Burr, In re

• Decision Date: 08 October 1998
• Docket Number: No. 98-9007,98-9007
• Citation: Burr, In re, 160 F.3d 843 (1st Cir. 1998)
• Parties: 41 Collier Bankr.Cas.2d 42, Bankr. L. Rep. P 77,848 In re James E. BURR and Katherine A. Burr, Debtors. BANK OF BOSTON, Appellant, v. James E. BURR and Katherine A. Burr, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 843

160 F.3d 843

41 Collier Bankr.Cas.2d 42, Bankr. L. Rep. P 77,848

In re James E. BURR and Katherine A. Burr, Debtors BANK OF BOSTON, Appellant, v. James E. BURR and Katherine A. Burr, Appellees.

No. 98-9007.

United States Court of Appeals First Circuit.

Heard Oct. 8, 1998.

Decided Nov. 25, 1998.

Matthew J. McGowan with whom Salter McGowan Swartz & Sylvia was on brief for appellants.

Joel F. Soforenko for appellees.

John Rao on brief for National Consumer Law Center, Inc., amicus curiae.

Before STAHL, Circuit Judge, LIPEZ, Circuit Judge, and REAVLEY, ^* Senior Circuit Judge.

STAHL, Circuit Judge.

This appeal presents a question of statutory interpretation that has divided the circuits: under 11 U.S.C. § 521(2), must debtors in chapter 7 proceedings simply state whether they intend to retain or surrender property of the estate that is collateral for a consumer debt, or (if they intend to retain the property) must they also elect and perform one of three retention options specified in the statute? The bankruptcy court held that chapter 7 debtors wishing to retain property of this nature need not elect or perform any of the specified retention options, and the bankruptcy appellate panel ("BAP") affirmed, albeit on a somewhat different basis. We reverse.

I.

On October 25, 1996, James and Katherine Burr filed a chapter 7 petition. At the time of their filing, the Burrs owed First National Bank of Boston (now BankBoston and hereafter "the Bank") approximately $8,000 on a consumer loan secured by a 1993 Pontiac minivan. The debtors' payments under the loan agreement were current, but the agreement provided that the filing of a bankruptcy petition would constitute an event of default.

On February 18, 1997, the Bank filed a motion to compel the debtors to elect and perform one of three courses of conduct: (1) reaffirm their debt under the terms of the original loan agreement (thus giving the bank recourse against them in the event of a default post-discharge); (2) surrender the minivan; or (3) redeem the minivan by paying the bank a lump sum corresponding to the minivan's value. The motion also set forth an alternative request that, in the event the debtors should decline to reaffirm the debt or to surrender or redeem the minivan, the Bank be relieved from the automatic stay prescribed by 11 U.S.C. § 362 so that it might foreclose on its collateral in state court.

In support of its motion, the Bank argued that it was entitled to relief under the plain language of 11 U.S.C. § 521(2), which provides:

[I]f an individual debtor's schedule of assets and liabilities includes consumer debts which are secured by the property of the estate--

(A) within thirty days after the date of the filing of a petition under chapter 7 of this title or on or before the date of the meeting of creditors, whichever is earlier, or within such additional time as the court, for cause, within such period fixes, the debtor shall file with the clerk a statement of his intention with respect to the retention or surrender of such property and, if applicable, specifying that such property is claimed as exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm debts secured by such property;

(B) within forty-five days after the filing of a notice of intent under this section, or within such additional time as the court, for cause, within such forty-five day period fixes, the debtor shall perform his intention with respect to such property, as specified by subparagraph (A) of this paragraph; and

(C) nothing in subparagraphs (A) and (B) of this paragraph shall alter the debtor's or the trustee's rights with regard to such property under this title....

Debtors opposed the Bank's motion and asserted an entitlement under the Bankruptcy Code to retain the minivan without performing the retention-related options specified in § 521(2)(A), so long as their payments remained current under the original loan agreement.

On February 25, 1997, the bankruptcy court (Queenan, J.) tacitly rejected the Bank's claimed entitlement to surrender, redemption, or reaffirmation (all agree that the minivan is ineligible for exemption and avoidance of the Bank's security interest) by entering an endorsed order requiring only that "the Debtors ... file a statement indicating whether they intend to retain or surrender the collateral." This order (which did not address the Bank's alternative request for relief from the stay) was consistent with Judge Queenan's published opinion in In re Ogando, 203 B.R. 14 (Bkrtcy.D.Mass.1996), where he had (1) held that 11 U.S.C. § 521(2) requires nothing more from a debtor than a statement specifying "his intention either to retain or surrender the collateral," id. at 17, and (2) indicated that a chapter 7 debtor may, as a "fourth option," retain the collateral simply by remaining current on the payments under the original loan agreement, see id. The reasoning of In re Ogando mirrors, in all relevant respects, the views of the Second, Fourth, Ninth, and Tenth Circuits. See In re Boodrow, 126 F.3d 43, 53 (2d Cir.1997), cert. denied, --- U.S. ----, 118 S.Ct. 1055, 140 L.Ed.2d 118 (1998); In re Belanger, 962 F.2d 345, 347-48 (4th Cir.1992); In re Parker, 139 F.3d 668, 672-73 (9th Cir.1998), cert. denied, --- U.S. ----, 119 S.Ct. 592, 142 L.Ed.2d 535, 67 U.S.L.W. 3284 (1998) (No. 98-618); and Lowry Fed. Credit Union v. West, 882 F.2d 1543, 1546-47 (10th Cir.1989); see also 4 Collier on Bankruptcy, p 521.10 (15th ed. rev.1998) (endorsing the reasoning of these courts). But it has been rejected by the Fifth, Seventh, and Eleventh Circuits, which hold that a chapter 7 debtor wishing to retain collateral securing a consumer debt must elect and then perform one of the retention options specified in § 521(2)(A). See In re Johnson, 89 F.3d 249, 250-52 (5th Cir.1996) (per curiam); In re Edwards, 901 F.2d 1383, 1385-87 (7th Cir.1990); and In re Taylor, 3 F.3d 1512, 1516-17 (11th Cir.1993).

The BAP affirmed, although it disapproved of the bankruptcy court's tacit ruling that a chapter 7 debtor may retain the collateral post-discharge simply by continuing to make payments under the original loan agreement. See In re Burr, 218 B.R. 267, 271-73 (1st Cir.BAP1998). Instead, it followed the approach sketched in In re Mayton, 208 B.R. 61 (9th Cir.BAP1997), where, in a case preceding In re Parker, a Ninth Circuit BAP held (1) that debtors in the circumstances just described need only specify whether they intend to surrender or retain the collateral, see 208 B.R. at 66-68; but (2) when the automatic stay of 11 U.S.C. § 362 expires upon discharge, secured creditors may foreclose on the collateral (so long as the bankruptcy was an event of default), see id. See In re Burr, 218 B.R. at 272-73. This appeal followed.

II.

We set to one side the dispute over whether debtors may retain the collateral post-discharge if they remain current on their payments under the original loan agreement, and begin by noting that courts deciding whether the list of retention options specified in 11 U.S.C. § 521(2)(A) is exhaustive have interpreted the statute in one of the three ways. The first interpretation--that the plain language of § 521(2) contemplates retention options beyond those specified in § 521(2)(A)--is most forcefully articulated in In re Parker. There, the Ninth Circuit construed § 521(2)(A) to require only the filing of a statement of intention. See 139 F.3d at 673 ("[T]he only mandatory act is the filing of the statement of intention, which the debtor 'shall' file.").

Then, "if applicable,"--that is, if the debtor plans to choose any of the three options listed later in the statute (claiming the property as exempt, redeeming the property, or reaffirming the debt)--the debtor must so specify in the statement of intention. The debtor's other options remain available, as unambiguously stated in § 521(2)(C): "[N]othing in subparagraph[ ](A) ... shall alter the debtor's or the trustee's rights with regard to such property under this title."

Id.

The second interpretation--that 11 U.S.C. § 521(2), taken as a whole, is ambiguous--begins with the proposition, stated in the opinion of the BAP, that § 521(2)(A) mandates election of one the specified retention options and that § 521(2)(B) directs performance of the elected option:

Section 521(2) certainly requires the debtor to do certain things. It mandates, inter alia, that: (1) "the debtor shall file with the clerk a statement of his intention"; and (2) "within forty-five days after the filing of the notice of intent ... the debtor shall perform his intention." 11 U.S.C. § 521(2)(A) and (B) (emphasis added). Putting § 521(2)(C) aside, the language of § 521(2)(A) and (B) is unambiguous.

In re Burr, 218 B.R. at 271. By focusing on § 521(2)(B)'s requirement that the debtor's intention be performed within forty-five days, the BAP thus rejected the view, exemplified by In re Parker, that the statute unambiguously contemplates options beyond those listed in § 521(2)(A). In the BAP's view, if the stated intention need be performed within forty-five days, the retain-and-keep-current option (which is not capable of "performance" within forty-five days) simply cannot be said to have been plainly within the contemplation of Congress. See 218 B.R. at 271-73.

Yet the BAP saw 11 U.S.C. § 521(2)(C), which provides that "nothing in subparagraphs (A) and (B) of this paragraph shall alter the debtor's or the trustee's rights with regard to such property under this title," as raising questions whether the unambiguous requirements of § 521(2)(A) and (B) are enforceable. See id. at 271. Specifically, the BAP was concerned that reading § 521(2)(A) as setting forth exclusive retention options would undermine § 521(2)(C)'s directive that the statute not be read to diminish rights otherwise available to debtors under the Bankruptcy Code. See id. at 272. For instance,

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