Lomas Mortg. USA v. Wiese

• Decision Date: 04 December 1992
• Docket Number: 91-36173,Nos. 91-36082,s. 91-36082
• Citation: 980 F.2d 1279
• Parties: , 28 Collier Bankr.Cas.2d 129, Bankr. L. Rep. P 75,036 LOMAS MORTGAGE USA, Creditor-Appellant, v. Daniel WIESE; Sue Ann Wiese, Debtors-Appellees. LOMAS MORTGAGE USA, Creditor, and Federal National Mortgage Association, Creditor-Appellee, v. Daniel WIESE; Sue Ann Wiese, Debtors-Appellants. *
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1279

980 F.2d 1279

61 USLW 2364, 28 Collier Bankr.Cas.2d 129,

Bankr. L. Rep. P 75,036

LOMAS MORTGAGE USA, Creditor-Appellant, v. Daniel WIESE; Sue Ann Wiese, Debtors-Appellees.

LOMAS MORTGAGE USA, Creditor, and Federal National Mortgage Association, Creditor-Appellee, v. Daniel WIESE; Sue Ann Wiese, Debtors-Appellants.

Nos. 91-36082, 91-36173. ^*

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 20, 1992.

Submission Deferred Sept. 1, 1992.

Resubmitted Dec. 2, 1992.

Decided Dec. 4, 1992.

Richard Ullstrom, Routh Crabtree & Harbour, Anchorage, Alaska, for creditor-appellant-creditor-appellee.

David Rankine, McNall & Rankine, Anchorage, Alaska, for debtors-appellees-debtors-appellants.

Appeal from the United States District Court for the District of Alaska.

Before: HUG, D.W. NELSON, and T.G. NELSON, Circuit Judges.

T.G. NELSON, Circuit Judge:

Lomas Mortgage (Lomas), a partially secured and unsecured creditor of Chapter 13 debtors, Daniel and Sue Ann Wiese, held a security interest in the Wieses' residence. Lomas appeals the district court's partial affirmance of the bankruptcy court's order confirming the Wieses' Chapter 13 plan. The Wieses cross-appeal the district court's calculation of the amount of the secured claim in their residence.

I. BACKGROUND

The Wieses purchased their residential real property in September, 1985, with the aid of a mortgage loan which was secured by a deed of trust against their residence. The loan was covered by private mortgage insurance which protected the lender in case of default by the Wieses and a decline in the value of the collateral. The note and deed of trust were assigned by the original lender to the Federal National Mortgage Association ^MA.

The Wieses filed this Chapter 13 proceeding with the Bankruptcy Court on January 25, 1990. At the time of their petition, the residence was worth less than the $155,000 balance still outstanding on the debt, due to a downturn in the Alaskan real estate market and economy. The bankruptcy court confirmed the Wieses' Chapter 13 plan on November 2, 1990, in an order that provided:

The debtor and Lomas Mortgage USA and Federal National Mortgage Association ... have stipulated that the secured claim of Secured Creditor is $145,000.00, less $11,000.00 to repair a septic system and certain other "transaction costs" of $13,500.00, for [a] net figure of $120,500.... This is secured by a deed of trust in favor of Secured Creditor against the real property that is the debtor's principal residence. Secured Creditor therefore has an allowed secured claim of [$120,500]. The balance [of] Secured Creditor's claim is disallowed as a secured claim but is allowed as a general unsecured claim....

Lomas appealed the order of confirmation to the district court which affirmed the confirmation of the plan and reversed the bankruptcy court's reduction of the secured claim based upon transaction costs. As a result of the partial reversal, Lomas' secured claim was raised to the full $145,000. Lomas appealed and the Wieses cross-appealed contending the transaction costs were valid.

Lomas concedes that our decision in Hougland v. Lomas & Nettleton Co. (In re Hougland), 886 F.2d 1182 (9th Cir.1989), which permitted modification of unsecured portions of the debt, controls. It argues, however, that we should reverse our earlier ruling because the plain meaning of 11 U.S.C. § 1322(b) prohibits modification of both the secured and unsecured portions of a residential mortgagee's claim. Lomas claims that Hougland was based on faulty reasoning because it "ignored" the definition of the word "claim" provided by section 101(5)(A) as a "right to payment" whether it is secured or unsecured. ¹ Second, Lomas urges us to overrule Hougland in light of the recent Supreme Court ruling in Dewsnup v. Timm, --- U.S. ----, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992). Finally, Lomas contends that Hougland 's interpretation of the statute creates absurdities by eliminating the special protection for residential mortgagees. We reject these contentions and affirm.

II. JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction pursuant to 28 U.S.C. § 158(d). We review de novo the interpretation of a statute by the district court and bankruptcy court. In re Am. Mariner Indus., Inc., 734 F.2d 426, 429 (9th Cir.1984).

III. DISCUSSION

A. Bifurcation and Modification of Unsecured Claims

Hougland concerns the interplay between two bankruptcy statutes, 11 U.S.C. §§ 506(a) and 1322(b)(2). 886 F.2d at 1183. That case resolved two issues and held that: (1) a Chapter 13 debtor could bifurcate a claim secured only by the debtor's principal residence into a secured and unsecured portion; and, (2) the lender's rights on the unsecured claim could be modified. Id. at 1185. We now reaffirm our holding in Hougland.

Initially, Hougland noted that " '[s]ubsection (a) of § 506 provides that a claim is secured only to the extent of the value of the property on which the lien is fixed; the remainder of that claim is considered unsecured.' " Id. at 1183 (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 239, 109 S.Ct. 1026, 1029, 103 L.Ed.2d 290 (1989)). Second, the court observed that section 1322, dealing with debtors' plans in Chapter 13 proceedings, provides in part:

(b) Subject to subsections (a) and (c) of this section, the plan may ...

(2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims....

Id. (emphasis in original). Finally, after acknowledging the split in authority, Hougland agreed with the line of cases which "found that nothing in section 1322 affects the determination under section 506(a) that an undersecured claim can be divided into a secured portion and an unsecured portion." Id.

In allowing the modification of the unsecured portion of a claim, Hougland reasoned that the meaning of the statute begins and ends with the language of the statute itself:

It should first be noted that it is clear that section 506(a) applies to Chapter 13 proceedings. See § 103(a). There is, therefore, no reason to believe that the phrases "secured claim" and "unsecured claim" in section 1322(b) have any meaning other than those given to them by section 506(a). It follows that Lomas' claim had a "secured claim" and an "unsecured claim" component.

That being said, we can look at the "other than" clause. That clause follows the secured claim portion of the sentence and precedes the unsecured claim portion. Certainly it refers to what preceded it, and indicates that a secured residential real estate claim will have special protection. Indeed, if the referent of the "other than" clause is not the secured claim language which precedes it, what could the referent be? It would be most unusual if it were the unsecured claim language or the whole sentence. That strongly indicates that only the "secured claim" portion is protected.

Hougland, 886 F.2d at 1183-84.

This interpretation has been uniformly followed by the only three other circuit courts which have had occasion to address the question. Bellamy v. Federal Home Loan Mortgage Corp. (In re Bellamy), 962 F.2d 176, 180-81 (2d Cir.1992) ("other than" clause must be limited to secured claim, citing Hougland ); Hart v. Eastland Mortgage Co. (In re Hart), 923 F.2d 1410, 1415 (10th Cir.1991) ("[t]he position of the Third and Ninth Circuits and the other courts which have adopted threshold bifurcation under section 506(a) prior to submission of the secured claim portion of a mortgage to the protection of section 1322(b)(2) reflects the plain meaning of section 1322(b)(2) ..."); Wilson v. Commonwealth Mortgage Corp., 895 F.2d 123, 127 (3rd Cir.1990) ("[w]e agree with the Ninth Circuit's view that because the 'other than' phrase is best read to refer to secured claims, the 'other than' phrase should be read to limit modification only of that portion of the claim that is secured"). Hougland was correctly decided and we find no reason to upset its holding. Moreover, even assuming that we disagreed with Hougland, "[w]e are bound by decisions of prior panels unless an en banc decision, Supreme Court decision, or subsequent legislation undermines those decisions." United States v. State of Washington, 872 F.2d 874, 880 (9th Cir.1989) (internal quotations omitted). Because Hougland has not been undermined, we cannot depart from its holding.

Although Lomas spends a great deal of energy discussing the legislative history behind section 1322(b)(2), we need not delve into that here because the statute can be interpreted on its face. "[W]here, as here, the statute's language is plain, 'the sole function of the courts is to enforce it according to its terms.' " United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917)). We still adhere to the brief comments made in Hougland that the legislative history indicates a desire to assist home lenders and nothing more. See 886 F.2d at 1185.

We also reject Lomas' contention that lenders will be subject to unfair treatment and will face "absurd results" if Hougland is to stand. "[T]hese speculative contingencies regarding fluctuating real estate prices are not sufficient to justify a result contrary to that required by the Code's language." Bellamy, 962 F.2d at 186.

The recent Supreme Court decision, Dewsnup v. Timm, --- U.S. ----, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992), does not affect our decision in Hougland. As the Second Circuit has observed, "Dewsnup did not hold that 'secured claim' in other provisions of the Code was never to be construed as it was in § 506(a). Its analysis was limited to 506(d) and the facts before it." Bellamy, 962 F.2d...