In re Price

Decision Date03 June 2004
Docket NumberNo. 03-2084.,03-2084.
PartiesIn re: Michael B. PRICE; Christine R. Price, Debtors Michael B. Price; Christine R. Price, Appellants v. Delaware State Police Federal Credit Union U.S. Trustee, Trustee.
CourtU.S. Court of Appeals — Third Circuit

Andrea G. Green [Argued], Doroshow, Pasquale, Krawitz, Siegel & Bhaya, Dover, for Appellants.

W.J. Winterstein, Jr. [Argued], Bryn Mawr, for Appellee.

Eric L. Frank, Miller, Frank & Miller, Philadelphia, for Amicus-Appellants National Association of Consumer Bankruptcy Attorneys and Consumer Bankruptcy Assistance Project.

Before SLOVITER, RENDELL, and ALDISERT, Circuit Judges.

RENDELL, Circuit Judge.

The Prices are chapter 7 debtors who wanted to use their automobiles while remaining current on their monthly auto loan payments. The lienholder, Delaware State Police Federal Credit Union ("Credit Union"), convinced the Bankruptcy Court and the District Court that section 521(2)(A) of the Bankruptcy Code does not permit the Prices to continue possessing the cars simply by paying their bills, but instead allows the Prices only four options: surrender the cars, purchase them in a lump-sum payment, negotiate another loan that would attach postpetition liability, or claim a recognized exemption under the Bankruptcy Code. This issue has been the subject of no fewer than eight discordant decisions of the courts of appeals. Four courts of appeals have held that a debtor is not limited by the options enumerated in 521(2), while four others have held to the contrary. It seems that the only thing our courts can agree on is that we disagree. After a close examination of the text and context of section 521(2)(A), we conclude that the provision does not prevent nondefaulting debtors, such as the Prices, from retaining secured property by keeping current on their loans.


Michael and Christine Price filed a petition for relief under chapter 7 on December 11, 2001. On their bankruptcy schedules, the Prices listed two loans owed to the Credit Union, which were secured by liens on their two motor vehicles. Along with their petition, the Prices filed a "Statement of Intention with Respect to Secured Debt," indicating that they intended to continue regular payments to the Credit Union on the two secured loans and retain the two vehicles.

Thereafter, the Credit Union advised the Prices that their only choice in connection with the retention of the cars was to exercise one of the options stated in section 521(2), namely: (1) surrender the vehicles; or, (2) if they wished to retain the vehicles, redeem the collateral by making a lump sum payment; or (3) enter into a formal reaffirmation agreement. The Prices relied on their Statement of Intention and took no further action other than keeping up the payments on the loans. At the time of filing of their petition, the Prices were current on their payments on the vehicle loans and they continued to keep the loans current during the chapter 7 proceeding. On February 21, 2002, the Credit Union filed a Motion to Compel Debtors to Elect to Surrender, Redeem, or Reaffirm Secured Debt.

On June 25, 2002, the United States Bankruptcy Court for the District of Delaware granted the Credit Union's motion, and on April 1, 2003, the United States District Court for the District of Delaware affirmed the order of the Bankruptcy Court. Therefore, the Prices are currently under order to surrender, reaffirm, or redeem their automobiles, although the effect of that order was stayed by the District Court pending this appeal.


At the outset, we will examine the justiciability of this controversy in light of recent communications received from the parties regarding the effect of loan payments made by the Prices. We are persuaded that this matter is not moot.

On March 31, 2004, counsel for the Prices notified the panel that she believed the Prices had paid the amount due to the Credit Union under both auto loans and that the matter may be moot. However, counsel urged us to decide the issue before us, as it fell under the exception to the mootness doctrine for issues "capable of repetition yet evading review." In re Surrick, 338 F.3d 224, 230 (3d Cir.2003). The panel sought the Credit Union's response, and it too "beg[ged] for resolution by this Court" because "the factual predicate central to this appeal frequently recur[s] in the bankruptcy courts in this circuit...." We note that although both parties urge us to decide the issue before us, parties may not stipulate as to whether a matter is moot. Kremens v. Bartley, 431 U.S. 119, 134 n. 15, 97 S.Ct. 1709, 52 L.Ed.2d 184 (1977). This Court is duty-bound to independently examine the issue of mootness. North Carolina v. Rice, 404 U.S. 244, 246, 92 S.Ct. 402, 30 L.Ed.2d 413 (1971).

Both parties make the argument that this case qualifies under the exception to the mootness doctrine for those cases that are capable of repetition and yet which evade review. "Under the `capable of repetition' exception, a court may exercise its jurisdiction and consider the merits of a case that would otherwise be deemed moot when `(1) the challenged action is, in its duration, too short to be fully litigated prior to cessation or expiration, and (2) there is a reasonable expectation that the same complaining party will be subject to the same action again.'" Merle v. United States, 351 F.3d 92, 95 (3d Cir.2003) (quoting Spencer v. Kemna, 523 U.S. 1, 17, 118 S.Ct. 978, 140 L.Ed.2d 43 (1998)). It is reasonable to suppose that the Credit Union will again encounter the same scenario with respect to section 521(2) with other borrowers of auto loans. And owing to the typically short duration of these loans, the issue raised in this appeal would arguably evade judicial review.1 That this matter has been considered by several of our sister courts of appeals does not gainsay this point. Indeed, given the high volume of personal bankruptcies in this judicial circuit, and the twenty years of bankruptcy practice since the enactment of section 521(2), it is notable that this most basic issue of a debtor's obligation under chapter 7 is a matter of first impression in this Court. But in any event, even if this exception to the mootness doctrine is inapplicable we cannot conclude on the record before us that this matter is moot.

We doubt that the letters from counsel, containing vague assertions as to the satisfaction of the Prices' loans, meet the heavy burden of establishing mootness. Princeton Cmty. Phone Book, Inc. v. Bate, 582 F.2d 706, 710 (3d Cir.1978) ("party arguing that a case is moot must bear a heavy burden of demonstrating the facts underlying that contention" (quoting United States v. W.T. Grant Co., 345 U.S. 629, 633, 73 S.Ct. 894, 97 L.Ed. 1303 (1953))). The Court of Appeals for the Second Circuit recently resolved a strikingly similar issue of mootness with respect to the same bankruptcy provision under consideration in this appeal, section 521(2). BankBoston, N.A. v. Sokolowski (In re Sokolowski), 205 F.3d 532, 534 (2d Cir.2000). In Sokolowski, the debtor represented to the court that the relevant loans were paid in full. The creditor bank acknowledged that the obligations were paid in full but nevertheless argued that the matter was capable of repetition yet evading review. Reply Br. at 6, Sokolowski, 205 F.3d 532 (2d Cir.2000) (Nos.99-5048, 99-5054).2 Notwithstanding this representation, the court held that "Sokolowski ha[d] failed to proffer competent evidence to support her claim that this particular appeal ha[d] been rendered moot. Specifically, she ha[d] not pointed to any evidence in the record of her satisfaction of the BankBoston loan or of her disposal of the vehicle in question." Sokolowski, 205 F.3d at 534. Here, there is a similar absence of any evidence demonstrating mootness. Counsel for the Prices, like Sokolowski, stated her belief that the Prices' loans were paid in full, offering no evidence whatsoever to support that assertion. Moreover, while the creditor in Sokolowski acknowledged full payment, in this case the Credit Union's response made no mention at all of whether the obligations had been paid, whether it relinquished its right to enforcement, or whether it retained its right to damages arising out of the order on appeal requiring that the debtors must redeem or reaffirm. We have no assertion by the Credit Union that the liens are fully satisfied, no evidence that would compel a finding of mootness, and no acknowledgment that it has no claim against the Prices. Because the present controversy is justiciable, we conclude that it is proper to address the merits of the Prices' appeal.

Accordingly, we have jurisdiction over the District Court's order under 28 U.S.C. § 158(d) and exercise plenary review over the District Court's interpretation of the Bankruptcy Code. Official Comm. of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340, 346 (3d Cir.2001).


The Bankruptcy Code requires debtors to file a "statement of intention" with the bankruptcy court indicating whether the debtor intends to retain or surrender personal property subject to a security interest. 11 U.S.C. § 521(2). Section 521 provides, in relevant part, that:

The debtor shall —

(1) file a list of creditors, and unless the court orders otherwise, a schedule of assets and liabilities, a schedule of current income and current expenditures, and a statement of the debtor's financial affairs;

(2) if an individual debtor's schedule of assets and liabilities includes consumer debts which are secured by property of the estate —

(A) within thirty days after the date of the filing of a petition under chapter 7 of this title or on or before the date of the meeting of creditors, whichever is earlier, or within such additional time as the court, for cause, within such period fixes, the debtor shall file with the clerk a statement of his intention with...

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