491 B.R. 122
Bankr. E.D. Cal.2013Background
- Plaintiff filed an Adversary Proceeding to void CitiFinancial’s lien on 41 Monarch Drive, Oroville, CA.
- CitiFinancial filed a proof of claim on May 1, 2009 asserting a secured claim of $52,294.71 secured by the Deed of Trust.
- The court valuated CitiFinancial’s secured claim at $0.00 under §506(a) in 2009, treating the balance as unsecured.
- Chapter 13 plan was confirmed on May 29, 2009 providing for $0 secured claim (Class 2) and classifying the unsecured claim (Class 7).
- The Plan was completed and the debtor received a discharge on October 1, 2012; Plaintiff now seeks quiet title and reconveyance of the Deed of Trust.
- The court held that the lien is void by operation of federal law after completion of the Plan and that reconveyance is required under state law and the Deed of Trust terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the lien is void after Plan completion | Martin argues lien void due to §506(d) and Plan completion | CitiFinancial contends lien remains until reconveyed under state law | Lien void; reconveyance required |
| Effect of §506(a) valuation and Plan confirmation on liens | Plan fixes secured claim at $0 | Valuation does not nullify lien without reconveyance | Plan completion fixes secured claim at $0; lien extinguished |
| Reconveyance obligation after completion | Creditor must reconvey once obligation no longer exists | No timely reconveyance obligation shown | Defendant must reconvey; lien void and title cleared |
| Role of state law in lien validity | California law voids lien when no debt remains | Lien remains until reconveyance | California law supports voiding the lien and reconveyance |
| Attorney’s fees and costs for reconveyance litigation | Plaintiff entitled to fees for clearing title | Fees not addressed in record | Fees may be recoverable; court declined to decide here beyond costs/fees provisions |
Key Cases Cited
- Nobleman v. American Savings Bank, 968 F.2d 483 (5th Cir.1992) (§1322(b)(2) anti-modification and §506(a) valuation framework)
- Zimmer v. PSB Lending Corp. (In re Zimmer), 313 F.3d 1220 (9th Cir.2002) (valuation of secured claims under §506(a) in Chapter 13; lien versus value)
- Lam v. Investors Thrift (In re Lam), 211 B.R. 36 (9th Cir. BAP 1997) (Totally unsecured claims and effect of plan on liens)
- Hillis Motors v. Hawaii Automobile Dealers’ Association (In re Hillis Motors), 997 F.2d 581 (9th Cir.1993) (confirmation resembles contract; plan binding effect)
- First American Title Insurance Co. v. XWarehouse Lending Corp., 177 Cal.App.4th 106 (Cal. Ct. App. 2009) (lien existence depends on underlying indebtedness)
- Bank of Italy National Trust & Savings Ass’n v. Bentley, 217 Cal. 644 (Cal. 1933) (lien as an incident of the debt it secures)
- Coon v. Shry, 209 Cal.612 (Cal. 1930) (mortgage requires debt to be secured; no debt no lien)
- Alliance Mortgage Co. v. Rothwell, 10 Cal.4th 1226 (Cal. 1995) (lien validity dependent on obligation to be secured)