David M. Warren, United States Bankruptcy Judge.
This matter comes before the court upon the Minutes of 341 Meeting and Motion for Confirmation of Plan ("Confirmation Motion")
At the Hearing, the Debtor and Kenneth R. Wiggins ("Wiggins") testified on behalf of the Debtor. The court admitted Wiggins as an expert in personal property with general knowledge of manufactured home values, although not as a certified appraiser of manufactured homes. Walter Banks ("Banks") testified on behalf of 21st Mortgage, and the court admitted Banks as an expert in the field of manufactured home valuations. Based upon the testimony, other evidence presented, filed case information, and arguments of counsel, the court makes the following findings of fact and conclusions of law:
1. The Debtor filed a voluntary petition ("Petition") for relief under Chapter 13 of the United States Bankruptcy Code ("Code") on April 7, 2016, and the court appointed the Trustee to administer the estate pursuant to 11 U.S.C. § 1302.
2. On or about June 8, 2008,
3. The Note, which was assigned by First Choice Homes to 21st Mortgage, grants the holder a security interest in the Collateral. 21st Mortgage properly perfected its security interest in the Collateral by noting its lien on the Collateral's certificate of title. The Note requires the Debtor to make monthly payments to 21st Mortgage in the amount of $409.02 for a period of 266 months, commencing July 15, 2008.
4. On April 20, 2016, 21st Mortgage filed a proof of claim which states that on the date of the Petition, the balance due under the Note was $39,359.91 ("21st Mortgage Claim"), and the Note was in default for five (5) payments, plus late fees, and minus a previous overage totaling $3,178.87.
5. The Collateral, which is generally described as a "double wide mobile home," serves as the Debtor's residence and is located upon real property ("Collateral Location") in Jones County which is owned by the Debtor's mother. The Collateral Location is within the rural township of Trenton, North Carolina which is near the city of New Bern, North Carolina.
6. The Debtor's Schedule A/B: Property filed with the Petition values the Collateral at $28,600.00.
7. On April 7, 2016, the Debtor filed a proposed Chapter 13 Plan ("Plan"). The Plan provides for the Debtor to make monthly payments to the Trustee in the amount of $696.00 for a period of 60 months. The Plan proposes that 21st Mortgage be allowed a secured claim in the amount of $28,600.00 plus interest accruing at the rate of 5.50% per annum to be paid
8. In the Objection, 21st Mortgage resists the proposed treatment of its Claim and disputes the Debtor's valuation of the Collateral, contending that the fair market value of the Collateral is significantly higher than $28,600.00. 21st Mortgage requests the court to determine the value of the Collateral and 21st Mortgage's secured status pursuant to 11 U.S.C. § 506(a) and Rule 3012 of the Federal Rules of Bankruptcy Procedure.
9. The Debtor contends that the Collateral was not properly installed at the Collateral Location. The Debtor described various damage or disrepair to the Collateral including separation of the two sides, the top, and the bottom; separation of crown molding; cracks throughout the structure; unlevel floors; damaged and irreplaceable kitchen faucets; and splintered steps. The Debtor had to replace most of the Collateral's original appliances due to damage by lightning.
10. The Plan's valuation of the Collateral was based upon Wiggins' written appraisal ("Wiggins Appraisal") of the Collateral dated March 15, 2016.
Wiggins NADA Value $ 35,393.00 Less Repairs Re-leveling $ 5,000.00 Carpet replacement 2,500.00 Molding removal — repainting 600.00 Storm door replacement 200.00 Kitchen cabinet replacement 1,000.00 Replace steps in front & back 250.00 Door frame repair 200.00 __________ (9,750.00) Plus Enhancements 5 Replacement refrigerator 242.00 Skirting (incomplete) 300.00 Location adjustment 353.00 __________ 895.00 ___________ Total Wiggins Adjusted Value $ 26,538.00 ===========
11. 21st Mortgage's dispute of the Plan's valuation of the Collateral is based upon Banks' written appraisal ("Banks Appraisal") of the Collateral dated July 11, 2016.
Banks NADA Value $ 38,700.00 Less Cost of Repairs Pressure wash $ 150.00 Repair siding 150.00 Replace faucet 100.00 Re-stain cabinets 50.00 Re-stretch carpet 75.00 Repair crown molding 100.00 Re-level home 500.00 _________ (1,125.00) Plus Added Components Roofing 911.00 Siding 751.00 Dual-glazed windows 592.00 Carpeting 392.00 Full bathtub 816.00 Fiberglass shower stall 136.00 Fiberglass tub 191.00 Garden tub 226.00 Side-by-side refrigerator 398.00 Ice maker 66.00 Dishwasher 177.00 Furnace 228.00 Air conditioner ready furnace 114.00 Washer-dryer outlet 76.00 150-200 amp. Electricity 114.00 40 gallon water heater 70.00 Drapes/curtains 242.00 Fireplace 762.00 Smoke detector 128.00 Wind zone 2 construction 1,042.00 _________ 7,432.00 Plus Accessories Central air conditioning 846.00 Porch/deck 96.00 Porch/deck steps 202.00 Block skirting 4,000.00 _________ 5,144.00 __________ Total Banks Adjusted Value $50,151.00 9 ==========
1. This matter is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(K) and (L). Bullard v. Blue Hills Bank, ___ U.S. ___, 135 S.Ct. 1686, 1693, 191 L.Ed.2d 621 (2015) (holding that the confirmation process is a core proceeding, not the ruling on each specific plan); In re Hoekstra, 253 B.R. 193, 195 (Bankr. E.D. Va. 2000) (finding that a determination of a creditor's secured status under 11 U.S.C. § 506 is a core proceeding in which final judgments and orders may be entered by a bankruptcy judge).
2. The court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 151, 157, and 1334. The court has the authority to hear this matter pursuant to the General Order of Reference entered August 3, 1984 by the United States District Court for the Eastern District of North Carolina.
3. The Code provides that "[a]n allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property... and is an unsecured claim to the extent that the value of such creditor's interest... is less than the amount of such allowed claim." 11 U.S.C. § 506(a). In Chapter 13 cases, this ability to "bifurcate" a secured creditor's claim is restricted when the collateral is real property that serves as the debtor's residence. 11 U.S.C. § 1322(b)(2) (stating that a Chapter 13 plan may "modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence"). In such cases, the court shall confirm a proposed plan if, inter alia, "the value, as of the effective date of the plan, of property to be distributed under the plan on account of [an allowed secured claim] is not less than the allowed amount of such claim ...." 11 U.S.C. § 1325(a)(5)(B)(ii). In this case, while the Collateral is the Debtor's residence, it is not real property; therefore, the Plan may bifurcate 21st Mortgage's Claim if the court determines that the value of the Collateral is less than the amount of the Claim.
4. When considering valuations of manufactured homes or other motor vehicles, this district finds an NADA value to be a "`starting point' for use in determining the correct retail value of personal property for plan cram down purposes under 11 U.S.C. § 1325(a)(5)." In re Hardy, Case No. 15-05431-5-JNC, 2016 WL 3549078 at *2 (Bankr. E.D.N.C. June 21, 2016) (citing In re Russell, 211 B.R. 12 (Bankr. E.D.N.C. 1997)). That value "is subject to further adjustment based upon evidence concerning the actual condition and need for repairs of the [property]." Id. (citing In re Marshall, 181 B.R. 599 (Bankr. N.D. Ala. 1995)).
5. The disparity between the Wiggins NADA Value and the Banks NADA Value is attributable the application of different dimensions for the Collateral. Unlike Wiggins, Banks performed a physical measurement of the Collateral and articulately explained to the court the proper procedure for measuring manufactured homes. The court finds the Banks NADA Value to be the more appropriate starting point for determination of the Collateral's
6. When appropriately valuing manufactured homes using the NADA, an appraiser begins with a standard "box" that is the basic unit and adds value for components and accessories and subtracts value for damage and needed repairs. The additions are similar to pricing a base model of a standard motor vehicle and increasing the price for luxury or sport package options such as a sunroof or four-wheel drive. The reductions are similar to decreasing that price for high mileage or body damage. It appears that Wiggins did not follow this logical approach to valuation. Instead, he relied on a more random and inconsistent valuation approach.
7. The court was impressed and persuaded by Banks' detailed testimony describing the methodology used in the Banks Appraisal and how each adjustment from the Banks NADA Value was determined. The Banks Valuation is far more accurate than the Wiggins Valuation. While Wiggins also made adjustments to the Wiggins NADA Value starting price, these adjustments were more general and subjective. Banks was by far the better prepared and more credible witness. Without a better correlation to the Collateral, the value of the property in the Craigslist Listing has little relevance and can hardly be considered for illustrative purposes.
8. Despite its initial adoption of the Banks Valuation, the court agrees with the Debtor and Wiggins that various repairs are needed to the Collateral. The court believes that the Costs of Repairs reflected in the Banks Valuation should be tripled from $1,125.00 to $3,375.00. The Banks Valuation already includes a deduction of $1,125.00 and should, therefore, be further reduced by the amount of $2,250.00.
9. The court also agrees with the Debtor's argument that while the Collateral constitutes personal property that is feasibly mobile, the rural Collateral Location negatively affects the Collateral's value. For this reason, the court will apply a five percent (5%) discount ("Location Discount") in its final valuation. The Location Discount also considers the cost of having workers travel to the Collateral Location to undertake the repairs.
10. The court concludes that the Collateral's value is as follows:
Banks Valuation $ 50,200.00
Less Additional Costs of Repair (2,250.00)
___________
Subtotal 47,950.00
Less Location Discount (2,398.00)
___________
Collateral Value $ 45,552.00
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11. The Collateral's value is greater than the amount of 21st Mortgage's Claim; therefore, the Claim must be treated as fully secured pursuant to 11 U.S.C. §§ 506(a) and 1325(a)(5)(B), and the Plan cannot be confirmed; now therefore,
IT IS ORDERED, ADJUDGED, AND DECREED as follows:
1. The value of the Collateral be, and hereby is, adjudicated to be $45,552.00;
2. Confirmation of the Plan be, and hereby is, denied without prejudice; and
3. 21st Mortgage's Claim be, and hereby is, adjudicated to be an allowed secured claim in the amount of $39,359.91 pursuant to 11 U.S.C. § 506(a), and the Debtor and
