In re Prewitt
552 B.R. 790
Bankr. E.D. Tex.2015Background
- Debtor Bobby Dean Prewitt filed Chapter 13 after falling into arrears on a 2001 Palm Harbor 18' x 76' manufactured home secured by a purchase-money security interest held by 21st Mortgage.
- Lender moved under 11 U.S.C. § 506 and Fed. R. Bankr. P. 3012 to value the collateral; the Lender sought a replacement value of at least $24,104; Debtor objected and proposed $13,898 based on his appraiser.
- Lender presented two NAS/NADA-based appraisals (Harvey and Pendergraft) that produced retail-style values of $24,104 (including delivery/setup charges) and $18,600 (no setup), respectively.
- Debtor’s appraiser (Jones) used a sales-comparison approach, rejected NADA data, and estimated replacement value at $13,898.
- The court found Pendergraft’s NAS-based approach more credible but adjusted slightly based on comparable sales evidence and disallowed hypothetical delivery/setup charges.
- Court set replacement value of the manufactured home at $18,500 under § 506(a)(2) and denied inclusion of delivery/setup costs.
Issues
| Issue | Plaintiff's Argument (21st Mortgage) | Defendant's Argument (Prewitt) | Held |
|---|---|---|---|
| Proper valuation standard | Use NAS/NADA replacement retail value under § 506(a)(2) | Use comparable-sales approach reflecting local market; lower value | Court applied § 506(a)(2) replacement-value standard but weighed appraisals and comparables; adopted $18,500 |
| Weight of competing appraisals | Harvey and Pendergraft NAS appraisals reliable; produce higher values | Jones’ comparable-sales appraisal shows lower market value | Court found Pendergraft most credible, adjusted slightly using best comparable; rejected Jones as less reliable |
| Inclusion of delivery/setup costs in replacement value | Delivery/setup, utility hookup, underpinning and porch attachment should be added to retail replacement cost | These are ancillary, hypothetical; should be excluded under Rash and § 506(a)(2) | Court held delivery/setup costs are not part of replacement value and disallowed them |
| Burden of proof | Lender must prove asserted valuation | Debtor challenges valuation; invites court to weigh evidence | Court reaffirmed Lender bears burden to prove its valuation and resolved conflicts by credibility findings |
Key Cases Cited
- Associates Commercial Corp. v. Rash, 520 U.S. 953 (Sup. Ct.) (establishes replacement-value standard for retained property in Chapter 13 cramdown)
- Boyle v. Wells (In re Gustav Schaefer Co.), 103 F.2d 237 (6th Cir.) (valuation is inexact; differing appraisals do not prove error)
- In re Sneijder, 407 B.R. 46 (Bankr. S.D.N.Y.) (movant bears burden to prove valuation in Rule 3012 context)
- In re Creekside Sr. Apartments, LP, 477 B.R. 40 (6th Cir. BAP) (courts assign weight to appraisal testimony and accept valuation approximations)