Opinion ID: 596191
Heading Depth: 2
Heading Rank: 1

Heading: Bifurcation and Modification of Unsecured Claims

Text: 9 Hougland concerns the interplay between two bankruptcy statutes, 11 U.S.C. §§ 506(a) and 1322(b)(2). 886 F.2d at 1183. That case resolved two issues and held that: (1) a Chapter 13 debtor could bifurcate a claim secured only by the debtor's principal residence into a secured and unsecured portion; and, (2) the lender's rights on the unsecured claim could be modified. Id. at 1185. We now reaffirm our holding in Hougland. 10 Initially, Hougland noted that  '[s]ubsection (a) of § 506 provides that a claim is secured only to the extent of the value of the property on which the lien is fixed; the remainder of that claim is considered unsecured.'  Id. at 1183 (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 239, 109 S.Ct. 1026, 1029, 103 L.Ed.2d 290 (1989)). Second, the court observed that section 1322, dealing with debtors' plans in Chapter 13 proceedings, provides in part: 11 (b) Subject to subsections (a) and (c) of this section, the plan may ... 12 (2) 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, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims.... 13 Id. (emphasis in original). Finally, after acknowledging the split in authority, Hougland agreed with the line of cases which found that nothing in section 1322 affects the determination under section 506(a) that an undersecured claim can be divided into a secured portion and an unsecured portion. Id. 14 In allowing the modification of the unsecured portion of a claim, Hougland reasoned that the meaning of the statute begins and ends with the language of the statute itself: 15 It should first be noted that it is clear that section 506(a) applies to Chapter 13 proceedings. See § 103(a). There is, therefore, no reason to believe that the phrases secured claim and unsecured claim in section 1322(b) have any meaning other than those given to them by section 506(a). It follows that Lomas' claim had a secured claim and an unsecured claim component. 16 That being said, we can look at the other than clause. That clause follows the secured claim portion of the sentence and precedes the unsecured claim portion. Certainly it refers to what preceded it, and indicates that a secured residential real estate claim will have special protection. Indeed, if the referent of the other than clause is not the secured claim language which precedes it, what could the referent be? It would be most unusual if it were the unsecured claim language or the whole sentence. That strongly indicates that only the secured claim portion is protected. 17 Hougland, 886 F.2d at 1183-84. 18 This interpretation has been uniformly followed by the only three other circuit courts which have had occasion to address the question. Bellamy v. Federal Home Loan Mortgage Corp. (In re Bellamy), 962 F.2d 176, 180-81 (2d Cir.1992) (other than clause must be limited to secured claim, citing Hougland ); Hart v. Eastland Mortgage Co. (In re Hart), 923 F.2d 1410, 1415 (10th Cir.1991) ([t]he position of the Third and Ninth Circuits and the other courts which have adopted threshold bifurcation under section 506(a) prior to submission of the secured claim portion of a mortgage to the protection of section 1322(b)(2) reflects the plain meaning of section 1322(b)(2) ...); Wilson v. Commonwealth Mortgage Corp., 895 F.2d 123, 127 (3rd Cir.1990) ([w]e agree with the Ninth Circuit's view that because the 'other than' phrase is best read to refer to secured claims, the 'other than' phrase should be read to limit modification only of that portion of the claim that is secured). Hougland was correctly decided and we find no reason to upset its holding. Moreover, even assuming that we disagreed with Hougland, [w]e are bound by decisions of prior panels unless an en banc decision, Supreme Court decision, or subsequent legislation undermines those decisions. United States v. State of Washington, 872 F.2d 874, 880 (9th Cir.1989) (internal quotations omitted). Because Hougland has not been undermined, we cannot depart from its holding. 19 Although Lomas spends a great deal of energy discussing the legislative history behind section 1322(b)(2), we need not delve into that here because the statute can be interpreted on its face. [W]here, as here, the statute's language is plain, 'the sole function of the courts is to enforce it according to its terms.'  United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917)). We still adhere to the brief comments made in Hougland that the legislative history indicates a desire to assist home lenders and nothing more. See 886 F.2d at 1185. 20 We also reject Lomas' contention that lenders will be subject to unfair treatment and will face absurd results if Hougland is to stand. [T]hese speculative contingencies regarding fluctuating real estate prices are not sufficient to justify a result contrary to that required by the Code's language. Bellamy, 962 F.2d at 186. 21 The recent Supreme Court decision, Dewsnup v. Timm, --- U.S. ----, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992), does not affect our decision in Hougland. As the Second Circuit has observed, Dewsnup did not hold that 'secured claim' in other provisions of the Code was never to be construed as it was in § 506(a). Its analysis was limited to 506(d) and the facts before it. Bellamy, 962 F.2d at 182 (citations omitted). Dewsnup was concerned solely with lien avoidance which extends beyond a bankruptcy case, arising by effect of the 'lien avoidance' language of § 506(d). In re Taras, 136 B.R. 941, 949 (Bankr.E.D.Pa.1992). Nowhere does Dewsnup suggest that its discussion of 'lien stripping' has any impact on the bifurcation of secured claims from unsecured claims for the purposes of Chapter 13.