495 B.R. 522
Bankr. D. Haw.2013Background
- Debtor Rosa jointly owns Ewa Beach real property subject to a first mortgage (City National Bank/Ocwen) and a second mortgage; mortgages are seriously delinquent and debtor has no equity.
- Debtor’s Chapter 13 plan classifies both mortgages in Class 3 and states she will "surrender" the property to secured creditors.
- Plan adds a nonstandard provision vesting title in the first mortgagee on confirmation and treating surrender as full satisfaction.
- Chapter 13 trustee objects to the vesting provision, arguing surrender alone does not transfer title and the trustee must protect creditor rights at confirmation.
- The first mortgagee received notice of confirmation but did not object.
- Court considers whether §1322(b)(9) permits vesting and whether a creditor’s silence constitutes acceptance under §1325(a)(5)(A).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1322(b)(9) allows a plan to vest estate property in a secured creditor on confirmation | Rosa: §1322(b)(9) expressly permits vesting to another entity, which can effect present transfer of title | Trustee: Surrender (per §1325(a)(5)(C)) does not transfer title; vesting provision is improper | Court: §1322(b)(9) authorizes vesting; statutory text distinguishes vesting from surrender |
| Whether plan can be confirmed when it proposes both surrender and vesting of collateral | Rosa: Plan meets §1325 because secured creditor accepted by silence | Trustee: Surrender alone insufficient; plan must meet one of §1325(a)(5) tests | Court: Because vesting makes the plan not a pure surrender or cramdown, confirmation depends on §1325(a)(5)(A) acceptance; creditor’s silence constitutes acceptance here |
| Whether a creditor’s failure to object to confirmation constitutes acceptance of the plan under §1325(a)(5)(A) | Rosa: Creditor’s lack of objection should be inferred as acceptance | Trustee: Acceptance cannot be presumed without proper notice | Court: Where clerk mailed required notice to creditor’s last-listed address and creditor did not object, silence constitutes acceptance (citing Ninth Circuit and other authority) |
| Whether debtor’s notice to the mortgagee was adequate | Rosa: Clerk/BNB mailed notice to the address provided by debtor; mortgagee had no notice request or proof of claim | Trustee: Adequate notice is required before inferring acceptance | Court: Notice was proper under Fed. R. Bankr. P. 2002(b) and 2002(g); address-rule provisions and Rule 7004 are inapplicable; therefore notice was adequate |
Key Cases Cited
- Foster v. Double R Ranch Assoc., 435 B.R. 650 (9th Cir. BAP 2010) (debtor’s personal liability for HOA dues survives discharge while debtor retains any interest in property)
- Andrews v. Loheit (In re Andrews), 49 F.3d 1404 (9th Cir. 1995) (creditor’s failure to object to a chapter 13 plan may be treated as acceptance under §1325(a)(5)(A))
- Pratt v. General Motors Acceptance Corp. (In re Pratt), 462 F.3d 14 (1st Cir. 2006) (surrender in a plan does not effect transfer of title; surrender authorizes creditor to exercise state-law remedies)
- Szostek, 886 F.2d 1405 (3d Cir. 1989) (absence of timely objection can be inferred as acceptance of a plan by a secured creditor)
- Gollnitz, 456 B.R. 733 (Bankr. W.D.N.Y. 2011) (authorization for surrender does not constitute transfer of title; transfer requires surrender plus acceptance)