United States Bankruptcy Appellate Panel of the Eighth Circuit
In re: Benjamin and Teresia Bennett Debtors.
Benjamin M. Bennett, Debtor - Appellee The Paddock, LLC Creditor - Appellant, Teresia R. Bennett Debtor - Appellee
Submitted: February 23, 2018
from United States Bankruptcy Court for the Northern District
SALADINO, Chief Judge, SHODEEN and SANBERG, Bankruptcy
SHODEEN, Bankruptcy Judge
Paddock, LLC appeals the bankruptcy court's orders dated
April 20, 2017, and September 5, 2017, confirming Benjamin
and Teresia Bennett's chapter 13 plan. Because we agree
with the bankruptcy court that the Bennetts can modify The
Paddock, LLC's secured claim, we affirm.
Paddock is in the business of installing, renting and selling
manufactured homes in a planned neighborhood that it owns. In
2003 the Bennetts rented a home previously installed by The
Paddock at 222 Hackeny Court in Iowa City, Iowa. A few years
later The Paddock financed the Bennetts' purchase of that
home through an installment sale contract. At the same time
the parties entered into a Ground Lease for the lot
underneath the home. The combination of these two contracts
require the Bennetts to make monthly payments to The Paddock
for the purchase of the home as well as for a maintenance
fee. Personal property taxes are paid by the Bennetts to the
County Treasurer. The Paddock pays real estate taxes on the
land where the home sits.
the Bennetts filed a Chapter 13 bankruptcy petition. Their
proposed plan treated The Paddock's claim as partially
secured and partially unsecured as provided for under 11
U.S.C. §1322(b)(2). This code section states in relevant
part: "[T]he plan may [m]odify 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, or of holders
of unsecured claims, or leave unaffected the rights of
holders of any class of claims." (emphasis added). The
Paddock objected to this treatment arguing that it holds a
security interest in real property that is the debtor's
principal residence and is, therefore, protected from
bifurcation of its claim under section 1322(b)(2). After
conducting an evidentiary hearing, the bankruptcy court
concluded that the Bennetts' home was not real property
under Iowa law, overruled The Paddock's objection and
confirmed the Bennetts' chapter 13 plan. This appeal
followed. The Paddock presents two primary arguments. First,
that the bankruptcy court committed error because the record
as a whole demonstrates its intent to make the Bennetts'
home a fixture. Second, that the bankruptcy court incorrectly
applied the law.
appeal involves a mixed question of law (the bankruptcy
court's application of Iowa law regarding fixtures) and
fact (the bankruptcy court's fact findings regarding the
property and the intent of the parties). As the United States
Supreme Court recently observed, "Mixed questions are
not all alike." U.S. Bank Nat. Ass'n v. Vill. at
Lakeridge, LLC, 200 L.Ed.2d 218, 222 (U.S. 2018). But,
as applicable here, certain "mixed questions immerse
courts in case-specific factual issues - compelling them to
marshal and weigh evidence, make credibility judgments, and
otherwise address what we have . . . called
'multifarious, fleeting, special, narrow facts that
utterly resist generalization.'" Id. at 227
(quoting Pierce v. Underwood, 487 U.S. 552, 561-562 (1988)).
In such a situation, "appellate courts should usually
review a decision with deference. Id. (citing
Anderson v. Bessemer City, 470 U.S. 564, 574-576 (1985)).
Accordingly, we review the bankruptcy court's
determination that the manufactured home at issue is not a
fixture under Iowa law with deference; that is, for clear
error. Its conclusions of law are reviewed de novo.
Green Tree Servicing, LLC v. Coleman (In re
Coleman), 392 B.R. 767, 768 (BAP 8th Cir. 2008).
order for the anti-modification provision of 1322(b)(2) to
apply, The Paddock's claim "must both be
secured only by an interest 'in real property'
and further, that the real property must be the
'debtor's principal residence'" In re
Coleman, 392 B.R. at 770. The Paddock bears the burden
of proof on these issues. In re Snowden, 546 B.R.
39, 44 (Bankr. E.D. KY 2016); In re Hutsler, No.
16-60275, 2016 Bankr. LEXIS 4361, at *10 (Bankr. W.D. Mo.
Dec. 19, 2016); In re Petrella, 230 B.R. 829, 832
(Bankr.N.D.Ohio 1999). Here, there is no dispute that the
manufactured home is the principal residence of the debtors.
The only dispute is whether that manufactured home is real
property or personal property. That is an issue to be
determined under the laws of the state of Iowa, which is
where the home is located. In re Coleman, 392 B.R.
common law recognizes that personal property may become a
fixture and be considered real property. See Cornell
Coll. v. Crain, 211 Iowa 1343, 1345 (1931). Determining
whether an item has become a fixture is not a simple process.
Fixtures are a species of property which are the dividing
line between real and personal property, and to decide which
side of the line certain property belongs is often a
vexatious question. When we compare a thing at the extremity
of one class with a thing at the extremity of another the
difference is obvious, but when we approach the point of