544 B.R. 702
Bankr. M.D. Ala.2016Background
- Debtor William Moorer owns 98 acres in Alabama with a mobile home; land valued at $198,000.
- Moorer obtained a commercial loan from Community Bank & Trust (CBT) in 2007, later modified in 2013 to a balance with a balloon maturity in May 2016.
- Moorer filed Chapter 13 (Feb 2015) proposing to pay CBT $198,000 (the land value) at 4.75% and discharge the remainder; CBT filed a secured claim and objected.
- At evidentiary hearings, testimony showed the land was mainly used for farming/cattle pasture and the mobile home became the debtor’s principal residence only in 2014.
- The bankruptcy court confirmed Moorer’s plan, concluding the property was not used exclusively as his principal residence and thus CBT’s mortgage could be modified (cramdown).
- CBT moved to reconsider, arguing the anti-modification provision of 11 U.S.C. § 1322(b)(2) protects its mortgage because the property includes Moorer’s principal residence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1322(b)(2) bars modification of a mortgage that secures property containing the debtor’s principal residence plus commercial/farm uses | Moorer: anti-modification applies only when collateral is used exclusively as the debtor’s principal residence; here it is not exclusively residential | CBT: § 1322(b)(2) protects mortgages on property that includes the debtor’s principal residence even if the property has other uses | Court: § 1322(b)(2) applies only when the collateral is used exclusively as the debtor’s principal residence; CBT loses |
| Whether the court’s confirmation ruling was clearly erroneous under Rule 59(e) | Moorer: earlier ruling correct based on evidence that land was not exclusively residential | CBT: alleged statutory misinterpretation of § 1322(b)(2) warranting reconsideration | Court: no clear error; oral ruling affirmed and reconsideration denied |
| Whether an alternative statutory exception permits cramdown despite § 1322(b)(2) | Moorer: even if § 1322(b)(2) applied, § 1322(c)(2) allows modification of short-term/balloon mortgages | CBT: did not defeat applicability of § 1322(c)(2) argument | Court: § 1322(c)(2) would permit modification because the mortgage matures before plan completion, so CBT would still be subject to cramdown |
| Timing question (which date governs residence status) | Moorer: not necessary to resolve; property was never exclusively residential at relevant times | CBT: argued debtor claimed homestead exemption and was principal resident | Court: did not decide specific timing question since exclusive-use requirement was not met at any relevant time |
Key Cases Cited
- United States v. Ron Pair Enters., 489 U.S. 235 (general rule on secured claim limited to collateral value)
- American Gen. Fin., Inc. v. Paschen, 296 F.3d 1203 (11th Cir.) (Chapter 13 debtors’ power to modify secured claims)
- Till v. SCS Credit Corp., 541 U.S. 465 (prime-rate interest standard for cramdown)
- Associates Commercial Corp. v. Rash, 520 U.S. 953 (cramdown framework for replacement value/interest)
- Nobelman v. American Savings Bank, 508 U.S. 324 (anti-modification rule protecting home mortgages)
- Scarborough v. Chase Manhattan Mortg. Corp., 461 F.3d 406 (3d Cir.) (§ 1322(b)(2) requires exclusive residential use)
- Lomas Mortgage, Inc. v. Louis, 82 F.3d 1 (1st Cir.) (same conclusion applying legislative history)