In re Rodriguez

• Decision Date: 28 August 2007
• Docket Number: Bankruptcy No. 06-41999.,BAP No. WW-07-1046-MoDJ.
• Citation: 375 B.R. 535
• Parties: In re Natalie Dionne RODRIGUEZ, Debtor. Wells Fargo Financial Acceptance, Appellant, v. Natalie Dionne Rodriguez; Karla Forsythe, Chapter 13 Trustee, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

375 B.R. 535

In re Natalie Dionne RODRIGUEZ, Debtor Wells Fargo Financial Acceptance, Appellant, v. Natalie Dionne Rodriguez; Karla Forsythe, Chapter 13 Trustee, Appellees.

BAP No. WW-07-1046-MoDJ.

Bankruptcy No. 06-41999.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted on July 27, 2007.

Filed August 28, 2007.

COPYRIGHT MATERIAL OMITTED

Richard A. Hayden, Richard J. Hayden, P.S., Spokane, WA, for Wells Fargo Financial Acceptance.

Robert Charles Russell, Robert C. Russell, PC, Vancouver, WA, for Natalie Dionne Rodriguez.

Before: MONTALI, DUNN and JAROSLOVSKY,¹ Bankruptcy Judges.

OPINION

MONTALI, Bankruptcy Judge.

A chapter 13 debtor purchased a vehicle for her personal use with financing obtained within 910 days of her petition date. Debtor filed a plan providing for surrender of the vehicle in full satisfaction of the secured claim, relying on the infamous "hanging paragraph" following 11 U.S.C. § 1325(a)(9),² and objected to the creditor's claim. Applying the hanging paragraph, the bankruptcy court concluded that the debtor's proposed surrender extinguished the creditor's deficiency claim. The court disallowed the creditor's claim and overruled the creditor's objections to the debtor's plan. The creditor appealed. Today we join the swelling legion of courts writing on the subject, and we REVERSE, joining one court of appeals, several district courts, and a minority of bankruptcy courts, departing from the result reached by two of our fellow bankruptcy appellate panels and a majority of bankruptcy courts.

I. FACTS

Appellee Natalie Dionne Rodriguez ("Debtor") filed a chapter 13 petition on August 29, 2006. On the same date, she filed a chapter 13 plan providing for 100 percent payment to creditors over 42 months. In addition, the plan provided that Debtor would surrender a 2004 Pontiac Aztec (the "Aztec") to Appellant Wells Fargo Financial Acceptance ("Wells Fargo") upon plan confirmation "in full satisfaction of the entire debt owed to [Wells Fargo]." Debtor noted, and Wells Fargo does not dispute, that the Aztec was purchased within 910 days of her petition date. As such, Wells Fargo belongs to a class of creditors frequently referred to generally and in this opinion as "910 creditors," and the Aztec is known as a "910 vehicle." Debtor's plan also provided, in Paragraph 9 (entitled "Revestment of Property"), that "... during the pendency of the plan all property of the estate as defined by [section] 1306(a) shall remain vested in the Debtors (sic)...."

On November 2, 2006, Debtor filed an objection to Wells Fargo's claim stating in relevant part:

Pursuant to [section] 1325, a surrender of a "910" vehicle is in full satisfaction of the underlying debt. See, In re Pool, 2006 WL 2801934 (Bankr.D.Or.2006) (sides with over-whelming majority of cases that the surrender of a "910" vehicle is in full satisfaction of the debt).

Wells Fargo filed a reply to the objection, an objection to Debtor's chapter 13 plan, and two memoranda of points and authorities urging the bankruptcy court to reject the argument that surrender of a 910 vehicle through a chapter 13 plan extinguishes the deficiency claim of a 910 creditor.

The bankruptcy court held two hearings before issuing a memorandum decision indicating that it would "follow the majority view, holding that upon surrender of secured property pursuant to [section] 1325(a)(5)(C), the secured creditor's claim is satisfied in full, thereby precluding any deficiency claim."

On January 24, 2007, the bankruptcy court entered an order granting relief from the automatic stay to Wells Fargo, overruling Wells Fargo's objection to Debtor's plan, and sustaining Debtor's objection to Wells Fargo's claim. Wells Fargo filed a timely notice of appeal on January 30, 2007. Because Wells Fargo filed an ineffective statement of election to have the district court hear the appeal, we entered an order on March 8, 2007, retaining jurisdiction over the appeal.³

On July 5, 2007, Debtor's counsel submitted a declaration contending that the appeal had become moot. On the same date, Debtor filed with the bankruptcy court a notice of withdrawal of her chapter 13 plan (which had not been confirmed as of that date) and indicated that she would surrender the Aztec "but not in full satisfaction of the debt." According to the declaration, "the primary issue of this appeal is now resolved and made moot by the withdrawal of [Debtor's] plan." Debtor did not indicate what she intended to do about the portion of the January 24, 2007, order sustaining her objection to Wells Fargo's claim. On July 11, Debtor filed her amended chapter 13 plan with the bankruptcy court,⁴ stating that the Aztec would be "surrendered at confirmation not in full satisfaction of the entire debt owed to [Wells Fargo]." (Emphasis in original). The "Revestment of Property" provision that appeared at Paragraph 9 of the initial plan is repeated verbatim.

On July 9, 2007, Wells Fargo and Boeing filed objections to Debtor's position that the appeal is now moot. Boeing essentially requested that we retain jurisdiction because lenders in general are affected by the issue on appeal. Wells Fargo argued, among other things, that the appeal is not moot because Debtor has not requested or stipulated to vacatur of the order disallowing Wells Fargo's claim, which is the subject of the appeal. Consequently, according to Wells Fargo, a portion of the controversy remains live on appeal. Alternatively, Wells Fargo contended that two exceptions to the mootness doctrine apply: (1) the case on appeal is capable of repetition yet evading review, and (2) Debtor's voluntary cessation of its position precludes mootness.

Debtor filed a reply disputing that the exceptions to mootness apply, but she did not address Wells Fargo's argument that the order disallowing its claim remains extant, and the appeal is thus not moot. Rather, Debtor simply states that "Wells Fargo has received exactly what it has asked for and there is no further relief that Wells Fargo can obtain from the court."

On July 11, 2007, we issued an order determining that, based on the circumstances then existing, the appeal was not moot. We also ordered that the positions of parties not wanting to appear at oral argument would be submitted on the briefs. At oral argument, Debtor's counsel did not appear, although counsel for amicus NACBA did present arguments supporting affirmance.

II. ISSUES

(1) Is this appeal moot?

(2) Does the hanging paragraph of section 1325 allow a chapter 13 debtor to surrender, through a plan, a 910 vehicle in full satisfaction of the indebtedness remaining on it?

III. STANDARD OF REVIEW

This case presents no factual issues, but solely one of statutory construction. Issues of statutory interpretation are questions of law which we review de novo. County of El Dorado v. Crouch (In re Crouch), 199 B.R. 690, 691 (9th Cir. BAP 1996), citing Aceguia, Inc. v. Clinton (In re Acequia, Inc.), 787 F.2d 1352, 1357 (9th Cir.1986).

IV. JURISDICTION

Ordinarily we have jurisdiction over appeals of final orders via 28 U.S.C. § 158 but we lack jurisdiction to hear a moot appeal. I.R.S. v. Pattullo (In re Pattullo), 271 F.3d 898, 901 (9th Cir.2001); see also Pilate v. Burrell (In re Burrell), 415 F.3d 994, 998 (9th Cir.2005), and Chang v. U.S., 327 F.3d 911, 918 (9th Cir.2003). "Our mootness inquiry focuses upon whether we can still grant relief between the parties." Pattullo, 271 F.3d at 901. "`If an event occurs while a case is pending on appeal that makes it impossible for the court to grant any effectual relief whatever to a prevailing party, the appeal is moot and must be dismissed.'" hi, quoting United States v. Arkison (In re Cascade Rds., Inc.), 34 F.3d 756, 759 (9th Cir.1994); see also Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 40 L.Ed. 293 (1895) ("The duty of this court, as of every other judicial tribunal, is to decide actual controversies by a judgment which can be carried into effect, and not to give opinions upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it.").

That said, an appeal is not moot "if the court can fashion some form of meaningful relief' for the appellant in the event it decides the appeal on the merits in its favor. Pattullo, 271 F.3d at 901; Burrell, 415 F.3d at 998. Here, Wells Fargo seeks a reversal of the bankruptcy court's order overruling its objection to. Debtor's chapter 13 plan and sustaining Debtor's objection to its claim on the grounds that surrender of the Aztec extinguished its deficiency claim. While Debtor has withdrawn the challenged plan, she has not sought or stipulated to a vacatur of the order disallowing Wells Fargo's claim. Based upon the current state of the record, if Debtor's amended chapter 13 plan were confirmed, Wells Fargo would be denied the right to be treated as an unsecured creditor and be paid under the plan. Consequently, if we reverse on the merits, we could grant Wells Fargo effective relief by way of reinstatement of its claim. A live case or controversy thus still exists on appeal, and we therefore have jurisdiction.

Because we hold that the appeal is not moot based on the relief we can grant, we will not address any of the exceptions to mootness urged by Wells Fargo or amicus Boeing.

V. DISCUSSION

In cases filed prior to the effective date of BAPCPA, chapter 13 debtors could surrender collateral (there was no separate distinction for 910 vehicles) and treat the amount of debt remaining after the creditor realized foreclosure value as an unsecured claim, or divide the debt into a secured portion (representing the replacement value of the collateral) and unsecured portion (representing the deficiency), pay the secured portion in full inside or outside the plan, and pay the unsecured portion in the same manner that they were paying other unsecured debts ...