Court Opinion

ID: 2737914
Source: CourtListenerOpinion
Date Created: 2014-09-29 20:01:26.738347+00
Date Added: 2024-06-11T12:59:27.828028
License: Public Domain

Case: 14-12585    Date Filed: 09/29/2014   Page: 1 of 3

                                                          [DO NOT PUBLISH]

            IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT
                      ________________________

                            No. 14-12585
                        Non-Argument Calendar
                      ________________________

         D.C. Docket Nos. 2:14-cv-00095-RWS; BK-13-23492-REB

In Re: JAMES JEROME PHILLIPS,
        TAMARA JOHNSTON PHILLIPS,

                                        Debtors.
__________________________________________________

BANK OF AMERICA, NA,

                                              Plaintiff - Appellant,

versus

JAMES JEROME PHILLIPS,
TAMARA JOHNSTON PHILLIPS,

                                              Defendants - Appellees.

                      ________________________

               Appeal from the United States District Court
                  for the Northern District of Georgia
                     ________________________

                            (September 29, 2014)
              Case: 14-12585     Date Filed: 09/29/2014   Page: 2 of 3

Before WILSON, ROSENBAUM, and COX, Circuit Judges.

PER CURIAM:

      Appellees, James and Tamara Phillips, are Chapter 7 debtors. They have

two mortgages on their house. The parties do not dispute that the second lien is

completely underwater. Appellant, Bank of America, N.A. (“Bank of America”),

holds the second lien. The Phillipses moved in the bankruptcy court to have Bank

of America’s lien declared void under Section 506(d) of the Bankruptcy Code.

The bankruptcy court granted the motion, and the district court affirmed.

      Section 506(d) of the Bankruptcy Code provides, in pertinent part, that “[t]o

the extent that a lien secures a claim against the debtor that is not an allowed

secured claim, such lien is void.” 11 U.S.C. §506(d). This Court held in Folendore

v. Small Business Administration, 862 F.2d 1537, 1540 (11th Cir. 1989), that

Section 506(d) permitted a Chapter 7 debtor to “strip off” a wholly “underwater”

lien, such as Bank of America’s lien in this case.

      The Supreme Court of the United States rejected the reasoning of Folendore

in Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773 (1992), holding that a lien

partially underwater could not be stripped down to the value of the collateral under

Section 506(d). Nevertheless, bound by this Court’s “prior panel precedent” rule

and reasoning that Dewsnup was not “clearly on point” with Folendore, this Court

in McNeal v. GMAC Mortgage, LLC, 735 F.3d 1263, 1264–65 (11th Cir. 2012),

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                Case: 14-12585      Date Filed: 09/29/2014      Page: 3 of 3

declined to follow Dewsnup and other courts that had departed from Folendore.

The McNeal panel held fast to Folendore and allowed the debtor to strip off an

underwater junior lien pursuant to Section 506(d).1 We hold that McNeal and

Folendore are the law in this circuit with respect to the issue presented here.

Accordingly, we affirm the decision of the district court.

       Bank of America concedes that the McNeal holding is binding precedent,

but seeks further appellate review of the issue. Should Bank of America choose to

petition this Court for en banc consideration of the issue it raises here, this Court

should seriously consider the petition.

       AFFIRMED

       1
         “Although Folendore addressed the 1978 version of the Bankruptcy Code, the 1984
amendments to the Code did not alter the pertinent language of Section 506(a) or (d).” McNeal,
735 F.3d at 1265 n.3.
                                              3