In the Matter of: Elray RASH and Jean Rash, Debtors. ASSOCIATES COMMERCIAL CORPORATION, Appellant, v. Elray RASH and Jean Rash, Appellees.
No. 93-5396
United States Court of Appeals, Fifth Circuit.
Aug. 16, 1995.
ON PETITION FOR REHEARING Aug. 16, 1995
61 F.3d 685
Before REYNALDO G. GARZA, SMITH, and PARKER, Circuit Judges.
Because we find that Vuong has failed to establish the requisite prejudice, we need not examine the reasonableness prong. Vuong argues that had his attorneys objected, the instruction on parole would not have been submitted to the jury. Vuong, therefore, must prove that the instruction on parole was prejudicial as defined by Fretwell.
As we have noted, a jury may not consider parole possibilities when rendering its punishment decision. Vuong has not proven that the jury did take parole possibilities into account. Moreover, there is no dispute that the judge informed the jury that it was not to consider parole. Such limiting instructions generally are sufficient, as juries are presumed to follow their instructions. See Zafiro v. United States, --- U.S. ---, ---, 113 S.Ct. 933, 939, 122 L.Ed.2d 317 (1993).
The judgment is AFFIRMED.
Ben L. Aderholt, Tina Snelling, Hirsch, Glover, Robinson & Sheiness, Houston, TX, for appellant.
Rebecca A. Leigh, Houston, TX, amicus curiae, for M.B.C.C.
Pamela A. Bassel, Dabney D. Bassel, Law, Snakard & Gambill, Fort Worth, TX, Erin B. Shank, Nationsbank of Texas, N.A., Dallas, TX, amicus curiae, for Nationsbank.
John J. Durkay, Mehaffy & Weber, Beaumont, TX, Robert E. Barron, Nederland, TX, for appellee.
Norma L. Hammes, James J. Gold, San Jose, CA, amicus curiae, for Nat. Ass‘n. of Consumer Bankruptcy Attys.
ON PETITION FOR REHEARING
JERRY E. SMITH, Circuit Judge:
The petition for panel rehearing is DENIED. The opinion, 31 F.3d 325 (5th Cir. 1994), is modified to delete, as dicta, the last portion of part II, beginning with the incomplete paragraph that begins on 31 F.3d at 329, through the end of part II, id. at 331.
In their suggestion for rehearing en banc, which remains pending despite our denial of panel rehearing, the debtors assail this court‘s holding that retail or replacement value is to be used to value collateral that a debtor proposes to retain in a chapter 13 plan. Our opinion, id. at 329, speaks for itself on that issue. We wish now to note, however, that since this case was decided, the law of the various circuits has moved decidedly in the direction we have proposed.
For example, in Metrobank v. Trimble (In re Trimble), 50 F.3d 530 (8th Cir.1995), the court specifically approved of our approach as follows:
We adopt the reasoning of the Fifth Circuit in In re Rash, and other courts that have focused on the second sentence
of section 506(a), and we now conclude that the value of Metrobank‘s lien interest is properly based on the retail value of the collateral without deduction for costs of sale. We agree with the Fifth Circuit that the retail valuation method is the only method that gives full effect to the entire language of § 506(a) .... Under the wholesale valuation method, the creditor‘s interest would always be valued at the amount the creditor would receive upon disposition of the collateral, regardless of the purpose of the valuation or of the proposed disposition or use of the property. The wholesale method would not be affected by whether the debtor intended to release the property or intended, instead, to retain and use the property. Rather, where a debtor intends to retain and use the collateral, the purpose of the valuation is to determine the amount an unsecured creditor will be paid for the debtor‘s continued possession and use of the collateral, not to determine the amount such creditor would receive if it hypothetically had to repossess and sell the collateral. Such an interpretation ignores the express dictates of section 506(a).
Id. at 531-32 (emphasis added, quotation from Rash, 31 F.3d at 329, omitted). Thus, the Eighth Circuit agrees with our conclusion that retail value is the proper measure.
A few days after Trimble was decided, the First Circuit followed suit, in Winthrop Old Farm Nurseries v. New Bedford Inst. for Sav. (In re Winthrop Old Farm Nurseries), 50 F.3d 72 (1st Cir.1995). Like the Eighth Circuit, the Winthrop court gave meaning to the second sentence of
... A number of courts ..., including four Circuit Courts, have adhered to this clear expression of congressional intent and declined to value collateral that a debtor proposes to retain based on a hypothetical foreclosure sale. These courts reason that because the reorganizing debtor proposes to retain and use the collateral, it should not be valued as if it were being liquidated; rather, courts should value the collateral “in light of” the debtor‘s proposal to retain it and ascribe to it its going-concern or fair market value with no deduction for hypothetical costs of sale.1
We are persuaded that [this] line of cases2 correctly interprets the statute[, ] gives meaning to both sentences of
§ 506(a) , and enables bankruptcy courts to exercise the flexibility Congress intended. By retaining collateral, a Chapter 11 debtor is ensuring that the very event Winthrop proposes to use to value the property — foreclosure sale — will not take place. At the same time, the debtor should not be heard to argue that, in valuing the collateral, the court should disregard the very event that, according to the debtor‘s plan, will take place — namely, the debtor‘s use of the collateral to generate an income stream. In ordinary circumstances the present value of the income stream would be equal to the collateral‘s fair market value. Under such circumstances, a court remains faithful to the dictates of§ 506(a) by valuing the creditor‘s interest in the collateral in light of the proposed post-bankruptcy reality: no foreclosure sale and economic benefit for the debtor derived from the collateral equal to or greater than its fair market value. Our approach allows the bankruptcy court, using its informed discretion and applying historic principles of equity, to adopt in eachcase the valuation method that is fairest given the prevailing circumstances. The [contrary] interpretation ... renders the second sentence of
§ 506(a) virtually meaningless....
Id. at 74-76 (second emphasis added).
Finally, in Huntington Nat‘l Bank v. Pees (In re McClurkin), 31 F.3d 401 (6th Cir.1994), decided the week Rash was argued but before it was issued, the court focused, as we did in Rash, on the second sentence of
It is so ORDERED.
ROBERT M. PARKER, Circuit Judge, dissenting:
I respectfully dissent from the panel‘s denial of the petition for rehearing. I would grant the petition because I believe the original panel opinion was in error.
I
Because Associates Commercial Corp. (ACC) refused to accept Rash‘s Chapter 13 plan, Rash was compelled to invoke the provisions of
[T]he court shall confirm a plan if —
(5) with respect to each allowed secured claim provided for by the plan —
(A) the holder of such claim has accepted the plan;
(B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and
(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim; or
(C) the debtor surrenders the property securing such claim to such holder....
Since Rash proposed to retain the truck, he had only one alternative under
II
Under
Given the purpose of this valuation, it is appropriate to value the collateral from the creditor‘s perspective.2 In this case, the record supports the bankruptcy court‘s use of wholesale value. ACC is not a retail dealer in Kenworth trucks. Rather, ACC is merely the assignee of the security agreement and loan documents. Accordingly, the amount ACC would realize from a resale would likely be the truck‘s wholesale value from sale to a retail dealer. ACC presented no evidence that it had the ability to dispose of the truck at its retail value.
Furthermore, assigning retail value to the collateral simply ignores the inherent risk that the creditor took when it made or obtained the loan — the risk that if the debtor defaulted, the creditor might have to repossess the collateral and sell it at less than retail value. This is a risk commercial lenders are well-equipped to address on the front end of the lending process by requiring an adequate down-payment or credit insurance. By properly evaluating the value of the collateral at the time of making or obtaining a loan, a lender is fully capable of protecting against potential loss in case of default. Thus, allowing a secured claim in an amount greater than the creditor‘s potential recovery on repossession and sale is granting the creditor more protection than that for which it bargained.
III
The panel opinion correctly focuses on
An allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor‘s interest in the estate‘s interest in such property ... and is an unsecured claim to the extent that the value of such creditor‘s interest ... 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.
The panel opinion holds that, read as a whole, this section requires that the collateral be valued from the debtor‘s perspective. The opinion first looks to the second sentence of
Next, the panel opinion calls on the “disposition or use” clause in the second sentence of
The panel opinion also emphasizes the “estate‘s interest in such property” language in the first sentence of
As Collier on Bankruptcy explains, the “estate‘s interest” language is designed to prompt a determination of “whether the estate actually has an interest in the collateral,” and to prompt an examination of the nature of the estate‘s interest in the collateral. See 3 Lawrence P. King, Collier on Bankruptcy para. 506.04, at 506-17 to -19 (15th ed. 1994). As Collier observes:
The interest of the estate in the subject property may be of a nature other than an ownership interest, such as a leasehold interest. Alternatively, the debtor may not be the sole owner. In such an instance the value of the estate‘s interest in the subject property may be substantially different than, and may even be determined appropriately by means of a different method than, the value of the property itself.
Id. at 506-18. Thus, the key purpose of the “in the estate‘s interest” language is to point out that the value of the estate‘s interest may differ from the value of the collateral. The language is not the critical focus of the valuation question, however, for as
This conclusion does not mean that retail value is always inappropriate. For example, a secured creditor who is also a retail dealer may be able to resell for retail value. However, this determination is necessarily fact-specific and should be made on a case-by-case basis from the creditor‘s perspective.
IV
As a result of the panel opinion, the secured creditor, ACC, will receive a secured claim valued at retail value, which the panel defines as the amount that the debtor Rash would have to pay to purchase another similar truck. The net effect of the panel‘s holding is that ACC, a nondealer creditor, receives a windfall from Rash‘s bankruptcy in the form of a retail mark-up over what it would have been entitled to receive under state law upon repossession and sale of the collateral. Because I believe this is an incorrect interpretation of the Bankruptcy Code, I would grant the debtor‘s petition for rehearing and reconsider our previous panel opinion.