Nobelman v. American Savings Bank

RESPONDENT: American Savings Bank et al.
LOCATION: An apartment on the North Side

DOCKET NO.: 92-641
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 508 US 324 (1993)
ARGUED: Apr 19, 1993
DECIDED: Jun 01, 1993

Michael J. Schroeder - on behalf of the Respondents
Philip Palmer - on behalf of the Petitioners

Facts of the case


Media for Nobelman v. American Savings Bank

Audio Transcription for Oral Argument - April 19, 1993 in Nobelman v. American Savings Bank

William H. Rehnquist:

We'll hear argument next in No. 92-641, Leonard Nobelman against the American Savings Bank.

Mr. Palmer.

Philip Palmer:

Mr. Chief Justice and may it please the Court:

The basic issue in this case is whether section 506(a) of the Bankruptcy Code and section 1322(b)(2) are compatible and can be harmonized, or whether they are hostile and conflict.

It is the position of the petitioner that they are compatible and they can be harmonized.

The function of Code section 506(a) is to divide a claim into secured and unsecured parts.

A creditor who is undersecured under 506(a) may wind up with two claims, one of which is a secured claim to the extent of the value of the collateral, and the excess, or any amount above that, becomes an unsecured claim.

We know that 506(a) does apply in Chapter 13, because the Code tells us it does in section 103(a).

But does it apply specifically to Chapter 13, Code section 1322(b)(2)?

Everything I've said so far is little in dispute between the parties, but we now reach the point where the ways divide.

The respondents argue that it does not apply, in an argument that is based upon the 1322, the clause that reads

"other than a claim secured only by security interest in the real property that is the debtor's principal residence. "

As you look at the various respondent positions taken, they differ somewhat between themselves as to why the 506(a).

American Savings and Freddie Mac specifically focus on the word "rights" to tell us that the "other than" clause modifies only the word "rights".

Nationsbanc, Fannie Mae, and the Chapter 13 Trustee look to almost the same thing, "rights of holders".

Whereas the Realtor Group, Fannie Mae again, and Freddie Mac look to the word "claims", which they define by going back to the definitional section of the Code to determine that a claim is both a secured and an unsecured claim... indeed, a right to payment.

None of the respondents look to the word "secured" or "secured claim" together.

Now, the argument for the application of 506(a) can be made first by the rule of last antecedent, which was applied by the Ninth Circuit in the Bellamy case to say you should look to the words that immediately precede the clause in question.

Not just claims, but Bellamy looked to the adjective as well, secured claims.

Another approach is that when several words are followed by a clause and the clause is just as applicable to the first word or the last word or middle words, that clause should be read as applicable to all, which was an approach espoused by Justice O'Connor and Kennedy in the Ron Pair dissent.

Either approach is fatal, because either approach puts the word 1322(b)(2).

And it is 506(a), and 506(a) is what the respondents must avoid.

Now if, as those opposed to the application of 506(a) would argue, that it was not meant to apply, one thought which occurs is that the clause could have been put at the very first of 1322(b)(2), or at the very end.

In effect, to start off by saying "other than" what I'll call a homestead mortgage, the debtor may modify secured or unsecured claims, and you could reach the same reasoning at the end.

Or as another alternative, Congress intended that both the secured and the unsecured homestead lands were untouchable, and put in something equivalent to the 1111(b) option that is found in Chapter 11 and with which all respondents seem to be happy.

But none of those things happened.

And if you simply take the statute as it reads, 506(a), for the determination of what is a secured claim, and 1322 by either of the techniques of the "other than" clause, you come out with a statute that is consistent.

It harmonizes, there is no conflict.

We do not need to search further for the intention of Congress because it is expressed clearly.

Byron R. White:

You mean your clients weren't trying to alter a secured claim.