IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF OREGON 

BANK OF NEW YORK MELLON, 

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 

Case No. 3:14-cv-02051-AA 

OPINION AND ORDER 

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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 1 of 16
AIKEN, Chief Judge: 

Bank of New York Mellon, as trustee for certificate holders of 

the CWALT, Inc., alternative loan trust 2006-0A21, mortgage 

pass-through certificates series 2006-0A21 ("BNYM"), appeals the 

bankruptcy court's confirmation of Nicolas 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 purchase a second residence in Newport, Oregon 

("Property"), 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 and DOT, such that BNYM commenced 

PAGE 2 - OPINION AND ORDER 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 2 of 16
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. § 362. At that time, the Property was subject to 

several liens. Specifically, the 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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 3 of 16
Further, Bank of America, N. A., possessed a $34, 000 consensual 

lien. ER 72. Finally, Meritage held a 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' obligation to pay post-petition HOA 

assessments and fines. 3 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, in which they 

3 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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 4 of 16
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. In other 

words, BNYM asserted that 11 U.S.C. § 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 (Bankr.D.Or. 2014). The bankruptcy court first 

recognized that, "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, 495 

PAGE 5 - OPINION AND ORDER 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 5 of 16
B.R. 522 (Bankr.D.Haw. 2013), and In re Rose, 512 B.R. 790 

(Bankr.W.D.N.C. 2014) - 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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 6 of 16
ER 127-30 (internal citations, brackets, and quotations omitted). 

Accordingly, the bankruptcy court approved the second amended plan, 

but ordered debtors to ~amend [it] by interlineation to make clear 

that [they] 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 from the bankruptcy court, the district court 

independently reviews findings of fact for clear error, 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, plus 

PAGE 7 - OPINION AND ORDER 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 7 of 16
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. § 94.712(1). 

The debtor bears the burden of establishing, "by a 

preponderance of the evidence," that his or her proposed plan 

satisfies the requirements of the Bankruptcy Code and is 

appropriate for confirmation. In re Lavilla, 425 B.R. 572, 576 

(Bankr.E.D.Cal. 2010) (citations omitted). The contents of a 

Chapter 13 bankruptcy plan are regulated by 11 U.S. C. § 1322. 

Subsection (a), which is not at issue here, dictates what a plan 

"shall provide." 11 U.S.C. § 1322 (a). Subsection (b) includes a 

list of permissive terms that "may" be included. 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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 8 of 16
respect to each allowed secured claim, one of the following three 

requirements are satisfied: ( 1) "the holder of such claim has 

accepted the plan;" ( 2) the debtor's payments 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 commenced") . Thus, vesting is the 

PAGE 9 - OPINION AND ORDER 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 9 of 16
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. § 1325(a) (5) 

exclusively controls whether a plan is confirmable; and (2) 11 

U.S.C. § 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) does not 

list consent as a prerequisite of vesting. 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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 10 of 16
under the third prong when the debtor proposes surrender in 

addition to a nonstandard provision, such as vesting, and the 

secured creditor opposes the inclusion of that nonstandard term. 

The Court answers this question in the negative, such that 

reversal of the bankruptcy court's decision is required. 

Essentially, the bankruptcy court interpreted 11 U.S.C. § 

1322(b) (9) as creating a "fourth option" under 11 U.S.C. § 

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 to be confirmed without meeting the 

requirements of 11 U.S. C. § 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 option specified in 11 U.S.C. § 1325(a) (5) 

unambiguously states that a plan is confirmable solely where 

surrender is proposed. 11 U.S.C. § 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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 11 of 16
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 (BNYM articulating at the hearing that "[t]he 

issue here, frankly, is that we're stepping into a minefield of 

liability, 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. at 525 ("the mortgagee may have legitimate reasons to 

object [to accepting title such as where the] property [is] a 

liability rather than an asset [because it is] subject to 

exorbitant association fees [or] other liens or 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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 12 of 16
Thus, in confirming a Chapter 13 plan that advanced nonconsensual 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, 717 F.3d 668, 677 (9th Cir. 

2013) ("[u]nder the standard rules of statutory construction, [the 

court] will not read into the statute [language] that is not 

there") (citations and internal quotations omitted). Therefore, 

where, as here, 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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 13 of 16
unreasonable result. Indeed, the bankruptcy court's interpretation 

impermissibly transforms the secured creditor's right into an 

obligation, thereby rewriting both the Bankruptcy Code and the 

underlying 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); see also Butner v. United States, 440 U.S. 48, 55-56 

(1979) ("[u]nless some federal interest requires a 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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 14 of 16
495 B.R. at 523-25; Rose, 512 B.R. at 793-96; see also In re 

Holoka, 525 B.R. 495, 499 n.38 (Bankr.N.D.Fla. 2014) (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 property or take 

possession of or title to it"); In re Khan, 504 B.R. 409, 410-14 

( Bankr. D. Md. 2 014) (granting a HOA' s motion for relief from stay, 

thereby enabling it to collect post-petition fees, while 

recognizing that nnone of the secured creditors has gone forward 

with foreclosure, and Debtor cannot compel them to accept his 

surrender pursuant to 11 U. S.C. § 1325 (a) (5) (C)"). 

Finally, although the bankruptcy court was undoubtedly 

motivated by equitable considerations - i.e. that BNYM, a large 

corporation with considerable assets, 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 In re Concretize, Inc., 2009 WL 

6 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, 69-

73 (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 

Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 15 of 16
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 and internal quotations 

omitted); see also Rose, 512 B.R. at 795 (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] [n]or 

does it generally discharge the ongoing burdens of owning 

property") . 

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Case 3:14-cv-02051-AA Document 31 Filed 04/22/15 Page 16 of 16