In re Maynes
| Decision Date | 18 April 2019 |
| Docket Number | No. 18-11609-j7,18-11609-j7 |
| Citation | 598 B.R. 648 |
| Parties | IN RE: Ruben R. MAYNES, Jr. and Donna L. Maynes, Debtors. |
| Court | U.S. Bankruptcy Court — District of New Mexico |
Ronald E Holmes, Davis Miles McGuire Gardner, PLLC, Albuquerque, NM, for Debtors.
ROBERT H. JACOBVITZ, United States Bankruptcy JudgeDebtors Ruben R. Maynes, Jr. and Donna L. Maynes seek to redeem a 1978 Ford F350 truck (the "Truck") subject to a lien held by State Employees Credit Union (the "Credit Union") for $ 1,500 payable within sixty days of the date of entry of the order authorizing redemption. See Debtors' Motion for Redemption of 19791 Ford F350 Truck ("Motion to Redeem") – Docket No. 16. The Credit Union objected to the Motion to Redeem. See State Employees Credit Union's Objection to Debtors' Motion for Redemption of "1979 Ford F350 Truck" ("Objection") – Docket No. 18.
The Court held a final, evidentiary hearing on the Motion to Redeem on February 7, 2019 and took the matter under advisement.2 For the reasons explained below, the Court finds that the value of the Truck for redemption purposes is $ 5,000, not $ 1,500 as requested by the Debtors in their Motion. Accordingly, the Court will deny the Motion to Redeem, with leave for the Debtors to redeem the Truck by paying the redemption value of $ 5,000 to the Credit Union within 30 days of the date of entry of this Memorandum Opinion and Order and thereby to retain the Truck.
Debtors filed a voluntary petition under Chapter 7 of the Bankruptcy Code on June 26, 2018. Debtors listed the following vehicles with the following values on Schedule A/B:
1979 Ford F350 $6,010
2001 Ford F150 $6,010
2013 Hyundai Sonata $4,350
See Docket No. 1. The vehicle scheduled as the 1979 Ford F350 is the 1978 Truck. On Schedule C, Debtors claimed an exemption in the Truck in the amount of $ 7,550. Id. Debtors' Schedule A/B reflects that the Truck is secured by a lien held by the Credit Union in the "approximate amount of $ 14,591.62" cross-collateralized with the 2001 Ford F150. Id. Debtors have since returned the 2001 Ford F150 to the Credit Union. Mr. Maynes testified that the identification of the Truck as a 1979 Ford F350 rather than a 1978 Ford F350 in his bankruptcy schedules was a mistake that he did not notice when he reviewed his bankruptcy schedules before signing them. He also testified that to arrive at the scheduled values he simply divided the combined value of the two trucks listed in his schedules in half because they were cross-collateralized to secure loans from the Credit Union.
The Truck was not originally manufactured as an F350. It started out as an F150, two-wheel drive truck, but was heavily modified into a custom truck with four-wheel drive.4 The Debtor testified that the Truck is a "heavily modified one ton truck" with a "3/4 ton chassis." The body of the Truck is a Super Cab. Notwithstanding the Truck's origination as an F150, the exterior of the Truck now bears an F350 designation.
Debtors obtained a loan in the principal amount of $ 15,715.88 from the Credit Union to purchase the Truck in August of 2014. See Exhibit 7.5 The Debtors obtained the Truck from Spokane, Washington. The Truck also served as collateral for another loan. See Exhibit No. 4. Mr. Maynes has collected these types of trucks over the years. The Truck is titled in the name of Ruben Maynes. See Exhibit 4. The Debtor wants to redeem the Truck because it was his son's first vehicle. The Debtor wants to give the Truck to his son who wants to fix it up when he comes home on leave from the coast guard.
The odometer on the Truck runs to 99,999 before it rolls over to begin again at zero. Because the Truck is well over thirty years old, it is difficult to estimate the Truck's mileage. The mileage reflected in the repair estimate prepared in December of 2018 is 62,997. See Exhibit 16. In the past when the Debtor lived in Pecos, New Mexico, the Debtor used the Truck for hauling wood and for camping. At the time Debtor filed his bankruptcy petition, the Truck was not operating. A repair estimate for the Truck prepared by San Tan Ford in Gilbert, Arizona in December of 2018 recommends repairs that would cost an estimated $ 1,746.50. See Exhibit 16. In addition, in the Debtor's opinion the cam shaft in the Truck is damaged and in need of repair, and the transmission needs to be replaced. It would be difficult to find a replacement transmission for the Truck because it is an obsolete item.
Because the Truck came from Spokane, Washington and weathered the northwest climate, it has some rust on the exterior. The exterior of the Truck could use a full paint job, although pictures of the Truck indicate that the exterior is in fair condition. See Exhibit 16. Pictures of the Truck's interior show some cracking in the upholstery of the front bench seat, but for the most part, the interior looks to be in fairly good condition considering its age. The Debtor currently keeps the Truck at his home in Gilbert, Arizona. The Debtor considers the Truck a daily driver, though he agrees it is a "classic" because of its age. In the Debtor's opinion, the Truck is worth only $ 600 because of the need for repairs.
Because the Truck was modified from its original manufactured form, it is difficult to find comparable NADA values. The Truck has a Super Cab, but Ford did not manufacture an F350 in 1978 that had a Super Cab. The NADA retail values for a 1978 Ford F350 (no Super Cab) as of July 11, 2018 are: 1) low retail value of $ 2,375; 2) average retail value of $ 5,800; and 3) high retail value of $ 8,050. See Exhibit 2.6 The NADA retail values for a 1978 Ford 350 1 ton Styleside Crew Cab with four wheel drive and a 351 V8 engine as of January 17, 2019 are: 1) low retail value of $ 3,525; 2) average retail value of $ 8,025; and 3) high retail value of $ 10,775, with a list price of $ 6,100. See Exhibit 3. The NADA values for a 1979 Ford F350 range from a low retail value of $ 4,275 to a high value of $ 21,800. See Exhibit B. NADA values for a 1978 Ford F250 ¾ Ton Flareside as of August 6, 2014 range from a low retail value of $ 1,775 to a high retail value of $ 7,125 with a list price of $ 5,087. See Exhibit 6.7
Linda Moya, collections manager for the Credit Union, with eighteen years of experience testified on behalf of the Credit Union. She is familiar with working on old cars and has assisted in rebuilding engines, transmissions, and replacing clutches and brakes. If the Credit Union repossessed the Truck, the Credit Union would perform the recommended repairs and sell the Truck. A representative of the Credit Union has not recently inspected the Truck in person because the Truck is no longer located in New Mexico. In Ms. Moya's opinion, this type of truck is in high demand and would be easy for the Credit Union to sell. In her opinion, the Truck is worth $ 9,000 after making the $ 1,746.50 of recommended repairs.
The Court finds that the value of the Truck is $ 5,000 for purposes of redemption.
Section 722 governs redemption. Under that section, an individual chapter 7 debtor may redeem exempt personal property intended for personal or family use subject to a lien securing dischargeable consumer debt by paying the lienholder at the time of redemption the amount of the lienholder's secured claim in full. See 11 U.S.C. § 722.8 See also 6 Collier on Bankruptcy ¶ 722.01 (Richard Levin & Henry J. Sommer, eds., 16th ed.) (" Section 722 of the Bankruptcy Code provides that an individual debtor may redeem consumer goods from a lien securing a dischargeable consumer debt, if the property is exempted under section 522 or has been abandoned under section 544, by paying the lienholder the amount of the allowed claim secured by the lien, i.e., the value of the lienholder's collateral if he or she is undersecured."). Redemption under 11 U.S.C. § 722 thus requires the following: 1) the property must be exempted under 11 U.S.C. § 522 or abandoned under 11 U.S.C. § 544 ; 2) the property must be used primarily for personal, family, or household use; 3) the debt must be consumer debt; 4) the redemption amount must be equal to the value of the creditor's secured claim; and 5) the debtor must pay the value of the secured claim in full at the time of redemption. 11 U.S.C. § 722.
The first three requirements
The first three redemption requirements have been satisfied. First, the Debtors claimed an exemption in the Truck on Schedule C. Second, the Truck will be used primarily for personal, family, or household use. Although Mr. Maynes testified that he wants to redeem the Truck for the benefit of his son rather than for himself, such use fits within the requirements for redemption. Mr. Maynes' son is a family member, and the Truck will be used primarily for personal, rather than business purposes. See Cypher Chiropractic Center v. Runski (In re Runski) , 102 F.3d 744, 747 (4th Cir. 1996) (). Third, the debt secured by the Truck is consumer debt. "Consumer debt" is defined in the Bankruptcy Code as "debt incurred by an individual primarily for a personal, family or household purpose." 11 U.S.C. § 101(8). Because the Debtors acquired the Truck for their personal use, this redemption requirement has also been satisfied.
The fourth requirement for redemption is payment of the redemption amount, which is equal to the value of the creditor's allowed secured claim. Redemption allows a debtor "to ‘strip off’ a portion of a claim against exempt or abandoned property, paying the lender only the portion of its claim secured by the value of the collateral." In re Weber , 332 B.R. 432, 436 (10th Cir. BAP 2005).
Under 11 U.S.C. § 506(a), the value of a creditor's interest in the collateral "shall be determined in light of the purpose of the valuation and of the proposed disposition or...
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