Capitol Credit Plan of Tennessee, Inc. v. Shaffer

• Decision Date: 10 September 1990
• Docket Number: 89-2726,Nos. 88-2877,s. 88-2877
• Citation: 912 F.2d 749
• Parties: , Bankr. L. Rep. P 73,617 CAPITOL CREDIT PLAN OF TENNESSEE, INC., Plaintiff-Appellant, v. Cynthia Kay SHAFFER, Defendant-Appellee, v. AMERICAN FINANCIAL SERVICES ASSOCIATION; North Carolina Clients' Councils, Amici Curiae (Two Cases).
• Court: U.S. Court of Appeals — Fourth Circuit

Page 749

912 F.2d 749

20 Bankr.Ct.Dec. 1728, Bankr. L. Rep. P 73,617

CAPITOL CREDIT PLAN OF TENNESSEE, INC., Plaintiff-Appellant, v. Cynthia Kay SHAFFER, Defendant-Appellee, v. AMERICAN FINANCIAL SERVICES ASSOCIATION; North Carolina

Clients' Councils, Amici Curiae (Two Cases).

Nos. 88-2877, 89-2726.

United States Court of Appeals Fourth Circuit.

Argued Oct. 6, 1989.

Decided Sept. 10, 1990.

Archibald Carter Magee, Jr., argued, and Jonna M. McGraw, Rebecca Buehler Connelly, on brief, Magee and Associates, Roanoke, Va., for plaintiff-appellant.

Barry Lynn Proctor, Abingdon, Va., for defendant-appellee.

Frank Max Salinger, Robert E. McKew, American Financial Services Ass'n, Washington, D.C., for amicus curiae American Financial Services Ass'n.

Douglas Scott, Virginia Poverty Law Center, Richmond, Va., John Rao, Robert Sabel, National Consumer Law Center, Boston, Mass., for amicus curiae North Carolina Clients' Council.

Before RUSSELL and PHILLIPS, Circuit Judges, and HAYNSWORTH, ^* Senior Circuit Judge.

DONALD RUSSELL, Circuit Judge:

In this case, we consider the jurisdiction of the circuit courts to hear appeals in bankruptcy cases. We hold that when a bankruptcy case has been tried in bankruptcy court and has been appealed to the district court, it may only be appealed further to the circuit court when the district court's ruling was a final decision. In this instance, since the district court remanded the case to the bankruptcy court for further consideration, the decision was not final. Thus, we do not have subject matter jurisdiction to hear this appeal, and the appeal is dismissed.

I.

This case concerns the Chapter 13 bankruptcy of Cynthia K. Shaffer. In her petition for bankruptcy, Shaffer listed two debts that were secured by deeds of trust on her principal residence. One of these debts was a short-term note in favor of appellant Capitol Credit Corporation. This note was secured only by Shaffer's home; however, this loan had not been used by Shaffer to purchase her home. Instead, the note was what is popularly known as a "home equity loan."

The bankruptcy plan filed by Shaffer proposed to reduce the size of this note in a number of ways: the interest rate was to be reduced, the principal amount was to be slightly reduced, the payments were to be extended over a longer period of time, the overdue payments were to be forgiven, and no attorneys fees or costs were to be paid (as provided for in the note in the case of default). Capitol Credit objected strongly to this plan, maintaining that it was entitled to the full value of the note.

Capitol Credit primarily argued that 11 U.S.C. Sec. 1322(b)(2) prohibits the modification of the rights of a creditor whose only security interest is in the debtor's home. The plain language of that section supports Capitol Credit's position. However, the bankruptcy court ruled that this section was only intended to protect the home mortgage industry, and that nonpurchase money loans were not included in that section's protection. Accordingly, the bankruptcy court scaled back Capitol Credit's loan in keeping with the debtor's plan. The district court upheld this reading of section 1322(b)(2) on appeal.

In addition to the section 1322(b)(2) issue, Capitol Credit had raised two additional arguments in the bankruptcy court which the bankruptcy judge did not address. Capitol Credit had argued that two other provisions of the U.S. Code also prevented the scaling back of the note in a bankruptcy plan. Capitol Credit raised the failure of the bankruptcy court to address these arguments on appeal in the district court. The district court declined to resolve them, however. Instead, it remanded these issues to the bankruptcy court, stating that "the record is devoid of any findings on these aspects of the case and Shaffer cannot afford to defend the decision."

Capitol Credit then sought to appeal the ruling regarding section 1322(b)(2) to this court before returning to the bankruptcy court. It petitioned the district court to certify that issue to this court as an interlocutory appeal under 28 U.S.C. Sec. 1292(b). The district court agreed, and certified the issue to this court, which accepted the appeal.

II.

The first issue in every appeal is one of jurisdiction. This issue may be raised at any time, even on appeal, even by the court sua sponte. Mansfield, Coldwater & Lake Railway Co. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511, 28 L.Ed. 462 (1884). Although this court initially granted the petitioners the right to appeal the decision below, we did not consider at that time whether this court had subject matter jurisdiction. We subsequently raised this jurisdictional issue, and we now hold that we do not have jurisdiction.

First, some background is helpful. Bankruptcy cases can originate in either the bankruptcy court or the district court. See 28 U.S.C. Secs. 151, 1334(b). If the case originates in the bankruptcy court, the district court generally hears the appeal. Of course, if the case begins in the district court, then the first appeal is to the circuit court.

Unfortunately, the U.S. Code does not lay out a clear appellate scheme in bankruptcy cases. See 16 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure, Sec. 3926 (Supp.1990). Title 28, U.S.C., Sec. 158 specifically addresses bankruptcy appeals, but it does not paint a complete picture. ¹ Subsections (a) and (b) address appeals from the bankruptcy court to the district court. They provide for appeals from final decisions and interlocutory orders. Further, they provide that a circuit may designate a bankruptcy appellate panel to hear bankruptcy appeals in lieu of district court review. This appellate panel would be composed of bankruptcy judges from within the circuit, and the affected district judges must consent to this dislocation of their appellate jurisdiction. Section 158(d) addresses the appellate jurisdiction of the circuit court over appeals from both the decisions of the district court and the bankruptcy appellate panel. However, there is no provision for interlocutory appeals; it merely provides jurisdiction for "appeals from all final decisions, judgments, orders, and decrees entered under subsections (a) and (b) of this section." 28 U.S.C. Sec. 158(d).

Since we are not presented with an appeal of a final decision, the plain language of section 158(d) would indicate that we do not have jurisdiction, since this section does not provide for interlocutory appeals. The issue is whether the Code provisions for ordinary civil appeals supplement section 158(d) so that an appellate court may hear an interlocutory appeal in a bankruptcy case that originates in the bankruptcy court. We find that section 158(d) is the exclusive section governing our jurisdiction in that instance, and, thus, there is no interlocutory jurisdiction in this court in such cases. ²

Section 1291 of 28 U.S.C. grants jurisdiction to circuit courts to hear appeals from the final decisions of district courts. ³ Section 1292(b) provides for interlocutory appeals to circuit courts from district court orders by certification. ⁴ The district judge may certify an issue for interlocutory appeal if there is a "controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." The circuit court has discretion in deciding whether to accept the appeal. This appeal arrived by this route. Yet, are sections 1291 and 1292(b) pertinent to bankruptcy appeals when the case began in the bankruptcy court? There are three possible positions that can be taken, and the circuits that have addressed this question are badly split. We explore each school of thought briefly.

First, section 158(d) could be the exclusive section regarding all bankruptcy appeals. For several reasons, this cannot be so. Most importantly, there would be no provision for appeals to the circuit court for bankruptcy cases that originated in the district court. Section 158(d) only provides for appellate jurisdiction for decisions rendered under sections 158(a) and (b). Those sections only address the instance where a case originates in the bankruptcy court, and is appealed to the district court.

In addition, if section 158 was the exclusive jurisdiction section, then there would be no jurisdiction for any interlocutory appeal to a circuit court in a bankruptcy case ever, either in cases originating in the bankruptcy court or the district court. This would produce disparate appellate schemes. Interlocutory appeals would be permitted to the district court from the bankruptcy court under section 158(a), but there would be no parallel provision for interlocutory appeals to the circuit court for cases originating in the district court. There is no apparent reason for such a difference. No circuit has adopted the first school of thought to our knowledge. The Ninth Circuit adopted this position at first, Teleport Oil Co. v. Security Pacific National Bank, 759 F.2d 1376, 1378 (9th Cir.1985), but later recognized the weakness of such a position. In re Benny, 791 F.2d 712, 717-19 (9th Cir.1986). We implicitly rejected the first school of thought in A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994 (4th Cir.), cert. denied, 479 U.S. 876, 107 S.Ct. 251, 93 L.Ed.2d 177 (1986), where we held that section 1291 governed our review of bankruptcy cases commencing in the district court. Id. at 1009. We did not address the relationship of section 1291 and section 158 in that case, yet that ruling established that the first school of thought was not the law of this circuit.

Under the second school of thought, section 1292(b) would be a supplemental provision concerning all bankruptcy appeals to the circuit court, regardless of whether the case began in the bankruptcy court or the district court. Two arguments can be made in support of this...