In re Adebanjo, Bankruptcy No. 90-51903-13. Adv. No. 90-5382.

• Decision Date: 30 March 1994
• Docket Number: Bankruptcy No. 90-51903-13. Adv. No. 90-5382.
• Citation: 165 BR 98
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re Majekodunmi ADEBANJO and Rashidat Adebanjo, Debtors. Majekodunmi ADEBANJO and Rashidat Adebanjo, Plaintiffs, v. The DIME SAVINGS BANK OF NEW YORK, FSB and Ethel Zeisler, Defendants.

165 B.R. 98 (1994)

In re Majekodunmi ADEBANJO and Rashidat Adebanjo, Debtors Majekodunmi ADEBANJO and Rashidat Adebanjo, Plaintiffs, v. The DIME SAVINGS BANK OF NEW YORK, FSB and Ethel Zeisler, Defendants.

Bankruptcy No. 90-51903-13. Adv. No. 90-5382.

United States Bankruptcy Court, D. Connecticut.

March 30, 1994.

Ira B. Charmoy, Daniel Meister, Charmoy & Nugent, Bridgeport, CT, for the plaintiffs.

Lynn A. Kappelman, Scott J. Krowitz, Paul, Hastings, Janofsky & Walker, Stamford, CT, for the defendant Dime Sav. Bank.

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO VACATE JUDGMENT BIFURCATING CLAIM

ALAN H.W. SHIFF, Bankruptcy Judge.

The defendant The Dime Savings Bank of New York, FSB (the "defendant"), seeks an order vacating a judgment which entered August 5, 1991, bifurcating its first mortgage into secured and unsecured claims. See § 506(a). The defendant contends that a stipulation it entered into with the debtors on August 27, 1991, requires the application of Nobelman v. Am. Sav. Bank, ___ U.S. ___, 113 S.Ct. 2106, 124 L.Ed.2d 228 (1993) which compels that result. Because I conclude that the stipulation does not require the application of Nobelman, and that the application of Nobelman would not, in any event, require the vacation of the bifurcation judgment, the motion is denied.

BACKGROUND

On October 3, 1990, the debtors commenced a chapter 13 case. On December 19, 1990, the defendant filed a proof of claim in the amount of $203,176.19.¹ On October 29, 1990, the debtors commenced an adversary proceeding against the defendant and another party, seeking to avoid and discharge liens on certain real property to the extent they were deemed unsecured pursuant to § 506(a) and (d). The debtors asserted that the fair market of that real property was $169,000.00 as of the petition date, and in support of that assertion attached to their complaint a copy of an appraisal dated August 14, 1990, valuing the property as of July 18, 1990. The real property was known as 183-187 Taft Avenue, Bridgeport, Connecticut. The appraisal stated on page 2 that the "subject property is improved with a 2.5 story wood frame three family dwelling . . . containing 3,095 square feet of finished living area with 15 rooms, 6 bedrooms and 3 baths," and had a three car detached garage.² The appraisal indicated on page 3 that the highest and best use of the property was "its current use as a 3 family residential dwelling." All of the comparables used to determine the property's value were also three family dwellings, and the value was calculated on a per-unit basis.

The debtors resided at 185 Taft Avenue, apparently one of the three dwelling units in the building. The debtors' Chapter 13 Statement, item 4(a)(3), filed October 3, 1990, and amended October 17, 1991, disclosed that their income included $1,235.00 per month in rental income. The rental income was about 28 percent of the debtors' total income. As the Statement, at item 14(a), also disclosed that the three-family property was the only real estate the debtors owned, it is apparent that the debtors' rental income was derived from the rental of one or both of the units in which they did not reside. The Chapter 13 Worksheet and Summary, filed January 31, 1992, indicated that the debtors' rental income was considered in determining the feasibility of their plan.

In the adversary proceeding, the defendant did not dispute the debtors' valuation, but argued that § 1322(b)(2) prohibited the bifurcation of its undersecured claim into secured and unsecured components. On January 10, 1991, this court issued its opinion in Bellamy v. Fed. Home Loan Mortgage Corp. (In re Bellamy), 122 B.R. 856 (Bankr. D.Conn.1991), in which it was determined that an undersecured claim secured only by a security interest in real property that was the debtor's principal residence could be bifurcated into secured and unsecured claims notwithstanding § 1322(b)(2). That decision was affirmed by the District Court on June 26, 1991. 132 B.R. 810 (D.Conn.1991). Applying that decision to the instant adversary proceeding, this court entered a judgment against the defendant on August 5, 1991, bifurcating its claim and voiding its lien to the extent it exceeded the property's value. The defendant filed a notice of appeal on August 14, 1991.

On September 11, 1991, the defendant and the debtors entered into, and this court approved, a Stipulation and Order (the "Stipulation"). After reciting the pendency of the defendant's appeal, the Stipulation provided:

2. The appeal involves a legal issue only as to whether, pursuant to 11 U.S.C. § 506(a) and (d), the Bankruptcy Court is authorized to avoid and discharge as a secured claim amounts owing on a first residential mortgage in a Chapter 13 case.

3. The foregoing issue is identical to the issue involved in In re Bellamy, in which the United States Bankruptcy Court for the District of Connecticut entered a judgment in a Chapter 13 case avoiding and discharging as a secured claim a portion of an amount owing on a first residential mortgage and allowing said portion as an unsecured claim (the "Bellamy Judgment"). The Bellamy Judgment was affirmed by the United States District Court for the District of Connecticut and is currently on appeal to the Second Circuit.

4. Following the exhaustion of all appeals, if the Bellamy Judgment is reversed by the Second Circuit or the Supreme Court of the United States, the Judgment entered in this adversary proceeding shall be vacated.

5. In consideration of the foregoing agreement to vacate the Judgment in the event of a reversal of the Bellamy Judgment, the defendant will withdraw its Notice of Appeal of the Judgment promptly following the so ordering of this stipulation.

On September 19, 1991, the defendant filed a Withdrawal of Notice of Appeal. On February 4, 1992, an order entered confirming the debtors' plan, which treated a portion of the defendant's claim as an unsecured claim. On April 21, 1992, the Second Circuit affirmed the district court's holding in Bellamy. 962 F.2d 176 (2d Cir.1992). At that time, no circuit court of appeals had disagreed with the holding in Bellamy. No review was sought of the Second Circuit's decision. On August 13, 1992, the Fifth Circuit issued a decision in Nobleman v. Am. Sav. Bank (Matter of Nobleman), 968 F.2d 483 (5th Cir.1992), which declined to follow Bellamy and the decisions of the other courts of appeals that had addressed the issue. On June 1, 1993, the Supreme Court affirmed Nobelman. On September 23, 1993, the defendant filed the instant motion seeking to vacate the bifurcation judgment based on the Stipulation.

DISCUSSION

1. The Stipulation

The goal in construing any contract is to effectuate the intent of the parties. That intent must be ascertained by considering the language of the contract in light of the circumstances surrounding its formation and the motives and purposes of the parties. Barnard v. Barnard, 214 Conn. 99, 109-110, 570 A.2d 690 (1990). If its language is clear, the court must give effect to the intent expressed by that language, without regard to "any intention one of the parties may have silently entertained." In re RBS Indus., Inc., 115 B.R. 419, 421 (Bankr.D.Conn.1990). "A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity, and words do not become ambiguous simply because lawyers or laymen contend for different meanings." Downs v. Nat'l Casualty Co., 146 Conn. 490, 494-95, 152 A.2d 316 (1959).³

The defendant asserts that the Stipulation provided for the vacation of the judgment against it if the holding in Bellamy was ever disapproved by either the Second Circuit or the Supreme Court. That is, vacation would be required not only if the order entered by this court in Bellamy was actually reversed, but also if the concept endorsed by that order was subsequently overruled in any subsequent proceeding before the Second Circuit or the Supreme Court, regardless of when that result occurred. The debtors, on the other hand, argue that the Stipulation is unambiguous and provides for the vacation of the judgment in this adversary proceeding only if the Bellamy order was reversed on direct appeal.

I agree with the debtors' interpretation. While paragraph 2 of the Stipulation identifies the "legal issue" that was involved in Bellamy, it is clear from paragraph 3 that the defined term "Bellamy Judgment" refers not to that issue, but to the judgment entered by this court in Bellamy. Indeed, the defendant concedes that the term "Bellamy Judgment" refers to "the judgment entered by the United States Bankruptcy Court for the District of Connecticut in In re Bellamy. . . ." See Motion at p. 4 n. 1. While paragraph 3 describes what that judgment did, i.e., "avoided and discharged as a secured claim a portion of an amount owing on a first residential mortgage and allowed said portion as an unsecured claim," that language is merely descriptive of that particular judgment. Paragraph 3 describes the "Bellamy Judgment" as having been "affirmed" by the District Court and as "on appeal" to the Second Circuit. Judgments are appealed and affirmed, not concepts or issues.

Further, the condition stated in paragraph 4 is that the Bellamy Judgment be "reversed" by the Second Circuit or Supreme Court "following the exhaustion of all appeals."

To "reverse" a judgment means to "overthrow, vacate, set aside, make void, annul, repeal, or revoke it." Black\'s Law Dictionary 1319 (6th ed. 1990). A judgment reversed by a higher court is "without any validity, force or effect, and ought never to have existed." Butler v. Eaton, 141 U.S. 240, 244, 11 S.Ct. 985, 987, 35 L.Ed. 713 (1891). Reversal of a judgment and remand for a new trial places the parties in the same position, insofar as relief is concerned, as if the case had never been tried.

Wheeler v. John Deere Co., 935 F.2d 1090, 1096 (10th Cir.1991) (some citations omitted). There...