In re Coleman

• Decision Date: 02 August 2007
• Docket Number: No. 07-30271.,07-30271.
• Parties: In re Tony W. COLEMAN and Stephanie A. Coleman, Debtors.
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Western District of Missouri

373 B.R. 907

In re Tony W. COLEMAN and Stephanie A. Coleman, Debtors.

No. 07-30271.

United States Bankruptcy Court, W.D. Missouri.

August 2, 2007.

COPYRIGHT MATERIAL OMITTED

Marc D. Licata, Wagoner Bankruptcy Group; Kansas City, MO, for Debtors.

ORDER SUSTAINING, IN PART, GREEN TREE'S OBJECTION TO CONFIRMATION OF PLAN

ARTHUR B. FEDERMAN, Bankruptcy Judge.

Creditor Green Tree Servicing, LLC, objects to confirmation of the Debtors' Chapter 13 Plan on the ground that, among other things, the Plan violates 11 U.S.C. § 1322(b)(2) because it proposes to pay Green Tree less than the full amount of its claim which is secured by a manufactured home. Alternatively, Green Tree asserts that the Debtors have undervalued the manufactured home securing Green Tree's claim. This is a core proceeding under 28 U.S.C. § 157(b)(2)(L) over which the Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b), 157(a), and 157(b)(1).

Green Tree is the holder of a claim secured by a 1996 Chandaleur 16 × 80 Manufactured Home (the "Mobile Home") owned by Debtor Stephanie Coleman. According to Green Tree, Stephanie owes it approximately $23,000 on its claim. The Debtors value the Mobile Home at $6,000. Their Plan proposes to bifurcate Green Tree's claim and pay Green Tree an Equal Monthly Amount of $100 per month for 60 months.

Green. Tree first asserts that the Plan impermissibly modifies its rights in violation of § 1322(b)(2). That section, commonly referred to as the "anti-modification provision," provides in relevant part that a plan may "modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims...."¹ Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, there was little doubt that § 1322(b)(2)'s anti-modification provision applied only to real property, and not to a mobile home considered to be personal property under state law. Relying on BAPCPA's expanded definition of "debtor's principal residence" in § 101(13A), Green Tree contends that § 1322(b)(2)'s anti-modification provision has also been expanded to include a mobile home, even if the mobile home is considered to be personal property under state law.

Specifically, § 101(13A) provides:

(13A) The term `debtor's principal residence' —

(A) means a residential structure, including incidental property, without regard

to whether that structure is attached to real property; and

(B) includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer.²

According to Green Tree, since § 101(13A)(B) of the Code now defines "debtor's principal residence" to expressly include a mobile or manufactured home, § 1322(b)(2)'s anti-modification provision is also expanded to include mobile homes. To conclude otherwise, according to Green Tree, would render 101(13A)(B) meaningless.

I disagree. As the court in In re Cox³ pointed out, the phrase "debtor's principal residence" modifies "real property," not the other way around.⁴ I further agree with the In re Herrin court that § 101(13A) and § 1322(b)(2) can be read in a manner that gives meaning to every word in both statutes.⁵ In many states, including Missouri, a mobile home can be transformed from personal property into real property. And, as the Herrin court pointed out, there are three states in which a mobile home can be converted to real property even when the debtor does not own the land to which it is attached.⁶ Hence, under the plain language of the § 1322(b)(2), in order for a secured claim to be included in the coverage of the antimodification provision, the claim must be (1) "secured only by a security interest in real property" and (2) the real property mortgaged must be the "debtor's principal residence."⁷ If the manufactured or mobile home is considered to be personal property under applicable state law, the antimodification provision would not apply.

In Missouri, a mobile home is considered in the first instance to be personal property, but it can be converted to real property if certain conditions are met.⁸ Pursuant to § 700.111 of the Missouri Statutes:

1. The owner of a manufactured home may convert the manufactured home to real property by:

(1) Attaching the manufactured home to a permanent foundation situated on real estate owned by the manufactured home owner; and

(2) The removal or modification of the transporting apparatus including but not limited to wheels, axles and hitches rendering it impractical to reconvert the real property thus created to a manufactured home.

2. The conversion of a manufactured home to real property by the method provided in subsection 1 of this section shall prohibit any political subdivision of this state from declaring or treating that manufactured home as other than real property.⁹

Here, if these conditions are present, the Debtors' Mobile. Home would fall within the antimodification provision because it would be considered to be real property under Missouri Law.

"The burden of proof in an objection to confirmation in a Chapter 13 case is on the objecting creditor. The debtor then has the burden of coming forward with evidence to rebut any evidence introduced by the objecting creditor."¹⁰

Mrs. Coleman was the only witness as to the antimodification provision. She testified that she owns the land on which the Mobile Home sits. However, the Mobile Home is sitting on bricks and is tied to the land with what she referred to as "standard tie-downs" connected to metal poles hammered into the ground. It has no foundation, and is not permanently secured to the real property. She further testified that, in order to move it, all she would need to do is get a person with a truck out there, untie it, hoist it up, put wheels on it, and drive it off. In fact, she had done that very thing when she moved it from another location to its current location in 1999. There was no evidence as to whether skirting had been installed around the Mobile Home, whether it had a deck or porch, or whether it was attached to a well, or, a septic system, or any other permanent type of fixture.

Based on this testimony, I find that the Mobile Home has not been permanently attached to the real estate under § 700.111. It is, therefore, personal property and Green Tree's claim can thus be modified under the Debtors' plan.

Green Tree next contends that the Debtors have undervalued the Mobile Home. As stated above, the Debtors value it at $6,000, which is based simply on the Debtors' own estimate of what it is worth. Green Tree asserts that it is worth $14,972.58, based on NADA's "replacement value."

I note at the outset that, although Green Tree has filed a Proof of Claim in which it asserts that its $22,735.50 claim is fully secured, the Debtors have not yet objected to it. Rather, the issue of the Mobile Home's valuation has arisen here in the context of Green Tree's objection to plan confirmation, not in the context of claim allowance. One court has suggested that resolving what amounts to a claim objection in a plan confirmation proceeding could possibly be procedural error, particularly if the creditor is not aware that its claim is at issue.¹¹ However, if the parties voluntarily proceed in this manner, and the confirmation proceeding is essentially a two-party dispute over the value of the creditor's secured claim, then any procedural defect is both waived and harmless.¹² Indeed, proceeding in this manner is commonplace in this district,¹³ and benefits all parties because it promotes prompt confirmation of plans and, hence, prompt payments to creditors by the Chapter 13 Trustee.

That being the case here, because valuation in the plan confirmation context implicates claim allowance, it is appropriate to apply the burden of providing evidence normally applicable in the claims allowance context.

Rule 3001(f) of the Federal Rules of Bankruptcy Procedure provides that a properly executed proof of claim is prima facie evidence of the validity and amount of the claim. A party in interest may, however, file a written objection to a proof of claim. If an objection to a claim is supported by sufficient evidence to rebut the presumption, the burden of proving the validity and amount of the claim shifts back to the claimant. In other words, once sufficient evidence is offered to rebut the prima facie validity of a proof of claim, the respective parties have the same burden of proof they would have under non-bankruptcy law.¹⁴

As discussed in more detail below, Mrs. Coleman testified as to value at the hearing on confirmation. That evidence was sufficient to rebut the prima facie validity of Green Tree's claim as to the Mobile Home's value. Thus, the initial burden of proving value shifted to Green Tree.

I recently issued a decision discussing the valuation of vehicles in light of BAPC-PA's new definition of "replacement value" in § 506(a)(2).¹⁵ That section provides:

If the debtor is an individual in a case under chapter 7 or 13, Such value with respect to personal property securing an allowed claim shall be determined based on the replacement value of such property as of the date of the filing of the petition without deduction for costs of sale or marketing. With respect to property acquired for personal, family, or household purposes, replacement value shall mean the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined.¹⁶

This definition clarified that a court is to use retail merchant values, taking the condition of the vehicle into account, and using the value at the time the determination is being made. This provision would apply not only to vehicles, but to any personal property securing an allowed claim, including the Mobile Home at issue...