fort Worth, Tex., for appellee Tim Truman.
Dean Cooper, Assoc. Gen. Counsel, FHLMC, McLean, Va., for amicus curiae Federal Home Loan Mortg. Corp.
Michael L. Riddle, Dallas, Tex., for amicus curiae Mortg. Bankers Ass'n of America.
Appeal from the United States District Court For the Northern District of Texas.
Before BROWN, GARWOOD and EMILIO M. GARZA, Circuit Judges.
The United States Bankruptcy Court for the Northern District of Texas denied confirmation of the Chapter 13 reorganization plan proposed by Leonard and Harriet Nobleman, in which the Noblemans attempted to bifurcate a mortgage lien claim on their principal residence into secured and unsecured claims. The United States District Court for the Northern District of Texas affirmed the decision of the bankruptcy court. See 129 B.R. 98 (N.D.Tex.1991). The Noblemans appeal, and, finding that the use of 11 U.S.C. § 506 1 to bifurcate this claim would impermissibly modify the rights of American Savings Bank under 11 U.S.C. § 1322(b)(2), 2 we affirm the order of the district court.
The facts of this case are uncontested. The Noblemans executed a note in the amount of $68,250.00, payable to American Savings Bank (American), and secured by a deed of trust on their principal residence--a condominium in a complex in Dallas, Texas. 3 Six years later, the Noblemans filed a voluntary petition for relief under Chapter 13 of the bankruptcy code. American filed its proof of claim for $71,265.04--which was later amended to $71,335.04. The Noblemans then filed an initial and modified Chapter 13 Plan of Reorganization. The plan valued the Noblemans' residence at $23,500.00. The Noblemans also filed a motion for valuation pursuant to 11 U.S.C. § 506 along with certain modifications to their plan. At the confirmation hearing, Mr. Nobleman testified as to the value of the property; no controverting evidence of its value was offered by any other party.
In their modified plan, the Noblemans proposed to make direct payments to American at the mortgage contract rate only up to the scheduled value of the condominium. The balance of American's claim--$41,257.66--would be treated as a general unsecured claim under the Plan, payable pari passu, though the Noblemans did plan to cure the prepetition arrearages owed to American. The unsecured creditors would receive nothing.
Both American and the Standing Chapter 13 Trustee objected to the confirmation of the plan on the grounds that, inter alia, the plan purported to alter the lienholders' rights in violation of 11 U.S.C. § 1322(b)(2). The bankruptcy court found that the plan impermissibly proposed to modify American's rights by bifurcating American's claim into secured and unsecured claims in violation of 11 U.S.C. § 1322(b)(2). Accordingly, the bankruptcy court denied confirmation of the Noblemans' modified Chapter 13 plan, and the district court affirmed. 4
The parties and their amici are not in agreement regarding the approach we should take in interpreting the interplay between sections 506(a) and 1322(b)(2) of the bankruptcy code. The Noblemans concede that a debtor may not modify the rights of holders of a secured claim if such security is an interest in real property that is the debtor's principal residence. They assert, however, that section 506(a) defines a secured claim as the value of the collateral, while any balance on the debt above this amount is an unsecured claim. Thus, they contend that, under section 1322(b)(2), the only portion of a claim which cannot be modified is the part supported by the value of the collateral--the secured claim. The part of the claim in excess of the value of the collateral becomes an unsecured claim, which can be modified.
One amicus suggests that allowing debtors to bifurcate a mortgage lien claim pursuant to section 506 and allowing a modification pursuant to section 1322(b)(2) results in a systematic and coherent application of the bankruptcy code. It further argues that to prohibit the bifurcation of a claim would ignore that various sections of the bankruptcy code are to be read together.
American, on the other hand, contends that the proposed modification of the Noblemans' Chapter 13 plan is impermissible because it would bifurcate the creditor's claim into secured and unsecured claims. American asserts that bifurcation of a secured claim in real property that is the debtor's principal residence violates section 1322(b)(2) because the plain meaning of section 1322(b)(2) prohibits such a modification. Furthermore, American contends that the general provisions of section 506 must not be read to prevail over the specific provisions of section 1322(b)(2), because the general language of one section should not control matters specifically addressed in another. American also argues that the limited bar regarding modification of the rights of residential lenders was enacted in response to Congressional perceptions that these lenders perform a valuable social purpose by making home loans.
Two other amici agree with American, contending that bifurcating a debtor's secured claim under section 1322(b)(2) is unfair and unworkable because bifurcation: (i) provides a windfall to Chapter 13 debtors (ii) results in home mortgage lenders receiving worse treatment under Chapter 13 than other secured creditors; and (iii) does not help promote the bankruptcy code's fresh start objective. Furthermore, the amici argue that the plain meaning of section 1322(b)(2) precludes a debtor from "cramming down" 5 a claim secured only by the debtor's principal residence, and that the rights of holders of secured claims, which include a claim secured only by a security interest in property that is the debtor's principal residence, may not be modified.
The foregoing summary of the different positions of the parties and their amici demonstrates that the interplay between sections 506 and 1322(b)(2) of the bankruptcy code is not entirely clear.
Four circuit courts have adopted the position advocated by the Noblemans, allowing bifurcation of an undersecured mortgage into a secured portion and an unsecured portion. In Bellamy v. Federal Home Loan Mortgage, 962 F.2d 176, 179-180 (2d Cir.1992), the Second Circuit discussed sections 506(a) and 1322(b)(2), and reasoned that a claim must first be analyzed under section 506(a) to determine the part that is fully secured--that is, the amount equal to the market value of the property on which the lien is fixed. The balance of the claim owed above the market value is unsecured. Id. Bifurcating a claim into secured and unsecured portion does not, for purposes of section 1322(b)(2), modify the creditor's rights, but rather determines how, under the bankruptcy code, the creditor's right to payment must be satisfied. Id. at 179-180. The Third, Ninth, and Tenth Circuits have held similarly. See In re Hart, 923 F.2d 1410, 1411 (10th Cir.1991) (); Wilson v. Commonwealth Mortgage Corp., 895 F.2d 123, 126-29 (3d Cir.1990) () 6; In re Hougland, 886 F.2d 1182, 1183 (9th Cir.1989) ().
Bankruptcy courts, including some in this circuit and the First, Sixth, Seventh, Eighth and Eleventh circuits, have adopted the position advocated by American. These courts that have held bifurcation impermissible because such bifurcation would vitiate the purpose of section 1322(b)(2). See, e.g., In re Chavez, 117 B.R. 733, 736 (Bankr.S.D.Fla.1990) (); In re Kaczmarczyk, 107 B.R. 200, 202 (Bankr.D.Neb.1989) (). In In re Boullion, 123 B.R. 549, 551 (Bankr.W.D.Tex.1990), the bankruptcy court discussed the interplay between sections 1322(b)(2) and 506(a), and stated that "in view of Grubbs' [v. Houston First Am. Sav. Ass'n, 730 F.2d 236 (5th Cir.1984) (en banc) ] interpretation of the intention of Congress in enacting § 1322(b)(2), applying 11 U.S.C. § 506 to these secured claims would result in a 'modification' in contravention of the clear meaning of the statute." Similarly, in In re Schum, 112 B.R. 159, 162 (Bankr.N.D.Tex.1990), the bankruptcy court held that the "proposed modification of the debt would have the effect of treating the real property secured by only a lien on the debtor's principal residence in the same manner as any other property secured by a lien." 7
The Supreme Court's recent decision in Dewsnup v. Timm, --- U.S. ----, 112 S.Ct. 773, 775, 116...
To continue reading
Request your trial
-
U.S. v. Johnson
... ... That heading is but a short-hand reference to the general subject matter involved. 63 The general subject matter of 16901(d) is sex offenders who cannot comply with SORNA's requirement that registration be completed ... 1981, 104 L.Ed.2d 557 (1989) (A general statutory rule usually does not govern unless there is no more specific rule.); In re Nobleman, 968 F.2d 483, 488 (5th Cir.1992) (citing Ginsberg and holding that specific language prevails over general language). 69. See, e.g., Russello ... ...
-
In re Holmes
... ... Knapp, Esq., 30 Two Bridges Road, Suite 330, Fairfield, New Jersey 07004 OPINION ROSEMARY GAMBARDELLA, UNITED STATES BANKRUPTCY JUDGE MATTER BEFORE THE COURT This matter comes before the Court by way of a Remand Order and Opinion dated 573 B.R. 551 September 16, 2016 issued by the United ... Id. (citing In re Nobleman, 968 F.2d 483, 489 (5th Cir. 1992) ; In re McDonald, 205 F.3d 606 ). Id. However, Robinson did not specifically analyze whether the ... ...
-
Waindel, Matter of
...the specific provisions of Chapter 7 modify the general provisions of Chapter 5 in Chapter 7 cases. See Nobelman v. American Sav. Bank (In re Nobelman), 968 F.2d 483, 488 (5th Cir.1992) (applying specific language of Chapter 13 over general language of Chapter 5 in Chapter 13 case), aff'd, ......
-
In re Perez
... ... The term "indubitable equivalent" is not defined in the Bankruptcy Code, or for that matter, anywhere else. The phrase first appeared in Judge Learned Hand's opinion In re Murel Holding Corp., 75 F.2d 941 (2d Cir.1935), and Congress ... The Fifth Circuit Court of Appeals recently dealt with the issue of modification of rights under 1322(b)(2) in Matter of Nobleman, 968 F.2d 483 (5th Cir.1992) ... holding that bifurcation of an undersecured claim that is secured by real property that is a debtor's primary ... ...
-
The Last Dance: Righting the Supreme Court's Greatest Bankruptcy Apostasy.
...principal residence, applied only to the post-bifurcation secured claim, (emphasis added). Nobleman v. Am. Savs. Bank (In re Nobleman), 968 F.2d 483, 489 (5th Cir. 1992). The debtors' name, "Nobelman," was misspelled in the caption of the Fifth Circuit case and throughout that (74) 508 U.S.......
-
Hey, the Sun Is Hot and the Water's Fine: Why Not Strip Off That Lien?
...of unsecured claims, or leave unaffected the rights of holders of any class of claims"). 53. Nobleman v. Am. Savs. Bank (In re Nobleman), 968 F.2d 483, 489 (5th Cir. 1992). The debtors' name, "Nobelman," was misspelled in the caption of the Fifth Circuit case and throughout that opinion.54.......
-
Anthony Mccready, Strip-off: What Is the Correct Procedure to Avoid a Wholly Unsecured Junior Mortgage?
...WILLIAM L. NORTON III, NORTON BANKRUPTCY LAW AND PRACTICE 3D § 149:7, at 149-51 (2008).Compare Nobleman v. Am. Sav. Bank (In re Nobleman), 968 F.2d 483, 487–89 (5th Cir. 1992), aff’d, 508 U.S. 324 (1993) (prohibiting strip-down), with Bellamy v. Fed. Home Loan Mortg. Corp. (In re Bellamy),9......
-
Individual taxes, penalties and interest forgiven in a Chapter 7 versus a Chapter 13 bankruptcy.
...windfall if the property value increased by the time of foreclosure sale). (59) Nobelman v. American Savings Bank, Sup. Ct., 6/l/93, aff'g 968 F2d 483, 486 (5th Cir. 1992). (60) BC Section 1325(a)(5). (61) Louis George Barbier, 896 F2d 377 (9th Cir. 1990)(90-1 USTC [paragraph]150,107). (62)......