Bank of New York Mellon v. Watt et al

Filing 31

OPINION AND ORDER. The bankruptcy court's order is VACATED and this case is REMANDED for further proceedings. See formal OPINION AND ORDER. Signed on 4/22/2015 by Chief Judge Ann L. Aiken. (rh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
BANK OF NEW YORK MELLON,

Case No. 3:14-cv-02051-AA
OPINION AND ORDER

Appellant,

v.
NICOLAS LEE WATT & PATRICIA
MOUDY WATT,
Appellees.
Crystal S. Chase
Oren B. Haker
Stoel Rives LLP
900 S.W. 5th Avenue, Suite 2600
Portland, Oregon 97204
Attorneys for appellant
Bank of New York Mellon
Michael D. O'Brien
Michael D. O'Brien & Associates PC
12909 S.W. 68th Parkway, Suite 160
Portland, Oregon 97223
Attorney for appellees
Nicolas and Patricia Watt
Britta E. Warren
Black Helterline, LLP
805 S.W. Broadway, Suite 1900
Portland, Oregon 97205
Attorney for appellees
Meritage Homeowners' Association
C. Anthony Crnic , III
Klatt, Augustine, Sayer, Treinen & Rastede, PC
6th Avenue, Suite 1015
Des Moines, Iowa 50309
Attorney for amicus curiae
American Legal and Financial Network
PAGE 1 - OPINION AND ORDER

AIKEN, Chief Judge:
Bank of New York Mellon, as trustee for certificate holders of
the

CWALT,

Inc.,

alternative

loan

trust

pass-through certificates series 2006-0A21
bankruptcy court's confirmation of Nicolas

2006-0A21,
("BNYM"),

mortgage

appeals the

and Patricia Watt's

("debtors") Chapter 13 plan. For the reasons set forth below, the
bankruptcy court's decision is vacated and this case is remanded
for further proceedings.
BACKGROUND

In November 2006, debtors took out a loan, in the amount of
$296,940,

to

("Property"),

purchase

a

second

residence

in

Newport,

Oregon

which is one of eighteen townhouse units within a

planned community that is subject to a series of covenants and
restrictions

enforced

by

Meritage

Homeowners'

Association

("Meritage"). Excerpt of Record ("ER") 19-48, 70. Pursuant to this
transaction, debtors executed a promissory note ("Note") in favor
of Mortgage Trust,

Inc.

("MTI").

ER 19-23,

39-48.

The Note was

secured by a deed of trust ("DOT"), which lists MTI as the lender,
Western Title and Escrow as the trustee, and Mortgage Electronic
Registration Systems, Inc.

("MERS"), as the beneficiary. ER 25-38.

The DOT was duly recorded in Lincoln County, Oregon. ER 25.
In April 2012,

MERS assigned MTI's interest in the DOT to

BNYM. ER 50. This assignment was recorded in the official records
of Lincoln County.

Id. At some unspecified time in 2012, debtors

stopped making the requisite loan repayments, thereby materially
defaulting

under

the

Note

PAGE 2 - OPINION AND ORDER

and

DOT,

such

that

BNYM

commenced

preliminary foreclosure proceedings.

ER 88-89,

122.

Coterminous

with or subsequent to that default, debtors incurred a significant
amount of assessments leveraged by Meritage as a result of their
failure to repair defective windows and pay homeowners' association
("HOA")

fees. ER 70-72.

On March 12, 2014, debtors filed a petition for relief under
Chapter 13 of the Bankruptcy Code. 1 ER 122.

By operation of law,

debtors' Chapter 13 petition stayed BNYM's foreclosure efforts. ER
122;

11 U.S.C.

several liens.

§

362. At that time,

Specifically,

the

the Property was subject to

DOT,

held by BNYM, 2 created a

secured first-position lien on the Property; the total amount owing
under the Note was greater than $346,000.

ER 71-72.

Meritage's

unpaid assessments and fines formed an automatic lien under Oregon
law, subordinate to the DOT. ER 72; Or. Rev. Stat.

§

94. 709(1) (b).

1

This chapter of the Bankruptcy Code enables individuals
with regular income to develop a plan to repay all or part of
their debts over time. See, e.g., 11 U.S.C. § 1322(a); see also
In re Harris, 757 F.3d 468, 480 (5th Cir.), cert. granted, 135
S.Ct. 782 (2014) (Chapter 13 bankruptcy effectuates a "quid pro
quo" relationship between creditors and the debtor). Accordingly,
debtors here have ongoing income and a primary residence; this
bankruptcy pertains solely to debt incurred in relation to the
Property. ER 53-58, 69-72, 121-33.
2

The parties stipulated to certain facts before the
bankruptcy court, including that "[t]he current owners of the
Note are the Certificateholders of CWALT [for whom the BNYM] is
the trustee." ER 71. Nevertheless, debtors imply on appeal that
BNYM is not the current holder of the Note and DOT because those
"documents .
. do not mention [BNYM] at all." Debtors' Opening
Br. 2. Debtors' assertion ignores the fact that MTI effectuated
an assignment of the DOT to BNYM. ER 50. Regardless, for the
purposes of this appeal, the Court accepts BNYM as the owner of
the Note and DOT, irrespective of the ambiguity surrounding
mortgage instruments designating MERS as the beneficiary.
PAGE 3 - OPINION AND ORDER

Further,
lien.

Bank of America,

ER 72.

Finally,

N. A.,

possessed a

Meritage held a

$34, 000

consensual

judgment lien against the

Property in the amount of $225,000. Id. As such, the value of the
Property did not exceed the value of the secured claims.

ER 71,

124.
On April 1, 2014, debtors proposed their initial plan, which
advanced "selling the Property pursuant to 11 U.S.C.

§

363(b)," as

well as surrendering the Property to creditors with secured claims.
ER 1-4. Meritage objected to this plan on the ground that it sought
to

discharge

debtors'

assessments and fines.

3

obligation

to

pay

post-petition

HOA

BNYM's Opening Br. 4-5 (citation omitted).

On April 23, 2014, debtors amended their initial plan, but without
addressing Meritage's objection. ER 5-9. As such, Meritage filed a
substantively identical opposition to debtors' amended plan. BNYM's
Opening Br. 5 (citation omitted).
On June 17,

2014,

BNYM moved for relief from the automatic

stay to enable it to pursue its remedies under the Note and DOT. ER
10-52. On June 30, 2014, debtors filed a second amended plan. ER
53-58. This plan no longer proposed the sale and surrender of the
Property; instead, debtors added a nonstandard provision pursuant
to which they planned to vest the Property in BNYM under 11 U.S.C.
§

1322(b) (9) upon confirmation. ER 58. That same day, debtors filed

a response to BNYM's motion for relief from stay,

3

in which they

As the bankruptcy court observed, "the majority of
[debtors'] household income is from retirement accounts, which
would be exempt from execution if Meritage did seek to recover
post-petition assessments." ER 129.
PAGE 4 - OPINION AND ORDER

argued that the stay should remain in place in light of their
second amended plan. ER 60.
On July 31, 2014, BNYM objected to the second amended plan on
the grounds that confirmation thereof would force it to take title
to the Property "subject to the junior liens [and] be obligated on
the

[post-petition HOA]

dues and assessments." ER 65.

words, BNYM asserted that 11 U.S.C.

§

In other

1325(a) (5) was the exclusive

statutory provision concerning confirmation of Chapter 13 plans and
that the requirements listed therein could not be enlarged by other
provisions

of

the

Bankruptcy

Code,

including

11

U.S.C.

§

1322 (b) (9). ER 64-68. On August 28, 2014, a hearing was held before
the bankruptcy court,

wherein BNYM reiterated its objection to

debtors' second amended plan. ER 73-120.
On October 15, 2014, the bankruptcy court issued a memorandum
opinion and order confirming the second amended plan and granting
BNYM's motion for relief from stay. ER 121-33; see generally In re
Watt, 520 B.R. 834
recognized

that,

(Bankr.D.Or. 2014). The bankruptcy court first
"in

this

post-2007

world,

debtors

may

find

themselves in a position where lenders are reluctant to foreclose
on their collateral [and, because] surrender alone does not divest
them of ownership [,]

[they]

remain liable for post-petition HOA

assessments." ER 125. Further, the bankruptcy court noted that 11
U.S.C.

§

1322(b) (9)

allowed a debtor to include a provision in a

bankruptcy plan vesting the property of the estate in a secured
creditor. ER 126. The bankruptcy court then acknowledged that two
recent cases involving analogous circumstances - In re Rosa,
PAGE 5 - OPINION AND ORDER

495

B.R.

522

(Bankr.D.Haw.

(Bankr.W.D.N.C.

2014)

-

2013),

and

In

re

Rose,

512

B.R.

790

held that a secured party could not be

required, against its will, to take title to property surrendered
in a bankruptcy proceeding. ER 126-27.
Nevertheless, the bankruptcy court "s[aw] no prohibitions to
allowing [d]ebtors to both surrender the Property and vest it" in
BNYM:
I respectfully disagree with both the Rose and the Rosa
courts [because they] took the position that § 1322 (b) (9)
could not be used to compel a lender to accept title to
its collateral without its consent [but] nothing in the
language of § 1322 (b) ( 9) requires such consent. In the
absence of such language, I find that a plan which
provides for vesting of property in a secured lender at
time of confirmation may be confirmed over the lender's
objection. However, such a plan must still comply with
the provisions of section 1325 (a) (5) with respect to
payment of secured claims .
In Rosa, the court held that the third standard
surrender - did not fully validate the debtor's plan,
because the debtor proposed vesting in addition to
surrender [but the Rosa court] failed to explain why the
act of vesting eliminated surrender as a proper treatment
of a secured claim. Nor do I see any reason why it would
do so .
[BNYM] resists taking title and surrender but yet seeks
relief from the automatic stay to foreclose at an
undeterminative date with no commitment to moving
forward. [BNYM] did not offer to waive its security and
be treated as an unsecured creditor [thereby] creat[ing]
a stalemate. This hurts more than [d]ebtors [and]
Meri tage. It affects all the homeowners in Meri tage
[pursuant to Or. Rev. Stat. §] 94.723. 4

4

This statute specifies that, "[i]f a first mortgagee
acquires a lot in a planned community by foreclosure or deed in
lieu of foreclosure, the mortgagee and subsequent purchaser shall
not be liable for any of the common expenses chargeable to the
lot which became due before the mortgagee or purchaser acquired
title to the lot. The unpaid expenses shall become a common
expense of all lot owners including the mortgagee or purchaser."
PAGE 6 - OPINION AND ORDER

ER 127-30 (internal citations, brackets, and quotations omitted).
Accordingly, the bankruptcy court approved the second amended plan,
but ordered debtors to
that

[they]

~amend

[it] by interlineation to make clear

are surrendering the Property and that entry of the

Order has no effect on the relative priority or extent of the liens
against the Property." ER 130.

BNYM now appeals the bankruptcy

court's decision. ER 134-41.
STANDARD OF REVIEW

On

appeal

independently

from
reviews

the

bankruptcy

findings

of

court,

fact

for

the

district

clear

error,

court
while

conclusions of law are reviewed de novo. Barrientos v. Wells Fargo
Bank, N.A., 633 F.3d 1186, 1188 (9th Cir. 2011)

(citation omitted).

DISCUSSION

BNYM argues on appeal that the bankruptcy court erred as a
matter of law in confirming debtors' Chapter 13 plan because it did
not meet any of the three requisite criteria listed in 11 U.S.C. §
1325(a) (5).

Conversely,

debtors

contend

that

~the

substantive

rights given to them by Congress under§ 1322(b) are balanced with
and not supplanted by the substantive obligations imposed on them
by§ 1325(a) ,"such that these provisions should be read together
to

allow

the

vesting

of

property

in

a

non-consenting

secured

creditor. Debtors' Opening Br. 10.
I.

Legal Overview
The filing of a bankruptcy petition under Chapter 13 creates

a bankruptcy estate comprised of all of the legal and equitable
interests owned by the debtor as of the commencement date,
PAGE 7 - OPINION AND ORDER

plus

certain assets accrued post-commencement, until the case is closed,
dismissed,

or

converted.

11

U.S.C.

§§

541,

1306.

Following

confirmation of a plan, the property of the estate "vests" to the
debtor,

typically

free

and

clear

of

any

claim

or

interest

previously held by creditors. 11 U.S.C. § 1327. Nevertheless, where
a Chapter 13 debtor owns real property that is encumbered during
the

post-petition

period

by

HOA

dues

and

fees,

the

debtor's

liability for such dues and fees continues as long as he or she
retains an interest in that property. In re Foster, 435 B.R. 650,
661-62

(B.A.P. 9th Cir. 2010); Or. Rev. Stat.

The

debtor

preponderance
satisfies

bears

of

the

the

the

burden

evidence,"

requirements

of

appropriate for confirmation.
(Bankr.E.D.Cal.

2010)

that
the

Chapter 13 bankruptcy plan are

94.712(1).

of

establishing,

his

or her proposed plan

Bankruptcy

In re Lavilla,

(citations

§

omitted).

Code

425 B.R.
The

"by

and
572,

contents

regulated by 11 U.S. C.

a

§

is
576

of

a

1322.

Subsection (a), which is not at issue here, dictates what a plan
"shall provide." 11 U.S.C.
list

of permissive

terms

1322 (a).

§

that

"may"

Subsection
be

(b)

included.

includes a
11

U.S. C.

§

1322(b). In relevant part, subsection (b) specifies that "the plan
may .

. provide for the vesting of property of the estate,

on

confirmation of the plan or at a later time, in the debtor or in
any other entity." 11 U.S.C.

§

1322 (b) (9).

The confirmation of a Chapter 13 bankruptcy plan is governed
by 11 U.S.C.

§

1325. In re Andrews,

49 F.3d 1404, 1407

(9th Cir.

1995). The bankruptcy court "shall confirm a plan" only if, with
PAGE 8 - OPINION AND ORDER

respect to each allowed secured claim, one of the following three
requirements

are

satisfied:

accepted the plan;"

( 2)

( 1)

"the

holder of

the debtor's

payments

such claim has
to

the

creditor

comply with certain standards and the creditor retains its lien; or
(3) "the debtor surrenders the property securing such claim to such
holder."

Id.

at

1407-08

(citations

and

internal

quotations

omitted); 11 U.S.C. § 1325(a)(5).
The Bankruptcy Code does not define the terms "surrender" or
"vesting" for the purposes of Chapter 13. Nonetheless, "surrender"
has been interpreted in this context as the debtor's relinquishment
of his or her right to the property at issue, such that the secured
creditor is free to accept or reject that collateral.

Rosa,

4 95

B.R. at 523 (citation omitted); see also In re Arsenault, 456 B.R.
627, 629-30 (Bankr.S.D.Ga. 2011) ("surrender of encumbered property
leaves the secured creditor in control

of the exercise of

its

remedies") (citation and internal quotations omitted). Accordingly,
where

the

offered

collateral

is

part

of

a

planned

community

regulated by a HOA, "surrender alone does not cut off the debtor's
liability for association fees." Rosa, 495 B.R. at 523; ER 124-25.
Unlike surrender, "vesting

includes a present transfer

of ownership." Rosa, 495 B.R. at 524; see also In re Gonzales, 512
B.R.

255,

259-61

(Bankr.C.D.Cal.

2014)

(although "there is very

little case law discussing the meaning and impact of the vesting,"
it generally allows the debtor or other specified party, upon plan
confirmation, to "take whatever property rights [the debtor] had in
the

property when

the

case

PAGE 9 - OPINION AND ORDER

commenced") .

Thus,

vesting

is

the

mechanism that, in the context of real property, transfers title
and,

by

extension,

terminates

the

debtor's

liability

for

post-petition HOA assessments.
II.

Analysis
Initially, it is undisputed on appeal that, consistent with

the bankruptcy court's decision, debtors were permitted to vest the
Property in BNYM via their Chapter 13 plan pursuant to 11 U.S.C.

§

1322(b) (9), provided that it otherwise complied with 11 U.S.C.

§

1325(a) (5). ER 127-29; Debtors' Opening Br. 5; BNYM's Opening Br.
10; see also Meritage' s Opening Br.

6-7

("the vesting provision

found in section 1322(b) (9) is not without limitations devised by
Congress; it remains subject to the laundry list of confirmation
requirements found in sections 1322(a) and 1325(a)"). As such, the
parties

are

in

agreement

that:

(1)

11

U.S.C.

§

exclusively controls whether a plan is confirmable;
U.S.C.

§

1325(a) (5)
and

(2)

11

1322(b) (9) is the mechanism that allows a bankruptcy court

to alter the default presumption embedded in

11

U.S. C.

§

1327

regarding when and with whom the property of the estate vests.
It is also undisputed that 11 U.S. C.

1322 (b) ( 9)

list consent as a prerequisite of vesting.

does not

ER 12 7-2 9;

§

Debtors'

Opening Br. 5; BNYM's Opening Br. 23. Additionally, neither party
asserts,

and nor does the Court find,

that the first or second

permitted treatments enumerated in 11 U.S.C.

§

1325(a) (5) apply in

the case at bar. See generally Debtors' Opening Br.; BNYM's Opening
Br.; see also ER 64-68 (BNYM's objection to debtors' second amended
plan) . This case therefore turns on whether a plan is confirmable
PAGE 10 - OPINION AND ORDER

under

the

third

addition to a

prong

when

the

debtor

nonstandard provision,

proposes

such as

surrender

vesting,

in

and the

secured creditor opposes the inclusion of that nonstandard term.
The Court answers this question in the negative,
reversal

of

the

Essentially,
1322(b) (9)

the
as

bankruptcy

court's

bankruptcy

creating

a

decision

is

required.

interpreted

court

"fourth

such that

11

U.S.C.

§

U.S.C.

§

option"

under

11

1325(a) (5). ER 79, 124-30. This holding, however, is at odds with
both the plain language of 11 U.S.C.

§

1325(a) (5) and established

precedent. As BNYM denotes, "section 1322(b) does not state that a
plan that includes any of these provisions is per se confirmable
[and this is because]

[c]onfirmation is governed by section 1325,

not section 1322." BNYM's Opening Br. 10; see also Am. Legal & Fin.
Network Amicus Br. 5 (bankruptcy court's decision "opened the door
to allow Chapter 13 plans
requirements of 11 U.S. C.

to be confirmed without meeting the
§

1325 (a) ( 5) ") .

In other words,

that

"section 1322(b) (9) permits inclusion [of a nonstandard provision
that vests property in a secured creditor does not resolve] whether
the plan can be confirmed with the nonstandard provision." Rosa,
595 B.R. at 524.
The

third

unambiguously

option

states

specified

that

a

plan

surrender is proposed. 11 U.S.C.

§

in

11

U.S.C.

is

confirmable

§

1325(a) (5)

solely

where

1325 (a) (5) (C). Here, debtors'

second amended plan did not merely propose the cessation of their
interest

in

the

Property,

it

also

forcibly

transferred

that

interest, and the attendant liabilities, to BNYM. ER 58, 133; see
PAGE 11 - OPINION AND ORDER

also

BNYM's

Reply

Br.

5

("[t]o

vest

and

surrender

are

not

synonymous [such that had] Congress intended to allow a debtor to
'vest' ownership of property to a secured creditor over its express
objection

[it]

could

have

done

so

[but

chose]

not

to") .

The

attendant liabilities in this case are substantial and ongoing.
See,

e.g.,

ER 98

issue here,
liability,

(BNYM articulating at the hearing that "[t]he

frankly,

is that we're stepping into a minefield of

and we have no control over how the

[other secured

creditors] will act going forward"). These are precisely the type
of circumstances that courts find determinative in holding that a
secured creditor cannot be compelled to take title to collateral
over its objection.

See Rose,

512 B.R.

at 795-96

(" [f] orcing a

lender to take title to property would open a pandora's Box of
unintended, injurious consequences

First, and obviously, [it]

causes [the lender] to assume burdens of ownership for which it did
not contract . . . The potential for personal liability also exists
if the collateral property is dilapidated, damaged," or "subject to
multiple encumbrances, [including] accrued HOA obligations"); Rosa,
4 95 B. R.
object

at 525

("the mortgagee may have legitimate reasons to

[to accepting title such as where the]

liability
exorbitant

rather

than

association

an
fees

asset
[or]

[because
other

it

liens

property
is]
or

[is]

subject

a
to

co-ownership

interests"). 5
5

As BNYM notes, Rosa and Rose are "the only two .
published decisions to have considered the issue." BNYM's Opening
Br. 11. In fact, the one other case relied on by the bankruptcy
court was "an unpublished order from the Bankruptcy Court for the
District of Massachusetts, In re Gerardi," which is now under
PAGE 12 - OPINION AND ORDER

Thus,

in confirming a

Chapter 13 plan that

advanced non-

consensual vesting in conjunction with surrender, the bankruptcy
court read language into the Bankruptcy Code that does not exist,
as well as

frustrated the purpose of the

statute,

which is to

provide protection to creditors holding allowed secured claims. See
McDaniel v. Wells Fargo Invs., LLC,
2013)

717 F.3d 668,

677

(9th Cir.

("[u]nder the standard rules of statutory construction,

court]
there")
where,

will

not

read

into

the

statute

[language]

that

(citations and internal quotations omitted).
as here,

is

[the
not

Therefore,

a Chapter 13 plan includes a nonstandard term,

irrespective of whether that term is permitted by another provision
of the Bankruptcy Code, the first or second prong of 11 U.S.C. §
1325 (a) (5)

are

activated.

Rosa,

495

B.R.

at

524-25;

see

also

Chapter 13 Practice & Procedure§ 5:9 ("a provision in a plan for
surrender of encumbered property in full satisfaction of the claim
is not permissible under Code § 1325 (a) (5) (C)

[b] ecause such a

provision seeks to require the creditor to accept the encumbered
property in satisfaction of its claim, [such that] it must meet the
cramdown requirements of Code§ 1325(a) (5) (B), unless the creditor
accepts it under Code § 1325 (a) (5) (A)").
Reading 11 U.S.C. § 1325(a) (5) in any other manner leads to an

reconsideration, such that debtors do not cite to that case on
appeal. Id. at 25 n.8 (citations omitted); ER 128. Furthermore,
Rosa involved nearly identical circumstances, except the secured
creditor in that case accepted title to the real property at
issue such that the bankruptcy plan was confirmable under the
first prong of 11 U.S.C. § 1325(a) (5). Rosa, 495 B.R. at 523-25.
Unlike the bankruptcy court, this Court finds Rosa to be both
well-reasoned and persuasive.
PAGE 13 - OPINION AND ORDER

unreasonable result. Indeed, the bankruptcy court's interpretation
impermissibly
obligation,
underlying

transforms

the

secured

creditor's

right

into

an

thereby rewriting both the Bankruptcy Code and the
loan documents,

while

at

the

same

time belying the

secured creditor's state-created property rights. See ER 31-36 (DOT
allows, but does not require,

BNYM to take title to the Property

through foreclosure); Thompson v. Bollinger, Hampton & Tarlow, 118
Or.App. 700, 710, 849 P.2d 526, rev. denied, 317 Or. 163, 856 P.2d
318 (1993)

(under Oregon law, a court "may not read into a contract

provisions that simply do not exist")

(citation omitted); Lancaster

v. May, 194 Or. 647, 655, 243 P.2d 268 (1952)

(under Oregon law, a

mortgagee must consent to the transfer of a deed to encumbered
property);
(1979)

see also Butner v.

("[u]nless

some

United States,

federal

interest

440 U.S.

requires

a

48,

55-56

different

result[,] the federal bankruptcy court should take whatever steps
are necessary to ensure that the mortgagee is afforded in federal
bankruptcy court the same protection he would have under state law
if no bankruptcy had ensued") .
Significantly, debtors have not cited to, and the Court is not
aware of,

any authority holding,

either directly or by analogy,

that a bankruptcy plan proposing a present transfer of property
rights is confirmable absent the secured creditor's consent. See
generally Debtors' Opening Br.; Meritage's Opening Br. Case law,
while limited, generally indicates that a secured creditor cannot
be forced to accept surrendered property, even where post-petition
costs, including those assessed by a HOA, continue to accrue. Rosa,
PAGE 14 - OPINION AND ORDER

495

B.R.

Holoka,

at

523-25;

525 B.R.

495,

Rose,

512

499 n.38

B.R.

at

793-96;

(Bankr.N.D.Fla.

see also

2014)

In

re

(collecting

cases holding that nthe Code does not provide for the court or the
debtor to direct the means by which the secured creditor deals with
the

surrendered

property")

(citations

and

internal

quotations

omitted); Arsenault, 456 B.R. at 629-30 (na plan cannot require a
secured

creditor

to

accept

a

surrender

of

possession of or title to it"); In re Khan,

property

or

take

504 B.R. 409, 410-14

( Bankr. D. Md. 2 014)

(granting a HOA' s motion for relief from stay,

thereby

it

enabling

to

collect

post-petition

fees,

while

recognizing that nnone of the secured creditors has gone forward
with

foreclosure,

and

Debtor cannot

surrender pursuant to 11 U. S.C.
Finally,

although

the

§

compel them to accept

his

1325 (a) (5) (C)").

bankruptcy

motivated by equitable considerations corporation with considerable assets,

court
i.e.

was

undoubtedly

that BNYM,

a large

should be required to bear

post-petition HOA costs instead of debtors, individuals faced with
a difficult financial situation, or nall the [other] homeowners in
Meritage" - the fact remains that such equity must comport with the
law.

6

ER 93,

124-30;

see also

6

In re

Concretize,

Inc.,

2009 WL

Debtors assert repeatedly on appeal that a nbalance must
be struck between the rights of creditors on the one hand, and
the policy of affording the debtor a fresh start on the other."
Debtors' Opening Br. 20 (citation and internal quotations
omitted). Their second amended plan, however, effectuated no such
balance; it wholly eliminated their financial responsibility in
relation to the Property, at the sole expense of a secured
creditor. See Canning v. Beneficial Maine, Inc., 706 F.3d 64, 6973 (1st Cir. 2013) (n [a] fresh start [through a bankruptcy
allowing the surrender of collateral] does not mean debtors are
free from all of the consequence of every decision that they have
PAGE 15 - OPINION AND ORDER

3929890, *2

(Bankr.D.Or. Nov. 18, 2009)

(11 U.S.C.

§

105 (a), the

Bankruptcy Code's catch-all relief provision, "does not authorize
the

bankruptcy

courts

to

create

substantive

rights

that

are

otherwise unavailable under applicable law, or constitute a roving
commission

to

do

equity")

( citations

omitted); see also Rose, 512 B.R. at 795

and

internal

quotations

(declining "to permit a

debtor to transfer property to its mortgage lender by fiat" under
11 U.S.C.

§

105(a)). As discussed herein, debtors' second amended

plan was not confirmable under 11 U.S.C.

§

1325(a) (5). The Court

also notes that debtors are not without other remedies;

as they

initially proposed, and as BNYM advocated for at the hearing, the
Property could be sold as part of the bankruptcy estate pursuant to
11 U.S.C.

§

363(b). ER 4, 90.
CONCLUSION

For the reasons set forth above, the bankruptcy court's order
is VACATED and this case is REMANDED for further proceedings.
IT IS SO ORDERED.

Nl?

Dated this ~ day of April 2015.

Ann A1ken
United States District Judge

made, which in hindsight, might have been ill-advised [and]
does it generally discharge the ongoing burdens of owning
property") .
PAGE 16 - OPINION AND ORDER

[n]or