Opinion
MEMORANDUM DECISION ON MOTIONS FOR VALUATION AND FOR RELIEF FROM STAY
PETER W. BOWIE, Chief Judge
These matters came on regularly for evidentiary hearing on the Creditor's motion for relief from stay and on the Debtor's motion to value his residence and to avoid the Creditor's junior lien on the property.
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334 and General Order No. 312-D of the United States District Court for the Southern District of California. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (G), and (O).
This case was filed September 10, 2009. Debtor's appraiser used a date of value of July 31, 2009, while Creditor's appraisal date of value was December 10, 2009. An important threshold question is what is the date of valuation for purposes of a lien strip motion. The issue is not free from doubt, but the Court is persuaded that the better approach in routine consumer cases is to utilize the date of filing of the petition because it is the seminal date as of which the claim relationships of debtor and creditor are fixed for purposes of the bankruptcy case. In re Johnson , 165 B.R. 524 (S.D. GA. 1994). Section 502 of Title 11, United States Code, is illustrative. In subpart (b) it provides that upon objection to a creditor's claim, the court shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition...."
In the instant case, the Debtor testified without controversion that the payoff amount of the senior loan on the property was $250,321.77 as of October 1, 2009. Consequently if the value of the debtor's property as of the petition date is less than the amount, then Creditor's lien is wholly unsecured and may be avoided in a Chapter 13 plan pursuant to 11 U.S.C. § 1322(b)(2). Conversely, if the property value is in excess of the senior debt, then no part of Creditor's lien may be avoided because of the prohibition of § 1322(b)(2) and In re Nobelman , 508 U.S. 324 (1993).
Debtor's appraiser testified that her opinion of value as of July 31, 2009 was $220,000, while Creditor's appraiser testified he thought it was worth $263,000 as of December 10, 2009. As noted, the bankruptcy petition was filed September 10, 2009. Both appraisers utilized the sales comparison approach, adjusting various factors by dollar amounts to reconcile the subject property with the compared sale. The Creditor's appraisal adjusted 5 of 6 of his comparables upwards $5,000 in recognition that the seller was the bank, which he testified had an effect on the market. The Court disagrees, for two reasons. First, that is the market. Second, most of those sales resulted in bidding competition with the final sales price exceeding the asking price.
Only one comparable was used by both appraisers. Debtor's appraiser used three comps with lot sizes more than 2000 square feet less than the subject (which is 7841). One adverse impact of smaller lot size is greater density of housing on a street. The Court is persuaded by the testimony that the location of the subject in a small subdivision adjacent to the Sweetwater Reservoir is desirable.
Based on the testimony and photos, the Court finds the condition of the subject property to be average, not below average, although it was overflowing with personal property. There was no evidence of discoloration, no holes in walls, carpets not stained. Debtor's appraiser deducted $10,000 for difference in one level of condition, while Creditor's used $5,000. The Court is persuaded that $10,000 is a more accurate adjustment for a 3 bedroom 1 story home of about 1, 500 square feet of living area.
Debtor's appraiser testified that she reviewed the comparables used by Creditor's appraiser and made her own adjustments to five of them. Her assessment of his Comp 1, adjusted, was $242,650; Comp 2, $254,000; Comp 3, $246,000; Comp 4, $243,400; Comp 5, $231,700. Then she testified that she examined overall sales trends in the area over the second, third and fourth quarters of 2009. The numbers are relevant only in relation to each other and not the specific subject house, but they are significant. For the second quarter the average was $216,250; the third quarter jumped to $267,000; and the fourth quarter settled to $254,000. Debtor's appraiser also testified that she adjusted her opinion of value based on the date of valuation of September 10, 2009, and when she did so her value increased to $240,000-$245,000
Based on all the foregoing, and having adjusted the value because of the Court's finding concerning the condition of the subject property, thereby increasing the value of the subject by $10,000, the Court finds and concludes that the value of the subject property on September 10, 2009 was approximately $253,000.
Accordingly, because the value of the subject property is determined to be $253,000, which is more than the debt owed to the senior lienholder, the junior lien of Ronald M. Smith, Trustee of the RMS Living Trust dated 08/17/04 is partially secured. Because it is partially secured, no part of it may be stripped down. 11 U.S.C. § 1322(b), In re Nobelman , 508 U.S. 324 (1993).
Further, the lien of the Trust is not adequately protected either by the value of the property or by regular monthly payments to the Trust. Therefore, relief from the automatic stay of 11 U.S.C. § 362 is warranted under both subpart (d) (1) and (d) (2), and is hereby granted.
Counsel for the Trust shall prepare and lodge a separate form of order consistent with the foregoing within fifteen (15) days of the date of entry of this Memorandum Decision.