Rake v. Wade

PETITIONER: Rake et al.
RESPONDENT: Wade
LOCATION: Red Pearl Saloon

DOCKET NO.: 92-621
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Tenth Circuit

CITATION: 508 US 464 (1993)
ARGUED: Mar 22, 1993
DECIDED: Jun 07, 1993

ADVOCATES:
David A. Carpenter - for petitioners
David W. Carpenter - on behalf of the Petitioners
Lawrence A.G. Johnson - on behalf of the Respondent
Ronald J. Mann - as amicus curiae, supporting the Respondent

Facts of the case

Question

Media for Rake v. Wade

Audio Transcription for Oral Argument - March 22, 1993 in Rake v. Wade

William H. Rehnquist:

We'll hear argument now in No. 92-621, Donald Neal Rake v. William J. Rade... Wade, pardon me.

Mr. Carpenter.

David W. Carpenter:

Thank you, Mr. Chief Justice, and may it please the Court:

The Tenth Circuit in this matter has just plainly missed the mark.

They have adopted a case of this term... or this Court, the Ron Pair case, United States v. Ron Pair Enterprises Inc., which only superficially bears any relationship to the facts framed here.

But having committed that mistake, the Tenth Circuit has compounded that error by misreading the Ron Pair decision so as to require the petitioners to pay interest not only on an arrearage in a Chapter 13 plan, bankruptcy plan, but also with respect to fees, costs, and other charges.

And that is found in the final paragraph of the Tenth Circuit opinion.

The Ron Pair decision of this Court specifically holds, by reason of its grammatical construction, that interest is to be paid only upon the allowed secured claim, and is grammatically separated from the contractually required fees, costs, and other charges.

So in any event, and I... the brief of the respondent and also the Government failed to rebut this point.

The Tenth Circuit court of appeals must be reversed, at least for the purpose of correcting this issue.

Otherwise, we believe that the Ron Pair decision does not even apply to the facts framed in a Chapter 13 cure scenario.

First, the case of Ron Pair dealt exclusively with whether or not there was a distinction between a consensual versus a nonconsensual lien on an oversecured claim, and if that distinction made any difference with regard to paying interest as required under section 506(b) under a Chapter 11 plan of reorganization.

Secondly, Ron Pair did not involve the specific framework of Chapter 13.

It is a Chapter 11 proceeding, and there are certain statutory limitations in Chapter 13, specifically section 1322(b)(2), that are inapplicable in every Chapter 11 proceeding.

Third, Ron Pair did not involve a long-term debt, as that term is... is not employed, but intended under Chapter 13.

Byron R. White:

Are you to talk about the statutory provisions?

David W. Carpenter:

Yes, Justice White, as I am.

This... the statutory provision, section 506(b), requires that where a claim is oversecured the allowed secured claim must be paid interest and must also be paid its contractually provided for fees, costs, and other charges.

We feel that section 506(b), however, does not apply in the cure scenario found under Chapter 13, specifically section 1322(b)(5).

William H. Rehnquist:

In the what scenario?

I didn't get what adjective you used.

David W. Carpenter:

I'm sorry.

A cure scenario where a debtor in a Chapter 13 proceeding has fallen delinquent in home mortgage payments and desires to cure that arrearage, or cure that default.

Under section 1322(b)(5), the Code provides that he may... he or she may do so, and maintain regular payments.

That is the upshot of 1322(b)(5).

That particular paragraph applies only to what I have termed long-term debts; that is to say, a debt whose normal maturity date would not come to pass until completion of all Chapter 13 plan payments.

Byron R. White:

In what... and you rely on 1322(b)(2).

David W. Carpenter:

I rely on 1322(b)(2), yes, Justice White.

I also rely on 1322(b)(3) and (b)(5).

Byron R. White:

Well, you say... you say that 1322(b)(2) prohibits modification of the terms of the mortgage.