Sagendorph was recently overturned on appeal to the district court. SeeWells Fargo Bank, NA. v. Sagendorph (In re Sagendorph) , 562 B.R. 545 (D. Mass. 2017). Two district courts in other circuits have likewise vacated plans with forced vesting provisions. SeeHSBC Bank USA v. Zair , 550 B.R. 188 (E.D.N.Y. 2016) ; Bank of N.Y. Mellon v. Watt , 2015 WL 1879680 (D. Or. Apr. 22, 2015). Bankruptcy courts outside of Massachusetts have also generally eschewed forced vesting.
" (Bankr. Rec. at 127.) AccordHSBC Bank USA v. Zair , 550 B.R. 188, 192–93, 203 (E.D.N.Y. 2016) (adopting statement). This Court joins in this view and defines ‘vesting’ as the acceptance of an offer to transfer ownership.
In the wake of the mortgage foreclosure crisis, several courts have been confronted with the question of whether a debtor may require a creditor to take title to collateral, over that creditor's objection. See, e.g.,In re Sagendorph , 562 B.R. 545 (D. Mass. 2017) ; In re Brown, 563 B.R. 451 (D. Mass. 2017) ; HSBC Bank, USA v. Zair , 550 B.R. 188 (E.D.N.Y. 2016), appeal dismissed Nov. 15, 2016; In re Tosi , 546 B.R. 487 (Bankr. D. Mass. 2016) ; In re Arsenault , 456 B.R. 627 (Bankr. S.D. Ga. 2011). Commentators have noted the lack of legal clarity on this question.
A debtor bears the burden of establishing by a preponderance of the evidence that his or her plan satisfies the requirements of the Bankruptcy Code and is appropriate for confirmation. See In re Zair , 535 B.R. 15, 18 (Bankr. E.D.N.Y. 2015), rev'd , HSBC Bank USA, N.A. v. Zair , 550 B.R. 188 (E.D.N.Y. 2016), appeal dismissed , No. 16–1648 (2d Cir. Dec. 7, 2016); In re Merhi , 518 B.R. 705, 709 (Bankr. E.D.N.Y. 2014). The contents of a chapter 13 plan are governed by § 1322, which is generally divided between mandatory provisions outlined in § 1322(a) (what a chapter 13 plan "shall" provide), and permissive provisions outlined in § 1322(b) (what a chapter 13 plan "may" provide).
See, e.g., In re Sagendorph, 562 B.R. 545 (D. Mass. 2017) ; In re Brown, 563 B.R. 451 (D. Mass. 2017) ; HSBC Bank, USAv.Zair, 550 B.R. 188 (E.D.N.Y. 2016), appeal dismissed Nov. 15, 2016; In re Tosi, 546 B.R. 487 (Bankr. D. Mass. 2016) ; In re Arsenault, 456 B.R. 627 (Bankr. S.D. Ga. 2011). Commentators have noted the lack of legal clarity on this question.
(Conveying title to property after judicial foreclosure sale); U.S. Bank Nat'l Ass'n as Tr. for RMAC Tr. Series 2016-CTT v. Bridges, 3:17-CV-0085-MCR-GRJ, 2019 WL 2323536, at *1 (N.D. Fla. Feb. 26, 2019) (same); See, e.g., Allen v. Campbell, 2021 WL 1239803, *5 (D. Idaho 2021), appeal dismissed, 2021 WL 4693230 (9th Cir. 2021) (divesting defendant's title and vesting in plaintiff); Fort v. Cilwa, 2017 WL 8772164, *2 (M.D. Fla. 2017) (divesting title and vesting in trustee); In re Zair, 535 B.R. 15, 23 (Bankr. E.D. N.Y. 2015), rev'd on other grounds and remanded, 550 B.R. 188 (E.D. N.Y. 2016) (“[V]esting provides a simplified mechanism to convey legal title to the secured lender.”).
The cases that have denied a property-for-debt plan are almost exclusively in the context of surrender under § 1325(a)(5)(C). See, e.g.,Sagendorph, 562 B.R. at 555 ; HSBC Bank USA, N.A. v. Zair (In re Zair) , 550 B.R. 188, 195-202 (E.D.N.Y. 2016) ; In re Tosi, 546 B.R. at 493. These cases are distinguishable because they do not consider distributing property pursuant to § 1325(a)(5)(B) and do not fully explore application of that subpart.
Other courts, however, followed Rose and held that a forced vesting plan cannot be confirmed over the objection of the secured creditor. See, e.g.,In re Brown , 563 B.R. 451 (D. Mass. 2017) (reversing on appeal a bankruptcy court order confirming plan vesting title in an unwilling secured creditor); Wells Fargo Bank v. Sagendorph (In re Sagendorph) , 562 B.R. 545 (D. Mass. 2017) (reversing Sagendorph on appeal); HSBC Bank USA v. Zair (In re Zair) , 550 B.R. 188 (E.D.N.Y. 2016) (reversing Zair on appeal); Bank of New York Mellon v. Watt (in re Watt) , 2015 WL 1879680 (D. Ore. April 22, 2015) (reversing Watt ); In re Williams , 542 B.R. 514 (Bankr. D. Kan. 2015). The majority view and more recent trend—particularly in light of the outcome on appeal in district courts—seems to follow Rose and favor interpretation of § 1325(a)(5)(C) to preclude confirmation over a secured creditor's objection of a Chapter 13 plan that vests title to collateral in the creditor.
Surrender means making the property available to be taken; vesting means transferring title. E.g., HSBC Bank USA, N.A. v. Zair, 550 B.R. 188, 192–93 (E.D.N.Y. 2016). Thus, a chapter 13 debtor may "surrender" a property to a secured creditor or attempt to vest property to a secured creditor, but cannot force title to vest to a secured creditor over the objection of the creditor.
In re Coughlin, 568 B.R. 461, 467-68 (Bankr. E.D.N.Y. 2017); see AmeriCredit Fin. Servs., Inc. v. Tompkins, 604 F.3d 753, 756 (2d Cir. 2010); see also HSBC Bank USA, N.A. v. Zair, 550 B.R. 188, 192 (E.D.N.Y. 2016); Newberry, 2007 Bankr. LEXIS 2351, at *6-7. Here, SONYMA has not consented to or otherwise accepted Debtor's chapter 13 plan, so § 1325(a)(5)(A) is not satisfied.