Appeal from the Ninth Circuit Bankruptcy Appellate Panel. Ashland, Volinn and Jones, Judges, Presiding.
Before: Alfred T. Goodwin, Mary M. Schroeder and John T. Noonan, Jr., Circuit Judges. Opinion by Judge Schroeder; Dissent by Judge Noonan.
SCHROEDER, Circuit Judge:
General Motors Acceptance Corporation (GMAC) appeals from the decision of the Bankruptcy Appellate Panel (BAP) which established the value of an automobile owned by George H. and Carol J. Mitchell. The purpose of the valuation was to determine the amount of GMAC's allowed secured claim in the Mitchells' Chapter 13 cram-down bankruptcy plan. A careful reading of the statutory language involved here, 11 U.S.C. § 506(a), and the overwhelming weight of authority support the outcome reached by the BAP. We affirm its use of the wholesale blue book valuation. We also affirm the BAP's holding that GMAC did not have a security interest in the mechanical service agreement the debtors had purchased with the car.
On January 14, 1987, the Mitchells bought a 1987 Cadillac El Dorado, paying $5,000 down and signing a conditional sale contract under which they agreed to pay the remaining $26,940 plus interest at a rate of 11 percent annually in 60 monthly installments of $585. The purchase price included $695 for a 60-month, unlimited mileage, mechanical service contract under the General Motors Purchaser Protection Plan, a contract assumable by a subsequent purchaser of the car on payment of $25. The conditional sale contract gave the seller or its assignee "a security interest in the vehicle and all parts and accessories put on the vehicle" and in all insurance premiums or service contract premiums financed by the seller. On January 26, 1987, the seller assigned the contract to GMAC.
On March 4, 1988, the Mitchells filed a joint petition under Chapter 13. They proposed a plan under which they would pay their secured creditors, over time, the full value of their allowed claims, a projected total of $76,000 over 4 1/2 years. They would pay unsecured creditors 10 percent of their allowed claims. The bankruptcy court confirmed the plan on May 11, 1988.
In April 1988, GMAC filed a claim as a secured creditor in the amount of $27,062.25. The Mitchells objected. At an evidentiary hearing George Mitchell testified that he was a commercial glass contractor and that this business was his sole source of income for making the payments required under the Chapter 13 plan. As part of his glass business he drove to customers' places of business either in his truck or in the Cadillac.
Two expert appraisers testified as to the value of the Cadillac. The Mitchells' expert testified that as of March 4, 1988, the Cadillac had a value of $20,761, based on low, or wholesale, Kelley Blue Book values. He stated that this is what the trustee in bankruptcy could reasonably expect to receive selling the Cadillac. The expert hired by GMAC testified that on March 4, 1988, the value of the Cadillac was $24,185, based on high, or retail, Kelley Blue Book values.
The bankruptcy court chose the value proposed by GMAC. To this value the court added the value of the mechanical service contract, which the court put at its original cost of $695.
The Mitchells appealed. The Bankruptcy Appellate Panel held that the Cadillac should have been valued at its wholesale value and further held that GMAC did not have a security interest in the mechanical service contract but only an interest in any return of premiums due on cancellation of that contract.
GMAC appeals to this court.
WHOLESALE OR RETAIL VALUATION
Neither the Supreme Court nor any circuit court has considered what standard should be used in a Chapter 13 proceeding to establish a creditor's allowed security interest in an automobile. The issue is a recurring one in the bankruptcy courts, so our decision is significant, at least in terms of the number of cases it may ...