Matter of Bartee

• Decision Date: 15 May 2000
• Docket Number: No. 99-20463,99-20463
• Citation: 212 F.3d 277
• Parties: (5th Cir. 2000) In The Matter Of: RONALD BARTEE, Debtor. RONALD BARTEE, Appellant, v. TARA COLONY HOMEOWNERS ASSOCIATION and DANIEL E. O'CONNELL, Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 277

212 F.3d 277 (5th Cir. 2000)

In The Matter Of: RONALD BARTEE, Debtor.

RONALD BARTEE, Appellant, v. TARA COLONY HOMEOWNERS ASSOCIATION and DANIEL E. O'CONNELL, Appellees.

No. 99-20463

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

May 15, 2000

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Appeal from the United States District Court for the Southern District of Texas

Before HIGGINBOTHAM and PARKER, Circuit Judges; and ATLAS, District Judge.¹

ROBERT M. PARKER, Circuit Judge:

Appellant Ronald Bartee ("Debtor") seeks review of an order sustaining the objection of Appellee Tara Colony Homeowners Association ("Creditor") to his proposed Chapter 13 Plan (the "Plan"). Under the Plan, Debtor moved to "cramdown" ² Creditor's claim that is secured by a subordinate lien on Debtor's principal residence. Debtor argues that since no equity exists in the residence after satisfaction of the senior mortgage, pursuant to the valuation and classification provisions of Bankruptcy Code § 506, Creditor holds only an unsecured claim. Consequently, without a secured claim, Creditor cannot benefit from the antimodification provisions of § 1322(b)(2) that protect holders of allowed secured claims secured by a debtor's principal residence. Creditor argues that the Supreme Court's decision in Nobelman v. American Savings Bank, 508 U.S. 324 (1993), which interpreted § 1322(b)(2) as prohibiting the cramdown of under-secured liens, should be extended to protect junior liens that are wholly unsecured by any corresponding value in the collateral residence.³

Debtor advances a second line of argument based on § 1322(c)(2)(1994), an exception to § 1322(b)(2) which permits modification of short-term mortgages under which the final payment comes due during the life of the proposed plan. According to Debtor, § 1322(c)(2) provides an independent basis for cramdown of the claim, because the single payment due on this annual assessment came due during the course of the proposed plan.

The bankruptcy court and the district court rejected both of Debtor's arguments; we agree solely with his first. We hold that (1) the Bankruptcy Code's antimodfication provisions do not protect secondary lienholders whose interest is not supported by at least some value in the debtor's principal residence, and (2) the narrow exception to the antimodification provisions intended to cover short-term mortgages does not apply to secondary liens for annual assessments. AFFIRMED IN PART, REVERSED IN PART and REMANDED.

I. FACTS AND PROCEEDINGS BELOW

The parties to this appeal submitted the case to the bankruptcy court upon a stipulated record. The record reflects that on March 12, 1998, Ronald Bartee filed a Chapter 13 bankruptcy case including as property of the estate his principal residence, a home situated on a lot in Tara Colony subdivision, Richmond, Texas. Ocwen Federal Bank, FSB holds a first lien mortgage on the real property and an allowed secured claim in the amount of $88,840.23. As of the proposed effective date of the Plan, Debtor's homestead was valued at only $87,000.

A second claim, secured only by a lien against Debtor's principal residence, was filed by Tara Colony Homeowners Association in the amount of $1,096.62. This subordinate claim is for a pre-petition annual assessment imposed pursuant to subdivision covenants and deed restrictions. These covenants and restrictions provide that each lot within Tara Colony is subject to an annual maintenance assessment; that each homeowner is deemed to agree to pay this assessment when he accepts the deed for the lot; that the assessments, together with interest, costs, and reasonable attorney's fees, would be a continuing lien on the property; and that the assessments would come due on January 1, of the specific year for the preceding year. ⁴ The payment at issue came due on January 1, 1998.

On August 19, 1998, Debtor filed his First Amended Chapter 13 Plan and served all creditors and parties-in-interest. All conditions and requirements for confirmation of the Plan were met save only the issue of the treatment of Tara Colony's claim. The Plan called for the cramdown of the subordinate lien, treating the entire claim as a general unsecured claim. Although, as an unsecured creditor, Tara Colony would not receive any disbursements on its claim for the delinquent assessment payment, Tara Colony's lien is to be retained.

Tara Colony filed an objection to the Plan; Bartee responded with an objection to the Tara Colony claim. Daniel E. O'Connell, the Chapter 13 Trustee, appearing as an interested party, opposed confirmation of the Plan. Following a contested hearing on the objections, the bankruptcy court allowed the secured claim and denied confirmation of the Plan.

Bartee appealed to District Court for the Southern District of Texas. The district court affirmed the bankruptcy court's ruling and dismissed the appeal with prejudice. This appeal followed.

II. JURISDICTION

Before considering the substantive issues now before us, we must first address the question of our jurisdiction over this appeal. Counsel were instructed to brief the question of "[w]hether the order entered [by the bankruptcy court] is a final decision, appealable within the meaning of 28 U.S.C. § 158(d), or whether there is some other basis for appellate jurisdiction." All three parties to this appeal contend that this Court may properly exercise its appellate jurisdiction, invoking the grant of jurisdiction in § 158(d). We agree.

The jurisdiction of this Court to hear bankruptcy appeals is conferred by 28 U.S.C. § 158(d)(1994) and 28 U.S.C. §§ 1291 & 1292 (1994). Since this case does not involve interlocutory orders, injunctions, or any other orders specified in § 1292, we have jurisdiction over this case only to the extent that the judgments below are considered "final" within the meaning of § 158(d) or § 1291. ⁵ Because "finality" for the purposes of bankruptcy appeals under § 158(d) is considered more liberally or flexibly than "finality" under § 1291, we address the appealability of the denial of confirmation order in this case solely under the less stringent standard of § 158(d). See Internal Revenue Serv. v. Orr (In re Orr), 180 F.3d 656, 659 (5th Cir. 1999)("There is [] a lower threshold for meeting the 'final judgments, orders, and decrees' appealability standard under 28 U.S.C. § 158(d) than there is for the textually similar 'final decisions' appealability standard under 28 U.S.C. § 1291.").

This circuit has long rejected adoption of a rigid rule that a bankruptcy case can only "be appealed as a 'single judicial unit' at the end of the entire bankruptcy proceeding." Orr, 180 F.3d at 659 (quoting Texas Extrusion Corp. v. Lockheed Corp. (In re Texas Extrusion Corp.), 844 F.2d 1142, 1155 (5th Cir. 1988)).⁶ Instead, an appealed bankruptcy order must constitute either a "final determination of the rights of the parties to secure the relief they seek," or a final disposition "of a discrete dispute within the larger bankruptcy case for the order to be considered final." Orr, 180 F.3d at 659 (quoting In re Texas Extrusion Corp., 844 F.2d at 1155). We recently explained the utility of our flexible rule of finality:

[A] determination that appellate jurisdiction arises only when the bankruptcy judge enters an order which ends the entire bankruptcy case, leaving nothing for the court to do but execute the judgment, would substantially frustrate the bankruptcy system. This is so particularly when, as here, one independent decision materially affects the rest of the bankruptcy proceedings. Separate and discrete orders in many bankruptcy proceedings determine the extent of the bankruptcy estate and influence creditors to expend or not to expend effort to recover monies due them. The reversal of such an order would waste exorbitant amounts of time, money, and labor and would likely require parties to start the entire bankruptcy process anew. This potential waste of judicial and other resources has influenced this Court and other courts of appeals to view finality in bankruptcy proceedings in a more practical and less technical light.

England v. Federal Deposit Ins. Corp. (In re England), 975 F.2d 1168, 1171 (5th Cir. 1992).

Recognition that the denial of a Chapter 13 plan can be a final order is all but compelled by considerations of practicality. Often an appeal is the only reasonable course, since the debtor is left without any real options in formulating his plan. In the instant case, under the bankruptcy court's ruling, Debtor cannot modify Tara Colony's claim, he therefore lacks any alternative if the plan is to address the assessment claim. If an appeal is impermissible, Debtor must choose between filing an unwanted or involuntary plan and then appealing his own plan, or dismissing his case and then appealing his own dismissal.

Under our flexible rule of finality, we have, on numerous occasions, addressed the merits of appeals from the denial of confirmation of Chapter 13 plans. See, e.g., Williams v. Tower Loan of Mississippi, Inc. (In re Williams), 168 F.3d 845 (5th Cir. 1999); O'Connell v. Troy & Nichols, Inc. (In re Cabrera), 99 F.3d 684 (5th Cir. 1996); Grubbs v. Houston First American Savings Assoc. (In re Grubbs), 730 F.2d 236 (5th Cir. 1984) (en banc); Foster v. Heitkamp (In re Foster), 670 F.2d 478 (5th Cir. 1982). In fact our decision in Nobleman v. American Savings Bank (In re Nobleman), 968 F.2d 483 (1992), ⁷ aff'd, Nobelman v. American Savings Bank, 508 U.S. 324 (1993), involved the denial of confirmation of a Chapter 13 plan. ⁸

In the case of a denial of confirmation of a plan, we look to whether or not the order was intended to serve as a final denial of the relief sought by the debtor. If the order was not intended to be final -- for example, if the order addressed an issue that left the debtor able to file an amended plan (basically to try again) -- appellate jurisdiction would be...