Case: 18-50420 Document: 00515707927 Page: 1 Date Filed: 01/14/2021
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 18-50420 United States Court of Appeals
Fifth Circuit
FILED
January 14, 2021
IN RE: LUCIO BARRAGAN-FLORES,
Lyle W. Cayce
Debtor. Clerk
EVOLVE FEDERAL CREDIT UNION,
Appellee,
v.
LUCIO BARRAGAN-FLORES,
Appellant.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 3:17-CV-364
Before OWEN, Chief Judge, and WIENER and DENNIS, Circuit Judges.
PRISCILLA R. OWEN, Chief Judge:
Lucio Barragan-Flores filed for Chapter 13 bankruptcy. At the time, he
had outstanding balances on car loans with Evolve Federal Credit Union that
he had obtained to purchase a GMC Sierra and a Toyota Camry. The loans
were cross-collateralized, meaning that the Sierra and Camry were both
pledged as collateral for each loan. Barragan-Flores’s bankruptcy plan (the
Plan), citing 11 U.S.C. § 1325(a)(5), proposed retention of the Sierra, “cram
down” of the loan for the purchase of the Sierra, and surrender of the Camry
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No. 18-50420
as the collateral for the purchase the Camry. The bankruptcy court approved
the Plan, but the district court reversed, holding that Barragan-Flores could
not elect to surrender one of the vehicles as the collateral securing the Camry
Loan (the Camry) and retain the other vehicle (the Sierra). We affirm.
I
The facts of this case are undisputed. In June 2017, Lucio Barragan-
Flores filed a Chapter 13 bankruptcy petition. Prior to filing his Chapter 13
petition, Barragan-Flores entered into two loan agreements with Evolve
Federal Credit Union (Evolve). Barragan-Flores used the proceeds of the first
loan to purchase a 2011 GMC Sierra (Sierra Loan), and the proceeds of the
second loan to purchase a 2016 Toyota Camry (Camry Loan). Barragan-Flores
possessed both vehicles at the time of his Chapter 13 filing. Both loan
agreements contain a cross-collateralization provision that states: “Collateral
securing other loans with the Credit Union may also secure this loan.” The
parties stipulated that each loan agreement is “cross-collateralized by both
vehicles.” Evolve filed two separate Proofs of Claim, one for the Camry Loan
(Camry Claim) and another for the Sierra Loan (Sierra Claim).
Barragan-Flores could no longer afford to keep both vehicles, so his
Chapter 13 Plan proposed that he retain the Sierra, “cram down” the Sierra
Loan, and surrender the Camry to Evolve as collateral for the Camry Loan.
Evolve filed an objection to the Plan, specifically the “partial surrender” of
collateral under the Camry Claim, arguing that the cross-collateralization
provisions in the loans prevented Barragan-Flores from surrendering the
Camry and retaining the Sierra.
The bankruptcy court entered an order confirming the Plan. Evolve filed
a motion for a new trial, which the bankruptcy court denied. Evolve appealed
the orders confirming the Plan and denying the motion for a new trial to the
district court. The district court reversed the bankruptcy court’s order
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confirming the Plan and remanded the case for further proceedings in
accordance with its order. 1 Barragan-Flores appeals.
II
When reviewing the ruling of a bankruptcy court, this court applies the
same standards of review as the district court. 2 We review findings of fact for
clear error and legal conclusions de novo. 3
Section 1325(a) of the Bankruptcy Code contains a number of
requirements regarding a bankruptcy court’s confirmation of a Chapter 13
plan. 4 Subsection (a)(5) governs a plan’s treatment of an allowed secured
claim: 5
(a) Except as provided in subsection (b), the court shall confirm
a plan if—
....
(5) with respect to each allowed secured claim provided for
by the plan—
(A) the holder of such claim has accepted the plan;
(B)(i) the plan provides that—
(I) the holder of such claim retain the lien
securing such claim until the earlier of—
(aa) the payment of the underlying debt
determined under nonbankruptcy law; or
(bb) discharge under section 1328; and
1 Evolve Fed. Credit Union v. Barragan-Flores (In re Barragan-Flores), 585 B.R. 397,
403 (W.D. Tex. 2018).
2 ASARCO L.L.C. v. Barclays Capital, Inc. (In re ASARCO, L.L.C.), 702 F.3d 250, 257
(5th Cir. 2012) (citing In re Scopac, 624 F.3d 274, 279-80 (5th Cir. 2010)).
3 In re Cahill, 428 F.3d 536, 539 (5th Cir. 2005) (per curiam) (citing In re Coho Energy,
Inc., 395 F.3d 198, 204 (5th Cir. 2004); In re Barron, 325 F.3d 690, 692 (5th Cir. 2003)).
4 11 U.S.C. § 1325(a).
5 Assocs. Com. Corp. v. Rash, 520 U.S. 953, 956-57 (1997).
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(II) if the case under this chapter is dismissed or
converted without completion of the plan, such
lien shall also be retained by such holder to the
extent recognized by applicable nonbankruptcy
law;
(ii) the value, as of the effective date of the plan, of
property to be distributed under the plan on account
of such claim is not less than the allowed amount of
such claim; and
(iii) if—
(I) property to be distributed pursuant to this
subsection is in the form of periodic payments,
such payments shall be in equal monthly
amounts; and
(II) the holder of the claim is secured by personal
property, the amount of such payments shall not
be less than an amount sufficient to provide to
the holder of such claim adequate protection
during the period of the plan; or
(C) the debtor surrenders the property securing such
claim to such holder . . . 6
The Supreme Court has explained that, under § 1325(a), “a plan’s
proposed treatment of secured claims can be confirmed if one of three
conditions is satisfied: The secured creditor accepts the plan; the debtor
surrenders the property securing the claim to the creditor; or the debtor
invokes the so-called ‘cram down’ power.” 7 The “cram down” option allows the
debtor to keep the collateral over the objection of the creditor and provide the
creditor with payments that, over the life of the plan, will total the present
value of the collateral. 8
6 11 U.S.C. § 1325(a)(5).
7 Rash, 520 U.S. at 957 (citations omitted) (citing 11 U.S.C. § 1325(a)(5)).
8 Id. (citing 11 U.S.C. § 1325(a)(5)(B)).
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Barragan-Flores argues that the plain language of § 1325(a)(5), which
requires a debtor to select an option “with respect to each allowed secured
claim,” 9 allows debtors to select different options for each individual claim
against their estate. Under Barragan-Flores’s reading of § 1325(a)(5), he may
select a different option for each car loan claim regardless of the cross-
collateralization provisions. Evolve focuses on the fact that § 1325(a)(5)
presents its options using the conjunction “or,” arguing that, accordingly, “the
options . . . for treatment of secured claims are mutually exclusive.” Under
Evolve’s reading of § 1325(a)(5), Barragan-Flores must select one of the three
options for each claim—he may not select different options for different
collateral securing the same claim. The district court agreed with Evolve and
held that Barragan-Flores “must either cramdown or surrender all of the
collateral securing the Camry Loan, i.e., the Sierra and the Camry.” 10
We agree with the district court. The text of § 1325(a)(5) does allow
debtors to select a different option “with respect to each allowed secured
claim.” 11 However, allowing a debtor to select a different § 1325(a)(5) option
for each claim is different from allowing a debtor to select different options for
different collateral securing the same claim. While § 1325(a)(5) allows the
former, it does not allow the latter: its use of the conjunction “or” between the
options provided in subsection (A), (B), and (C) makes it clear that debtors may
choose only one of those three options for each claim. A plan violates that
requirement when it selects different options for different collateral securing
the same claim.
9 11 U.S.C. § 1325(a)(5).
10 Evolve Fed. Credit Union v. Barragan-Flores (In re Barragan-Flores), 585 B.R. 397,
401 (W.D. Tex. 2018).
11 11 U.S.C. § 1325(a)(5).
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Barragan-Flores takes issue with this rule because it prevents debtors
from selecting different options for different claims. However, debtors are not
always free to select different options for different claims. For example, when
a single item of collateral secures two different claims, a debtor is not able to
choose distinct options for each claim—he may surrender the item of collateral
or retain it, but not do both. Our decision today merely restricts a debtor’s
ability to select different § 1325(a)(5) options for different pieces of collateral
securing the same loan.
III
Williams v. Tower Loan of Mississippi (In re Williams) supports our
decision. 12 Williams analyzed how a debtor may employ § 1325(a)(5)’s
options. 13 In Williams, the debtor’s plan sought to address one secured claim
by surrendering some of the collateral securing the claim and paying the cram
down value of the remaining collateral. 14 We held that the debtor’s plan could
not be approved because “[t]he plain language of [§ 1325(a)(5)] does not give
the debtor the right to adopt a combination of the options offered in (B) and
(C).” 15
In Williams, we largely adopted the reasoning of First Brandon National
Bank v. Kerwin (In re Kerwin), a Second Circuit case involving a Chapter 12
proceeding, noting that Chapter 12 “is modeled after and is identical to its
Chapter 13 counterpart.” 16 In Kerwin, the Second Circuit held that a debtor
had to choose the option provided in either subsection (B) or (C) and could not
12 168 F.3d 845 (5th Cir. 1999).
13 Id. at 846-47.
14 Id. at 846.
15 Id. at 847.
16 Id. (citing First Brandon Nat’l Bank v. Kerwin (In re Kerwin), 996 F.2d 552 (2d. Cir.
1993)).
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mix-and-match. 17 The Second Circuit also held that the language in subsection
(C) allowing for the surrender of “the property securing such claim” refers to
all of the debtor’s collateral and not just part of it. 18
In Williams, we also cited the Supreme Court’s statements in Associates
Commercial Corporation v. Rash that (1) “[a] plan’s proposed treatment of
secured claims can be confirmed if one of three conditions is satisfied” and
(2) “[i]f a secured creditor does not accept a debtor’s Chapter 13 plan, the debtor
has two options for handling allowed secured claims: surrender the collateral
to the creditor . . . or, under the cram down option, keep the collateral over the
creditor’s objection.” 19 As we said in Williams, those statements “strongly
indicate[] that a debtor cannot combine subsections (B) and (C) to create a
fourth option.” 20
Barragan-Flores attempts to distinguish Williams by emphasizing that
the dispute in Williams involved a single promissory note. Barragan-Flores
argues that, because the decision in Williams only involved one claim, Williams
did not address the fact that § 1325(a)(5) requires a debtor to make a decision
with respect to “each” secured claim. 21 The bankruptcy court agreed with
Barragan-Flores’s reading of Williams and held that the case was factually
distinguishable because it dealt with a single loan.
The district court reasoned that Evolve holds two allowed secured
claims, which it said “should be analyzed separately despite the cross-
collateralization clauses.” 22 However, the district court took issue with the
17Kerwin, 996 F.2d at 556-57.
18Id. at 557.
19 Williams, 168 F.3d at 847 (omission in original) (quoting Assocs. Com. Corp. v. Rash,
520 U.S. 953, 957 (1997)).
20 Id.
21 11 U.S.C. § 1325(a)(5).
22 Evolve Fed. Credit Union v. Barragan-Flores (In re Barragan-Flores), 585 B.R. 397,
401 (W.D. Tex. 2018).
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bankruptcy court’s focus on the number of claims at issue. In the district
court’s view, “Williams does not lend itself to any apparent distinction in cases
where more than one claim is secured by the same collateral.” 23 Instead,
according to the district court, Williams “turned on the treatment of the
collateral securing the claim at issue.” 24 Examining “the treatment of the
collateral securing the claim at issue” in this case—the Camry Claim—the
district court held that the Plan did exactly what Williams prohibited: selected
different § 1325(a)(5) options for different items of collateral. 25
The district court was correct. Williams held that debtors must select
the same § 1325(a)(5) option for all of the collateral securing a single claim.26
Applying that rule to the Camry Claim, for the Plan to be approvable under
§ 1325(a)(5), the Plan must select the same § 1325(a)(5) option for both items
of collateral securing the Camry Loan—the Camry and the Sierra. The cross-
collateralization provision does not free Barragan-Flores from this
requirement. As the district court reasoned, “[w]ere the holding
in . . . Williams inapplicable to debtors with multiple claims secured by the
same collateral, then such debtors would be afforded greater flexibility in
providing for secured creditors’ claims even though those debtors and their
collateral are more encumbered. That result is counterintuitive.” 27 It is also
contrary to the plain language of § 1325(a)(5).
* * *
For the foregoing reasons, we AFFIRM the judgment of the district court.
23 Id. at 402.
24 Id.
25 Id. at 402-03.
26 Williams v. Tower Loan of Mississippi (In re Williams), 168 F.3d 845, 847 (5th Cir.
1999) (“The plain language of the statute does not give the debtor the right to adopt a
combination of the options offered in (B) and (C).”).
27 Barragan-Flores, 585 B.R. at 402-03.
8