In re Collier-Abbott, Case No. 19-21310-E-13
| Decision Date | 27 May 2020 |
| Docket Number | Case No. 19-21310-E-13 |
| Parties | IN RE Wanda COLLIER-ABBOTT, Debtor. |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Eastern District of California |
Richard L. Jare, Granite Bay, CA, for Debtor.
Docket Control No. RJ-6
Wanda Collier-Abbott, the Debtor, has filed a Motion to Value the secured claim of RRA CP Opportunity Trust 2 ("Creditor").1 Debtor provides her declaration and the Declaration and Broker's Price Opinion of Osceola Winnumucca Stephenson as evidence of value of the Debtor's primary residence, the real property commonly known as 3101 Spinning Rod Way, Sacramento, California ("Property") that is the only collateral for Creditor's claim in this case. Dckts. 154, 209, 210. Debtor asserts that exception provided in 11 U.S.C. § 1322(c)(2) to the anti-modification provisions of 11 U.S.C. § 1322(b)(2) allow for the valuation and bifurcation of Creditor's allowed claim pursuant to 11 U.S.C. § 506(a).
Creditor has filed an Opposition, which is supported by the Declaration and Appraisal Report of Lynn Johnson. Dckt. 198. Creditor's claim is secured by the second deed of trust against the Property and it is not disputed that some value exists in the Property to secure this claim secured by the second deed of trust. The claim secured by the first deed of trust is identified as that of Bank of New York Mellon, as Trustee. Bank of New York Mellon, Trustee, has filed Proof of Claim No. 6-1, in which the amount of the secured claim is stated to be ($312,589.38).2
Creditor asserts that this is not a "short-term loan" to which the exception provided in 11 U.S.C. § 1322(c)(2) would apply, and therefore 11 U.S.C. § 1322(b)(2) prohibits modification (including a valuation pursuant to 11 U.S.C. § 506(a) ) of Creditor's secured only by the Debtor's primary residence.
Upon consideration of the evidence presented, the application of 11 U.S.C. § 1322(c)(2), the last payment on the debt owed to Creditor having come due on April 1, 2020, this bankruptcy case having been filed on March 1, 2019, and that the five years of Chapter 13 plan payments are continuing well after the April 1, 2020 due date; the Motion to Value the secured claim of Creditor is granted, and Creditor's secured claim is determined to have a value of ($157,410.62).
The valuation of property that secures a claim is the first step, not the end result of this Motion brought pursuant to 11 U.S.C. § 506(a). The ultimate relief is the valuation of a specific creditor's secured claim.
11 U.S.C. § 506(a) instructs the court and parties in the methodology for determining the value of a secured claim.
(a)(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property , or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor's interest or the amount so subject to set off is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest.
11 U.S.C. § 506(a) (emphasis added).
At dispute in this Contested Matter is whether Creditor's claim, secured only by Debtor's primary residence may be valued in this case pursuant to 11 U.S.C. § 506(a), thereby bifurcating the claim into a secured claim for the value in the Property which exists to secure Creditor's second deed of trust lien position, and the balance as a general unsecured claim. As addressed below, Creditor's claim may properly be valued pursuant to 11 U.S.C. § 506(a), notwithstanding that Creditor's only collateral is Debtor's primary residence.
In a matter that the Ninth Circuit Court of Appeals has not yet addressed,3 Debtor asserts that even though Creditor's claim is secured only by Debtor's primary residence for which there is undisputedly at least some value for Creditor's claim, that claim may be valued as provided in 11 U.S.C. § 506(a). This assertion is based on the 11 U.S.C. § 1322(c)(2) "notwithstanding clause," which makes the prohibition established in 11 U.S.C. § 1322(b)(5) on modifying such claims secured only by the debtor's primary residence not applicable under specified circumstance.
Proof of Claim No. 4-1 was filed on May 6, 2019, for Creditor. The attachments to Proof of Claim No. 4-1 include a Note which is titled "NOTE With Balloon Payment." Proof of Claim 4-1, p. 14. The date of the NOTE is March 24, 2005, and Paragraph 3 of the Note states that all amounts then owing on April 1, 2020, will be due in full on that date. The bankruptcy case was filed on March 1, 2019, approximately one year before the NOTE With Balloon Payment obligation being due in full on April 1, 2020, which is before the final payment will be due during the 60-month term of the plan in this case.
In considering this issue, the court begins with the well-established doctrine for statutory construction. The Supreme Court has been very clear in reading and applying the "plain language" stated by Congress in statutes. Hartford Underwriters Insurance Company v. Union Planters Bank, N.A. , 530 U.S. 1, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000) ; United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989). The basic direction is that Congress says in a statute what it means and means in a statute what it says. Connecticut Nat. Bank v. Germain, 503 U.S. 249, 254, 112 S. Ct. 1146, 117 L. Ed. 2d 391 (1992) ; (quoting Caminetti v. United States, 242 U.S. 470, 37 S.Ct. 192, 61 L.Ed. 442 (1917)) ; United Savings Association of Texas v. Timbers of Inwood Forest Associates, LTD. , 484 U.S. 365, 371, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988).
Beginning with the prohibition on modifying some secured claims in Chapter 13 plans, the Bankruptcy Code provides in 11 U.S.C. § 1322(b)(2) (emphasis added):
As the Ninth Circuit Court of Appeals addressed in Zimmer v. PSB Lending Corp. (In re Zimmer) , 313 F.3d 1220 (9th Cir. 2002) ; if there is no value in the collateral for the holder of the secured claim, then it may be valued at $0, there being no "secured claim" to be protected by the above. However, if there is any value, then the entire secured claim is protected from valuation under 11 U.S.C. § 506(a).
Debtor asserts that the above restriction on modifying claims secured by the debtor's residence is itself limited by 11 U.S.C. § 1322(c)(2), which provides (emphasis added):
Going to 11 U.S.C. § 1325(a)(5), it states in the provisions applicable to the treatment of Creditor's claim (emphasis added):
Looking at the "plain language" of 11 U.S.C. § 1325(a)(5), as made applicable by 11 U.S.C. § 1322(c)(2), it allows for the debtor to provide for the claim of a creditor secured only by the debtor's primary residence by paying that creditor the value of the secured claim, as determined pursuant to 11 U.S.C. § 506(a), and not any amount in excess of the 11 U.S.C. § 506(a) as part of the allowed secured claim.
The court begins with the Circuit Court of Appeals decision cited by Debtor, American General Finance, Inc. v. Paschen (In re Paschen) , 296 F.3d 1203 (11th Cir. 2002). In that case, the Eleventh Circuit concluded that the 11 U.S.C. § 1322(c)(2) exception works through 11 U.S.C. § 1325(b)(5) to allow not only payment terms to be modified, but also to allow for an 11 U.S.C. § 506(a) valuation.
In 2019, the Fourth Circuit Court of Appeals revisited and reversed a prior decision that went contrary to the ruling in Paschen . In Hurlburt v. Black , 925 F.3d 154 (4th Cir. 2019), the Fourth Circuit Court of Appeals concluded that the 11 U.S.C. § 1322(c)(2) exception providing for the 11 U.S.C. § 1325(a)(5) treatment for claims that come due in full during the period of the plan to be modified, includes an 11 U.S.C. § 506(a) valuation of such claims.
Creditor directs the...
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