In re Taranto

• Citation: 365 B.R. 85
• Decision Date: 30 March 2007
• Docket Number: No. 06-8034.,06-8034.
• Parties: In re Mark J. TARANTO and Kimberly Taranto, Debtors. DaimlerChrysler Services North America LLC, successor by merger to Chrysler Financial Company, LLC, Appellant, v. Mark J. Taranto and Kimberly Taranto, Appellees.
• Court: Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Sixth Circuit

Page 85

365 B.R. 85

In re Mark J. TARANTO and Kimberly Taranto, Debtors.

DaimlerChrysler Services North America LLC, successor by merger to Chrysler Financial Company, LLC, Appellant, v. Mark J. Taranto and Kimberly Taranto, Appellees.

No. 06-8034.

United States Bankruptcy Appellate Panel of the Sixth Circuit.

Argued: February 6, 2007.

Decided and Filed: March 30, 2007.

ARGUED: Thomas L. Canary, Jr., Mapother & Mapother, Louisville, KY, for Appellant. Lisa Barbacci Afarin, Medina, OH, for Appellees. ON BRIEF: Thomas L. Canary, Jr., Gregory A. Stout, Mapother & Mapother, Louisville, KY, for Appellant. Lisa Barbacci Afarin, Medina, OH, Jonathan I. Krainess, Cleveland, OH, for Appellees.

Before: AUG, GREGG, and SCOTT, Bankruptcy Appellate Panel Judges.

OPINION

GREGG, Bankruptcy Judge.

DaimlerChrysler Services North America LLC ("Appellant") appeals the bankruptcy court's order overruling its objection to confirmation of Mark and Kimberly Taranto's ("Debtors") proposed second amended chapter 13 plan. The plan provides for payment of the full principal amount of the Appellant's secured claim approximately 45 months sooner than provided for in the contract and for payment of interest at the contract rate of zero percent. The Appellant asserts it is entitled to prime-plus interest in accordance with Till v. SCS Credit Corp., infra. The Appellant's claim is secured by a vehicle purchased for the Debtors' personal use within 910 days prior to the bankruptcy filing. The bankruptcy court overruled the Appellant's objection to the Debtors' plan determining that the application of Till, infra, would result in an unfair diminution in the distribution to the Debtors' unsecured creditors thereby giving an unjustified windfall to the Appellant. For the reasons that follow, the bankruptcy court's order is. REVERSED and REMANDED.

I. ISSUE ON APPEAL

Under the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), what rate of interest must a chapter 13 debtor pay to the holder of a claim secured by a vehicle purchased for personal use within 910 days prior to the bankruptcy filing where the debtor proposes to pay the secured claim by making periodic installment payments?

II. JURISDICTION AND STANDARD OF REVIEW

The United States District Court for the Northern District of Ohio has authorized appeals to the Bankruptcy Appellate Panel of the Sixth Circuit ("Panel") and a final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). The parties to this appeal have not raised any issues regarding the Panel's jurisdiction; however, we must independently assess whether we have jurisdiction. See Bender v. Williamsport Area School Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986) (federal appellate court must satisfy itself that it has jurisdiction over appeal even if the parties concede it). 28 U.S.C. § 158(a)(1) confers jurisdiction on the Panel to hear appeals from "final judgments, orders, and decrees ...." (emphasis added); see id. at §§ 158(b)(1) & (c)(1). "[A] decision is ordinarily considered final and appealable under § 1291 [and § 158(a)] only if it `ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712, 116 S.Ct. 1712, 1718, 135 L.Ed.2d 1 (1996) (quoting Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633-34, 89 L.Ed. 911 (1945)); Wicheff v. Baumgart (In re Wicheff), 215 B.R. 839 (6th Cir. BAP 1998).

The bankruptcy court's order neither confirmed the Debtors' plan nor dismissed the chapter 13 case. The order simply overruled the Appellant's objection to the Debtors' proposed plan and scheduled a confirmation hearing. Subsequently, the bankruptcy court granted the chapter 13 trustee's motion to disburse funds prior to confirmation. The court's order further prohibited the trustee from paying allowed unsecured claims until a final order of this Panel has been issued determining this appeal. The confirmation hearing has since been repeatedly continued by the bankruptcy court. Generally, an order which neither confirms a plan nor dismisses the underlying case is not final. Lewis v. United States, 992 F.2d 767, 772 (8th Cir.1993); see also Jefferson Fin. Servs. v. Hance (In re Hance), 234 F.3d 1268, 2000 WL 1478390 (6th Cir.2000) (unpub. table decision) (finding lack of jurisdiction where confirmation of plan denied and notice of appeal filed before plan was confirmed).

However, in appropriate circumstances, we may consider the notice of appeal as a motion for leave to appeal and decide the appeal. See Wicheff, 215 B.R. at 843; Bankruptcy Rule 8003(c); 28 U.S.C. §§ 158(a)(3) and (b). While we are not constrained by the standards set forth in 28 U.S.C. § 1292(b), which define the courts of appeals' jurisdiction to review interlocutory orders, they are instructive. See Wicheff, 215 B.R. at 844; Moix-McNutt v. Coop (In re Moix-McNutt), 212 B.R. 953 (8th Cir. BAP 1997). Section 1292(b) provides for discretionary appellate review of interlocutory orders that involve a controlling question of law when there is substantial ground for difference of opinion and an immediate appeal may materially advance the ultimate termination of the litigation. Wicheff, 215 B.R. at 844; Cardwell v. Chesapeake & Ohio Ry. Co., 504 F.2d 444, 446 (6th Cir.1974).

During oral argument, the parties agreed that the issue presented involves controlling law as to which there is substantial ground for disagreement, and that an immediate appeal will materially advance this litigation. We agree. There has been a plethora of litigation, with different results, regarding what has now come to be commonly referred to as the "hanging paragraph" of 11 U.S.C. § 1325(a)(5).¹ Bankruptcy courts have disagreed regarding the meaning of the imprecise language in the hanging paragraph. See e.g. In re Sparks, 346 B.R. 767 (Bankr.S.D.Ohio 2006) (disagreeing with In re Carver, 338 B.R. 521 (Bankr.S.D.Ga. 2006) (holding that § 1325(a)(5) applies to secured claims; the status of claims as secured is made pursuant to § 506; the hanging paragraph makes § 506 inapplicable to a 910 claim, therefore § 1325(a)(5) does not apply to a creditor's 910 claim)); see also In re Green, 348 B.R. 601 (Bankr. M.D.Ga.2006) (declining to adopt the evolving majority view that a 910 claim is a secured claim); In re Wampler, 345 B.R. 730 (Bankr.D.Kan.2006) (holding, contrary to majority view, that a 910 claim is not secured and, therefore, is not entitled to any interest). Plan confirmation in this case is at a standstill. Action is necessary. We will treat the Appellant's notice of appeal as a motion for interlocutory appeal. We grant the motion.

This appeal presents a discrete legal question. A bankruptcy court's conclusions of law are reviewed de novo. Adell v. John Richards Homes Bldg. Co. (In re John Richards Homes Bldg. Co.), 439 F.3d 248, 254 (6th Cir.2006); In re Downs, 103 F.3d 472, 476-77 (6th Cir.1996). "De novo review means that the appellate court determines the law independently of the trial court's determination." Treinish v. Norwest Bank Minn., N.A. (In re Periandri), 266 B.R. 651, 653 (6th Cir. BAP 2001).

III. FACTS

On March 22, 2004, the Debtors and Brunswick Automart, Inc. entered into a Retail Installment Contract and Security Agreement ("Contract") for the purchase of a 2004 Chrysler Town & Country automobile (the "vehicle"). The Contract was later assigned to the Appellant. The purchase price was $38,319.84. The Contract provided for 72 monthly payments of $532.22 at zero percent interest. The Contract also permitted prepayment without penalty.

On November 16, 2005, the Debtors filed for relief under chapter 13 of the Bankruptcy Code.² The Appellant filed a proof of claim in the amount of $28,222.66 secured by the vehicle. The parties agreed that the value of the vehicle was $16,706.11. No objection to the claim was lodged. The Debtors filed a chapter 13 plan which was amended twice. The amended plan now proposes to pay the Appellant the full amount of its claim. Because the vehicle had been purchased within the 910 days before the date the Debtors filed their bankruptcy petition, the parties agreed that the Appellant's claim was fully secured. See 11 U.S.C. § 1325. The Debtors propose to pay the claim at the rate of $1,200 per month over 23 months at the Contract interest rate of zero percent. As a result, the Appellant's claim would be paid approximately three years ahead of the scheduled duration of the Contract. As noted by the bankruptcy court, the proposed plan increases the amount of the monthly payments and accelerates the repayment schedule over what would occur if the chapter 13 case had not been filed.

The Appellant objected to confirmation of the Debtors' amended plan and demands "prime-plus" interest on its claim in accordance with Till v. SCS Credit Corp., 541 U.S. 465, 124 S.Ct. 1951, 158 L.Ed.2d 787 (2004). The Debtors have not directly contested the applicability of Till. Rather, they argue that the Appellant is not entitled to interest because the plan provides for accelerated payments thereby placing the Appellant in a better position than had the payments been made in accordance with the Contract.

The bankruptcy court overruled the Appellant's objection. The court held that the application of Till would result in an unjustified windfall to the Appellant and in an unfair diminution in the distribution to unsecured creditors. This timely appeal followed.

IV. DISCUSSION

The requirements for confirmation of a chapter 13 plan are set forth in 11 U.S.C. § 1325. Subsection (a)(5) mandates the treatment of "allowed secured claims." Section 1325(a)(5)(B)(ii) states that the bankruptcy court shall confirm a chapter 13 plan if the plan provides that "the value, as of the effective date of the plan, of the property to be distributed under the plan on account of...