Document: 502 U.S. 410 112 S.Ct. 773 116 L.Ed.2d 903 Aletha DEWSNUP, Petitionerv.Louis L. TIMM et al. No. 90-741. Argued Oct. 15, 1991. Decided Jan. 1992. Syllabus Petitioner Dewsnup, the debtor in a case under Chapter 7 of Bankruptcy Code, filed an adversary proceeding, contending that debt approximately $120,000 she owed to respondents exceeded fair market value land securing and that, therefore, Court should reduce respondents' lien on land's pursuant 11 U.S.C. § 506(d), which provides is void "[t]o extent [it] secures claim against not allowed secured claim." Dewsnup reasoned would have such "allowed claim" only judicially determined their collateral, since, 506(a), "[a]n creditor by property estate has interest . creditor's estate's property." The court then question was $39,000, but refused grant requested relief entered judgment dismissal with prejudice. District Appeals affirmed. Held: Section 506(d) does allow "strip down" because been fully and, cannot be classified as "not for purposes lien-voiding provision 506(d). Pp. 414-420. (a) contrasting positions parties amici demonstrate its relationship other Code provisions are ambiguous. 414-416. (b) Although without difficulty, position espoused United States amicus curiae words need read indivisible term art defined reference term-by-term refer any is, first, allowed, second, secured—generally better several approaches argued this case. Were writing clean slate, it might inclined agree quoted must take same meaning 506(a). However, practical effect Dewsnup's argument freeze at valuation contravention pre-Code rule liens real pass through bankruptcy unaffected. Congress enacted full understanding latter rule, given statutory ambiguity here, attribute intention broad new remedy claims they become "unsecured" 506(a) mentioning somewhere or legislative history implausible contrary basic principles. 416-420. 908 F.2d 588 (CA10 1990), BLACKMUN, J., delivered opinion Court, REHNQUIST, C.J., WHITE, STEVENS, O'CONNOR, KENNEDY, JJ., joined. SCALIA, dissenting opinion, SOUTER, THOMAS, took no part consideration decision Timothy B. Dyk, Washington, D.C., petitioner. Richard G. Taranto, respondents. Ronald J. Mann, U.S., curiae, supporting respondent. Justice BLACKMUN Court. 1 We confronted issue concerning 506(d).1 May determined, when less than amount lien? 2 * On June 1, 1978, loaned $119,000 petitioner her husband, T. LaMar since deceased. loan accompanied Deed Trust granting two parcels Utah farmland owned Dewsnups. 3 defaulted following year. Under terms Trust, point could proceeded collateral accelerating maturity loan, issuing notice default, selling public foreclosure sale satisfy debt. See also Ann. §§ 57-1-20 57-1-37 (1990 Supp.1991). 4 Respondents did default 1981. Before place, however, sought reorganization 1101 seq. That petition dismissed, subsequent petition. In 1984, seeking liquidation 701 Because pendency these proceedings, were able proceed sale. 362. 5 1987, present proceeding seeking, 506, "avoid" portion lien. App. 3. represented value. According petitioner, compelled interrelationship security-reducing ("An interest. property"), collateral. And ("To claim, void"), required remaining within 6 relief. re 87 B.R. 676 (1988). After trial, subject $39,000. It indulged assumption had abandoned trustee 554, once longer fell reach applies "property interest," therefore covered summarily affirmed Court's Pet. Cert. 12a. 8 Tenth Circuit, turn, (1990). Starting from "fundamental premise" reduction security property, apply (nor, implication, 506(d)). F.2d, 590-591. noted result inconsistent 722 limited right redeem certain personal property. Id., 592. 9 reached odds Third Circuit Gaglia v. First Federal Savings & Loan Assn., 889 1304, 1306-1311 (1989), expressly recognized being conflict, see 591, we granted certiorari. --- ----, 111 949, 1038 (1991). II 10 As submissions, agreement respective problem interpretation confronts us. Petitioner-debtor takes complementary together. Because, fixed, can thus "an words, bifurcates classes into unsecured claims; deemed scope argues there exception trustee. Petitioner's plain language dictates proper undersecured whether further rationale lead evisceration debtor's redemption elimination ability participate distribution assets. 12 primarily assert not, it, "rigidly tied" Brief 7. They argue performs function classifying true status time ensure fairness claimants. contrast, directed where distributional purpose served voiding 13 alternative, respondents, joined more broadly definitional provision. Rather, secured. here "allowed" recourse underlying come voids corresponding This reading according States, gives simple sensible whenever itself allowed. ensures Code's determination personally preventing assertion property.2 14 out law preserved like nothing reflects intent alter law. Moreover, "fresh-start" policy justify impairment rights, fresh start extend rem discharge liability. III 15 foregoing recital demonstrates 506 do embrace some ambiguities. Collier Bankruptcy, ch. particular, ¶ 506.07 (15th ed.1990). Hypothetical applications mind those advanced oral illustrate difficulty interpreting statute single all possible fact situations. focus upon before us facts await legal resolution another day. 16 conclude alternative position, although generally approaches. Therefore, hold lien, 502. 506(a).3 But, text, convinced intended depart 17 1. petitioner's valuation. By approach, lose benefit increase accrue debtor, describe "windfall." 18 think, stays until foreclosure. what bargained mortgagor mortgagee. voidness sensibly aspect deficiency security. Any over during rightly accrues creditor, creditors whose who mortgagor-mortgagee bargain. 19 Such surely lienholder stayed aloof (subject, course, power persons entities pull him 501), reason why his acquiescence cause experience forfeiture kind proposes. participation results having well strike recompense proposes way remainder 20 2. appears clearly established passage 1978 Act. Act 1898, passed recently acknowledged so. Farrey Sanderfoot, 500 1825, 1829, 114 337 (1991) ("Ordinarily, interests survive bankruptcy"); Johnson Home State Bank, 501 2150, 2154, 115 66 ("Rather, extinguishes one mode enforcing claim—namely, action personam while leaving intact another—namely, rem.").4 21 Apart 616(1) (10) (1976 ed.), permitted involuntary payment Our cases reveal concern about this. Long Bullard, 117 617, 620-621, 917, 918, 29 L.Ed. 1004 (1886), held release mortgage created bankruptcy. Louisville Joint Stock Land Bank Radford, 295 555, 55 854, 79 1593 (1935), considered additions effected Frazier-Lemke Act, 48 Stat. 1289 (1934). There Act's "avowed object mortgagee rights specific security; end 'to scale down indebtedness' 594, S.Ct., 865. invalidated Takings Clause. observed: "No instance found, except either compelling relinquish free unless paid full." 579, 858. 22 practice. H.R.Rep. 95-595, p. 357 (1977), U.S.Code Cong. Admin. News pp. 5787, 6313 ("Subsection (d) permits unaffected"). 23 4. When amends laws, write "on slate." Emil Hanley, 318 515, 521, 63 687, 690-691, 954 (1943). Furthermore, reluctant accept arguments interpret however vague particular be, major change practice least discussion history. Assn. Texas Timbers Inwood Forest Associates, Ltd., 484 365, 380, 108 626, 634, 98 740 Pennsylvania Dept. Public Welfare Davenport, 495 552, 110 2126, 2138, 109 (1990); Ron Pair Enterprises, Inc., 489 235, 244-245, 1026, 1032-1033, 103 290 (1989). Of unambiguous, silence controlling. remedy's mentioned annals plausible, our view, 24 25 so ordered. 26 THOMAS 27 whom SOUTER joins, dissenting. 28 With exceptions pertinent provides: "To void. ." Read naturally accordance statute, automatically both "secured Code. holding otherwise, replaces said thinks ought said—and process disregards, hence impairs future use, well-established principles construction. I respectfully dissent. turns solely phrase found throughout Code: unambiguously secure (with exceptions) rendered (emphasis added). leave speculation. says (the obvious) "to [the] [the securing] (This means, speaking, "is fixed; unsecured." 239, 1029, (1989).) refers claim," referring carefully described brief subsections earlier. 30 obviously bears set forth used example, 506(b), addresses claim[s]" oversecured. Indeed, apparently concede, 40; Tr. Oral Arg. 29-30, even outside invariably means describes: after calculations performed. See, e.g., (permitting tangible "by paying holder lien"); 1225(a)(5) (prescribing treatment claim[s] " family farmer's plan); 1325(a)(5) (same respect individual reorganizations) (emphases similarly consistent use companion supported lien) treated 507(a)(7) (fixing priority governmental units"); 726(a)(2) (providing liquidation); 1225(a)(4) (setting standard 1325(a)(4) plan) When, hand, party's entire i.e., "secured" portions uses "—as 363(k), "a Given clear unmistakable pattern usage, seems me impossible hold, does, "the 'allowed claim' 506(a)." Ante, 415; ante, 416-417. often invoked 'normal construction 'identical different parts act meaning.' ' Sullivan Stroop, 496 2499, 2504, 438 (1990) (quoting Sorenson Secretary Treasury, 475 851, 860, 106 1600, 1606-1607, 89 855 (1986) Helvering Stockholms Enskilda 293 84, 87, 50, 51-52, 211 (1934) Atlantic Cleaners Dyers, Inc. 286 427, 433, 52 607, 608-609, 76 1204 (1932)). apply, fortiori, identical section enactment. 31 makes attempt establish textual structural basis overriding rests intuitions character,1 principle text "ambiguous" (a achieved disagreement between self-interested litigants) imprimatur "legislative history." Thus abandoning normal (and especially artfully claim") adopts instead called one-subsection-at-a-time approach exegesis. "[W]e express opinion," amazingly says, "as Code." 417, n. "We day." 32 subsection (considered, vacuum), embracing "respondents' position," "that 506(a)," (for alone) simply connotes ordinary sense, backed up suffices cover claim. attributes well, 415-416, 2, Government's different—and significantly so, (as do) give uniform meaning. theory, explain work. 33 distinctive feature States' seeks avoid invalidation so-called "underwater" focusing, prior "secures void" (Emphasis added.)) merely security, adequacy. say, "secures" lien—and avoidance 506(d).2 succeeds giving later compatible But virtue. 34 To begin with, renders surplusage. If describes actual economic value, allowed." For actually light 506(a)'s calculations. Another 506(d)'s opening available, assume clumsy draftsmanship—and employs, boot, much natural "lien ordinarily One say "mortgage purchase price house, if house inadequate means: retain partial satisfaction just .") added), elsewhere see, 362(a)(5) ("to claim"); 363(k) ("lien claim"). An unnatural disfavored time, particularly produces redundancy. Montclair Ramsdell, 107 147, 152, 431 (1883). 35 course creates redundancy (whether adequate), prologue reformulated follows: Quite obviously, lien" reformulation utterly redundant absurd—as (on interpretation) word "secured," create redundancy: former making adequate plain-and-simple. Only first ("[t]o Government not) second ("allowed previously make 36 consequences absurd. A completely worthless face disallowed entirely. claim: voided property's court's evaluation, asserted occur, order Unavoided (or accurately, potentials unavoided liens, knows evaluations relevant will exceed court) impede trustee's management settlement estate. difficult, sell overencumbered outstanding 363(b) (c), post-sale appreciation levied holders claims. "free clear" attached 363(f)(3), undisturbed claimant's attach proceeds collateral's post-petition appreciation, distributing possible, construing absurd results. 37 effort straightforward textually structurally incompatible out, nullifying pertain disallowance claims, inadequacy 506(d)(1) (2)—from applicability allowability establishes (plainly expressed) exist. premise argument—that qualifies noun adjectives ("allowed" "secured"), adjectives, disregarded—is false. most contradict interpretation; suggest support it. 38 identify supposed inconsistencies sections Code; largely illusory. principal source 722, enables "redeem" narrow exempt dischargeable consumer debt." fixed lienholder] provision, told, superfluous stripped 39 greatly overstated. necessary, superfluous, reduces lienholder's equitable insure opportunity price, pledge stood security." Black's Law Dictionary 1278 (6th ed. 1990). good solicitous exclusive 722), state laws typically generous personalty Compare, 57-1-31 Uniform Commercial 9-506, 3A U.L.A. 370 (1981). regarding permit concise formulation: Instead describing lien"—since cut back hardly call expansive formulation far removed "cutting back" reader likely forgotten 40 debtors deal receive Chapters enabling strip pocket discourage using preferred mechanisms 11, 12, 13. evaluation "finely reticulated" incentives affecting behavior critical—and perhaps erroneous—assumptions chapters. assume, placed home; may beg very answers today. True, 1322(b)(2) filers "modify claims" residence," been) read, prohibit modification mortgagee's Hart, 923 1410, 1415 1991); Wilson Commonwealth Mortgage Corp., 895 123, 127 (CA3 applied consistently fashion various chapters, 103(a) "chapters 3, [shall] chapter 7, 13"), appear unduly attractive. event, contains enticements lure away maintain control business assets, affords broader prepetition liabilities. 523 (listing numerous discharge) 1328(a) discharge). Kelly Robinson, 479 36, 353, 361, 93 216 (restitution obligations imposed criminal judgments nondischargeable 7) 563-564, ---- - (such restitution 13). 41 Finally, find incongruous protect context allowing them fleeced operation view mistakes generosity count reorganization. There, demand postevaluation increases 1129(b)(2)(A) "cram-down" plan objections payments equal cash payments).3 IV 42 address Circuit's today (alluded 414, discussed), 554. Respondents' modified logical) version point—viz., not. briefly, plain-language obstacles validity pronounced raised approach. 43 Appeals' reasoning effects lien-stripping 506(a); "in interest"; "[t]he in, administer, property," 588, 590-591 fallacy application 506(d)) undone ceases "have interest" "had outset proceeding. way. operates filed.4 Once secured-creditor unallowed occurred, abandonment Nothing unraveling, imagine If, abandonment, bifurcation accomplished nullified, claim—i.e., extent) distribution—would determine. Instead, "unsecured," neither disposition accord deprive claimant share general altogether. 726 claimants). (treating unsecured) pro rata (rather 506(a)-defined "unsecured reserving variation avoids absurdities yet irrationality—asserting though "abandonment" theory interest") contained nonetheless abandonment. deserves name theory. V 44 said, trouble evaluate arguments. Part (uncritically) 416, concludes, contrasting, "ambiguity text," 417. analysis every litigated ambiguous.) Having "ambiguity," summon deus ex machina: unaffected"—which eliminated ambiguous history" mention demise. 418. 45 have, consulted gaps coverage genuinely provisions. absent footing, presume departure longstanding Midlantic Natl. New Jersey Environmental Protection, 474 494, 501, 755, 759-760, 88 859 (1986); 46-47, 359-360, (1986). never determinative here: contradictory text. contrary, plainly reveals Congress' intent" regimes, supra, 563, enforced terms, insisting "at [of law] history," 419. 46 illustration how today's jurisprudence, examine recent decision, Union Wolas, 527, "contrasting positions" shrink finding, own analysis, existed. urged adopted overturn "no evidence make" change, 531. unnecessary "dispute accuracy [that] description reject conclusion" effected. "The fact," foreseen enactment sufficient refusing meaning." 530, reexamined entirely rewrote preference supports conclusion 547(c)(2) deliberate choice Congress." 532. What Wolas case: Congress's careful reexamination rewriting regardless retained abandoned, precisely says. complete matter deeply admires venerates "pre-Code law," manner preserves it—and itself, protestation fealty, No nor doctrine, purported invalidate—across board—liens bankruptcy, ed.); 67 (14th 1978), interpreted today, accomplishes. 47 instructive compare few years ago involved itself. 506(b) made available oversecured nonconsensual. change. disagreed. began "where inquiries begin: itself." 241, 1030. recite contentions declare [relevant] phrase," "grammatical structure statute," "terminology 241 242, 5, 1030 1031, 5. "natural conflict significant federal interest, Code," id., 245, 1033, irrelevant. whereas announces "[a]ny creditor," undeterred "arguably somewhat tension desirability uniformly practicable," 245-246, 1033. "Congress," "expressly chose alleged tension." 246, Almost point, methodological antithesis Pair—and greatest sympathy Courts predict shall next 49 harm caused misinterpretation brings closer irrelevantly observes, probably fairer standpoint justice. (I irrelevantly, little justice.) greater enduring damage consists destruction predictability, elsewhere. disregarding oft-repeated construction, certainty designed achieve attainable. seemingly sans replaced "one-subsection-at-a-time" interpretation, innumerable texts worth litigating. field alone, unfortunate litigants pay expressed neutrality taken resolve uncertainty spawning confusion scores others. full: "(a) setoff 553 title, setoff, proposed conjunction hearing "(b) which, recovery (c) section, reasonable fees, costs, charges provided arose. "(c) recover reasonable, necessary costs expenses preserving, disposing of, "(d) void, unless— "(1) 502(b)(5) 502(e) title; "(2) due failure entity file proof title." stated twice again 40, 33; 14, 20. dissent, SCALIA contends issue. 'secures' 506(d)." Post, 424. fact, says: "Under [petitioner's] reading, operate sense." Amicus Curiae Accordingly, d 1898 544, 564, explicit: "Liens accepted faith contemplation fraud consideration, recorded law, record thereof impart notice, affected Act." said: "Section d. declares it." City Richmond Bird, 249 174, 177, 186, 187-188, 543 (1919). precise Chandler 1938, 840. respected authority convincingly explained done remove draftsmen 1938 desired specify invalid." 4B 70.70, 771 1979) original). alteration substantive effect. Oppenheimer Oldham, 178 386, 389 (CA2 1949). example: "That creditor. [W]e lienholder's] bankruptcy] [T]he claim] lien." 778. inappropriate, effectuate them. feared "windfall" prevented 551, avoided "for estate," creditors. Note, Individual Debtor's Right Avoid Liens Cardozo L.Rev. 263, 280-281 Ward, 946, 952-953 (Bankr.Ct. MD Tenn.1984). prevail (secured enable lien-stripped (at trustee-managed sale) capture post-evaluation Carlson, Undersecured Claims Sections 1111(b): Second Looks Judicial Valuations Collateral, Bankr.Devs.J. 253, 272-279 questions remand. insistence put forward same, mistaken. excerpts brief, among others, (which respondents') claim": "On face, [§ ] circumstances—where 'a claim'—and carve lesser included 'is claim.' carved-out "According triggered '[t]o claim,' common parlance, unsecured. [I]t say—as urges—that prime situation where, fails original) (footnote omitted). consequence, (more adopts) merits concerned election 1111(b)(2) treat notwithstanding affect electing guaranteed effective date plan, holder's claims." 1129(a)(7)(B). [to elector] collateral." 1111.02, 1111-25 1111-26, "has 541(d) holds title alone estate" title). 541(a)(1) (defining include "all commencement [bankruptcy] case").

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