In Re Robert Eugene Russell And, Case No. 10-20818-E-13L
| Decision Date | 14 September 2010 |
| Docket Number | Case No. 10-20818-E-13L,Docket Control No. APN-1 |
| Parties | In re ROBERT EUGENE RUSSELL and RACHEL GOQUINGCO RUSSELL, Debtors. |
| Court | U.S. Bankruptcy Court — Eastern District of California |
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NOT FOR PUBLICATION
This memorandum decision is not approved for publication and may not be cited except when relevant under the doctrine of law of the case or the rules of claim preclusion or issues preclusion.
Objection to Confirmation of Plan
and
Motion to Value Secured Claim of Wells Fargo Bank
Two related mattershave been presented, to the court in connection with the proposed Chapter 13 Plan in this case. Wells Fargo Bank, N.A. ("Wells Fargo") has filed an Objection to confirmation of the proposed Chapter 13 Plan filed by Robert and Rachel Russell, the Chapter 13 debtors ("Debtors"). This objection to confirmation is based on Well Fargo's opposition to the Debtors' motion to value the Wells Fargo secured claim pursuant to 11 U.S.C. §506(a). The total Wells Fargo claimis $113,108.77. of which the Debtors assert $0.00 is Wells Fargo's secured claim. Both matters were set for an evidentiary hearing. The court issues this Memorandum Opinion and Decision, which shall constitute the findings of fact and conclusions of law in support of the orders itissues confirming the Debtors' Chapter 13 Plan and determining the value the Wells Fargo secured claim.
The ultimate dispute of the parties is the value of the Debtors' real property commonly known as 6312 Di Lusso Drive, Elk Grove, California (the "Di Lusso Property"). This is the Debtors' residence. The Debtors value the Di Lusso Property at $135,000.00 and Wells Fargo values the Di Lusso Property at $178,000.00. Wells Fargo holds a claim secured by a second trust deed against the Di Lusso Property. The senior trust deed against the Di Lusso Property secures a claim in the amount of $159,465.00. If the Debtors are correct in their valuation, then under 11 U.S.C. §506(a) Wells Fargo's secured claim would be valued at $0.00. Zimmer v. PSB Lending Corp., 313 F.3d 1220 (9th Cir. 2002); and In re Lam, 211 B.R. 36 (9th Cir. BAP 1997), appeal dismissed, 192 F.3d 1309 (9th Cir. 1999). However, if Wells Fargo is correct, then the claim is treated as a secured claim for the full $113,108.77. 11 U.S.C. §1322(b)(2).
Valuation of the Di Lusso Property
The Debtors provided the testimony of Scott Miller, an appraiser, for the value of the Di Lusso Property. Mr. Miller testified that the value of the Di Lusso Property is $135,000.00. This valuation opinion was based on his personal inspection of the Di Lusso Property, consideration of comparable properties, and his experience in the industry, Mr. Miller's appraisal report was admitted into evidence as Exhibit "A."
Three comparables identified by Mr. Miller were for similar single family homes within.22 miles to.58 miles from the Di Lusso Property. For the comparables, one was an REO sale by the lenderand two were short sales. Before adjustments, the gross sales prices for these properties ranged from $137,000.00 to $150,000.00.
In describing the Di Lusso Property, Mr. Miller testified in his appraisal report that: He further testified,
In coming to his opinion as to value, Mr. Miller considered an estimated $32,188.00 in remodel and repair expense which the Debtors disclosed to Mr. Miller. Copies of the estimates were attached to the appraisal, but no evidence was submitted to the court as to the actual repairs and costs.
Wells Fargo presented the testimony of Theresa M. Huffman, an appraiser, in support the bank's valuation of the Di Lusso Property. Ms. Huffman testified that the Di Lusso Property has a value of $178,000.00. Ms. Huffman's appraisal report was admitted as Exhibit "5." Her testimony was based upon her inspection of the Di Lusso Property and considering other properties to generate relevant comparables.1 This was an increase of $3,000.00 from herJanuary 2009 opinion that the Di Lusso Property had a value of $175,000.00.
Ms. Huffman testified that the market for the Di Lusso Property was relatively stable, but declining slightly. Her adjustment to the comparables for time of sale was a one percent per month reduction since the 2009 appraisal. She concurred that foreclosure sales should be included in an appraisal, and are considered as a factor, but not determinative, in the valuation of real property.
For comparables, Ms. Huffman identified several properties not included in the Miller appraisal. These are identified as 6418 Di Lusso Drive (December 1, 2009-$192,000.00 sale) and 6967 Storia Way (November 11, 2009-$183,000.00 sale). The court was not presented with the specifics for these properties or adjustments which should be made as part of the necessary comparable property analysis.
Ms. Huffman's comparables included properties sold during the period December 2008 through January 2009. The unadjusted sales for these properties ranged from $175,000.00 to $200,000.00. When adjusted for condition and structural differences, Ms. Huffman's comparables are in a value range of $170,000.00 to $193,000.00. The adjustments do not include any for the condition of or repairs to the Di Lusso Property. Her appraisal report states that there were no physical deficiencies or adverse conditions to the Di LussoProperty.
The rebuttal testimony provided by Ms. Huffman and the cross-examination of Mr. Miller included consideration of the adjustments not made by Mr. Miller for the 9042 Duovo Way and 9085 Duovo Way properties. These two properties are across the street from a high school. The Di Lusso Property is not located across from the high school, but several blocks down in an area consisting only of residential homes. Mr. Miller's appraisal does not make an adjustment for the location of the comparables.
The court ultimately must determine the value of the Di Lusso Property, and not merely choose one appraisal or the other. In this case, both appraisals and the testimony of the witnesses provide valuable information to the court, and neither appear to fully make the necessary adjustments to the comparables. The court determines the value of the Di Lusso Property to be $145,000.00.
Starting with Ms. Huffman's testimony and appraisal, the best comparables are those with an adjusted value, as of December 2008/January 2009 period, in the $170,000.00 to $180,000.00 range. The court also concurs that the real estate market for the Di Lusso Property has continued to decline, and anyone attempting to sell property faces competition from lenders selling REO properties and short sales from home owners attempting to avoid having a foreclosure as part of their credit history. Ms. Huffman's testimony was that approximately seventy-two percentof the sales or marketed properties were bank owned or foreclosure properties. Due to the downward pressure on prices during 2009 and into 2010, the court finds that a further downward adjustment of $20,000.00 from the earlier sales prices identified by Ms. Huffman iswarranted.
The court also...
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