Official Comm. of Unsecured Creditors v. Wells Fargo Retail Fin., LLC , Adv. Proc. 06-3018, Case No. 05-35484 (Bankr. W.D.N.C. May 5, 2006)(Hodges) - The court treated the defendants' Motion to Dismiss as one for summary judgment and held that there were no factual issues to be determined and that defendants were entitled to judgment in their favor. The court found that the Agent held a perfected security interest in Lease Proceeds and in proceeds from the sale of Augment Goods. Because the court determined that the lenders had a duly perfected lien on Lease Proceeds and proceeds from the sale of the Augment Goods, the court found that the Lenders were oversecured. Therefore, the court did not disallow the early termination fee on the basis that the Lenders were undersecured. In addition, the court concluded that the early termination fee was reasonable under 11 U.S.C. § 506(b). Finally, the court denied the plaintiffs' claim for equitable subordination because the plaintiffs did not set forth any facts supporting a finding of inequitable conduct by the defendants.

In re Springs, Case No. 06-40192 (Bankr. W.D.N.C. July 11, 2006)(Hodges) - The Trustee objected to confirmation of the debtor's Chapter 13 Plan because it failed to provide for any pre-confirmation adequate protection payments for 910- and 365-day personal property claims under 11 U.S.C. § 1325(a)(9). The court agreed with and adopted the reasoning of Judge Leonard in In re Brooks, Case No. 05-10644-8-JRL (Bankr. E.D.N.C. June 9, 2006). Consistent with that case, the court held that a 910- or 365-day claim may be an allowed secured claim. Thus, the debtor's plan must provide for pre-confirmation adequate protection payments for 910- and 365-day claims pursuant to 11 U.S.C. § 1326(a)(1)(C). Accordingly, the court sustained the Trustee's Objection to Confirmation.

In re Robinette, Case No. 06-30334 (Bankr. W.D.N.C. June 28, 2006)(Wooten) - Sharonview objected to confirmation of the debtors' Chapter 13 plan because it failed to provide for full payment of the remaining balance due under a contract for the sale of a vehicle to the debtors that was entered into within the 910 days preceding the filing of the petition. This court agreed with and adopted the reasoning of Judge Leonard in In re Brooks, Case No. 05-10644-8-JRL (Bankr. E.D.N.C. June 9, 2006) and Judge Carruthers in In re Shaw, Case No. 05-84059 (Bankr. M.D.N.C. May 11, 2006), and held that the debtors' plan must provide for payment in full of Sharonview's secured claim with interest calculated at the Trustee's Formula Rate. Accordingly, the court sustained Sharonview's Objection to Confirmation.

In Re Bailey, Bank W.D.N.C. February 27, 2002(Whitley) - Case law interpreting NCGS 45-21.38 supports the view that a purchase money note cannot be enforced against nonpurchase money collateral. However, if all participants in a prior hearing assume the contrary, and if the collateral is part of a creditors' adequate protection, the assumption cannot be undone after the fact.

In re Hicks, (Case No. 01-30126) (Bankr. W.D.N.C. April 25, 2001)(Whitley) - Chapter 7 Debtors brought a motion for a Certificate of Discharge cancelling two judgment liens of record in the Mecklenburg County Public Registry. As of the bankruptcy date, the Debtors did not have any equity in their real property because two mortgages, in addition to the two judgment liens, encumbered the real property. Decisions of other bankruptcy courts in this Circuit persuaded the Court that the Supreme Court's decision in Dewsnup v. Timm does not apply to a wholly unsecured lien and that such a lien is voidable pursuant to 11 U.S.C. § 506. But in the case at bar, the motion to avoid the lien must be denied without prejudice because an action to avoid a lien must be accomplished through an adversary proceeding, not a motion. The Debtors' case file will remain open so that the Debtors can file an adversary proceeding within the next thirty days to avoid the wholly unsecured judgment liens.

Smith v. TMS Mortgage, Inc., Case No.00-31220 (Bankr. W.D.N.C. April 5, 2001)(Hodges) - Plaintiff-Debtors filed an adversary proceeding and putative class action challenging the defendant's practice of placing a $125 charge to its Proof of Claim without court approval pursuant to Section 506(b) of the Bankruptcy Code and Rule 2016 of the Federal Rules of Bankruptcy Procedure. The defendants filed a Motion to Dismiss the Complaint, arguing that the plaintiffs lacked constitutional and statutory standing. The court concluded that the plaintiffs met the constitutional and statutory standing tests, but dismissed the case on its own initiative. The court concluded that a class action is not a necessary, efficient, or appropriate vehicle for resolution of the issues raised in the plaintiff's Complaint, and that the allegedly improper practices of the creditor could be rectified by an administrative order and prospective injunctive relief ordering the defendant to cease immediately the practice of including a charge for the preparation of the Proof of Claims in Proofs of Claims filed in the Western District of North Carolina.

Tate & Ballard et. al. v. NationsBanc Mortgage Corp., Case No. 97-3725 (Bankr. W.D.N.C. Oct. 2, 2000)(Whitley) - Mortgage lender filed proofs of claim in Chapter 13 cases, which included a $125 "bankruptcy fee." Class plaintiffs objected to the fee on the grounds that it was not "reasonable" under s 506(b). The class also sought damages and statutory penalties under the NC Fair Debt Collection and Deceptive Trade Practices Acts. On the parties' cross-motions for summary judgment, the creditor argued there was no subject matter jurisdiction and that the plaintiffs' state law claims were preempted. The Bankruptcy Court held it had jurisdiction over the entire class, and that the creditor could not collect the fee (which was reimbursement for legal fees) without making a fee application under Rule 2016. The creditor was therefore ordered to disgorge the fees. However, the Court also held that the plaintiffs' state law claims were preempted by federal law due to the unique federal interest in regulating bankruptcy procedure.

IN RE JONES, Case No. 99-30986 (Bankr. W.D.N.C. August 14 2000)(Hodges) - Centura Bank made two prepetition loans to the debtors secured by their residence. Through a drafting error, the second deed of trust referred to the same obligation as the first. BB&T made a third prepetition loan also secured by the debtors' residence. BB&T assumed its payoff to Centura at closing would cancel both prior instruments; however, Centura cancelled its first deed of trust only. After the debtors' bankruptcy, this priority dispute ensued. The Court held Centura could not deny BB&T's seniority under the quasi-estoppel doctrine, which states that "where one having the right to accept or reject a transaction or instrument takes and retains the benefits thereunder, he ratifies it, and cannot avoid its obligation or effect." Here, BB&T's letters to Centura showed that the former expected cancellation of both prior instruments in return for the payoff funds. Further, Centura drafted the incorrect deed of trust and failed to respond to BB&T's communications about the loans.

IN RE ROBERT LEE SMITH AND EVY P. SMITH, Case No. 97-31740 (Bankr. W.D.N.C., November 12, 1997)(Hodges) - The matter was before the court on the Objection to Claim of SouthTrust Mortgage Corporation (SouthTrust) filed by the debtors. The court held that SouthTrust's claim for trustee/attorney's fees should be denied under 11 U.S.C. § 506(b), as the fees claimed were not reasonable for a variety of reasons detailed by the court in its opinion.

TARLTON v. FIRST CITIZENS BANK (IN RE TARLTON), Case no. 98-3113 (Dec. 4, 1998) (Whitley) - A Chapter 7 Debtor cannot strip down a creditor's lien on real property under 11 U.S.C. section 506(a) and (d), even when that lien claim is entirely unsecured. (citing Dewsnup v. Timm , 502 U.S. 410, 112 S.Ct. 773 (1992)). Dewsnup held that the term "allowed secured claim" in section 506(d) does not mean the same thing as "allowed secured claim" in seciton 506(a), as applied in a Chapter 7 context.

IN RE JONES, Case No. 96-30469 (Bankr. W.D.N.C., July 15, 1996)(J. Wooten) - The Court held that 11 U.S.C. 1322(b)(2) did not prevent the modification of a creditor's claim that was secured by a perfected lien on the debtor's principal residence and an unperfected lien on the debtor's automobile. The Court noted that the Chapter 13 Trustee could utilize his avoidance powers under 11 U.S.C. 544 to avoid the lien of a creditor on the debtor's automobile because the creditor had not had its lien noted on the title to the automobile prior to the filing of the petition. However, the Court held that whether or not a trustee may be able to avoid one of a secured creditor's liens under 11 U.S.C. 544 is irrelevant for the purposes of determining whether that creditor is secured solely by a lien on the debtor's principal residence. The Court further held that whether or not a creditor holds liens on property other than real estate constituting the debtor's residence should be determined according to state law as of the date of the petition, independently of post-bankruptcy events. Therefore, the Court held that if the Chapter 13 Trustee was to defeat the creditor's lien on the debtor's automobile under 11 U.S.C. 544, the creditor would be secured solely by a lien on the debtor's principal residence, without the benefit of 11 U.S.C. 1322 protection. Accordingly, the Court overruled the creditor's objection to confirmation of the debtor's Chapter 13 plan.

IN RE PLYLER, Case No. 92-31886 (Bankr. W.D.N.C., July 9, 1996)(J. Whitley) - The Court reviewed the terms of an agreement entered into between an automobile dealer and the Chapter 13 debtors and rejected the dealer's argument that the agreement was a true lease that could not be modified by the Chapter 13 debtors or the trustee. Instead, the Court found that the agreement falls within the parameters of N.C.G.S. 25-1-201(37)(a)(iv), and therefore, it constitutes a security agreement. The Court continued the hearing on this matter because the record did not establish whether the creditor had taken appropriate steps to perfect its security interest.

BURCHFIELD V. ASSOCIATES FINANCIAL SERVICES, INC., (IN RE BURCHFIELD), Case No. 92-31244, Adv. Proc. No. 95-3267 (Bankr. W.D.N.C., June 3, 1996)(J. Whitley) - The Court granted the Chapter 13 debtors' Motion for Summary Judgment against a creditor who filed a proof of claim as a secured creditor but was later found to be unsecured as a result of its failure to record its deed of trust on the debtors' real property. The creditor argued that confirmation of the debtors' Chapter 13 plan treating its claim as secured precludes the debtor and the Trustee from asserting otherwise under the theory of res judicata. The Court rejected this argument and held that a confirmation order lacks a res judicata effect to the extent that it conflicts with the purposes of the Bankruptcy Code. The Court held that treating the claim at issue as a secured claim on res judicata grounds would violate the Bankruptcy Code's statutory scheme, as it would impinge upon 11 U.S.C. 502 (a claim is not allowable if unenforceable against the debtor or his property under applicable law), 11 U.S.C. 506 (a creditor is secured only to the extent of the value in the collateral), and 11 U.S.C. 1322(b)(3) (equal treatment must be given to claims within a particular class). Finally, the Court held that, within this Circuit, issues which are required by Federal Rule of Bankruptcy Procedure 7001 to be raised by adversary proceeding are not affected by a confirmation order, even if that order specifically purports to do so (citing Cen-Pen Corporation v. Hanson, 58 F.3d 89 (4^th Cir. 1995)). Therefore, the Court held that no res judicata effect can be given to the Chapter 13 plan's statement that the claim at issue was secured, and the creditor was ordered to return to the Trustee the amount that it had received over and above what it was entitled to receive as an unsecured creditor.

IN RE SUMMEY, Case No. 95-31870 (Bankr. W.D.N.C., May 28, 1996)(J. Whitley) - The Court held that a "Purchase Agreement and Disclosure Statement" entered into between the debtor and Curtis Mathis was a true lease and not a disguised security agreement. Therefore, the Court sustained Curtis Mathis' objection to the debtor's Chapter 13 plan and held that the debtor could not "strip-down" Curtis Mathis' lien. Instead, the debtor was required to assume or reject the lease under 11 U.S.C. 365. The Court found that none of the four factors set forth in N.C.G.S. 25-1-201(37)(a) as conclusive evidence of the existence of a security agreement was present in this case. Therefore, the Court stated that the matter became a question of fact based on the totality of circumstances. The Court based its determination on 1) the debtor could surrender the property at any time and terminate the arrangement without penalty; 2) the debtor was not building equity in the property; and 3) the creditor was responsible for general maintenance of the goods during the term of the agreement.

IN RE MIDDLE PLANTATION LIMITED PARTNERSHIP, Case No. 95-31507 (Bankr. W.D.N.C., April 23, 1996)(J. Hodges) - The Court denied an Application for Payment of Interim Attorney Fees and Expenses filed by the attorney for the Chapter 11 debtor-in-possession because there were no unencumbered asset from which to pay these administrative expenses and they would have to be taxed against the sole secured creditor's collateral. The Court held that under 11 U.S.C. 506(c), a secured creditor's collateral may not be taxed to cover the expenses of administering the estate unless the charges are 1) necessary to preserve or dispose of the property, 2) of benefit to the secured creditor, and 3) reasonable. Because the applicant failed to meet his burden of proving the existence of these three factors, the Court denied his application.

IN RE CORNETT, Case No. 95-50756 (Bankr. W.D.N.C., March 27, 1996)(J. Whitley) - The Chapter 13 debtors made only one payment on their automobile loan and filed their petition less than sixty days after their first payment was due. The lender objected to confirmation of the debtors' Chapter 13 plan alleging that their actions and their attempt to "strip down" the lender's claim was an indication of objective bad faith. The Court agreed with the lender and confirmed the Chapter 13 plan after the debtors agreed to lift the automatic stay and allow repossession of the automobile.

IN RE U.S. FACSIMILE, Case No. 95-30196 (Bankr. W.D.N.C., Feb. 1, 1996)(J. Hodges) - A Chapter 11 debtor may strip an IRS tax lien under 11 U.S.C. 506.

IN RE YOUNT, Case No. 95-50321 (Bankr. W.D.N.C., Nov. 2, 1995)(J. Whitley) - The Court granted a creditor's Motion for Increase in Valuation of Secured Claim by $1,683.50 over the value of the automobile securing its claim because the creditor also held a valid perfected security interest in both an extended warranty contract and a credit life insurance contract. The Court held that in the absence of any applicable state law perfection requirements, the creditor's security interest in the credit life insurance contract and extended warranty contract must be assumed to be perfected upon creation, and as perfected security interests, 11 U.S.C. 506 requires that these interests be valued and allowed as part of the secured claim to the extent of that value.

IN RE SIMPSON, Case No. 94-50572 (Bankr. W.D.N.C., Aug. 17, 1995)(J. Whitley) - The Court addressed the issue of prioritizing administrative expense claims in a Chapter 7 case that had been converted from a Chapter 11 case. The Court appointed a trustee in the Chapter 11 case because of misconduct on the part of the debtor, and the trustee hired a collection agent and manager to assist him. When the case was converted, the trustee remained in this position in the Chapter 7 case. The trustee later filed applications for fees and expenses incurred by himself and the collection agent both during the Chapter 11 period and the Chapter 7 period. The debtor's attorney, who held an allowed Chapter 11 administrative expense claim, objected to these applications and alleged that these fees and expenses should be paid pro rata with his administrative expense claim. The Court noted that Chapter 7 administrative expense fees claim a higher priority than Chapter 11 expenses, so the argument for pro rata payment was inapplicable to this portion of the applications. Based on the equities of the situation and the interplay of 11 U.S.C. 506 and 11 U.S.C. 105, the Court decided to allow, and, to the extent possible after payment of allowable Chapter 7 expenses, authorize payment of the collection agent's Chapter 11 expenses. The Court allowed the trustee's Chapter 11 expenses, but payment of these expenses was deferred pending on approved distribution from the Chapter 7 estate.

ADKINS V. KENTUCKY FINANCE (IN RE ADKINS), Case No. 93-50629, Adv. Proc. No. 94-5273 (Bankr. W.D.N.C., Feb. 17, 1995) - The Court denied an uncontested Motion for Default Judgment for failure to state a claim upon which relief can be granted. The Court essentially held that Dewsnup v. Timm, 112 S.Ct. 773 (1992) prohibits a Chapter 7 debtor from lien-stripping by valuation of personal property collateral under 11 U.S.C. 506.

IN RE GAINER, Case No. 90-31214 (Bankr. W.D.N.C., Aug. 1, 1994)(J. Hodges) - The lien-stripping prohibitions in Dewsnup v. Timm, 112 S.Ct. 773 (1992) do not apply in Chapter 13 cases with respect to personal property, and insurance proceeds on a Chapter 13 debtor's automobile that was destroyed after the secured portion of the claim had been paid may be applied toward the purchase of a substitute vehicle, with the secured creditor retaining a lien on the title and any surplus proceeds until the plan is paid-in-full.

IN RE KASEY, Case No. 94-30153 (Bankr. W.D.N.C., April 25, 1994) - A Chapter 13 debtor is not required to pay interest on arrearages which are being paid through the trustee to an under-secured mortgage holder. The court distinguished this case from Rake v. Wade, 113 S.Ct. 2187 (1993) in which the decision was based on 11 U.S.C. 1325(a)(5), which addresses only "allowed secured claims." Because the creditor in the case at issue was under-secured and the value of the real property was insufficient to cover any of the arrearages, the creditor was not entitled to interest on its arrearage claim.

IN RE KABBASH, Case No. 92-50456 (Bankr. W.D.N.C., May 26, 1993)(J. Wooten) - Chapter 13 debtors share the trustee's avoiding powers under 11 U.S.C. 544(a) and can utilize 11 U.S.C. 506(d) to invalidate the lien of a second mortgage holder who described the real property of the debtors as being in an incorrect county and recorded the mortgage instrument in the wrong county, even though the debtors themselves had actual knowledge of the second mortgage.

IN RE PECK, Case No. 92-32048 (Bankr. W.D.N.C., May 3, 1993)(J. Hodges) - Pursuant to 11 U.S.C. 506(b), a creditor can include in its allowed secured claim interest at the contract rate that accrues from the filing date through the confirmation of the debtor's plan. Post-confirmation interest on secured claims is permitted by 11 U.S.C. 1325(a)(5)(B)(ii). Secured creditors are entitled to interest on their claims throughout the debtor's proposed plan. The interest rate should be the market rate for the creditor's cost of borrowing funds in the open market. The Chapter 13 Trustee should determine an appropriate rate, and that rate shall serve as a rebuttable presumption of the market rate.

IN RE SPRAGUE, Case No. 91-20038 (Bankr. W.D.N.C., Aug. 26, 1992)(J. Hodges) - An over-secured creditor is entitled to collect its attorney's fees paid for various services performed in relation to the bankruptcy case if the attorneys' fee language in the loan agreements supports such a claim. The Court stated that the particular facts of a case or the specific language of the agreements will influence the Court's decision to grant or deny secured status for attorney's fees.

IN RE VANDERHALL, Case No. 91-32320 (Bankr. W.D.N.C., April 1, 1992)(J. Hodges) - Court's practice of allowing lien-stripping, even on a lien against the debtor's residence, provided there was no modification of the payment if any part of the claim was secured, must now stop in light of the Dewsnup decision.

IN RE FOWLER, Case No. 91-30360 (Bankr. W.D.N.C., July 17, 1991) - The appropriate standard for valuation of a secured claim under 11 U.S.C. 506(a) is not liquidation value but value of enhancement to the estate, less the amount of any prior liens.

IN RE WENAR ACQUISITION CO., Case No. C-B-89-10012 (Bankr. W.D.N.C., May 1990)(J. Wooten) - The court concluded that the more appropriate and equitable moment in time at which to value the collateral of a creditor under 11 U.S.C. 506(a) is on the date of the filing of the petition.

IN RE HENSLEY, Case No. A-B-85-00082 (Bankr. W.D.N.C., June 1, 1989)(J. Hodges) - A secured creditor applied for attorney's fees and expenses under 11 U.S.C. 506(b), and the debtors objected to such application. The court concluded that the number of hours billed by the creditor's attorney were reasonable, and it multiplied those hours by a reasonable hourly rate (determined by the local market). The court cautioned the creditor's attorney that future fee applications should contain detailed accountings of the time spent and a description of the hourly rate of the fee, but the court approved the fee petition as submitted.

IN RE McCLURE, Case No. A-B-86-00305 (Bankr. W.D.N.C., March 17, 1988)(J. Hodges) - The debtor disputed the amount of a creditor's claim base on a valuation of the claim by the court in a prior hearing. Although the earlier hearing was for a different purpose, because the degree of the creditor's interest had been the same as it was in the present case, the court allowed the debtor's objection and used the valuation in from the prior hearing.

IN RE FULLER, Case No. SH-B-84-00277 (Bankr. W.D.N.C., Oct. 11, 1985)(J. Wooten) - The Court denied an over-secured creditor's request for an award of attorney's fees in the amount of $4,365 under 11 U.S.C. 506(b). The Court held that the Fourth Circuit Court of Appeals decision in Unsecured Creditors Committee v. Walter E. Heller and Company, Inc., 768 F.2d 580 (4th Cir. 1985) was controlling, and federal law, not state law, governed the award of attorney's fees in the bankruptcy context. Therefore, an award of attorney's fees would be made in accordance with the provisions of 11 U.S.C. 506(b), not N.C.G.S. 6-21.2 (allowing 15% of the outstanding loan balance). The Court reviewed the fees in light of the twelve factors enumerated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), and the Court allowed $1,759 as reasonable attorney's fees. However, the Court opined that even that fee was excessive, although probably a result of the debtor's litigious and unbending attitude in the case.