Wallingford v. Green Tree Servicing, LLC (In re Wallingford)

Summarized by Thomas DeCarlo , John Steinberger & Associates, PC
12 years 10 months ago

Citation:

Case No. 12-4174

Tag(s):

Ruling:

Debtor can modifiy lien on mobile home used as debtor's residence where mobile home has not been converted to real property under state law.

Procedural context:

Debtor purchased mobile home and land on which it was located and financed the purchare through Green Tree's predecessor. Debtor later filed Chapter 13 and sought to bifurcate the loan on the mobile home through Section 506. Green Tree objected and claimed that the plan violated Section 1322(b)(2) is it sought to modify the rights of the holder of a lien on debtor's principal residence. The Bankruptcy Court held that the Plan violated Section 1322(b)(2). On appeal, the District Court reversed and concluded that as the mobile home never became part of the real estate, Section 1322(b)(2) did not prevent modification. On appeal, the Sixth Circuit affirmed the decision of the District Court.

Facts:

Debtor purchased a mobile home and also purchased the land on which it sat. The transaction was financed through two notes, one on the mobile home secured by a security interest in the title, and one on the land; and a mortgage on the land that cross-collateralized the mobile home. Debtor resided in the mobile home and it was undisputed that the mobile home constituted Debtor's principal residence. Debtor never surrendered the certificate of title to the mobile home and the State continued to treat the mobile home as separate and apart from the realty. Debtor later filed Chapter 13 and sought to "cram down" the loan on the mobile home, and Green Tree objected based on Section 1322(b)(2). The Sixth Circuit concluded that under Ohio law, the only way to convert a mobile home to real property is by surrendering the certificate of title and by permanenly affixing the mobile home to the land. Although debtor had permanently affixed the home, he had never sufferendered the title, and this was the dispositive factor under state law. Debtor can modify the security interest in the mobile home notwithstanding Section 1322(b)(2).

Judge(s):

MERRITT, SUHRHEINRICH, DONALD

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