21st Mortgage Corporation v. Kayla Glenn
900 F.3d 187
5th Cir.2018Background
- Debtor Kayla Glenn bought a used mobile home financed by 21st Mortgage; the contract listed a "base price" of $29,910 that apparently included delivery and setup costs. 21st Mortgage held a purchase-money security interest and had a secured claim of $27,714.
- Glenn filed Chapter 13 and proposed to retain the mobile home, paying the secured value over the plan; the plan valued the home excluding $4,000 in delivery/setup costs.
- 21st Mortgage objected, arguing § 506(a)(2) replacement value must include delivery and setup because replacement value is the retail price a merchant would charge and § 506(a)(2) prohibits deducting costs of sale or marketing.
- Bankruptcy and district courts rejected 21st Mortgage's view, holding delivery/setup costs should be excluded when the debtor retains a mobile home already delivered and set up.
- The Fifth Circuit affirmed, reasoning § 506(a)(1)’s requirement to consider the "proposed disposition or use" (as interpreted in the Supreme Court's Rash decision) is consistent with § 506(a)(2) and excludes tangential, nonrecurring costs the debtor will not receive when retaining collateral.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether delivery and setup costs must be included in replacement value under § 506(a) for a retained mobile home | 21st Mortgage: § 506(a)(2) replacement value is the retail price a merchant would charge, which includes delivery/setup; § 506(a)(2) bars deduction for costs of sale or marketing so these costs must be included | Trustee/Glenn/District Court: § 506(a)(1)’s "proposed disposition or use" (Rash) controls valuation; delivery/setup are tangential, nonrecurring services not part of the property's inherent value when retained | Delivery and setup costs are excluded from valuation of a retained mobile home under § 506(a) |
Key Cases Cited
- Associates Commercial Corp. v. Rash, 520 U.S. 953 (Supreme Court 1997) ("proposed disposition or use" of collateral is paramount in valuation and certain retail-price components not received by a retaining debtor should be excluded)
- RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639 (Supreme Court 2012) (statutory provisions should be read to give effect to every clause)
- BedRoc Ltd. v. United States, 541 U.S. 176 (Supreme Court 2004) (statutory interpretation begins and often ends with the text)
- In re Heritage Highgate, Inc., 679 F.3d 132 (3d Cir. 2012) (valuation standard should depend on what is to be done with property—liquidate, surrender, or retain)
- In re Brown, 746 F.3d 1236 (11th Cir. 2014) (§ 506(a)(2) valuation standard applies where debtor surrenders collateral; disposition/use language not applicable there)