Case: 14-12585 Date Filed: 09/29/2014 Page: 1 of 3
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 14-12585
Non-Argument Calendar
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D.C. Docket Nos. 2:14-cv-00095-RWS; BK-13-23492-REB
In Re: JAMES JEROME PHILLIPS,
TAMARA JOHNSTON PHILLIPS,
Debtors.
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BANK OF AMERICA, NA,
Plaintiff - Appellant,
versus
JAMES JEROME PHILLIPS,
TAMARA JOHNSTON PHILLIPS,
Defendants - Appellees.
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Appeal from the United States District Court
for the Northern District of Georgia
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(September 29, 2014)
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Before WILSON, ROSENBAUM, and COX, Circuit Judges.
PER CURIAM:
Appellees, James and Tamara Phillips, are Chapter 7 debtors. They have
two mortgages on their house. The parties do not dispute that the second lien is
completely underwater. Appellant, Bank of America, N.A. (“Bank of America”),
holds the second lien. The Phillipses moved in the bankruptcy court to have Bank
of America’s lien declared void under Section 506(d) of the Bankruptcy Code.
The bankruptcy court granted the motion, and the district court affirmed.
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). This Court held in Folendore
v. Small Business Administration, 862 F.2d 1537, 1540 (11th Cir. 1989), that
Section 506(d) permitted a Chapter 7 debtor to “strip off” a wholly “underwater”
lien, such as Bank of America’s lien in this case.
The Supreme Court of the United States rejected the reasoning of Folendore
in Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773 (1992), holding that a lien
partially underwater could not be stripped down to the value of the collateral under
Section 506(d). Nevertheless, bound by this Court’s “prior panel precedent” rule
and reasoning that Dewsnup was not “clearly on point” with Folendore, this Court
in McNeal v. GMAC Mortgage, LLC, 735 F.3d 1263, 1264–65 (11th Cir. 2012),
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declined to follow Dewsnup and other courts that had departed from Folendore.
The McNeal panel held fast to Folendore and allowed the debtor to strip off an
underwater junior lien pursuant to Section 506(d).1 We hold that McNeal and
Folendore are the law in this circuit with respect to the issue presented here.
Accordingly, we affirm the decision of the district court.
Bank of America concedes that the McNeal holding is binding precedent,
but seeks further appellate review of the issue. Should Bank of America choose to
petition this Court for en banc consideration of the issue it raises here, this Court
should seriously consider the petition.
AFFIRMED
1
“Although Folendore addressed the 1978 version of the Bankruptcy Code, the 1984
amendments to the Code did not alter the pertinent language of Section 506(a) or (d).” McNeal,
735 F.3d at 1265 n.3.
3