*2 pre-petition arrearages est on that are PERRIS, Before RUSSELL and Chapter cured under the debtor’s 13 ASHLAND, Bankruptcy Judges. when neither the note nor the deed of trust provide for such interest. OPINION 2. Fifth Whether the Amendment re- PERRIS, Bankruptcy Judge. quires of such interest. An oversecured creditor a securi- residence,
ty primary debtors’ STANDARD OF REVIEW appeals confirming from an order the debt- questions appeal The issues on of law Chapter proposed 13 to ors’ Plan which thаt are reviewed de novo. In re pre-petition arrearages appel- cure to owed Patterson, B.R. 227 BAP Cir. provide lant which did not for but 1988). arrearages. on the We AFFIRM. DISCUSSION FACTS creditor, 1. an oversecured Whether dispute. The not in relevant facts are whose sole is the debtors’ (the “debtors”) Cynthia Laguna Emilio and residence, is entitled to single family dwelling which is their own post-petition pre-peti- interest on principal residence and which is the sole that are cured un- obligation ap- for the debtors’ to der the debtor’s 13 Plan pellant, Mortgage Corpo- Lehman Shearson when neither the note the deed nor (“Shearson”). ration Shearson is an ov- provide trust such interest. for ersecured creditor. Debtors were six initially monthly payments on their Shearson contends that it behind obli- gation they Chap- post-petition is entitled to interest on the to Shearson when filed a 506(b).2 August pre-petition petition tеr 13 on arrears under section 506(b) determines the interest to be proposed 13 Plan debtors’ part included as of the allowed secured the current to Shearson and of confirmation rather claim as of the date pre-petition arrearages owed to to cure the paid than the interest to be on deferred period over a not to exceed 36 Shearson re payments under the Plan. See In Cor months, provide for but did not (Bankr.D.Or.1984). liss, 43 B.R. arrearages. objected Shearson to con- compels reject us to Shear- This distinction grounds that Plan firmation on the argument son’s that it should be allowed provide for interest on the arrear- failed post-confirmation interest on ar- recover the term of the Plan ages that is due over rearages under section 1325(a)(5).1 Neither the under U.S.C. § pertinent to trust Even if section were note nor the deed of it is arrearages. bankruptcy post-сonfirmation doubtful interest on interest on objection and that it would allow court overruled Shearson’s provision of a contractual confirming the Plan on the absence entered an order have providing for such interest. Courts January 1989. Shearson filed this time- generally disallowed ly appeal. claim, Code, tion, Bankruptcy greater of such than the amount references are to the 1. All seq., 101 et unless otherwise indicated. the holder of such §§ U.S.C. shall be allowed to there claim, claim, reason- interest on such 506(b) provides as follows: 11 U.S.C. Section fees, costs, charges provided for under able secured claim is To the extent that an allowed agreement under which such claim arose. which, by property the value of after (c) any recovery under subsection of this sec- trary impede unless there was a state law would bank- See, ruptcy goals for such fostering
contractual bаsis interest. financial rehabili- Gincastro, (Bankr. 48 B.R. e.g., equitable among tation and distribution D.R.I.1985). argues Shearson that the re creditors. *3 cent decision of United States v. Ron Pair 1325(a)(5) Shearson relies on section Inc., Enterprises, 489 U.S. 109 S.Ct. argument. the prong as second of its Un (1989), implicitly 290 103 L.Ed.2d 1325(a)(5), der section a secured cred disallowing overruled cases interest on ar- accept plan itor does not a and the debtor rearages in the absence of a cоntractual not does surrender the collateral such interest. In basis for creditor, of property the value dis post-petition may interest be allowed on plan no tributed under the must be less oversecured nonconsensual lien claims un provided than the claim allowed secured for 506(b), der the Court section in Ron Pair by plan.5 the Bankrupt 5 on See Collier right to determined that the interest under (15th ed.1988) (hereaf cy 111325.06[4][b][iii] 506(b) not in section is limited to those ”). plan proposes ter “Collier When the stances where a secured creditor has a by an secured claim allowed deferred contractual to such interest. We do provided payments, present may be value Pair, however, that Ron re believe by on proposing interest the al quires of the allowance interest on contract lowed secured claim over the course of the arrearages appropriate an absent period. payment The heart See id. of this provision. of The allowance such dispute 1322(b)(2) is whether sections and 506(b) applying
under section
would involve
(5) alter
possi
or are inconsistent with the
that section
twice—first
determine
ble
of
interest under
allowance
such
section
part
arrearages
of
unsecured
the
1325(a)(5)(B)(ii).
and then to determine that interest
claim3
us,
As relevant to the issue before
sec-
arrearages.
should
on the
Suсh
be allowed
1322(b)(2)
prohibits
the
under section
result
modification
allowance
would
Chapter
rights
plan
in
a
13
of the
of
compounding
the
of interest4 which is
holders
only by
a of “a claim
a security
inconsistent with state law unless there is
secured
contrary agreement.
property
See
real
that is the
Cal.Civ.Code
debtor’s
6
principal
Seidel,
a clear statutory
Absent
man
residence.”
1916-2.
§
Cir.1985).
date,
(9th
F.2d
to allow an oversecured creditor inter
1383
Not-
withstanding
prohibition,
such
con-
est on interest when
allowance is
section
listed,
proof
respect
3.
of claim
addition to
secured
Shearson’s
to each allowed
claim
arrearages
principal,
unpaid
amount
plan—
the
in the
the
$5,516.31.
arrearages apparently consist
(A)
of
accepted
claim has
the holder of such
interest,
charges
unpaid principal and
of
late
plan;
the
portion
attorney’s
and
ages cоnsisting
fees. The
of the arrear-
(B)(i)
plan provides
the
that the holder of
unpaid
principal
of
would be
securing
such claim retain the lien
such
part
the
of the allowed secured claim under
claim;
value,
(ii)
as of the effective
portion of
terms of the loan documents. The
plan,
property
date of the
of
to be distributed
interest,
consisting
unpaid
of
plan
under the
on account of such
is
claim
attorney’s
part
charges
fees
of
late
would
not less
of
than the allowed amount
such
pursuant
claim
to section
the allowed secured
claim; or
506(b).
(C)
property
the debtor surrenders
se-
record,
Although
proof in
curing
is no
such claim to the holder.
year
fact that the default occurred
the second
note,
year
suggests
the missed
provides
of a 30
payments
6.11
Section
that a
U.S.C.
consequently
con-
Chapter
plan may
primarily
part
of
which was made
sist
(2) modify
of holders
secured
claim
the allowed secured
claims,
only by
than a claim secured
a
other
Requiring the
property that
interest in real
is the
arrearages would therefore result
in the
residence,
or of
debtor's
holders of
compounding of interest.
claims,
unsecured
or leave unaffected the
1325(a)(5) provides
11 U.S.C.
holders of
class
claims.
if,
plan
inter
court shall confirm
alia,
courts,
Circuit,
including
a default
Other
the Sixth
to cure
allows
penden-
have held that
of interest on
payments during the
and maintain
permissible
is
section
proceeding
cy
1325(a)(5)
and is not barred
sections
last
claim on which the
(5),
notwithstanding
the fact
pay-
on which the final
due after the date
that the contract
between
does
Plan is due.7 There is a
ment under the
See, e.g.,
provide
for such interest.
authority
on the effect of these
split
Colegrove,
re
771 F.2d
Cir.
possible
entitlement
to in-
sections on
1985).
Colegrove
determined that
under these sections.
terest
is allowable under
sections
courts,
Many
including the Third and
1325(a)(5)
“merely
and such interest
inci
Circuits, have determined
*4
Eleventh
that
”
1322(b)(5)
dent
to the ‘cure’
of section
1322(b)(2)
(5) prohibit
pay
sections
and
impermissible
rather
than an
modification
ment of interest on
to a creditor
agreement.
of the loan
RUSSELL, Bankruptcy
Judge,
ute
state
on interest
is irrelevant
law
under Section
dissenting:
rate
majority
In
regard,
completely
I
Payment of interest on arrear-
dissent.
point clearly
misses the
made
the Su-
ages
required in a
13 case when
preme Court in Ron Pair that the interest
paid
of the
arrearages
are not
full as
506(b)
provided for in
is not the
Section
plan.
11 U.S.C.
effective date
specified
same as the interest
under а con-
1325(a)(5)(B)(ii).
planA
cannot
con-
be
§
majority
tract. The
would allow the debtor
otherwise.
provides
firmed if it
abridge rights
to use
Section
mortgage provides
Whether this
given
506(b)
the creditor under Section
arrearages
interest on
is irrele-
1325(a)(5)(B)(ii).
support
Section
of its
requirement
vant
that such
because
position,
majority
cites several cases
independent
payment made exists
to Ron
Pair.
prior
that were
If
decided
obligation
The
prоvision.
contract
Pair had held that
Ron
the Court in
Sec-
statutory
is a
re-
does require
allowance of
quirement
contained
Section
interest on contract
absent an
1325(a)(5)(B)(ii),
provides
a mort-
which
appropriate
provision, the
effect of
gagee
its
must receive the
value of
Ron Pair
might
the facts of this
case
claim,1
paid
The
if the claim is
in full.
very
However,
well be different.
I am
right
to interest
created
Section
Supreme
bound
Court
right
1325(a)(5)(B)(ii), like the
to interest
in Ron
Pair which
clearly
states
otherwise:
506(b),2
under
is not conditioned on
phrase
relevant
is:
§
the existence of a
interest under
“there
allowed to the
shall be
holder of
applicable bankrupt-
the contract or under
claim,
claim,
such
interest on such
cy law.
fees, costs,
charges
reasonable
agreement
for under the
makes
as-
majority
unwarranted
which such claim arose.”
“Such claim”
sumptions
most of the
are
refers to an oversecured claim. The nat-
apparently that there is some-
interest and
reading
phrase
ural
entitles the
thing
compounding interest.
evil about
holder
claim post-
of an oversecured
However,
dealing
only
here
with the
we
*7
petition
Recovery
post-
interest....
of
in-
on the
and not the
interest
petition
unqualified....
interest
is
The
principal.
paid
terest
rate to be
on the
in the absence
Therefore,
agree-
an
entirely
an
different
issue
the note is
of
ment,
is
postpetition
only
this
that
not now before
Panel.
is
recovery
added
available.
majority
The
cites California Civil Code
Pair,
Ron
at -,
489 U.S.
S.Ct. at
merely provides that
Section 1916-2 which
added).
(emphasis
modification of claim, where the claim is “secured
secured property in real
only by a principal residence.” is the debtor’s argued
It has been Section they modifications even if bars legisla- the secured creditor. The
benefit history of Section was re-
tive Seidel, length in at 752 F.2d
viewed (9th Cir.1985). defining the mean- “modification” the Ninth
ing of word Congress concluded that intended to
Circuit
protect wholly creditors home
mortgages from made modifications negatively impact creditors
debtors However,
rights. Id. at 1394-97. legislative history from the
no indication Congress intended
Section a prohibit modifications that benefit
creditor.
Therefore, 1322(b)(2) clearly no statutory provisions applicable
bar 1325(a)(5)(B)(ii),
of Title such as Section mortgagee’s rights
which “modifies” ability ignore
placing limits on debtor’s money providing
the time value plan.
for a secured creditor’s claim a therefore, would,
I reverse. OF
In re FINANCIAL CORPORATION AMERICA, Debtor. GILL, Chapter 11
David A.
Trustee, Appellant,
v. WITTENBURG,
Davis H. von United Trustee, Appellee.
States
BAP No. CC-89-1823 MeOV.
Bankruptcy No. 88-05405-JW. SA Bankruptcy Appellate Panel States
United the Ninth Circuit.
Argued March and Submitted May
Decided