21st Mortgage Corporation v. Kayla Glenn , 900 F.3d 187 ( 2018 )

Case: 17-60533 Document: 00514597354 Page: 1 Date Filed: 08/13/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 17-60533 August 13, 2018
Lyle W. Cayce
In the Matter of: KAYLA GLENN, Clerk
Debtor
--------------------------------------
21ST MORTGAGE CORPORATION,
Appellant,
v.
KAYLA GLENN,
Appellee.
Appeal from the United States District Court
for the Northern District of Mississippi
Before ELROD, COSTA, and HO, Circuit Judges.
JENNIFER WALKER ELROD, Circuit Judge:
This case involves whether, under § 506(a) of the Bankruptcy Code,
delivery and setup costs should be included in the valuation of a retained
mobile home in a Chapter 13 proceeding. Both the bankruptcy court and the
district court determined that delivery and setup costs should not be included
in the mobile home’s valuation. We agree and therefore AFFIRM.
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No. 17-60533
I.
The relevant facts of this case are undisputed. 21st Mortgage
Corporation financed Kayla Glenn’s purchase of a used mobile home for the
“base price” of $29,910. This base price apparently included the cost of
delivering the mobile home, as well as the costs of blocking, leveling, and
anchoring required by Mississippi law. 21st Mortgage retains a purchase-
money security interest in the home and has a secured claim of $27,714.
Glenn filed for bankruptcy under Chapter 13. Glenn’s bankruptcy plan
allowed her to retain her mobile home and pay 21st Mortgage the secured value
(plus 5% interest) over the life of the plan. 21st Mortgage objected to the
confirmation of the plan because it disputed the valuation of Glenn’s home.
The dispute is whether $4,000—the alleged cost of necessary delivery and
setup services for Glenn’s mobile home—should be included in the valuation.
Because Glenn has chosen to retain her mobile home, she will not again incur
the costs of delivery and setup.
The bankruptcy court determined that the delivery and setup costs
should not be included in the valuation of Glenn’s mobile home, overruling 21st
Mortgage’s objection to the plan’s confirmation. In light of the text of § 506(a)
and the Supreme Court’s decision in Associates Commercial Corp. v. Rash, 520
U.S. 953 (1997), the bankruptcy court reasoned that including delivery and
setup costs in the valuation of a mobile home that has already been delivered
and set up would be inconsistent with the statutory mandate to consider the
“proposed disposition or use” of the property and with the Supreme Court’s
interpretation of that language.
The district court agreed with the bankruptcy court’s decision in light of
Rash and the text of § 506(a), noting that “[v]irtually all of the courts that have
considered . . . whether to include delivery and setup costs in a mobile home
valuation have reached the same conclusion.” The district court therefore
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affirmed the bankruptcy court’s judgment and dismissed the appeal. 21st
Mortgage timely appealed to our court.
II.
“We review ‘the decision of a district court sitting as an appellate court
in a bankruptcy case by applying the same standards of review to the
bankruptcy court’s findings of fact and conclusions of law as applied by the
district court.’” Endeavor Energy Res., L.P. v. Heritage Consol., L.L.C. (In re
Heritage Consol., L.L.C.), 765 F.3d 507, 510 (5th Cir. 2014) (quoting Clinton
Growers v. Pilgrim’s Pride Corp. (In re Pilgrim’s Pride Corp.), 706 F.3d 636,
640 (5th Cir. 2013)). “Acting as a ‘second review court,’” we review a
bankruptcy court’s legal conclusions de novo and its findings of fact for clear
error. Official Comm. of Unsecured Creditors v. Moeller (In re Age Ref., Inc.),
801 F.3d 530, 538 (5th Cir. 2015) (quoting Fin. Sec. Assurance Inc. v. T-H New
Orleans Ltd. P’ship (In re T-H New Orleans Ltd. P’ship), 116 F.3d 790, 796 (5th
Cir. 1997)); ASARCO, L.L.C. v. Barclays Capital, Inc. (In re ASARCO, L.L.C.),
702 F.3d 250, 257 (5th Cir. 2012). Issues of statutory interpretation are
reviewed de novo. Nowlin v. Peake (In re Nowlin), 576 F.3d 258, 261 (5th Cir.
2009).
III.
The dispute here centers on conflicting interpretations of § 506(a) of the
Bankruptcy Code. 21st Mortgage argues that because § 506(a)(2) requires
calculating replacement value “without deduction for costs of sale or
marketing,” delivery and setup costs should be included in the replacement
value of a mobile home. Moreover, according to 21st Mortgage, a mobile home’s
“replacement value”—defined as “the price a retail merchant would charge for
property of that kind”—necessarily includes delivery and setup costs. 21st
Mortgage also contends that the “proposed disposition or use” standard from
the Supreme Court’s decision in Rash does not apply here because § 506(a)(2)’s
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language was added after Rash and applies regardless of whether a debtor
retains her property. The Manufactured Housing Institute submitted an
amicus brief in support of 21st Mortgage’s argument, asserting that, under
§ 506(a)(2), the price a retail merchant would charge includes delivery and
setup costs for mobile homes.
Glenn did not submit a brief to our court on appeal. We requested the
input of the United States Trustee Program. 1 The United States Trustee for
Region 5 (the Trustee) submitted a brief in support of the district court’s
determination that the valuation of a mobile home should not include delivery
and setup costs. The Trustee first contends that § 506(a)(2)’s definition of
replacement value as “the price a retail merchant would charge for property of
that kind” indicates that courts should “identify the retail price of a mobile
home, not all costs incurred in connection with the purchase of a home.” The
Trustee relies on Rash as directing courts to focus on the proposed disposition
of property in making a valuation. Moreover, the Trustee emphasizes that
§ 506(a)(2)’s exception for “costs of sale or marketing” does not apply here
because delivery and setup costs “are not ‘costs of sale,’ a term which refers to
the seller’s costs of doing business.”
We begin with the text of § 506(a). See Nowlin, 576 F.3d at 261 (“When
interpreting a statute, we begin by examining its language.”); see also BedRoc
Ltd. v. United States, 541 U.S. 176, 183 (2004) (“[O]ur inquiry begins with the
statutory text, and ends there as well if the text is unambiguous.”). It is a
cardinal rule of statutory interpretation that “effect shall be given to every
1 The United States trustees are appointed by the United States Attorney General
and are responsible for, among other things, “supervis[ing] the administration of cases and
trustees in cases under chapter 7, 11, 12, 13, or 15 of title 11.” 28 U.S.C. §§ 581, 586; see
Balser v. Dep’t of Justice, Office of U.S. Tr., 327 F.3d 903, 907 (9th Cir. 2003) (“The Attorney
General of the United States is empowered to appoint United States trustees for each federal
judicial district.”).
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clause and part of a statute.” RadLAX Gateway Hotel, LLC v. Amalgamated
Bank, 566 U.S. 639, 645 (2012) (quoting D. Ginsberg & Sons, Inc. v.
Popkin, 285 U.S. 204, 208 (1932)).
Section 506(a) of the Bankruptcy Code governs the valuation of secured
claims in Chapter 13 bankruptcy proceedings. Section 506(a)(1) states that
the value of a creditor’s claim “shall be determined in light of the purpose of
the valuation and of the proposed disposition or use of such property . . . .”
Section 506(a)(2) states:
If the debtor is an individual in a case under chapter 7 or 13, such
value with respect to personal property securing an allowed claim
shall be determined based on the replacement value of such
property as of the date of the filing of the petition without
deduction for costs of sale or marketing. With respect to property
acquired for personal, family, or household purposes, replacement
value shall mean the price a retail merchant would charge for
property of that kind considering the age and condition of the
property at the time value is determined.
11 U.S.C. § 506(a)(2).
Section 506(a)(2) should not be construed to the exclusion of § 506(a)(1)
when the two clauses can be read consistently. “[I]t is a ‘cardinal rule that a
statute is to be read as a whole,’ in order not to render portions of it inconsistent
or devoid of meaning.” Zayler v. Dep’t of Agric. (In re Supreme Beef Processors,
Inc.), 468 F.3d 248, 253 (5th Cir. 2006) (en banc) (quoting Wash. State Dep’t of
Soc. & Health Servs. v. Guardianship Estate of Keffeler, 537 U.S. 371, 385 n.7
(2003)); see also Antonin Scalia & Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 180 (2012) (Under the harmonious-reading
canon, “[t]he provisions of a text should be interpreted in a way that renders
them compatible, not contradictory.”). We agree with the district court that
there is nothing in § 506(a)(2) that prohibits considering the “proposed
disposition or use” of the property in the valuation.
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Moreover, the Supreme Court in Rash, considering the language of what
is now § 506(a)(1), stated that “the ‘proposed disposition or use’ of the collateral
is of paramount importance to the valuation question.” 520 U.S. at 962. In
Rash, the Supreme Court held that § 506(a) requires a replacement-value
standard when a debtor exercises the “cram down” option provided by
§ 1325(a)(5)(B) of the Code and thus “seeks to retain and use the creditor’s
collateral in a Chapter 13 plan.” 2 Id. at 955–56. While declining to establish
an exclusive method for calculating replacement value, the Court reasoned
that “replacement value, in this context, should not include certain items.” Id.
at 965 n.6. As an example, the Court stated that “where the proper measure
of the replacement value of a vehicle is its retail value, . . . [a] creditor should
not receive portions of the retail price, if any, that reflect the value of items the
debtor does not receive when he retains his vehicle, items such as warranties,
inventory storage, and reconditioning.” Id.
Section 506(a)(1)—and the Supreme Court’s interpretation of its
language in Rash—inform our interpretation of § 506(a)(2). 3 We interpret
2 Rash was decided before the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 (BAPCPA). When Congress amended § 506(a) of the Bankruptcy Code
in 2005, § 506(a) became § 506(a)(1), and a new subsection was added that became
§ 506(a)(2). BAPCPA, Pub. L. No. 109-8, 119 Stat. 23 (2005).
3 21st Mortgage discusses various congressional hearings that addressed the state of
the law after Rash and argues that “[t]he legislative history of § 506(a)(2) and the context in
which it arose” show that Congress intended § 506(a)(2) to overrule footnote six of Rash. 21st
Mortgage’s reliance on legislative history is inapposite here. First, under our circuit’s
caselaw, considering legislative history is permissible only if there is ambiguity. Goswami v.
Am. Collections Enter., Inc., 377 F.3d 488, 492–93 (5th Cir. 2004). The determinations of
most courts that have addressed the issue and the guidance of a leading bankruptcy treatise
indicate that the text of § 506(a)(2) does not conflict with Rash. See In re Scott, 437 B.R. 168,
172–73 (Bankr. D.N.J. 2010) (“Since the enactment of BAPCPA, most courts have interpreted
the first sentence of § 506(a)(2) as codifying the Supreme Court’s decision in Rash.”); 4 Collier
on Bankruptcy ¶ 506.03[6][a] (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2018) (“In
amending section 506(a) in 2005, Congress confirmed certain aspects of the Court’s decision
in Rash, and supplied additional rules governing the valuation process . . . .”). Looking to the
text alone, § 506(a)(2) is not ambiguous, and thus reliance on legislative history is
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§ 506(a)(2) as consistent with § 506(a)(1) and the Supreme Court’s statement
that “the ‘proposed disposition or use’ of the collateral is of paramount
importance to the valuation question.” Id. at 962. 21st Mortgage “should not
receive portions of the retail price . . . that reflect the value of items [Glenn]
does not receive” when she retains her mobile home. See id. at 965 n.6.
Under § 506(a)(2), the valuation of a mobile home is determined by its
replacement value, which is “the price a retail merchant would charge for
property of that kind considering the age and condition of the property at the
time value is determined.” 11 U.S.C. § 506(a)(2). This specific replacement-
value standard accords with § 506(a)(1)’s directive to consider the “proposed
disposition or use” of the property because both statutory requirements focus
on the specific property in question. See In re Allen, No. 16-11029, 2017 WL
685568, at *3 (Bankr. W.D. La. Feb. 17, 2017) (interpreting the phrase “of that
kind” in § 506(a)(2) to mean “a mobile home of that kind that is already fixed
in place and therefore not in need of delivery, setup and connection costs”); In
re Prewitt, 552 B.R. 790, 799 (Bankr. E.D. Tex. 2015) (reasoning that
unwarranted. Moreover, even assuming arguendo that we could consider the legislative
history here, it is far from clear that Congress intended § 506(a)(2) to overrule footnote 6 of
Rash. See In re Breaux, 410 B.R. 236, 241 (Bankr. W.D. La. 2009) (“The legislative history of
section 506(a)(2) is limited and does not provide much guidance on the intended purpose of
section 506(a)(2).”). However, because the text of § 506(a)(2) does not permit us to consider
legislative history, we leave for another day the discussion of whether it is ever appropriate
to look beyond the text to legislative history. Compare Digital Realty Tr., Inc. v. Somers, 138
S. Ct. 767, 783 (2018) (Sotomayor, J., concurring) (“[E]ven when, as here, a statute’s meaning
can clearly be discerned from its text, consulting reliable legislative history can still be
useful . . . .”), with Digital Realty Tr., Inc., 138 S. Ct. at 783–84 (Thomas, J., concurring in
part and concurring in the judgment) (“[W]e are a government of laws, not of men, and are
governed by what Congress enacted rather than by what it intended.” (quoting Lawson v.
FMR LLC, 571 U.S. 429, 459–60 (2014) (Scalia, J., concurring in part and concurring in the
judgment))). Cf. Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 627 n.9 (5th Cir. 2013)
(stating that “[w]e do not rely on this legislative history in our analysis of this case” and
quoting Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546, 568 (2005) (“[T]he
authoritative statement is the statutory text, not the legislative history or any other extrinsic
material.”)).
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§ 506(a)(2) is consistent with Rash because it defines “replacement value of
collateral securing a consumer debt . . . as the price a retail merchant would
charge for the property itself—not for tangential services that will not be
actually performed”). 4 Thus, considering the property at issue under
§ 506(a)(2)’s specific replacement-value standard and in light of the property’s
“proposed disposition or use,” we hold that delivery and setup costs of a mobile
home retained by a debtor must be excluded from the mobile home’s valuation
under § 506(a) of the Bankruptcy Code.
Section 506(a)(2)’s definition of replacement value as including any
“costs of sale or marketing” does not undermine this conclusion. The
mandatory inclusion of costs of sale or marketing does not extend to all costs
tangential to the replacement of a mobile home. While costs of sale or
marketing are repeat costs of doing business, delivery and setup costs for a
retained mobile home are completed service charges “which will not, in reality
be repeated.” In re Prewitt, 552 B.R. at 800; see also In re Thornton, No. 15-
6762-RLM-13, 2016 WL 3092280, at *4 (Bankr. S.D. Ind. May 23, 2016)
(“Courts consistently have held that, under § 506(a)(2), value cannot be
reduced by costs of removal and cannot be increased by costs of set up and
4 Amicus Manufactured Housing Institute states that delivery and setup costs “are
integral parts of the price of a manufactured home when sold by a retailer” in part because
Mississippi law requires that retail dealers be licensed and provide delivery and setup
services and because the quoted price of a mobile home typically includes the costs of delivery
and setup. However, as the bankruptcy court in this case observed, “[a] retailer may be
required to obtain a license in order to sell manufactured homes, but paying for the license
does not increase the value of the mobile homes the retailer will sell . . . .” Moreover, as the
Trustee contends, the value of collateral “should not turn on whether a cost is typically quoted
separately or as part of the base price.” Delivery and setup costs, the Trustee correctly
reasons, “are not part of the ‘value’ of the ‘property’ and they are not implicated by Glenn’s
retention of the home.” Like 21st Mortgage, the Manufactured Housing Institute neglects
the import of the statutory language, which indicates that courts should consider the
particular mobile home at issue. Cf. In re Allen, 2017 WL 685568, at *3 (“The mobile home
is already delivered, set up and connected to the ground and utilities at its current location.
These additional requested costs [of delivery and setup] are superfluous.”).
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delivery.”). As the Trustee correctly emphasizes, delivery and setup costs “are
not costs of sale being deducted from the home’s retail value, but instead [are]
additional costs, like sales taxes and service agreements, separate and apart
from that value.” Thus, § 506(a)(2)’s prohibition on deducting costs of sale or
marketing does not compel including delivery and setup costs. See 4 Collier on
Bankruptcy ¶ 506.03[6][a] (Alan N. Resnick & Henry J. Sommer eds., 16th ed.
2018) (“[S]ection 506(a)(2) directs that value shall be determined without
deduction for costs of sale or marketing, but leaves open the possibility that
the value of other items may be deducted, such as those identified by the Court
in Rash (warranties and other items that the debtor does not receive).”).
Our holding accords with the determinations of all courts that have
addressed the issue. See In re Eaddy, No. CV 15-05744-DD, 2016 WL 745277,
at *7 (Bankr. D.S.C. Feb. 23, 2016) (“Courts have uniformly rejected including
[relocation and setup] costs when determining value pursuant to section
506(a).”) (collecting cases). 21st Mortgage cites no caselaw to the contrary. 5
In light of the statutory requirements and the Supreme Court’s
determination that the “proposed disposition or use” of collateral is crucial to
its valuation, delivery and setup costs must not be included in the valuation of
a retained mobile home under § 506(a) of the Bankruptcy Code.
5 Moreover, 21st Mortgage identifies no circuit caselaw—either from this court or from
a sister circuit—addressing whether delivery and setup costs should be included in a § 506(a)
valuation of a retained mobile home in a Chapter 13 case. Compare In re Heritage Highgate,
Inc., 679 F.3d 132, 135–36, 141 (3d Cir. 2012) (considering how bankruptcy courts should
value collateral retained by a Chapter 11 debtor under § 506(a) and stating that if the
language in Rash about the proposed disposition or use being of paramount importance “is to
be afforded any significance, then, the appropriate standard for valuing collateral must
depend upon what is to be done with the property—whether it is to be liquidated,
surrendered, or retained by the debtor”), with In re Brown, 746 F.3d 1236, 1240–41 (11th Cir.
2014) (holding that § 506(a)(2)’s valuation standard applies when a Chapter 13 debtor
surrenders her vehicle and reasoning that § 506(a)(1)’s “broader ‘disposition or use’ valuation
language” was inapplicable).
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IV.
Accordingly, we AFFIRM the judgment of the district court.
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