Opinion ID: 2977690
Heading Depth: 3
Heading Rank: 1

Heading: Denial of Confirmation

Text: The Olivers attempt to cure the default on the mortgage on the Mississippi property through their proposed chapter 13 plan. However, the Sixth Circuit Court of Appeals has held in the context of a mortgage foreclosure on a principal residence that once a valid, pre-bankruptcy foreclosure sale has taken place, a debtor-mortgagor cannot revive and reinstate the mortgage and cure arrearages under a chapter 13 plan. Fed. Land Bank of Louisville v. Glenn (In re Glenn), 760 F.2d 1428, 1442 (6th Cir. 1985). If Glenn applies, it would be clear that the Olivers’ attempt to cure the default through their chapter 13 plan was improper. The holding in Glenn is not directly on point , however, because the foreclosed property is not the principal residence of the Olivers. The Sixth Circuit has not directly addressed the issue in the context of property that is not the debtor’s principal residence. However, the issue was addressed in Agee v. Fenton Poured Walls, Inc. (In re Agee), 330 B.R. 561 (E.D. Mich. 2005). In Agee, the chapter 13 debtor failed to pay a subcontractor for work on the construction of -5- a house on property he owned. The subcontractor filed a construction lien on the property, and a foreclosure action and sheriff’s sale of the property followed. Minutes after the sale was concluded, Agee filed a petition for relief under chapter 13 of the Bankruptcy Code. The debtor’s plan proposed to cure the debt owed on the lien pursuant to § 1322(b)(5). The subcontractor objected, and relying primarily on the Sixth Circuit’s holding in Glenn, the bankruptcy court denied confirmation of the plan. The District Court affirmed. Id. at 570. Agee argued that Glenn did not apply, in part, because the lien on his property did not involve his principal residence. The bankruptcy court concluded, and the District Court agreed, nevertheless, that “‘despite the differences between Glenn and [Agee], however, . . . the principles of the Glenn case, at least the broad general principles apply here by close analogy.’” Agee, 330 B.R. at 564 (quoting bankruptcy court opinion at 8). The District Court agreed with the debtor that the public policy addressed in § 1322(b)(2) whereby holders of claims secured by a debtor’s principal residence are granted a preferred status so as not to decrease attractiveness of home mortgages as investment opportunities, which was addressed in Glenn, was not present in Agee. However, it noted that both Glenn and Agee were concerned not with the right to modify under § 1322(b)(2), but with the right to cure under § 1322(b)(5). Id. The Panel agrees that even in the context of a non-principal residence, the “principles of the Glenn case, at least the broad general principles apply here by close analogy.” The Sixth Circuit in Glenn was frustrated by the failure of § 1322(b)(5) to provide a clear cut-off point for the right to cure. Glenn, 760 F.2d at 1435. In the end, they chose the sale of the mortgaged premises as the cutoff date of the statutory right to cure defaults. Id. While the Sixth Circuit chose this “pragmatic” result in the context of principal residence foreclosure, it did not specifically limit its holding. Moreover, the court’s reasons for choosing the sale as the cut-off date apply whether the mortgaged property is principal or non-principal. For example, the Sixth Circuit cited as reasons for its holding that “the date of sale is a measurable, identifiable event of importance in the relationship of the parties . . . the sale introduces a new element - the change of ownership . . . [t]he foreclosure sale normally comes only after considerable notice giving the debtor opportunity to take action . . . setting the date of sale as the cut-off point avoids most of what some courts have described as the ‘unseemly race to the courthouse.’” Id. at 1435-36. These reasons apply equally here despite the fact that the foreclosed property was not the Olivers’ principal residence. Because the mortgaged premises has -6- been sold, the Olivers cannot revive and reinstate the mortgage and cure the arrearages through a chapter 13 plan. Confirmation of the plan as proposed was properly denied. The Olivers’ argument that the automatic stay was in place when BankFirst foreclosed on the property also fails. The second chapter 13 case was filed on November 14, 2007, and dismissed on December 20, 2007. The foreclosure sale took place on February 1, 2008. The third chapter 13 case was not filed until April 9, 2008. There was no automatic stay in place on February 1, 2008.