In re Mayton, BAP No. CC-95-2267-MeKV

• Decision Date: 31 March 1997
• Docket Number: Bankruptcy No. SV 95-15067-GM.,BAP No. CC-95-2267-MeKV
• Citation: 208 BR 61
• Parties: In re Lorraine Lillian MAYTON, Debtor. Lorraine Lillian MAYTON, Appellant, v. SEARS, ROEBUCK & CO.; Heide Kurtz, Chapter 7 Trustee; United States Trustee, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

208 B.R. 61 (1997)

In re Lorraine Lillian MAYTON, Debtor Lorraine Lillian MAYTON, Appellant, v. SEARS, ROEBUCK & CO.; Heide Kurtz, Chapter 7 Trustee; United States Trustee, Appellees.

BAP No. CC-95-2267-MeKV, Bankruptcy No. SV 95-15067-GM.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Submitted Without Argument July 25, 1996.

Decided March 31, 1997.

Lorraine Lillian Mayton, Lancaster, CA, in pro per.

David S. Brower, Leibowitz & Constantino, Santa Clara, CA, for Sears, Roebuck & Co.

Before: MEYERS, KING¹ and VOLINN, Bankruptcy Judges.

OPINION

VOLINN, Bankruptcy Judge.

The debtor appeals from an order entered on motion of a consumer secured creditor, pursuant to 11 U.S.C. Sec. 521(2), requiring her to amend her statement of intention, Official Bankruptcy Form 8, as to the collateral claimed by the secured creditor. We reverse.

FACTUAL BACKGROUND

The debtor filed her Chapter 7 petition pro se² on July 7, 1995. Her schedules show approximately $30,000.00 in unsecured debts, consisting of ten credit card creditors, with charges incurred from 1986 through 1993, and two department store creditors, with total charges of approximately $2,400, incurred in 1986 and 1994. The schedules show that the debtor lived in a retirement community with a month-to-month tenancy. She had a monthly income of approximately $1,000 from social security and two small pensions and monthly expenditures of approximately $1,300. Her personal property, virtually all of which was claimed as exempt, consisted primarily of household furniture and personal belongings, including about $500 in cash. Her schedules listed no secured creditors.

As required by § 521(2),³ the debtor filed Form 8, designated "Chapter 7 Individual Debtor's Statement of Intention," with her schedules. Form 8, Paragraph 1 states: "I, the debtor, have filed a schedule of assets and liabilities which includes consumer debts secured by property of the estate." Official Bankruptcy Forms, Form 8 (reprinted in Norton Bankr.Law & Pract.2d: Bankr.Rules at 781 (1996)). Paragraph 2 requires the debtor to state whether she intends to retain or surrender property secured by the consumer debt. For property to be retained, the form provides three options:

(1) Debt will be reaffirmed pursuant to § 524(c);

(2) Property is claimed as exempt and will be redeemed pursuant to § 722, and

(3) Lien will be avoided pursuant to § 522(f) and property will be claimed as exempt.

Id. On the form, the debtor responded "N/A" to both the "Property to Be Surrendered" and "Property to Be Retained" statements.

At the § 341 meeting of creditors held on August 11, 1995, the debtor appeared for examination by the U.S. Trustee and interested creditors. The following exchange took place between the debtor and a representative of Sears:

SEARS: Ms. Mayton, do you still possess the microwave and washing machine and sewing machine purchased from Sears?

Debtor: Yes.

SEARS: Nothing further for the record. Thank you.

On October 2, 1995, Sears filed a motion to compel the debtor to file an amended statement of intention pursuant to Fed. R.Bankr.P. 1009(a). Sears alleged in a declaration attached to the motion, that the debtor had purchased a sewing machine, a microwave oven, a television and a "LXICU box/programmer" with her Sears credit card and that therefore the items were subject to security agreements.

The sales receipts attached contained language giving a security interest in the purchased goods.

The debtor's discharge was entered on November 2, 1995. A hearing on the motion to amend was held on November 9, 1995. On November 9, 1995, the court ordered the debtor "to file an Amended Statement of Intention, including her intention as to secured Creditor, Sears, Roebuck and Co., within thirty (30) days of entry of this order." The order was entered on November 15, 1995. The debtor filed a timely notice of appeal on November 17, 1995.

ISSUE

Whether the court could require that the debtor file an amended statement of intention, specifically responding to Form 8 in terms of surrender or retention of collateral and in the latter event whether the debtor would redeem or reaffirm?

STANDARD OF REVIEW

Essentially, there are no disputed facts. The fundamental issue is one of statutory interpretation which involves the de novo standard or independent appellate review. In re Pace, 67 F.3d 187, 191 (9th Cir.1995).

DISCUSSION

I.

As indicated, the order on appeal requires the debtor to comply with § 521(2).⁴

At the outset, there is a question as to whether the order on appeal is a final ruling on a discrete issue effectively fixing the relationship of the parties. The BAP has jurisdiction to review final orders of the bankruptcy courts. 28 U.S.C. § 158(a). The Ninth Circuit has adopted a "pragmatic approach to deciding whether a bankruptcy court's order is final, recognizing that certain proceedings in a bankruptcy case are so distinct and conclusive either to the rights of individual parties or the ultimate outcome of the case that final decisions as to them should be appealable as of right." Dunkley v. Rega Properties, Ltd. (In re Rega Properties, Ltd.), 894 F.2d 1136, 1138 (9th Cir.1990) (quotations omitted). Orders which resolve discrete issues and seriously affect substantial rights are immediately appealable. Allen v. Old Nat'l Bank of Washington (In re Allen), 896 F.2d 416, 418 (9th Cir.1990). The scope of appellate jurisdiction is ultimately defined by balancing "the costs and inconvenience of piecemeal review on the one hand and the danger of denying justice on the other." Gillespie v. United States Steel Corp., 379 U.S. 148, 152-53, 85 S.Ct. 308, 311, 13 L.Ed.2d 199, (1964)(quoting Dickinson v. Petroleum Conversion Corp., 338 U.S. 507, 511, 70 S.Ct. 322, 324, 94 L.Ed. 299 (1950)). It is at least arguable that the order, because it is directed to § 521(2)(A), which requires a debtor to furnish information as to his or her intention, is simply prologue to the requirement of § 521(2)(B) which requires that the statement of intention, as filed, be fulfilled within forty-five days. As indicated, official form 8, the statement of intention, directs the debtor to one of the four alternatives discussed above. The form further states "I understand that § 521(2)(B) of the Bankruptcy Code requires that I perform the above stated intentions within 45 days of the filing of the statement with the court or within such additional time as the Court, for cause, within such 45-day period fixes."

The statute plainly provides that the filing of a statement does not represent a discrete or separable act. Rather, the statement begins a self-executing continuum. Once the debtor files a statement, § 521(2)(B) commits the debtor as follows:

within forty-five days after the filing of a notice of intent under this section, or within such additional time as the court, for cause, within such forty-five day period fixes, the debtor shall perform his intention with respect to such property, as specified by subparagraph (A) of this paragraph . . .

Thus, the court order requiring debtor to file a statement commits the debtor to surrendering the property or to following any one of the three specific alternatives indicated. To put it otherwise, the order is self-executing and no further proceedings before the court are contemplated other than those which might be required for enforcement. It therefore appears that the order before us is final and appealable.

II.

Section 521(2), which was added to the Bankruptcy Code in 1984, was sponsored by consumer creditor organizations, resisted by debtor-oriented groups and debated in the Congress. The legislative pulling and hauling is described in considerable detail in the case of In re Weir, 173 B.R. 682 (Bankr. E.D.Cal.1994).

Because of the legislative compromises and logjam atmosphere attending the 1984 bankruptcy legislation, certain controversial sections of the Code, such as § 521(2), resulted in ambiguous language and inconsistent or conflicting provisions. The cases dealing with § 521(2) arise, for the most part, in two contexts: cases in which the debtor is considered not to have filed a statement of intention and cases in which the debtor stated an intention to pursue a course other than one specified in § 521(2). In the latter category, the debtor has generally stated an intention to retain the property and simply make payments as provided for by the security agreement. The instant matter falls in the former category.

Of the five circuit courts of appeal thus far interpreting the statute before us, three have held that the debtor is required to address only the alternatives set forth in § 521(2)(A)(B).⁵ For instance, in In re Johnson, 89 F.3d 249 (5th Cir.1996), the most recent circuit decision at the present time, the court, in a brief per curiam ruling adopting the bankruptcy court's reasoning, determined that, pursuant to § 521, the debtor was required to state her intention to surrender or retain the secured property and, in the event of retention, to make one of the three choices indicated by the statute. Two circuit courts of appeal have held that the debtor is not constrained to comply with the specific statutory alternatives.⁶ There is marked disagreement among bankruptcy courts and district courts in other circuits.⁷

Essentially, the cases that limit the debtor's choices focus on what appear to be the statute's explicit and mandatory requirements. Some of those courts also justify the result on pragmatic or equitable terms pointing out that if the debtor does not follow the mandate of § 521(2), the result will be, in the event of discharge, a non-recourse secured creditor who must stand by while the debtor makes payments on depreciating property only so long as it is useful to the debtor. Thus, the Eleventh Circuit recently stated:

Allowing retention of the property without reaffirmation or redemption would be tantamount to forcing the

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