Greg F. Colbourne v. Ocwen

Case: 12-14722 Date Filed: 10/29/2013 Page: 1 of 7
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
___________________________
No. 12-14722
Non-Argument Calendar
___________________________
D. C. Docket Nos. 6:10-cv-01813-TJC; 6:10-bk-00983-ABB
In Re: GREG F. COLBOURNE,
Debtor.
______________________________
GREG F. COLBOURNE,
Plaintiff-Appellant,
versus
OCWEN,
Defendant-Appellee.
______________________________
Appeal from the United States District Court
for the Middle District of Florida
_______________________________
(October 29, 2013)
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Before MARTIN, FAY, and EDMONDSON, Circuit Judges.
PER CURIAM:
Greg F. Colbourne appeals the district court’s affirmance of the bankruptcy
court’s denial of Colbourne’s motions to value the claims of Deutsche Bank;
claims asserted through Ocwen Loan Servicing, LLC (“Ocwen”). 1 In his motions,
Colbourne sought to cram down Ocwen’s first-priority mortgage liens on two
investment properties, pursuant to 11 U.S.C. §§ 506(a) and 1325(a)(5). No
reversible error has been shown; we affirm.
In August 2009, Colbourne filed a Chapter 7 bankruptcy case in which he
listed both Ocwen claims. Colbourne received a discharge. The Chapter 7 case
was closed as a “no asset” case in December 2009.
Colbourne filed this Chapter 13 bankruptcy case in January 2010. In his
schedules, Colbourne listed Ocwen’s mortgage liens: (1) a first-priority lien in the
amount of $374,000 on Colbourne’s Hopewell Drive property, which property is
valued at $125,000; and (2) a first-priority lien in the amount of $226,800 on
Colbourne’s Grasmere Parkway property, which property is valued at $70,000.
1
On appeal, Colbourne does not challenge the bankruptcy court’s denial of Colbourne’s motion
to value a claim filed by Wells Fargo Dealer Services, f/k/a Wachovia Dealer Services, Inc.
2
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Colbourne then filed motions to value and cram down Ocwen’s claims based on
the current appraised values of the properties, both of which were substantially less
than the amounts outstanding on the mortgages.
The bankruptcy court denied Colbourne’s motions. The bankruptcy court
concluded that, because Colbourne was ineligible to receive a Chapter 13
discharge -- pursuant to 11 U.S.C. § 1328(f)(1)2 -- based on his recent Chapter 7
discharge, he was precluded from cramming down Ocwen’s claims. 3 The district
court affirmed.
Colbourne argues that the bankruptcy court erred in concluding that, because
Colbourne was ineligible to receive a discharge under Chapter 13, he may not cram
down Ocwen’s mortgage liens.
When the district court affirms the bankruptcy court’s order, we review only
the bankruptcy court’s decision on appeal.4 Educ. Credit Mgmt. Corp. v. Mosley,
2
Section 1328(f)(1) provides that “the court shall not grant a discharge of all debts provided for
in the plan or disallowed under section 502, if the debtor has received a discharge . . . in a case
filed under chapter 7 . . . of this title during the 4-year period preceding the date of the order for
relief under this chapter . . . .” 11 U.S.C. § 1328(f)(1).
3
The bankruptcy court later confirmed Colbourne’s Chapter 13 plan. Although the plan
payments to Ocwen were calculated based on the proposed crammed down values, the
bankruptcy court ordered Colbourne to pay all disposable income into the estate until this appeal
was resolved. The bankruptcy court also ordered Colbourne to file a motion to modify the
confirmed plan to pay Ocwen’s claims in full if his appeal was unsuccessful.
4
The district court’s order affirming the bankruptcy court’s denial of Colbourne’s motions is a
final and appealable order. See In re Donovan, 532 F.3d 1134, 1136 (11th Cir. 2008); T&B
Scottdale Contractors v. United States, 866 F.2d 1372, 1375 (11th Cir. 1989). The district court
concluded definitively that Colbourne was not permitted to cram down Ocwen’s claims.
3
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494 F.3d 1320, 1324 (11th Cir. 2007). And we review the bankruptcy court’s legal
conclusions de novo. Hemar Ins. Corp. of Am. v. Cox, 338 F.3d 1238, 1241 (11th
Cir. 2003).
“Chapter 13 debtors enjoy ‘broad power to modify the rights of the holders
of secured claims.’” In re Paschen, 296 F.3d 1203, 1205 (11th Cir. 2002).
“Section 1325(a)(5) is recognized as the source of a Chapter 13 debtor’s authority
to bifurcate secured claims and to ‘strip down’ the value of the claim to an amount
equal to the value of the collateral.” Id. at 1206.
“Section 1325(a)(5) specifies the conditions under which Chapter 13 plans
must address ‘allowed secured claims’ 5 if the plans are to be confirmed . . . .” Id.
at 1205-06. In pertinent part, section 1325(a)(5) requires Chapter 13 plans to
provide that the holder of “each allowed secured claim . . . retain the lien securing
such claim until the earlier of . . . the payment of the underlying debt determined
under nonbankruptcy law; or . . . discharge under section 1328.” 11 U.S.C.
§ 1325(a)(5)(B)(i)(I).
Although the bankruptcy court must continue to oversee the administration of Colbourne’s
bankruptcy estate -- including modification of the confirmed plan in accordance with the district
court’s ruling -- the district court’s order fully resolved the issue and left the bankruptcy court
with no discretion in implementation.
5
The term “allowed secured claim” refers to section 506(a), which provides that “[a]n allowed
claim . . . secured by a lien on property . . . 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.” 11 U.S.C. § 506(a).
4
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Although Ocwen’s claims are undersecured, that Ocwen is a “holder” of two
“allowed secured claims” for purposes of section 1325(a)(5) is undisputed.
Other courts have explained that, when a “creditor’s claim is bifurcated into
a secured component and an unsecured component, [section 1325(a)(5)(B)(i)(I)]
makes clear that the creditor may not be forced to release its lien upon payment of
only the secured component.” In re Lilly, 378 B.R. 232, 235 (Bankr. Ct. C.D. Ill.
2007). Thus, where a debtor is ineligible for a discharge -- as Colbourne was in
this case -- the creditor retains its lien “until the entire amount of the debt,
calculated without regard to the modifications permitted in bankruptcy, is paid.”
Id. at 236.
Absent a discharge, “any modifications to a creditor’s rights imposed in the
plan are not permanent and have no binding effect once the term of the plan ends.”
Id.; see also In re Jarvis, 390 B.R. 600, 605-06 (Bankr. Ct. C.D. Ill. 2008) (“A no-
discharge Chapter 13 case may not . . . result in a permanent modification of a
creditor’s rights where such modification has traditionally only been achieved
through a discharge and where such modification is not binding if a case is
dismissed or converted.”).
Several courts -- including the Middle District of Florida -- have followed
the reasoning in In re Lilly and In re Jarvis in concluding that debtors ineligible for
discharge may not modify a secured creditor’s rights through cram down or strip
5
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off. See, e.g., In re Pierre, 468 B.R. 419, 423-24, n.19 (Bankr. Ct. M.D. Fla. 2012)
(collecting cases and explaining that debtors who are ineligible for Chapter 13
discharge are unable to cram down a partially secured lien on investment
property); In re Judd, 66 Collier Bankr. Cas. 2d (MB) 1620, 6 (Bankr. Ct. M.D.
Fla. 2011) (denying Chapter 13 debtor’s motion to strip off a partially secured
second-priority mortgage lien on an investment property when the debtor was
ineligible for a Chapter 13 discharge).
We are persuaded by the reasoning in these decisions. 6 Thus, because
Colbourne is ineligible for discharge under section 1328, he is unable to modify
permanently Ocwen’s claims through a cram down. See In re Lilly, 378 B.R. at
236.
Colbourne also argues that, although he is ineligible for a Chapter 13
discharge, the Bankruptcy Code does not preclude him from filing for, or from
receiving, Chapter 13 relief. Although Colbourne’s argument may be correct as a
matter of law, the bankruptcy court -- in fact -- made no ruling that Colbourne was
ineligible for filing a Chapter 13 case or that Colbourne was ineligible for all forms
of Chapter 13 relief. Instead, after denying Colbourne’s motions to value, the
6
We acknowledge that courts have approached differently the issue of lien-stripping in “Chapter
20” cases. Because the majority of cases that permit lien-stripping, including each of the cases
cited by Colbourne in his appellate brief, involve the stripping off of wholly unsecured second-
priority liens on principal residences -- not the cram down of undersecured first-priority liens on
investment property -- we see their guidance less applicable to the facts of this appeal.
6
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bankruptcy court confirmed Colbourne’s Chapter 13 plan pending resolution of
this appeal. Thus, although Colbourne is unable to cram down Ocwen’s claims, he
has already filed for (and benefited from) other forms of Chapter 13 relief.
We see no reversible error. Colbourne’s motions were denied properly.
AFFIRMED.
7