OPINION
INTRODUCTION
When Imperial Capital Bank (“Imperial”) sought relief from the automatic stay to foreclose its judgment lien, Kevin and Terry Concannon (“Debtors”) defended the motion in their chapter 7 bankruptcy case by seeking a valuation of their rental real property encumbered by the lien and avoidance of Imperial’s lien pursuant to 11 U.S.C. §§ 506(a) and (d). 2 The bankruptcy court granted Imperial’s motion and lifted the stay, but in so doing, valued Imperial’s secured claim at zero pursuant to § 506. At Imperial’s request, the bankruptcy court then amended its decision by deleting its valuation of Imperial’s secured claim and ruling that Imperial’s lien would pass through bankruptcy unimpaired. Debtors timely appealed.
We affirm.
FACTS
On January 2, 1997, The Manning House, L.L.C., an Arizona Limited Liability Company (“Manning House”) executed a promissory note to Imperial in the original principal sum of $1,880,000 (“Note”). As part of the transaction, Debtors each signed a Continuing Guaranty of Payment and Performance dated January 2, 1997 (collectively, “Guaranties”), guaranteeing payment of the Manning House Note and any subsequent loan advances made by Imperial to Manning House. On November 6, 1997, Manning House obtained an additional advance of funds from Imperial in the amount of $385,000 (“Additional Advance”).
On September 11, 1998, Manning House filed a voluntary chapter 11 petition in Case No. 98-03968-TUC-LO, styled In re Manning House, L.L.C., Debtor, in the United States Bankruptcy Court, District of Arizona, Tucson Division. 3 Shortly thereafter, Imperial demanded payment by Debtors of the Manning House Note and Additional Advance. When Debtors defaulted under their Guaranties, Imperial commenced an action in the Superior Court of Arizona, County of Pima, to enforce the Guaranties and caused a writ of attachment to be levied by the Pima County Sheriff on certain rental real property owned by the Debtors located in Tucson, Arizona (“Farr Property”). Thereafter, Imperial obtained a judgment against the Debtors in the amount of $2,472,371.23, and recorded its judgment with the Pima County Recorder’s Office on April 12, 2001.
On October 17, 2001, Debtors filed their voluntary petition for liquidation under
On January 11, 2005, the bankruptcy court conducted an evidentiary hearing on the validity, extent, and priority of Imperial’s lien. At the conclusion of the hearing, Imperial was granted leave to file a supplemental brief on the issue of whether it was entitled as a judgment creditor to foreclose on the Farr Property. Imperial’s supplemental brief was filed on January 18, 2005.
On January 24, 2005, the bankruptcy court issued a Memorandum Decision (“Memorandum”) granting Imperial’s Motion, lifting the stay, and valuing Imperial’s secured claim at zero pursuant to § 506. In so holding, the court determined that the Farr Property had a value of $159,825, but that Imperial’s lien was junior to senior liens totaling $168,364. Based on § 506, the court concluded that Imperial’s secured claim as to the Farr Property was wholly unsecured.
On January 31, 2005, Imperial filed a Motion to Alter or Amend the Court’s Memorandum Decision Dated 1/24/05 (“Motion to Amend”) arguing that the valuation of liens under § 506 is not permitted in chapter 7 cases. On February 11, 2005, Debtors filed a response in opposition to Imperial’s Motion to Amend asserting that Imperial had “offered nothing new to justify altering or amending” the court’s earlier ruling. After a hearing on February 18, 2005, the bankruptcy court issued an Order on April 8, 2005, granting Imperial’s Motion to Amend. In its Order, the court declined to change that portion of its Memorandum lifting the automatic stay, but deleted from its Memorandum any discussion of the valuation of Imperial’s lien, stating that “Imperial’s secured lien will pass through bankruptcy unaffected.”
ISSUE
Whether the bankruptcy court erred in its determination that § 506(d) cannot be used by a chapter 7 debtor to strip off a wholly unsecured nonconsensual lien.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § 1334 and 28 U.S.C. § 157(a), (b)(1), and (b)(2)(A), (B), (G) and (K). We have jurisdiction under 28 U.S.C. § 158(c)(1).
Whether § 506(d) can be used by a chapter 7 debtor to strip off a wholly unsecured nonconsensual lien is a question of law. Therefore, we review the bankruptcy court’s conclusions of law and interpretation of the Bankruptcy Code
de novo. Bunyan v. United States (In re Bunyan),
DISCUSSION
Section 506 of the Bankruptcy Code
5
governs the determination and treatment of secured claims in bankruptcy cases.
Shook v. CBIC (In re Shook),
Prior to
Dewsnup v. Timm,
[W]e hold that § 506(d) does not allow petitioner to “strip down” respondents’ lien, because respondents’ claim is secured by a lien and has been fully allowed pursuant to § 502.
We think ... that the creditor’s lien stays with the real property until the foreclosure. That is what was bargained for by the mortgagor and the mortgagee. The voidness language sensibly applies only to the security aspect of the lien and then only to the real deficiency in the security. Any increase over the judicially determined valuation during bankruptcy rightly accrues to the benefit of the creditor, not to the benefit of the debtor and not to the benefit of other unsecured creditors whose claims have been allowed and who had nothing to do with the mortgagor-mortgagee bargain.
Id. 7
In
Laskin v. First Nat’l Bank of Keystone (In re Laskin),
Dewsnup teaches that, unless and until there is a claims allowance process, there is no predicate for voiding a lien under § 506(d). Absent either a disposition of the putative collateral or valuation of the secured claim for plan confirmation in Chapter 11, 12 or 13, there is simply no basis on which to avoid a lien under § 506(d).
Id.
at 876.
8
Cf. Zimmer v. PSB Lending Corp. (In re Zimmer),
In neither Hoioard nor Yi does the court indicate whether there was any prior claim allowance proceeding. Both conclude that, since there was no equity to which the lien in question could attach and there could be no secured claim under § 506(a), the lien could therefore be avoided under § 506(d). With all respect to those courts, we think that analysis reverses the statutory process.
Laskin,
Since
Dewsnup,
hen stripping has not been permitted in chapter 7 cases.
Enewally,
Debtors attempt to distinguish Laskin by arguing that Dewsnup and its progeny apply only to consensual liens. Debtors reason that Imperial’s wholly unsecured judgment lien may be stripped off simply because it is nonconsensual. This is a distinction without a difference.
Lien stripping in chapter 7 cases is inconsistent with the purpose and policy of § 506 which, as we observed in
Laskin,
was “to facilitate valuation and disposition of property in the reorganization chapters of the Code.”
Laskin,
Debtors point to
Warthen v. Smith (In re Smith),
We are aware ... that some courts are not in agreement with this analysis of Dewsnup. See Yi v. Citibank,219 B.R. 394 , 397 (E.D.Va.1998) (Chapter 7 debtor’s proceeding—“Because Citibank’s lien is wholly unsecured, by definition it cannot be an ‘allowed secured claim.’ From this it inexorably follows that the lien is void.” (citing Howard,184 B.R. at 644 )); In re Smith,247 B.R. 191 (W.D.Va.2000); Farha v. First American Title Ins.,246 B.R. 547 , 549 (Bankr.E.D.Mich.2000) (where claim is unsecured rather than undersecured “there is no allowed secured claim under § 506(a)”); Zempel v. Household Finance Corp.,244 B.R. 625 (Bankr.W.D.Ky.1999) (same).
Other courts have concluded, as do we, that a Chapter 7 debtor may not use § 506(d) to strip off an allowed, wholly unsecured consensual junior lien from real property.
Finally,
Hoekstra v. United States (In re Hoekstra),
CONCLUSION
Not only have the authorities cited by Debtors either been rejected by this court or essentially overruled, but the majority of cases addressing this issue support the conclusion that Dewsnup prohibits the stripping of both consensual and noncon-sensual liens in chapter 7 cases. It is undisputed that Imperial’s claim is allowed pursuant to § 502 and is secured by a judgment lien against the Farr Property. Imperial’s lien does not impair an exemption to which the Debtors are entitled under § 522(b). Whether or not the value of the Farr Property is sufficient to cover Imperial’s claim, Dewsnup prohibits Debtors from utilizing § 506(a) and (d) to strip off Imperial’s judgment lien. The bankruptcy court did not err in determining that § 506(d) cannot be used by a chapter 7 debtor to strip off a wholly unsecured nonconsensual lien. Accordingly, the bankruptcy court’s order granting Imperial’s motion to revise its Memorandum, deleting the valuation of the Farr Property and permitting Imperial’s judgment lien to pass through bankruptcy unaffected is AFFIRMED.
. In prohibiting lien stripping in chapter 7 cases, the Supreme Court in
Dewsnup
made no distinction between consensual and non-consensual liens.
Apart from reorganization proceedings, no provision of the pre-Code statute permitted involuntary reduction of the amount of a creditor's lien for any reason other than payment on the debt.... Congress must have enacted the Code with a full understanding of this practice. When Congress amends the bankruptcy laws, it does not write "on a clean slate.” Furthermore, this Court has been reluctant to accept arguments that would interpret the Code, however vague the particular language under consideration might be, to effect a major change in pre-Code practice that is not the subject of at least some discussion in the legislative history. Of course, where the language is unambiguous, silence in the legislative history cannot be controlling. But, given the ambiguity here, to attribute to Congress the intention to grant a debtor the broad new remedy against allowed claims to the extent that they become "unsecured” for purposes of § 506(a) without the new remedy’s being mentioned somewhere in the Code itself or in the annals of Congress is not plausible, in our view, and is contrary to basic bankruptcy principles.
Id.
at 418-20,
Notes
.Unless otherwise indicated, all chapter and section references are to the unamended Bankruptcy Code, 11 U.S.C. §§ 101-1330, in effect when this case was filed, and prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA”). Rule references are to the Federal Rules of Bankruptcy Procedure (Fed. R. Bankr.P.), Rules 1001-9036.
.The Manning House bankruptcy case was later transferred to the United States Bankruptcy Court, District of Arizona, Phoenix Division.
. Because a homestead exemption was not claimed in the Farr Property, Debtors have not alleged that Imperial's nonconsensual judgment lien should be avoided under § 522(f)(1) to the extent that it impairs an exemption to which they are entitled under § 522(b).
. Section 506 provides, in pertinent part:
(a) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor's interest or the amount so subject to set off is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest....
(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless—
(1) such claim was disallowed only under section 502(b)(5) or 502(e) of this title; or
(2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under section 501 of this title.
11 U.S.C. § 506(a) & (d).
. The term "strip down” is used where the inferior mortgage is partially secured whereas "strip off” is used where the junior mortgage is totally unsecured.
In re. Fitzmaurice,
. The Ninth Circuit later observed in Enewal-l-y v. Washington Mut. Bank (In re Enewally):
The rationales advanced in the Dewsnup opinion for prohibiting lien stripping in Chapter 7 bankruptcies, however, have little relevance in the context of rehabilitative bankruptcy proceedings under Chapters 11, 12 and 13, where lien stripping is expresslyand broadly permitted, subject only to very minor qualifications. The legislative history of the Code makes clear that lien stripping is permitted in the reorganization chapters. 368 F.3d 1165 , 1170 (9th Cir.2004), citing Bartee v. Tara Colony Homeowners Ass'n (In re Bartee),212 F.3d 277 , 291 n. 21 (5th Cir. 2000) (quoting Jane Kaufman Winn, Lien Stripping After Nobleman, 27 Loy. L.A. L. Rev. 541, 554-55 (1994)).
. Indeed, the
Smith
court observed that "[t]he precedent in the Western District is to apply the
Dewsnup
holding to both consensual and non-consensual liens.”