In rе: GERALD DALE BURNS and LINDA JANE BURNS, Debtors. ANDREW W. SUHAR, Plaintiff-Appellee, v. GERALD DALE BURNS and LINDA JANE BURNS, Defendants, IMC MORTGAGE COMPANY, Defendant-Appellant.
Nos. 00-3667; 01-4264
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Argued: November 1, 2002. Decided and Filed: March 10, 2003
2003 FED App. 0071P (6th Cir.) | 322 F.3d 421
Appeal from the Bankruptcy Appellate Panel of the Sixth Circuit. No. 98-42868—William T. Bodoh, Bankruptcy Judge. RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206
COUNSEL
ARGUED: Amelia A. Bower, PLUNKETT & COONEY, Columbus, Ohio, for Appellant. Frederic P. Schwieg, Rocky River, Ohio, for Appellee. ON BRIEF: Amelia A. Bower, PLUNKETT & COONEY, Columbus, Ohio, for Appellant. Frederic P. Schwieg, Rocky River, Ohio, for Appellee.
OPINION
KAREN NELSON MOORE, Circuit Judge. Defendant IMC Mortgage Company (“IMC“) appeals from decisions of the Bankruptcy Appellate Panel rejecting IMC‘s attempt to obtain a recovery lien on certain property (Case No. 01-4264) and refusing to assert jurisdiction over an appeal from the bankruptcy court because it was not timely filed (Case No. 00-3667). The Debtors’ mortgage had been avoided, and IMC, the assignee mortgage company, asserted as a defense that it was entitled to a lien on the property under two provisions of the Bankruptcy Code that permit certain creditors to obtain liens on proрerty that a debtor has recovered. First, IMC sought a lien under
Because IMC was not entitled to assert the
I. BACKGROUND
On March 7, 1998, Debtors Linda Jane Burns and Gerald Dale Burns executed a promissory note payable to Defendant Alternative Mortgage Source, Inc. (“AMS“) in the amount of $59,200.00, and executed a mortgage deed giving AMS a mortgage interest in their residence. AMS immediately assigned its interest to IMC Mortgage Company (“IMC“). In September of that year, the Debtors filed for bankruptcy, and on January 8, 1999, the Trustee filеd this adversary proceeding in the United States Bankruptcy Court for the Northern District of Ohio.
According to the complaint, the Trustee sought a declaration that, pursuant to
IMC then asserted its defense thаt notwithstanding the avoidance,
transferees from whom a trustee recovers property under
The bankruptcy court concluded that IMC was not entitled to a lien under
IMC also filed a motion for reconsideration, arguing for the first time that
On January 26, 2000, the bankruptcy court denied IMC‘s motion for reconsideration. The court went beyond its earlier decision in which it had ruled that IMC did not meet the requirements of
applicability to the case at all. Section 550 governs only cases in which the trustee attempts to recover property or the value of property; the trustee in the present case had sought only to declare that his interest in the Debtors’ residence was superior to the interest of AMS and IMC. Accordingly, any effort to import
After this denial of the motion for reconsideration on January 26, IMC‘s notice of аppeal from the January 6
The BAP affirmed the bankruptcy court on the January 6
appealed. The ten-day period in which IMC should have appealed the January 26 judgment expired on February 7, and the twenty-day period that
IMC timely appealed from both decisions, and we have jurisdiction over the аppeals pursuant to
II. CASE NO. 01-4264: THE JANUARY 6 § 550(e) CASE
This case involves two main concepts in bankruptcy law. The first concept is avoidance, through which a trustee is able to nullify a mortgage-interest transfer that in some way diminished the estate. It is uncontroverted here that the Trustee avoided IMC‘s mortgage in the Debtors’ property. The question, however, is what happened to IMC‘s mortgage interest upon avoidance. IMC argues that once the transfer was avoided, the Trustee recovered the interest under
A. Relevant Statutes
Several portions of the bankruptcy code are relevant to this discussion. The analysis begins with
provides for the recovery of property avoided under other sections and, in
(a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from — (1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee.
(b) The trustee may not recover under section (a)(2) of this section frоm — (1) a transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided; or (2) any immediate or mediate good faith transferee of such transferee.
. . .
(e)(1) A good faith transferee from whom the trustee may recover under subsection (a) of this section has a lien on the property recovered to secure the lesser of — (A) the cost, to such transferee, of any improvement made after the transfer, less the amount of any profit realized by or accruing to such transferee from such property; and (B) any increase in the value of such property as a result of such improvement, of the property transferred. (2) In this subsection, “improvement” includes . . . (D) payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee . . . .
to a lien pursuant to
Three other statutes are also relevant. The first is
[The] estate is comprised of all the following property, wherever located and by whomever held: . . . (3) Any interest in property that the trustee recovers under section . . . 550 . . . of this title. (4) Any interest in property preserved for the benefit of or transferred to the estate under section . . . 551 of this title.
The trustee shall have . . . the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by . . . (3) a bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists.
Any transfer avoided under section 522, 544, 545, 547, 548, 549, or 724(a) of this title, or any lien void under section 506(d) of this title, is preserved for the benefit of the estate but only with respect to property of the estate.
B. Avoidance and Recovery
The Trustee properly avoided the mortgage for being improperly witnessed. Ohio Revised Code § 5301.234, which prior to its repeal provided recorded mortgages an irrebuttable presumption of validity, does not govern this case, which involves a bankruptcy petition filed before the short-lived § 5301.234 became effective.2 As we held in Zaptocky v. Chase Manhattan Bank (In re Zaptocky), 250 F.3d 1020, 1027-28 (6th Cir. 2001), another case that involved a bankruptcy petition filed before § 5301.234 went into effect,
Accordingly, we must determine whether IMC is entitled to a lien interest in the property pursuant to
First, avoidance and recovery are distinct concepts and processes. This is clear from both the statute itself and from its legislative history. Avoidance and recovery are addressed in two separate sections of the code,
concepts of avoiding a transfer and recovering from the transferee.” H.R. Rep. No. 95-595, at 375 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 6331. The fact that avoidance and recovery are distinct does not mean that avoidance cannot trigger recovery, but it does suggest that avoidance need not always trigger recovery.
Second, the fact that avoidance is a necessary precondition to
Even assuming that the defective mortgage created a рroperty interest under Ohio law, an assumption we implicitly made in Zaptocky, see In re Zaptocky, 250 F.3d at 1024, avoidance of that interest was an adequate remedy. The
statutory scheme provided that, immediately upon avoidance of the transfer, IMC‘s interest in the Debtors’ property returned to the estate without need for resort to the recovery process. First, the transfer was avoided under
As a textual and conceptual matter, there are strong reasons to affirm the BAP‘s conclusion that
We recognize that under our interpretation, many cases will turn on whether а particular creditor‘s interest in the debtor‘s property, prior to that interest being avoided, was possessory or nonpossessory. In the case of creditors who have possessory interests in the debtor‘s property, the trustee will generally have to pursue recovery, because mere avoidance would not bring the property back into the estate‘s possession. In contrast, in cases involving creditors such as IMC who have nonpossessory interests in the debtоr‘s property, trustees will generally not have to seek recovery, and the creditors will not be entitled to any of the
Although critics argue that this distinction between the holders of possessory and nonpossessory interests does not
itself appear in the code, see Black & White Cattle Co. v. Granada Cattle Servs., Inc. (In re Black & White Cattle Co.), 783 F.2d 1454, 1462 (9th Cir. 1986) (“[T]here is nothing in the statute or case law to suggest that Congress meant [to protect] only transferees in possession.“), and leaves “a gaping hole . . . in the theory of defense to avoidance powers,” David Gray Carlson, Bankruptcy‘s Organizing Principle, 26 Fla. St. U. L. Rev. 549, 609 (1999), the distinction that results from our interpretation is not as baseless as its proponents contend. First, although the In re Black & White Cattle Co. court is correct that the code itself does not explicitly refer to a possessory-nonpossessory
Regardless of whether the possessory-nonpossessory distinction is one that Congress intended, it is one that
Congress made, and this is not one of those “‘rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.‘” United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989) (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571 (1982)). The Supreme Court has made clear that in bankruptcy cases, we are to adhere closely to the text of the statute, see Toibb v. Radloff, 501 U.S. 157, 162 (1991), and the Bankruptcy Code‘s text and structure support our conclusions that recovery does not automatically follow frоm avoidance, and that where there is no recovery under
III. CASE NO. 00-3667: THE JANUARY 26 § 550(b) CASE
IMC also appeals the BAP‘s conclusion that the panel lacked jurisdiction to consider IMC‘s appeal from the January 26 order denying its motion for reconsideration. In order for the BAP to have had jurisdiction over IMC‘s appeal of the January 26 order on its motion for recоnsideration, IMC needed to timely appeal that order. The determination of whether IMC timely appealed is governed by
(a) Ten-day period. The notice of appeal shall be filed with the clerk within 10 days of the date of the entry of the judgment, order, or decree appealed from.
. . . .
(c) Extension of time for appeal. (1) The bankruptcy judge may extend the time for filing the notice of appeal by any party, unless the judgment, order, or decree appеaled from [is under certain statutes not at issue here]. (2) A request to extend the time for filing a notice of appeal must be made by written motion filed before the
time for filing a notice of appeal has expired, except that such a motion filed not later than 20 days after the expiration of the
time for filing a notice of appeal may be granted upon a showing of excusable neglect. An extension of time for filing a notice of appeal may not exceed 20 days from the expiration of the time for filing a notice of appeal otherwise prescribed by this rule or 10 days from the date of entry of the order granting the motion, whichever is later.
Rule 8002 applies equally to amended notices of appeal as well as notices of appeal. Like Appellate Rule 4, the text of which refers only to notices of appeal but which we have held to govern amended notices as well,4 Bankruptcy Rule 8002‘s time limit for filing notices of appeal would have little effect if parties could circumvent it by amending an earlier notice to add parties or claims long after the proper period had expired. See, e.g., F.P.P. Enters. v. United States, 830 F.2d 114, 118 (8th Cir. 1987) (refusing to permit appellant to amend notice of appeal to add additional appellant after oral argument had occurred).
Under Rule 8002, IMC‘s attempt to amend its notice of appeal was not timely. The motion for reconsideration was denied on January 26, 2000, and Rule 8002 required that IMC
either have filed a notice of appeal within 10 days, which would have been by February 7, or have filed a motion to extend the time for such a notice. Rule 8002 requires that such a motion to extend the time have been filed by February 7 or, upon a showing of excusable neglect, within twenty days of that datе, which would have been February 28.
Because IMC did not file its motion to amend the notice of appeal within the ten-day period of Rule 8002, or within the subsequent twenty-day period during which such a motion could have been granted upon a showing of excusable neglect, we affirm the decision dismissing the appeal in Case No. 00-3667.
IV. CONCLUSION
Because IMC was not entitled to a lien under
