In re Moses, 89-03267-C.
Decision Date | 21 February 1990 |
Docket Number | 89-03267-C. |
Parties | In re Mary L. MOSES, Debtor. |
Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Northern District of Oklahoma |
Jack A. Martin, Jenks, Okl., for debtor.
John B. Wimbish, Tulsa, Okl., for Com.
Don E. Gasaway, Tulsa, Okl., for Union.
The Debtor in this case, Mary L. Moses, filed a Petition for Relief under Chapter 7 of the Bankruptcy Code on October 27, 1989. One of the Debtor's assets is real property located in Wagoner County, Oklahoma and more particularly described as follows, to-wit:
Lot Three (3), Block Three (3), WOODSTOCK II, an Addition to the City of Broken Arrow, Wagoner County, Oklahoma, a Subdivision of Part of Lot 6 of Section 6, Township 18 North, Range 15 East of the Indian Meridian.
The Debtor claimed the property exempt as a homestead, no objections were made to this claim and it was, therefore, exempted from the Debtor's estate.
On November 20, 1989, the Debtor filed a motion to determine the amount of the mortgage lien claims of Commonwealth Mortgage Company ("Commonwealth") and Union Mortgage Company, Inc. ("Union"). The motion also asked that the Court determine the secured and unsecured status of each claim pursuant to Section 506(a) of the Bankruptcy Code.
On December 14, 1989, both mortgagees filed motions for relief from the automatic stay so they could foreclose their mortgage liens in the state court. On December 26, 1989, the Debtor responded to the motion of Union asking that its claim be allowed as unsecured because the value of the property was insufficient to cover even the lien of the first mortgage. In response to Commonwealth's motion, the Debtor asked that it be denied because she intended to keep the home and reaffirm the debt.
On January 10, 1990, a hearing on the motions of Commonwealth and Union was held and it was stipulated and agreed to as follows:
1. The debt of Commonwealth secured by a first mortgage on the property was $49,105.47;
2. The debt of Union secured by a second mortgage on the property was $10,340.00;
3. The value of the property was $46,000.00;
4. The automatic stay would be lifted in regard to the first mortgagee, Commonwealth; and,
5. The Court would take under advisement the request of the Debtor to void the lien of the second mortgagee, Union, under § 506(d) of the Bankruptcy Code because it was totally unsecured pursuant to § 506(a) of the Bankruptcy Code.
Section 506(a) and (d) of the Bankruptcy Code provides as follows:
The majority view and the view of every Circuit Court of Appeals that has ruled upon the issue is that unsecured real estate mortgage liens can be voided by the Bankruptcy Court pursuant to § 506(d). See Matter of Lindsey, 823 F.2d 189 (7th Cir. 1987); Matter of Folendore, 862 F.2d 1537 (11th Cir.1989); Gaglia v. First Federal Savings and Loan Assn., 889 F.2d 1304 (3d Cir.1989); In re Mays, 85 B.R. 955 (Bankr.E.D.Pa.1988); In re Zlogar, 101 B.R. 1 (Bankr.N.D.Ill.1989). Also this Court followed the majority in an unpublished decision In re Magee, Case No. 88-00764-C, U.S. Bankruptcy Court, Northern District of Oklahoma.
The most recent decision on this issue is Gaglia, supra. In its decision upholding the right of a debtor to void an unsecured lien under § 506(d), the Court stated as follows:
This Court agrees with the analysis in Gaglia, supra, and holds that the language of §§ 506(a) and (d) is not ambiguous and that there is no need for an investigation into legislative history or intent. The sections plainly state that when a claim against property is not an allowed secured claim, any lien securing such claim is void. To read it any other way would violate a fundamental rule of statutory interpretation. I.N.S. v. Cardoza-Fonseca, 480 U.S. 421, 452-53, 107 S.Ct. 1207, 1224, 94 L.Ed.2d 434 (1987) Scalia, J., concurring.
Voiding the second mortgage lien on the Debtor's property serves one of the underlying public policies of the Bankruptcy Code which is to provide the Debtor with a fresh start. In re Stokes, 39 B.R. 336 (Bankr.E.D.Va.1984); Matter of Folendore; In re Cleveringa, 52 B.R. 56 (Bankr. N.D.Iowa 1985). The Bankruptcy Code must be viewed in light of underlying policy considerations. In re Sokolsky, 18 B.R. 138 (Bankr.M.D.Fla.1982). The Bankruptcy Code is to be liberally construed to give the Debtor the full measure of relief afforded by Congress. In re Lange, 39 B.R. 483 (Bankr.D.Kan.1984).
Finally, mere common sense supports voiding the lien under § 506(a) and (d). The first mortgage in this case consumes the entire value of the Debtor's property. There is nothing left to satisfy the second mortgage. Nothing will be gained by allowing Union's mortgage lien to survive the bankruptcy. It benefits neither the creditor or debtor. The mortgage lien is, for all practical...
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