448 B.R. 870
1st Cir. BAP2011Background
- Picchi filed a Chapter 13 in Rhode Island; owns a two-family home with one unit rented.
- Property valued at $125,000; there is a first mortgage to Navigant for $134,928, a second to Pawtucket for $87,032, and a third to Beneficial for $16,382.
- Picchi’s plan seeks to bifurcate (cram down) Pawtucket’s secured claim to $125,000 value, effectively eliminating its secured status.
- Pawtucket objects, arguing the anti-modification provision of §1322(b)(2) prohibits modification on a multi-unit dwelling and that BTCA’s definitions of principal residence and incidental property would change the outcome.
- Bankruptcy court overruled Pawtucket’s objection and confirmed the plan; on appeal Pawtucket contends the court erred in applying §1322(b)(2) to bar or permit the modification.
- BTCA defined principal residence and incidental property in a way that could affect the analysis, but the panel reviews the decision based on law as it stood prior to BTCA’s amendments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1322(b)(2) bars modification of a mortgage on a multi-unit dwelling when one unit is the debtor's principal residence | Pawtucket: §1322(b)(2) bars modification on multi-unit dwellings; Lomas controls | Picchi: §1322(b)(2) allows modification; Lomas remains good law despite BTCA changes | No, §1322(b)(2) does not bar such modification; modification permitted. |
| Do BTCA’s definitions of principal residence and incidental property alter the §1322(b)(2) analysis | Pawtucket: definitions resolve ambiguity against modification | Picchi: definitions do not cure ambiguity or negate Lomas | Definitions do not alter the anti-modification scope. |
| Whether bifurcation under §506(a) and plan confirmATION comply with §1322(b)(2) | Pawtucket: would violate anti-modification by cramming down | Picchi: bifurcation permitted under §506(a) and plan; complies | Bifurcation and plan confirmation were proper under §506(a) and §1322(b)(2). |
Key Cases Cited
- Lomas Mortgage, Inc. v. Louis, 82 F.3d 1 (1st Cir. 1996) (anti-modification allows modification on multi-unit dwellings with principal residence units (context))
- Nobelman v. American Savings Bank, 508 U.S. 324 (Sup. Ct. 1993) (ant i-modification clause scope in home mortgages)
- In re Ramirez, 62 B.R. 668 (Bankr.S.D. Cal. 1986) (example where antimodification not applied; cited in Lomas)
- In re Scarborough, 461 F.3d 406 (3d Cir. 2006) (alternative conduction on §1322(b)(2) and multi-unit dwellings)