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IN RE THOMPSON, (B.A.P. 2nd Cir. 1998)
Summary of Opinion: Green Tree Credit Corporation v. Sharon Thompson (BAP No. 97-50035)
Factual and Procedural Background
In January 1996 Debtor Sharon Thompson purchased a mobile home and financed $13,111.50 of the purchase through Green Tree Credit Corporation under a "Manufactured Home Promissory Note, Security Agreement and Disclosure Statement." The written agreement expressly provided that the manufactured home "is and shall remain personal property and is not and shall not become a fixture or part of the real property unless you consent in writing and state law permits a contrary classification." Green Tree filed a UCC-1 financing statement in February 1996 in the Oswego County Clerk's office.
Debtor defaulted after making one payment and Green Tree initiated a replevin action in state court. Before repossession occurred, Debtor filed a Chapter 13 petition on October 31, 1996. Debtor listed no real property and valued the mobile home at $10,000 on her schedules; she claimed a homestead exemption for a "mobile home" under New York CPLR § 5206(a). Green Tree's proof of claim asserted a larger balance.
Debtor proposed a Chapter 13 plan to pay Green Tree $12,051.91 over 39 months based on a $10,000 valuation at 9% interest. Green Tree moved for summary judgment in the bankruptcy court seeking a declaration that 11 U.S.C. § 1322(b)(2) barred modification of its claim because the mobile home was real property and the statute prohibits modification of claims "secured only by a security interest in real property that is the debtor's principal residence." The bankruptcy court denied Green Tree's motion, finding the mobile home to be personal property. Green Tree appealed to this Bankruptcy Appellate Panel.
Legal Issues Presented
- Whether the mobile home in which Debtor resides is "real property" or "personal property" under New York law and the parties' agreements.
- If the mobile home is personal property, whether 11 U.S.C. § 1322(b)(2) prohibits modification of Green Tree's secured claim in Debtor's Chapter 13 plan.
Arguments of the Parties
Green Tree's Arguments
- Green Tree contended the mobile home should be treated as real property as a matter of law, relying heavily on the 1980 amendment to New York's homestead exemption statute (CPLR § 5206) which added "a mobile home" to the list of exempt principal residences and whose caption refers to "Real Property Exempt..."
- It argued that the amendment's purpose was to distinguish mobile homes used as principal residences (treated as real property) from those not so used, and that policy considerations underlying homestead protection support treating occupied mobile homes as real property for similar protection in bankruptcy.
- Green Tree also pointed to New York tax law (N.Y. Real Prop. Tax Law § 102(12)(g)) which treats mobile homes as real property, as support for its position.
Debtor's Arguments
- Debtor argued the 1980 amendment to CPLR § 5206 simply extended homestead exemption benefits to mobile homes used as residences but did not, and was not intended to, reclassify mobile homes as real property under state law.
- Debtor relied on the explicit contractual provision in the promissory/security agreement in which Green Tree agreed the manufactured home "is and shall remain personal property" and that Green Tree limited any contrary classification absent its written consent and state law permitting such classification.
- Debtor emphasized Green Tree's own conduct — the lender initiated a personal property replevin action rather than a real property foreclosure — as evidence that Green Tree treated the mobile home as personal property.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| In Re Rossi, 86 B.R. 220 (9th Cir. BAP 1988) | Cited for the standard of appellate review: that a lower court's grant or denial of summary judgment is reviewable de novo. | The Panel relied on In Re Rossi to support applying de novo review to the bankruptcy court's denial of summary judgment. |
| In Re Maxwell Newspapers, Inc., 981 F.2d 85 (2d Cir. 1992) | Cited for the same de novo standard on review of summary judgment decisions. | The Panel cited Maxwell Newspapers to corroborate that summary judgment rulings are reviewed de novo by the appellate tribunal. |
| Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) | Cited for the summary judgment standard from Fed. R. Civ. P. 56(c): genuine issue of material fact and drawing all inferences for the non-moving party. | The Panel applied the Anderson standard to conclude that summary judgment was properly denied below because factual inferences must favor the non-moving party. |
| Butner v. United States, 440 U.S. 48 (1979) | Cited for the principle that property interests are created and defined by state law. | The Panel applied Butner to justify determining the nature (realty vs. personalty) of the mobile home under New York law and the parties' agreement. |
Court's Reasoning and Analysis
The Panel's analysis proceeded in several steps that tracked the bankruptcy court's reasoning and the statutory text:
- Standard of review and summary judgment principles: The Panel stated it reviews the bankruptcy court's denial of summary judgment de novo (citing In Re Rossi and In Re Maxwell Newspapers) and applied the Anderson standard that summary judgment is proper only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. All factual inferences must be drawn in favor of the non-moving party. On that basis, the Panel agreed that summary judgment was properly denied below.
- Determination of the mobile home's character under state law and parties' agreement: Relying on Butner's teaching that property interests are defined by state law, the Panel examined New York law and the parties' contract. The security agreement unambiguously declared the manufactured home to "remain personal property" unless Green Tree consented otherwise in writing and state law permitted reclassification. The bankruptcy court had found, and the Panel agreed, that CPLR § 5206's inclusion of "a mobile home" in a homestead exemption did not demonstrate legislative intent to reclassify mobile homes as real property for all purposes. The court noted an analogy: CPLR § 5206(a)(2) exempts cooperative shares even though shares are not "real property" in the conceptual sense. Thus the 1980 amendment's purpose was to extend homestead exemption benefits to residences that are mobile homes, not to alter the underlying characterization under property law.
- Additional factual supports: The Panel noted two further factual bases supporting the characterization of this particular mobile home as personal property under New York law and the parties' dealings: (a) the explicit contractual clause classifying the manufactured home as personalty, and (b) the fact that Debtor moved the mobile home during the bankruptcy proceedings — an act consistent with personalty rather than realty.
- Statutory interpretation of 11 U.S.C. § 1322(b)(2): The Panel parsed the plain language of § 1322(b)(2), which prohibits modification of the rights of holders of secured claims "other than a claim secured only by a security interest in real property that is the debtor's principal residence." The Panel applied the interpretive maxim expressio unius est exclusio alterius (the mention of one thing excludes others) to conclude that Congress explicitly protected only creditors with claims secured only by real property that is the debtor's principal residence. Because the statute is narrowly drawn, the Panel would not expand the protected class to include creditors whose security is not "only" in real property.
- Comparison with the bankruptcy exemption statute: The Panel contrasted § 1322(b)(2) with § 522(d)(1), which explicitly provides for an exemption for "real or personal property" used as a residence. The inclusion of "or personal property" in § 522(d)(1) — and the absence of such language in § 1322(b)(2) — supported the Panel's inference that Congress knew how to include personal-property residences when it intended to do so, and did not do so in § 1322(b)(2).
- Conclusion of analysis: Given (i) the parties' contract designating the manufactured home as personal property, (ii) the bankruptcy court's factual finding (supported by the record) that the mobile home was moved, (iii) New York law as interpreted by the bankruptcy court and affirmed here, and (iv) the plain statutory language of § 1322(b)(2), the Panel concluded Green Tree's security interest was not of the narrow, real-property-only kind that § 1322(b)(2) protects from modification.
Holding and Implications
ORDER AFFIRMED.
Holding (core ruling): The Panel held that, under the circumstances presented and New York law as applied here, Debtor's mobile (manufactured) home is personal property, not real property. Accordingly, 11 U.S.C. § 1322(b)(2), which protects the rights of holders of claims "secured only by a security interest in real property that is the debtor's principal residence," does not protect Green Tree's claim in this case.
Immediate implications for the parties: Because Green Tree's security interest does not fit within the narrow statutory subset protected by § 1322(b)(2), Green Tree's claim may be modified in Debtor's Chapter 13 plan (i.e., the debtor may "cram down" the secured portion to the value of the collateral to the extent permitted by bankruptcy law). The Panel affirmed the bankruptcy court's denial of Green Tree's motion for summary judgment and its finding that the mobile home is personalty.
Broader implications: The opinion emphasizes a strict textual reading of § 1322(b)(2) and a reliance on state-law characterization of property rights (per Butner). It does not announce a broader federal rule reclassifying all mobile homes; rather, it affirms that classification depends on the particular facts, contract terms, and applicable state law, and that Congress's omission of explicit "personal property" language from § 1322(b)(2) indicates a deliberate narrowing of the class of protected claims.
CONRAD, Bankruptcy Judge.
Green Tree appeals from an order of Bankruptcy Judge Gerling that denied its motion for summary judgment which claimed Debtor could not modify the rights of Green Tree under § 1322(b)(2) of the Bankruptcy Code. The bankruptcy court found that Debtor's mobile home is personalty and denied Green Tree's motion, holding that § 1322(b)(2) applies only to realty. We must decide whether the mobile home is realty or personalty, and, if personalty, whether § 1322(b)(2) bars modification of Green Tree's rights in Debtor's homestead. For the reasons set forth below, we hold that Debtor's mobile home is personal property, both by contract and by statute. Section 1322(b)(2) prohibits modification of liens secured only by real property. Our ruling is a recognition of the Law of Impenetrability which states that it is impossible for more than one body to occupy the same place at the same time. Rather, each body forces the other into at least a trifle different environment, to which it must exactly conform. The Universal Panacea, N.D. Sickels, 1911. T.S. Eliot made the same observation in different words: "Each thing is what it is, and not some other thing." The mobile home is personalty, not realty, and § 1322(b)(2) applies only to realty. Accordingly, we affirm.
This Bankruptcy Appellate Panel, with the consent of the parties, has jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy judges within this circuit. 28 U.S.C. § 158(a), (b)(1). Because Green Tree did not timely opt to have the appeal heard by the District Court for the Northern District of New York, it is deemed to have consented. 2nd Cir. BAP L.R. 8001.1(a)(i).
All code references in this opinion are to Title 11 of the United States Code, the Bankruptcy Code.
FACTS
In January, 1996, Debtor signed a Manufactured Home Promissory Note, Security Agreement and Disclosure Statement. Under this Agreement, Debtor financed $13,111.50 of the purchase price of a mobile home with Green Tree and agreed to make monthly payments of $151.09 for 180 months, beginning in March of 1996. Paragraph 9 of the Agreement states:
I agree that regardless of how my Manufactured Home is attached to the real property and regardless of how your security interest in my Manufactured Home is perfected and regardless of whether an affidavit of affixture (or other similar instrument identifying the property as a fixture) has been recorded, my Manufactured Home is and shall remain personal property and is not and shall not become a fixture or part of the real property unless you consent in writing and state law permits a contrary classification. I agree to pay any and all personal property taxes assessed against my Manufactured Home . . .
Green Tree filed a UCC-1 with respect to the mobile home in February, 1996 in the Oswego County Clerk's office.
In April, 1996, after making only one payment on the mobile home, Debtor defaulted on her obligations to Green Tree. Green Tree then filed a replevin complaint. In July, the state court issued an Order to Show Cause why Green Tree should not be entitled to a replevin judgment and an order of seizure of the mobile home. While we have no record of what took place at the state court show cause hearing, we do know that before Green Tree could take possession of the collateral, Debtor filed her Chapter 13 bankruptcy petition on October 31, 1996.
Debtor listed no real property on her schedules. Her personal property included the mobile home that she valued at $10,000. Debtor claimed an exemption in the mobile home under § 5206(a) of the New York Civil Practice Law Rules (CPLR), which states:
The exact value of the mobile home is the subject of a dispute that is not before us today.
(a) Exemption of homestead. Property of one of the following types . . ., owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment . . .:
1. a lot of land with a dwelling thereon,
2. shares of stock in a cooperative apartment corporation
3. units of a condominium apartment, or
4. a mobile home.
CPLR § 5206 (McKinney's 1978 Supp. 1997). The above statute is entitled "Real Property Exempt from the Application to the Satisfaction of Money Judgments." The fourth type of property, "a mobile home," was added to the statute in 1980.
It is Debtor's proposed Chapter 13 plan that brings us together. Debtor proposes to pay Green Tree a total of $12,051.91 over 39 months, based on a claim of $10,000 (the stated value of the mobile home) at 9% per annum. Green Tree's proof of claim shows that it is owed $14,756.88. Not only does Green Tree contend that the mobile home is worth more than Debtor claims, it also contends that in any event, Debtor may not "cram down" its claim to the value of the collateral due to the prohibition set forth in § 1322(b)(2). This section provides that a chapter 13 plan may "modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence." 11 U.S.C. § 1322(b)(2) [emphasis added].
"Cram down" is bankruptcy jargon that describes what a debtor can do to a creditor in a plan of reorganization. It reduces an undersecured creditor's secured claim to the value of its collateral.
Whether Debtor's mobile home is "real property" within the meaning of § 1322(b)(2) was the issue brought before Judge Gerling by Green Tree's motion for summary judgment. Judge Gerling denied Green Tree's motion for summary judgment, which sought a declaration that § 1322(b)(2) applies to Debtor and that Green Tree's claim may not be modified in Debtor's chapter 13 plan of reorganization.
ARGUMENTS OF THE PARTIES
Green Tree argued below that Debtor's mobile home is real property as a matter of law. It put much emphasis on the 1980 amendment to include mobile homes in New York's homestead exemption law, especially because the title refers to "real property" entitled to exemption. The amendment intended to differentiate between mobile homes used as a principal residence (real property) and mobile homes not occupied as such (personal property), Green Tree reasoned. It also argued that the reasoning behind the law — to treat those who occupy mobile homes as their principal residence the same as those who own the land under their principal residences — should apply in any situation. Finally, Green Tree points out that New York tax law treats mobile homes as real property. N Y Real Prop. Tax Law Sec. 102(12)(g).
Debtor argued, and the bankruptcy court found, that while the intent of the 1980 amendments was to include mobile homes within the homestead exemption, there is no evidence of legislative intent to reclassify them as real property. There is no such statement of legislative intent submitted. Debtor also relied on the above-quoted portion of the contract to demonstrate Green Tree's intent to classify the mobile home as personal property and to restrict Debtor's ability to change that classification. Green Tree imposed that personal property classification, Debtor contended, and it ratified its choice when it initiated a personal property replevin action against Debtor rather than a real property foreclosure.
DISCUSSION
A lower court's decision to grant or deny summary judgment is reviewable by this Court under the de novo standard of review. See In Re Rossi, 86 B.R. 220 (9th Cir. BAP 1988); In Re Maxwell Newspapers, Inc., 981 F.2d 85, 89 (2nd Cir. 1992). Summary judgment is appropriately granted only upon a showing that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). All factual inferences should be drawn in favor of the non-moving party. Id. 477 U.S. at 255, 106 S.Ct. at 2513-14. Summary judgment was appropriately denied here.
The court below found that the legislature, in drafting the 1980 amendment, did not rely heavily on the caption of the statute. After all, shares of stock in a cooperative apartment corporation cannot conceptually be real property, yet are exempt under the same homestead statute. CPLR § 5206(a)(2). The amendment fulfilled its sole purpose of adding mobile homes to the types of principal residences whose owner may enjoy the benefits of a homestead exemption. Thus, we agree with the bankruptcy court that CPLR § 5206 was not designed to reclassify mobile homes as real property. We also agree with the finding that the mobile home in this instance is personal property because of the specific contract terms and because Debtor did indeed move her mobile home during the bankruptcy proceedings. Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979) tells us that property interests are created and defined by state law. Judge Gerling's insightful analysis below found Debtor's home to be personal property according to New York law. We affirm.
What is more important to this Court, however, is the plain meaning and purpose of § 1322(b)(2), the section that brings us here. As noted above, this section prohibits debtors from modifying the rights of creditors who are secured "only by a security interest in real property that is the debtor's principal residence." The section describes a very specific subset of creditors whose rights cannot be modified. We must assume that Congress intended that all other creditors be subject to this section because of its specificity. The plain meaning of § 1322(b)(2) does not allow us to include creditors who are not named in the section.
This is an expression of the maxim of statutory interpretation entitled expressio unis est exclusio alterius, which means that the mention of one thing is the exclusion of another.
In further support of our above holding, we note, as Judge Gerling did, that § 522(d)(1) provides for an exemption for " real or personal property " that a debtor uses as a residence, an explicit acknowledgment that residences can be personal property. On the other hand, no such language is included in § 1322(b)(2). We must assume that Congress, when drafting § 1322(b)(2), was aware of the age old debate over mobile homes and simply chose not to include the "or personal property" language from § 522 in § 1322(b)(2). Section 1322(b)(2) means what it says. Its intent is clear. Green Tree does not fit within the narrow subset of creditors protected by § 1322(b)(2).
CONCLUSION
For the reasons set forth above, we affirm the Order of the bankruptcy court in all respects.
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