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In re Wages

United States Bankruptcy Appellate Panel For the Ninth Circuit

March 7, 2014

In re: CLAYTON HOYT WAGES and ANDREA S. WAGES, Debtors. CLAYTON HOYT WAGES; ANDREA S. WAGES, Appellants,
v.
J.P. MORGAN CHASE BANK, N.A.; UNITED STATES TRUSTEE, Appellees

Argued and Submitted November 22, 2013

Appeal from the United States Bankruptcy Court for the District of Idaho. Bk. No. 8:11-bk-40249-JDP. Honorable Jim D. Pappas, Bankruptcy Judge, Presiding.

Brent Taylor Robinson, Esq., Robinson, Athone & Tribe, argued for appellants Clayton Hoyt Wages and Andrea S. Wages.

Jon A. Stenquist, Esq., Moffatt Thomas Barrett Rock & Fields, Chtd., argued for appellee J.P. Morgan Chase Bank, N.A.

Before: JURY, KIRSCHER, and KURTZ, Bankruptcy Judges. Opinion by Judge Jury. Dissent by Judge Kurtz.

OPINION

Page 162

JURY, Bankruptcy Judge:

Debtors, Clayton Hoyt Wages and Andrea S. Wages, appeal from the bankruptcy court's order denying confirmation of their chapter 11[1] plan in which they sought to modify the terms of a mortgage on their real property held by appellee-creditor, J.P. Morgan Chase Bank, N.A. (Creditor).

At issue is whether the anti-modification provision under § 1123(b)(5) applies to any loan secured only by real property that the debtor uses as a principal residence or whether it is limited to those claims secured by property used only as a debtor's principal residence. The issue is one of statutory construction and of first impression in this Circuit. We hold that the anti-modification

Page 163

provision in § 1123(b)(5) applies to any loan secured only by real property that the debtor uses as a principal residence. Accordingly, we AFFIRM.

I. FACTS[2]

In 1999, debtors purchased property consisting of a house, buildings and eleven acres near Heyburn, Idaho (property). Initially, they used approximately four acres for raising feed or crops, five acres for pasturing livestock and two acres for residential purposes. At that time, debtors' employment consisted of raising roping stock on the property to rent out for rodeos and roping events. About a year later, debtors purchased a truck to haul their livestock, and income from use of their truck became a component of their business income.

Between 2004 and 2006, debtors sold all their livestock to raise money to stave off a foreclosure against the property.[3] Since then, debtors have not used the property at all to generate income from livestock. Debtors leased an additional truck and began hauling commodities for others.

At some time, their former livestock/trucking business became a trucking-only business. Mr. Wages drives one of the trucks; Mrs. Wages secures permits, keeps the books for the business, and handles other administrative chores from an office in debtors' home. When they are not being used on the road, debtors park the two trucks and trailers on the property.

On March 4, 2011, debtors filed their chapter 11 petition to allow them to retain their residence. At the time, they were using a portion of the property to operate the business, including a small office in the house and enough adjoining space to park two truck tractors and up to three trailers.

In May 2011, Creditor[4] filed a $127,418.31 secured claim in debtors' bankruptcy case based on a mortgage debt. Under the mortgage note's terms, debtors agreed to make monthly payments through April 1, 2029, at an annual interest rate of 7.5%. The debt was secured by a mortgage on the property.

In November 2011, debtors filed a chapter 11 plan. Under the plan, debtors proposed to modify the terms of Creditor's mortgage by reducing the interest rate to 5.0% per year and extending the payoff date to March 1, 2032. Creditor objected to confirmation of the plan, arguing that it does not meet the confirmation requirements of § § 1129(a)(1) and 1123(b)(5).

On June 12, 2012, the bankruptcy court held an evidentiary hearing on the confirmation of debtors' proposed plan. At the end of the hearing, the court took the matter under advisement.

On July 24, 2012, the bankruptcy court entered its Memorandum of Decision, sustaining Creditor's objection to confirmation of debtors' proposed chapter 11 plan. On the same day, the court entered the order denying confirmation of debtors' chapter 11 plan. Debtors timely appealed and filed a motion for leave to appeal with this court. On September 10, 2012, a motion's panel granted leave to appeal.

II. JURISDICTION

The bankruptcy court had jurisdiction over this proceeding under 28 U.S.C. § § 1334 and 157(b)(2)(L). We have ...


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