|Johnson v. Home State Bank (90-693), 501 U.S. 78 (1991)|
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been pre- pared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337.
JOHNSON v. HOME STATE BANK
certiorari to the united states court of appeals for the tenth circuit
After petitioner Johnson defaulted on promissory notes secured with a mortgage on his farm, respondent Home State Bank (Bank) began fore- closure proceedings in state court. While foreclosure proceedings were pending, Johnson filed for liquidation under Chapter 7 of the Bankruptcy Code, and the Bankruptcy Court discharged him from personal liability on the notes. However, because the Bank's right to proceed against him in rem survived the bankruptcy, see 11 U.S.C. 522(c)(2); Long v. Bullard, 117 U.S. 617, the Bank reinitiated the foreclosure proceedings once the automatic stay protecting his estate was lifted. The state court entered judgment for the Bank, but before the foreclosure sale, Johnson filed for reorganization under Chapter 13, listing the mortgage as a claim against his estate. The Bankruptcy Court confirmed his plan to pay the Bank's judgment in installments, but the District Court reversed, ruling that the Code does not allow a debtor to include in a Chapter 13 plan a mortgage used to secure an obligation for which personal liability has been discharged in Chapter 7 proceedings. The court did not reach the Bank's alternative argument that the Bankruptcy Court erred in finding that Johnson had proposed his plan in good faith and that the plan was feasible. The Court of Appeals affirmed, reasoning that, since John- son's personal liability had been discharged, the Bank no longer had a "claim" against Johnson subject to rescheduling under Chapter 13.
1. A mortgage lien securing an obligation for which a debtor's per- sonal liability has been discharged in a Chapter 7 liquidation is a "claim" within in the meaning of 101(5) and is subject to inclusion in an ap- proved Chapter 13 reorganization Plan. Congress intended in 101(5) to incorporate the broadest available definition of "claim," see Pennsyl- vania Dept. of Public Welfare v. Davenport, 495 U. S. ---. As used in 101(5), "right to payment" and "right to an equitable remedy" mean "nothing more nor less than an enforceable obligation." Id., at ---. A surviving mortgage interest corresponds to an "enforceable obligation" of the debtor. Even after the debtor's personal obligations have been extinguished, the creditor still retains a "right to payment" in the form of its right to the proceeds from the sale of the debtor's property. Alter- natively, the creditor's surviving right to foreclose on the mortgage can be viewed as a "right to an equitable remedy" for the debtor's default on the underlying obligation. Thus, a bankruptcy discharge extinguishes only one mode of enforcing a claim -- an in personam action -- while leav- ing intact another -- an in rem action. Indeed, the need to codify Long v. Bullard, supra, presupposes that a mortgage interest is a "claim," be- cause only "claims" are discharged. This conclusion is consistent with other parts of the Code -- which contemplate circumstances in which a claim may consist of nothing more than a claim against the debtor's prop- erty, 502(b)(1), and establish that the phrase " `claim against the debtor' includes claim against" the debtor's property, 102(2) -- and with the Code's legislative background and history. The Bank's contention that serial filings under Chapters 7 and 13 evade the limits that Congress intended to place on the Chapters' remedies is unpersuasive, since Con- gress has expressly prohibited various forms of serial filings, see, e. g., 727(a)(8), yet fashioned no similar prohibition with regard to Chapter 7 and 13 filings. In addition, the full range of Code provisions designed to protect Chapter 13 creditors, see, e. g., 1325(a), combined with Con- gress' intent that "claim" be construed broadly, makes it unlikely that Congress intended to use the Code's definition of "claim" to police the Chapter 13 process for abuse. Pp. 3-9.
2. Because the lower courts never addressed the issues of Johnson's good faith or the plan's feasibility, this Court declines to address those issues and leaves them for consideration on remand. Pp. 9-10.
904 F. 2d 563, reversed and remanded.
Marshall, J., delivered the opinion for a unanimous Court.