Rogers v. E. Sav. Bank (In re Rogers)
Decision Date | 28 March 2013 |
Docket Number | No. 3:12 CV 818(JCH).,3:12 CV 818(JCH). |
Citation | 489 B.R. 327 |
Parties | In re Alicia ROGERS, Debtor. Alicia Rogers, Appellant, v. Eastern Savings Bank, Appellee, and Molly T. Whiton, Chapter 13 Trustee. |
Court | U.S. District Court — District of Connecticut |
OPINION TEXT STARTS HERE
George C. Tzepos, Middlebury, CT, for Appellant.
Robert Joseph Piscitelli, The Law Offices of Robert M. Meyers LLC, Avon, CT, for Appellee.
RULING ON DEBTOR–APPELLANT'S APPEAL (DOC. NO. 1) 1 AND CREDITOR–APPELLEE'S MOTION TO DISMISS THE APPEAL (DOC. NO. 22)
This is an appeal from a decision of the Bankruptcy Court for the District of Connecticut: The issue on appeal is whether the changes enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), Pub. L. No. 109–8, 119 Stat. 23, create a per se prohibition on the application of section 1322(b)(2)2 in a Chapter 13 case, where the debtor is discharge-ineligible in Chapter 13 due to a recent Chapter 7 discharge.3 Adopting the rationale in In re Sadowski, 473 B.R. 12 (Bankr.D.Conn.2011), which held that BAPCPA did create such a prohibition, the Bankruptcy Court below denied Appellant–Debtor Alicia Rogers' Motion to Determine Status of Claim pursuant to section 506(a) and confirmation of her Chapter 13 Plan. (B'cy Doc. No. 57 4).
As discussed below, Rogers' appeal is properly before this court. The Order of the Bankruptcy Court is AFFIRMED, but on a rationale different than that of the Bankruptcy Court.
Rogers filed this Chapter 13 Petition on November 28, 2011. Petition (B'cy Doc. No. 1). Rogers had obtained a Chapter 7 discharge just two weeks earlier. Mem. Decision and Order (B'cy Doc. No. 57) at 2 (“Bankruptcy Ruling”). The Bankruptcy Court determined that Rogers was ineligible to obtain a discharge in the instant Chapter 13 case, but she was otherwise entitled to proceed with her Petition. Id. at 4 (quoting Sadowski, 473 B.R. at 17).
Rogers' Chapter 13 Petition lists ESB as a secured creditor. Petition (B'cy Doc. No. 1) at 16. ESB is the holder of a first mortgage on a three-unit residential building owned by Rogers; she lives in one unit and leases the other two. Id. at 19; Appellant's Mem. (Doc. No. 13) at 2. At the time of the filing, the fair market value of the property is approximately $62,000, and the amount due on the mortgage is more than $210,000. Petition (B'cy Doc. No. 1) at 11, 16.
Although her prior Chapter 7 Petition discharged Rogers of in personam liability on the mortgage, her property remains subject to ESB's continuing in rem lien on it to the full amount due on the mortgage. Seeking to extinguish part of that interest as well, Rogers' Chapter 13 Plan proposes to bifurcate the ESB mortgage into a secured claim, equal to the fair market value of the property (approximately $62,000), and an unsecured claim, equal to the excess (approximately $153,000).5 Chap. 13 Plan (B'cy Doc. No. 17) at 2. Under Rogers' Chapter 13 Plan, that part of ESB's mortgage deemed unsecured would receive no payout. Id. at 3; Bankruptcy Ruling at 3.
To effectuate this bifurcation, Rogers filed the section 506(a) Motion now at issue. Mot. to Determine Claim Status (B'cy Doc. No. 43). The Bankruptcy Court denied that Motion. Bankruptcy Ruling at 3–4. The Bankruptcy Court also denied confirmation of Rogers' Chapter 13 Plan, which Rogers conceded could not be confirmed absent approval of the section 506(a) Motion. Id. at 4. Rogers then filed this appeal, seeking to reverse the decision of the Bankruptcy Court on her section 506(a) Motion. ESB objected, moving to dismiss Rogers' appeal as procedurally flawed. Mot. to Dismiss (Doc. No. 22). ESB further opposed the appeal on substantive grounds, arguing that the Bankruptcy Court's Ruling should be affirmed. Appellee's Br. (Doc. No. 21).
A district court has jurisdiction to review final and, in some cases, interlocutory, judgments, orders, and decrees of a bankruptcy court. See28 U.S.C. § 158(a). On appeal, a district court will review de novo a bankruptcy court's conclusions of law, including its determination of the legal standards applicable. SeeFed. R. Bankr.P. 8013; In re Refco Inc., 505 F.3d 109, 116 (2d Cir.2007); In re Ne. Contracting Co., 233 B.R. 15, 18 (D.Conn.1999). Findings of fact are reviewed for clear error. Id. The instant appeal concerns a purely legal question: no questions of fact have been raised by the parties.
III. DISCUSSIONA. ESB's Motion to Dismiss the Appeal
As an initial matter, the court must consider ESB's Motion to Dismiss the instant appeal on the ground that it is interlocutory and Rogers failed to obtain leave to appeal. On the theory that a debtor might file an alternative motion on the same issue or to approve another plan, an order denying a motion or rejecting a proposed Chapter 13 plan is generally not considered “to finally dispose of a discrete issue” and, as such, not appealable absent leave. See, e.g., Maiorino v. Branford Sav. Bank, 691 F.2d 89, 90–91 (2d Cir.1982).
However, the instant appeal is distinguishable. Having already discharged all of her dischargeable, in personam debt in her prior Chapter 7 case, Rogers' aim in this Chapter 13 case is to “strip down” ESB's mortgage to the fair market value of the underlying real property, through a combination of the section 506(a) Motion and confirmation of her Chapter 13 Plan.6 Because Rogers concedes that approval of the Motion is required for confirmation of the Plan and that no other plan is viable, no issue remains that would render the Bankruptcy Court's Ruling interlocutory. See Appellant's Obj. (Doc. No. 23) at ¶ 1. This appeal, therefore, is distinguishable from the circumstances controlling in Maiorino and similar cases. See Maiorino, 691 F.2d at 91 ( ).
Even if the Bankruptcy Court's Ruling were interlocutory, this court has discretionary appellate jurisdiction over the instant appeal. See28 U.S.C. § 158(a)(3); Bankr. Rule 8003(c). A district court may grant leave to appeal an interlocutory order by a bankruptcy court where: (1) such order involves a controlling question of law; (2) as to which there is substantial ground for difference of opinion; and (3) an immediate appeal from the order may materially advance the ultimate termination of the litigation. Mount Sinai Hosp. v. Arana, No. 11–CV–5360, 2012 WL 3307357, at *2 (E.D.N.Y. Aug. 12, 2012) (citation omitted).
Though the criteria for an interlocutory appeal can be difficult to meet, the instant appeal easily satisfies them. First, the issue on appeal involves a pure question of law; it does not require this court to review any factual determinations made by the Bankruptcy Court. See id. at *4. This is in sharp contrast to cases like Mount Sinai, where the court “would necessarily need to review all of the testimony and other evidence before the bankruptcy court.” Id. Such “review of the record is precisely the type of ‘heavily fact-based analysis' ... that district courts in the Second Circuit decline to review on interlocutory appeal.” Id. (citations omitted). Second, substantial ground for difference of opinion exists with respect to the controlling question of whether BAPCPA per se prohibits application of section 1322(b)(2) with respect to a discharge-ineligible debtor in a successive Chapter 13 petition. See Sadowski, 473 B.R. at 12, 19. Third, for the reasons discussed, supra at 330–31, a decision by this court would “materially advance the ultimate termination of the litigation.” Thus, while it is the court's view that the Ruling below is appealable as of right, this court would grant leave to appeal even if it were determined that the instant appeal is interlocutory.
B. The Bankruptcy Court Ruling
Relying on section 1322(b)(2)'s modification provision, Rogers' section 506(a) Motion and proposed Chapter 13 Plan seeks to “strip down” ESB's mortgage to the fair market value of the underlying real property. That is, Rogers proposes to modify the undersecured portion of the ESB lien (approximately $155,000) into an unsecuredclaim that would receive no payout. The mortgage lien would remain on the property in the amount of $62,000. Adopting the rationale in Sadowski, the Bankruptcy Court denied both the Motion and the Plan on the ground that BAPCPA prohibits discharge-ineligible debtors from availing themselves of section 1322(b)(2). See Bankruptcy Ruling at 4 ( ). Absent modification, the Bankruptcy Court ruled, Rogers could not confirm her Chapter 13 Plan because ESB's objection to the treatment of its lien under the Plan violates the lien retention requirement found in section 1325(a)(5)(B)(i)(I). Id. While the Bankruptcy Court reached the correct result—based on the arguments with which it was presented, see, infra, note 6—its reliance on Sadowski was inappropriate.
Generally, an in rem lien that is undersecured—as opposed to wholly unsecured—may not be voided if the lien is secured “only by a security interest in real property that is the debtor's principal residence....” Compare Nobelman v. Am. Sav. Bank, 508 U.S. 324, 329, 113 S.Ct. 2106, 124 L.Ed.2d 228 (1993) ( ), withIn re Pond, 252 F.3d 122, 126, 127 (2d Cir.2001) (...
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