Opinion
CASE NO. 16-11760
02-09-2017
IN THE MATTER OF: ERIC R. DUNLAP JESSICA A. DUNLAP Debtors
NOT FOR PUBLICATION
DECISION AND ORDER DENYING CONFIRMATION
On February 9, 2017
This matter is before the court following trial of the issues raised by confirmation of the debtors' proposed chapter 13 plan and the objection thereto filed by 21st Mortgage Corporation. The dispute centers around the value of a mobile home which is the debtors' residence and secures the objector's claim. The debtors place the value at $17,000 based on their appraisal. 21st Mortgage believes the value of the property is higher and places it at $25,400 based on its appraisal.
The trustee had also objected to confirmation, but that objection was previously withdrawn. Order for Pre-Trial Conference, dated Nov. 3, 2016.
Coincidentally, the value the debtors attributed to the property two months before their appraisal was prepared is exactly the same conclusion their appraiser reached as to value. --------
The debtors bear the burden of proving that the proposed plan is worthy of confirmation. In re Posey, 2006 WL 2711845 (Bankr. N.D. Ind. 2006); Matter of Jones, 119 B.R. 996, 997 (Bankr. N.D. Ind. 1990). Where secured claims are concerned, they must prove that the creditor will receive "not less than the allowed amount of [its secured] claim." See, 11 U.S.C. § 1325(a)(5). The first step in that process, and the one in issue here, is to properly value the creditor's collateral. In a Chapter 13 case, "with respect to personal property . . . [that value is] determined based upon the replacement value of such property as of the date of the petition. [Which is] the price a retail merchant would charge for property of that kind considering the age and condition of the property . . . ." 11 U.S.C. § 506(a)(2). See also, Associates Comm'l Corp. v. Rash, 520 U.S. 953, 117 S.Ct. 1879 (1997).
The court received evidence from two appraisers concerning their opinions as to the value of the mobile home. To reach their conclusions, each used a different methodology. The debtors' appraiser used a "comparable sales" approach, while the creditor's appraiser used an NADA computer program. As stated in open court, the court has problems with both appraisals. As for the debtors' appraisal, the court doubts its reliability because it was not based upon any actual sales, but only offers to sell, all of which came from a single entity, and did not include information concerning the age, make or model of the "comparable sales" that were compared to the home in question. However, the court also had problems with the creditor's appraisal, namely with the lack of sufficient testimony concerning how the NADA program he used arrived at the results it did or the nature of the data it uses to produce them. See, In re Wicoff, Case No. 03-33126 (Bankr. N.D. Ind. 2004) (Dees, J.) ("a system that receives data by 'remote control' from field representatives and enters it into software that translates the data into numbers like 'Colonel Sander's secret recipe' . . . should not be the ultimate determination of valuation") found at http://www.innb.uscourts.gov/opinions/opinionsearch_fulltext.asp? request=wicoff&submit=Submit (last visited Feb. 7, 2017). Cf., American Intern. Adjustment Co. v. Galvin, 86 F.3d 1455, 1464 (7th Cir. 1996) ("An expert who supplies nothing but a bottom line supplies nothing of value to the judicial process."). The court is not at all certain that it should blindly trust the software to produce a viable number, even if that number is only used as a starting point. If you do not begin at the right place, no matter how faithfully you may follow directions, you will not arrive at the proper destination.
Having considered the evidence presented at trial, with due regard for the credibility of the witnesses who testified, their experience, expertise and the information they used in formulating their opinions, the court is unable to accept the value placed upon the property by either party. Furthermore, it is not able to place any value upon the mobile home based upon the information it has been given. Accordingly, the debtors have failed to prove that 21st Mortgage Corporation will receive the value, as of the effective date of the plan, of its allowed secured claim.
Confirmation of the debtors' proposed plan is DENIED. Any further plan shall be filed within fourteen (14) days.
SO ORDERED.
/s/ Robert E . Grant
Chief Judge, United States Bankruptcy Court