In re Garza
462 B.R. 638
Bankr. N.D. Tex.2011Background
- Debtor owns a homestead at 3342 Ivandell Avenue, Dallas, Texas; contract for deed with 4G Holdings (assigned to 1G Capital).
- Under the contract, Debtor paid $733.49 monthly beginning January 15, 2005, with title to transfer to Debtor upon full payment.
- Debtor defaulted on December 15, 2009, and again failed to pay through May 2011.
- Debtor filed a voluntary Chapter 13 petition on May 2, 2011.
- 1G Capital filed a Motion to Compel on May 25, 2011 seeking to force assume or reject and cure defaults under 365; Debtor opposed asserting the contract is a secured financing arrangement under Texas law.
- Texas Property Code amendments (1995 onward) changed treatment of contracts for deed, prompting the court to evaluate whether the contract is executory or secured financing for purposes of cure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Classification of the contract for deed under the Bankruptcy Code | 1G Capital argues it is an executory contract under 365. | Garza contends the contract is a secured financing arrangement/mortgage under Texas law. | Contract treated as secured financing, not an executory contract. |
| Cure mechanism for default in Chapter 13 | Prompt cure under 365(b) should apply; Debtor must cure quickly. | Cure may occur over the life of the Chapter 13 plan under 1322. | Default may be cured through Chapter 13 plan under 1322(b)(3)(5) given secured financing status. |
Key Cases Cited
- Butner v. United States, 440 U.S. 48 (1981) (property rights depend on state law unless Congress dictates otherwise)
- In re Waldron, 65 B.R. 169 (Bankr.N.D. Tex. 1986) (explains equitable right vs equitable title in contracts for deed)
- Johnson v. Wood, 157 S.W.2d 146 (Tex. 1941) (contracts for deed confer equitable right before full payment)
- Jensen v. Bryson, 614 S.W.2d 930 (Tex.App.-Amarillo 1981) (Texas views contracts for deed as executory, not security devices)
- Gaona v. Gonzales, 997 S.W.2d 784 (Tex.App.-Austin 1999) (Texas cases recognizing executory nature of contracts for deed)
- Flores v. Millennium Interests, Ltd., 185 S.W.3d 427 (Tex. 2005) (Texas Property Code amendments extended protections beyond colonias)