In re Ezell

• Decision Date: 13 March 2006
• Docket Number: No. 05-38219.,05-38219.
• Citation: 338 B.R. 330
• Parties: In re Larry E. EZELL, Regina A. Ezell, Debtors.
• Court: U.S. Bankruptcy Court — Eastern District of Tennessee

338 B.R. 330

In re Larry E. EZELL, Regina A. Ezell, Debtors.

No. 05-38219.

United States Bankruptcy Court, E.D. Tennessee.

March 13, 2006.

COPYRIGHT MATERIAL OMITTED

Richard M. Mayer, Esq., Knoxville, TN, for Debtors.

Husch & Eppenberger, LLC, Holly N. Knight, Esq., Christopher M. Kerney, Esq., Nashville, TN, for JPMorgan Chase Bank, N.A.

Gwendolyn M. Kerney, Esq., Knoxville, TN, Chapter 13 Trustee.

Hodges, Doughty & Carson, Thomas H. Dickenson, Esq., Knoxville, TN, for Amicus Curiae Intervenors, Knoxville TVA Employees Credit Union, Y-12 Federal Credit Union, Tennessee Members 1st Federal Credit Union, Holston Methodist Federal Credit Union, Citizens National Bank, Bank of Tennessee, ORNL Federal Credit Union, and TNBank.

National Association of Consumer, Bankruptcy Attorneys, Tara Twomey, Esq., Washington, DC, Bond, Botes & Lawson, P.C., Cynthia T. Lawson, Esq., Knoxville, TN, Principal Attorneys for Amicus Curiae Intervenors, National Association of Consumer Bankruptcy Attorneys.

MEMORANDUM ON OBJECTION TO CONFIRMATION FILED BY JP MORGAN CHASE BANK, N.A.

RICHARD STAIR, JR., Bankruptcy Judge.

This contested matter is before the court on the Objection to Confirmation of Plan and Plan Terms Filed by JPMorgan Chase Bank, N.A. (Objection to Confirmation) filed on December 2, 2005, by JPMorgan Chase Bank, N.A. (Chase), a secured creditor, objecting to confirmation of the Debtors' Chapter 13 Plan. A preliminary hearing on the Objection to Confirmation was held on January 4, 2006, at which time the parties agreed that an evidentiary hearing would not be required and that all issues could be resolved on stipulations and briefs. Pursuant to an Order entered on January 6, 2006, the sole issue before the court is "whether 11 U.S.C. § 1325(a)(5), as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, effective on October 17, 2005, allows the Debtors to surrender JPMorgan Chase Bank's collateral in full satisfaction of its claim."

This is a core proceeding. 28 U.S.C.A. § 157(b)(2)(L) (West 1993).

I

The Debtors filed the Voluntary Petition commencing their joint Chapter 13 bankruptcy case on November 8, 2005. Chase is a creditor of Mrs. Ezell, holding a $24,942.07 claim secured by her 2003 Nissan Xterra (Xterra). Mrs. Ezell purchased the Xterra for the personal use of the Debtors from East Tennessee Nissan on December 26, 2003. Under the terms of the Debtors' Chapter 13 Plan (Plan), the Xterra is to be surrendered "in full satisfaction of debt owing."

The record before the court consists of the following: (1) the Joint Stipulations of Facts Filed by JPMorgan Chase Bank, N.A. filed by the parties on January 25, 2006, along with the following stipulated documents: (a) a Retail Installment Contract and Security Agreement (Contract) for the purchase of the Xterra executed by the Debtor, Regina A. Ezell, on December 26, 2003; (b) a Tennessee Certificate of Title issued on February 4, 2004;¹ and (c) the Proof of Claim filed by JPMorgan Chase Bank, N.A. as secured in the amount of $24,942.07 on December 5, 2005; (2) the Supplemental Joint Stipulation of Facts Filed by JPMorgan Chase Bank, N.A. filed by the parties on February 17, 2006; (3) the Debtors' Brief filed on January 13, 2006; and (4) the Memorandum of Facts and Law in Support of Objection to Confirmation by JPMorgan Chase Bank, N.A. filed by Chase on February 8, 2006. Also filed were the Amicus Curiae Brief of Intervenors, filed on February 10, 2006, by Knoxville TVA Employees Credit Union, Y-12 Federal Credit Union, Tennessee Members 1st Federal Credit Union, Holston Methodist Federal Credit Union, Citizens National Bank, Bank of Tennessee, ORNL Federal Credit Union, and TNBank (collectively, Bank Intervenors)² and the Brief of Amicus Curiae National Association of Consumer Bankruptcy Attorneys in Opposition to the Objection to Confirmation filed by JPMorgan Chase Bank, N.A., filed on February 24, 2006, by the National Association of Consumer Bankruptcy Attorneys (collectively, NABA Intervenors).³ On February 24, 2006, Chase filed a Motion to Set Aside Order Allowing NACBA to Intervene for Purposes of Filing an Amicus Curiae Brief (Motion to Set Aside), arguing that the NACBA Intervenors failed to state sufficient cause in support of their motion to intervene, that allowing NACBA to intervene would cause undue and prejudicial delay, and that Chase was not given an opportunity to be heard on the NACBA Intervenors' motion.⁴ For reasons hereinafter discussed in Section IV of this Memorandum, Chase's Motion to Set Aside will be denied.

II

As a preliminary matter, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 will hereinafter be referred to as "BAPCPA," references to specific sections of the Bankruptcy Code as amended by BAPCPA will be to 11 U.S.C. § ___ (2005) or to "Revised § ___," references to the Bankruptcy Reform Act of 1978, as amended, in effect prior to October 17, 2005, will be to 11 U.S.C. § ____ (2004) or to "Pre-BAPCPA § ___," and the concluding alphanumeric paragraph in Revised § 1325(a), the interpretation of which is the subject of this contested matter, will be referred to as the "Anti-Cramdown Paragraph."⁵

III

Following years of debate, BAPCPA became effective on October 17, 2005, for all cases filed on and after that date.⁶ One section receiving revision was 11 U.S.C. § 1325 (2004), dealing with the requirements for confirmation of a Chapter 13 plan. As it relates to this contested matter, Revised § 1325(a) now provides:

(a) Except as provided in subsection (b), the court shall confirm a plan if —

(5) with respect to each allowed secured claim provided for by the plan —

(A) the holder of such claim has accepted the plan;

(B)(i) the plan provides that —

(I) the holder of such claim retain the lien securing such claim until the earlier of —

(aa) the payment of the underlying debt determined under nonbankruptcy law; or

(bb) discharge under section 1328; and

(II) if the case under this chapter is dismissed or converted without completion of the plan, such lien shall also be retained by such holder to the extent recognized by applicable nonbankruptcy law;

(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim; and

(iii) if —

(I) property to be distributed pursuant to this subsection is in the form of periodic payments, such payments shall be in equal monthly amounts; and

(II) the holder of the claim is secured by personal property, the amount of such payments shall not be less than an amount sufficient to provide to the holder of such claim adequate protection during the period of the plan; or

(C) the debtor surrenders the property securing such claim to such holder;

. . . .

For purposes of paragraph (5), section 506 shall not apply to a claim described in that paragraph if the creditor has a purchase money security interest securing the debt that is the subject of the claim, the debt was incurred within the 910-day [period⁷] preceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle (as defined in section 30102 of title 49) acquired for the personal use of the debtor, or if collateral for that debt consists of any other thing of value, if the debt was incurred during the 1-year period preceding that filing[.]

11 U.S.C. § 1325(a) (2005) (emphasis added).

Revised § 1325(a)(5) differs from Pre-BAPCPA § 1325(a)(5) with respect to the treatment of secured claims under subsection (B), which allowed a debtor, pre-BAPCPA, to cramdown secured claims to the value of the collateral securing the claim. Under Revised § 1325(a)(5)(B), the cramdown provision is eliminated as to claims secured by "a motor vehicle" and "any other thing of value" falling within the criteria encompassed within the provisions of the Anti-Cramdown Paragraph. Under Revised § 1325(a)(5), the allowed secured claim of the class of creditors defined in the Anti-Cramdown Paragraph is fixed at the amount of the creditor's claim, without resorting to the secured/unsecured bifurcation procedure mandated by 11 U.S.C. § 506 (2005). The focus of this contested matter centers around Revised § 1325(a)(5) and application of the Anti-Cramdown Paragraph to the "surrender[]" language of Revised § 1325(a)(5)(C).

The Debtors and Chase have stipulated that all elements of the Anti-Cramdown Paragraph have been satisfied. Mrs. Ezell acquired the Xterra for her personal use on December 26, 2003, 684 days before the filing of the Debtors' bankruptcy petition on November 8, 2005, and granted Chase a purchase money security interest in the motor vehicle to secure the unpaid portion of the purchase price which presently amounts to $24,942.07.

The parties do not dispute that, were the Debtors to keep the Xterra and provide for its payment through the Plan under Revised § 1325(a)(5)(B), the Anti-Cramdown Paragraph would provide Chase with an allowed secured claim of $24,942.07. The Debtors contend, however, that the Anti-Cramdown Paragraph also affords them the right to provide for the surrender of the Xterra through the Plan pursuant to Revised § 1325(a)(5)(C) in full satisfaction of Chase's $24,942.07 allowed secured claim because the Anti-Cramdown Paragraph eliminates Revised § 506 from any application to Revised § 1325(a)(5). Therefore, according to the Debtors, there can no longer be a deficiency claim following surrender of the collateral because Chase's claim is fully secured, notwithstanding any lesser amount that Chase might. in fact, realize upon its liquidation of the Xterra following surrender. Conversely, Chase contends that because the Anti-Cramdown Paragraph expressly provides that Revised § 506 does not apply to Revised § 1325(a)(5), its claim remains fully secured by the Xterra following its surrender, with the result being that any deficiency balance...