Court Opinion

ID: 3047380
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:21:25.731899+00
Date Added: 2024-06-11T12:45:00.644228
License: Public Domain

Case: 14-13556    Date Filed: 11/26/2014   Page: 1 of 4

                                                           [DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS

                     FOR THE ELEVENTH CIRCUIT
                       ________________________

                             No. 14-13556
                         Non-Argument Calendar
                       ________________________

          D.C. Docket Nos. 5:14-cv-00343-TJC; 6:13-bk-14410-KSJ

In Re: CELIA ELLA CORRAD,

                                                Debtor.
__________________________________________________________________

BANK OF AMERICA, N.A.,

                                                          Plaintiff-Appellant,

                                    versus

CELIA ELLA CORRAD,

                                                          Defendants-Appellee.

                       ________________________

                Appeal from the United States District Court
                    for the Middle District of Florida
                      ________________________

                             (November 26, 2014)

Before JORDAN, JULIE CARNES, and JILL PRYOR, Circuit Judges.
               Case: 14-13556    Date Filed: 11/26/2014   Page: 2 of 4

PER CURIAM:

        This appeal concerns an order of the bankruptcy court permitting a debtor to

“strip off” an “underwater” second mortgage under § 506(d) of the Bankruptcy

Code.

I.      BACKGROUND

        Appellee Celia E. Corrad is a Chapter 7 debtor. She owns real property in

Yalaha, Florida that is encumbered by two mortgages. The balance of the first lien

exceeds the fair market value of the property, rendering the second lien, which

appellant Bank of America, N.A. holds, completely “underwater.”

        On November 26, 2013, Corrad moved the bankruptcy court to declare Bank

of America’s interest in her property to be unsecured and void under § 506(d) of

the Bankruptcy Code. 11 U.S.C. § 506(d). Relying on In re McNeal, 735 F.3d
1263 (11th Cir. 2012), the bankruptcy court granted Corrad’s motion on May 12,

2014. Bank of America appealed that order to the district court, where it moved

for a summary affirmance. The district court granted Bank of America’s motion

on July 21, 2014, and this appeal followed.

II.     STANDARD OF REVIEW

        When the district court affirms an order of the bankruptcy court, we review

the bankruptcy court’s decision independently of the district court. In re TOUSA,

                                          2
              Case: 14-13556     Date Filed: 11/26/2014    Page: 3 of 4

Inc., 680 F.3d 1298, 1310 (11th Cir. 2012). We review de novo the bankruptcy

court’s legal conclusions. Id.

III.   ANALYSIS

       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). In Folendore v. United

States Small Business Administration, we interpreted the above statutory language

to hold that even an allowed claim can be deemed voidable if it is wholly

unsecured. 862 F.2d 1537, 1538-40 (11th Cir. 1989). Thus, under Folendore, a

debtor can move a bankruptcy court to strip off an underwater lien. Id.

       Three years after the Folendore decision, the Supreme Court issued its

opinion in Dewsnup v. Timm, 502 U.S. 410 (1992), which Bank of America argues

“squarely repudiated Folendore’s interpretation of section 506(d).” Bank of

America claims that “Folendore [] could not have survived Dewsnup.”

Unfortunately for Bank of America, we considered and rejected this same

argument in our 2012 McNeal decision. 735 F.3d at 1265-66. There, although we

acknowledged Dewsnup’s seeming disavowal of Folendore’s “plain language

analysis” of § 506(d), we declined to deviate from that opinion because Dewsnup

was “not ‘clearly on point,’” as it “disallowed only a ‘strip down’ of a partially

                                           3
              Case: 14-13556     Date Filed: 11/26/2014    Page: 4 of 4

secured mortgage lien and did not address a ‘strip off’ of a wholly unsecured lien.”

Id. at 1265. Consequently, McNeal held that Folendore remained the controlling

precedent within this Circuit. Id.

      Under our prior precedent rule, we are bound by this Court’s prior decisions

“unless and until [they are] overruled by this court en banc or by the Supreme

Court.” United States v. Brown, 342 F.3d 1245, 1246 (11th Cir. 2003). Bank of

America argues that Folendore was wrongly decided, but concedes that it and

McNeal remain binding precedent and control this case. Accordingly, the

bankruptcy court did not err by permitting Corrad to strip off Bank of America’s

underwater lien, and the decision of the district court is therefore affirmed.

      AFFIRMED.

                                           4