Bank of America v. Celia Ella Corrad, No. 14-13556 (11th Cir. 2014)

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Case: 14-13556 Date Filed: 11/26/2014 Page: 1 of 4 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 14-13556 Non-Argument Calendar ________________________ D.C. Docket Nos. 5:14-cv-00343-TJC; 6:13-bk-14410-KSJ In Re: CELIA ELLA CORRAD, Debtor. __________________________________________________________________ BANK OF AMERICA, N.A., Plaintiff-Appellant, versus CELIA ELLA CORRAD, Defendants-Appellee. ________________________ Appeal from the United States District Court for the Middle District of Florida ________________________ (November 26, 2014) Before JORDAN, JULIE CARNES, and JILL PRYOR, Circuit Judges. Case: 14-13556 Date Filed: 11/26/2014 Page: 2 of 4 PER CURIAM: This appeal concerns an order of the bankruptcy court permitting a debtor to “strip off” an “underwater” second mortgage under § 506(d) of the Bankruptcy Code. I. BACKGROUND Appellee Celia E. Corrad is a Chapter 7 debtor. She owns real property in Yalaha, Florida that is encumbered by two mortgages. The balance of the first lien exceeds the fair market value of the property, rendering the second lien, which appellant Bank of America, N.A. holds, completely “underwater.” On November 26, 2013, Corrad moved the bankruptcy court to declare Bank of America’s interest in her property to be unsecured and void under § 506(d) of the Bankruptcy Code. 11 U.S.C. § 506(d). Relying on In re McNeal, 735 F.3d 1263 (11th Cir. 2012), the bankruptcy court granted Corrad’s motion on May 12, 2014. Bank of America appealed that order to the district court, where it moved for a summary affirmance. The district court granted Bank of America’s motion on July 21, 2014, and this appeal followed. II. STANDARD OF REVIEW When the district court affirms an order of the bankruptcy court, we review the bankruptcy court’s decision independently of the district court. In re TOUSA, 2 Case: 14-13556 Date Filed: 11/26/2014 Page: 3 of 4 Inc., 680 F.3d 1298, 1310 (11th Cir. 2012). We review de novo the bankruptcy court’s legal conclusions. Id. III. ANALYSIS Section 506(d) of the Bankruptcy Code provides, in pertinent part, that “[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void.” 11 U.S.C. § 506(d). In Folendore v. United States Small Business Administration, we interpreted the above statutory language to hold that even an allowed claim can be deemed voidable if it is wholly unsecured. 862 F.2d 1537, 1538-40 (11th Cir. 1989). Thus, under Folendore, a debtor can move a bankruptcy court to strip off an underwater lien. Id. Three years after the Folendore decision, the Supreme Court issued its opinion in Dewsnup v. Timm, 502 U.S. 410 (1992), which Bank of America argues “squarely repudiated Folendore’s interpretation of section 506(d).” Bank of America claims that “Folendore [] could not have survived Dewsnup.” Unfortunately for Bank of America, we considered and rejected this same argument in our 2012 McNeal decision. 735 F.3d at 1265-66. There, although we acknowledged Dewsnup’s seeming disavowal of Folendore’s “plain language analysis” of § 506(d), we declined to deviate from that opinion because Dewsnup was “not ‘clearly on point,’” as it “disallowed only a ‘strip down’ of a partially 3 Case: 14-13556 Date Filed: 11/26/2014 Page: 4 of 4 secured mortgage lien and did not address a ‘strip off’ of a wholly unsecured lien.” Id. at 1265. Consequently, McNeal held that Folendore remained the controlling precedent within this Circuit. Id. Under our prior precedent rule, we are bound by this Court’s prior decisions “unless and until [they are] overruled by this court en banc or by the Supreme Court.” United States v. Brown, 342 F.3d 1245, 1246 (11th Cir. 2003). Bank of America argues that Folendore was wrongly decided, but concedes that it and McNeal remain binding precedent and control this case. Accordingly, the bankruptcy court did not err by permitting Corrad to strip off Bank of America’s underwater lien, and the decision of the district court is therefore affirmed. AFFIRMED. 4