Appendix — Miller v. First Federal of Michigan

IN THE

Supreme Court of the Hnited States

OCTOBER TERM, 1985

IN RE: RALPH MILLER,

Debtor,

RALPH MILLER,

‘ Petitioner,

FIRST FEDERAL OF MICHIGAN,

Respondent.

IN RE: EDWARD J. PIGLOSKI AND

MARY L. PIGLOSKI,

Debtors,

EDWARD J. PIGLOSKI AND

MARY L. PIGLOSKI,

Vv.

MAXINE WYNN AND MANOR MORTGAGE Co.,

Respondents.

APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

SHEILA M. MCENTEE *

MATTHEW J. MASON

MARY ANN ZITO

UAW LEGAL SERVICES PLAN

7430 Second Avenue, Suite 405

Detroit, Michigan 48202

(313) 872-4600

Attorneys for Petitioners

* Attorney of Record

Petitioners,

SR I EE I a TE TE IE NETS TI TE STR IAE)

WILSON - EPES PRINTING Co.. INC. - 789-0096 - WASHINGTON. D.C. 20001

@® ctfiieates co

pt

TABLE OF CONTENTS

APPENDIX A: Opinions and Orders of the Circuit

Court of Appeals for the Sixth

IE Sacchieontbacdhctics ee ieshissiainnalbbionnpsanioe

Opinion of the Court of Appeals for the Sixth

Circuit in In re Glenn (April 16, 1985) ...............

Order of the Court of Appeals for the Sixth Cir-

cuit on Petition for Rehearing and Suggestion

for Rehearing En Banc in Jn re Miller (June 3,

SINE sade citgtaciscer tick cucthiints a hsneensbesiatiaaiaedcetnehiasdadeetaitiadeis

Order of the Court of Appeals for the Sixth Cir-

cuit on Petition for Rehearing and Suggestion

for Rehearing En Banc in In re Pigloski (June

en IL EERIE A ope Be aoe RL

Judgment of the Court of Appeais for the Sixth

Circuit in Jn ve Miller (June 11, 1985) .................

APPENDIX B: Opinions and Orders of the District

Se SERRA eSB Oe Reece Seen

Opinion of the Eastern District of Michigan in Jn

ve Geer (see Te, tee)...

Order of the Eastern District of Michigan in Jn

fa Heer GCG Gy Wee nn es

Memorandum Opinion and Order Affirming Order

of Bankruptcy of the Eastern District of Michi-

gan in In re Pigloski (March 29, 1983) ................

Judgment of the Eastern District of Michigan in

In re Pigloski (March 31, 1983) ...........................

APPENDIX C: Opinions and Orders of the Bank-

I I eidiestitstieiiciccciniccicgeinsnnn

Order Denying Debtor’s Motion for Stay Order

Tolling the Redemption Period of the Bank-

ruptcy Court for the Eastern District of Michi-

gan in In re Miller (December 2, 1982)................

Page

la

la

32a

33a

34a

36a

36a

46a

47a

54a

55a

ii

TABLE OF CONTENTS—Continued

Order Granting Relief from Automatic Stay and

Denying Confirmation of the Bankruptcy Court

for the Eastern District of Michigan in Jn re

Miller (January 24, 1988) ....................................

Opinion of the Bankruptcy Court for the Eastern

District of Michigan rendered from the bench

May 18, 1982 in In re Pigloski. Transcript of

SORTA, WD. TI cic cccticsnscccscuremnnstcicteenenaesiemne

Order Dissolving Temporary Restraining Order

and Prohibiting the Inclusion of Debtors’ Per-

sonal Residence in a Filed Chapter 13 Plan Nunc

Pro Tunc to May 18, 1982 and Staying Effect...

Page

57a

59a

66a

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Nos. 82-3821, 83-1316, 83-1585

IN RE: GERALD DAVID GLENN AND

JANICE SUE GLENN,

Debtors,

THE FEDERAL LAND BANK OF LOUISVILLE,

Creditor-Appellant,

Vv.

GERALD DAVID GLENN AND

JANICE SUE GLENN, (82-3821)

Debtors-A ppellees.

On Appeai from the United States Bankruptcy Court

for the Southern District of Ohio

IN RE: EDWARD J. PIGLOSKI AND

MARY L. PIGLOSKI,

Debtors,

EDWARD J. PIGLOSKI AND

MAry L. PIGLOSKI,

Plaintiffs-A ppellants,

V.

MAXINE WYNN AND MANOR MORTGAGE

CoMPANY, (83-1316)

Defendants-A ppellees.

On Appeal from the United States District Court

for the Eastern District of Michigan

2a

IN RE: RALPH MILLER,

Debtor,

‘FIRST FEDERAL OF MICHIGAN,

Defendant-Appellant,

Vv.

RALPH HENRY MILLER, (83-1585)

Plaintiff-A ppellee.

On Appeal from the United States District Court

for the Eastern District of Michigan

Decided and Filed April 16, 1985

Before: ENGEL and KRUPANSKY, Circuit Judges;

WEICK, Senior Circuit Judge.

ENGEL, Circuit Judge. These three appeals raise sim-

ilar questions about the point in the foreclosure process

at which a Chapter 13 debtor loses the right to cure a

default on a real estate mortgage on his principal resi-

dence.

In each case, the debtor gave a mortgage on real es-

tate that was subject to foreclosure proceedings. In Jn

re Gerald David Glenn, No. 82-3821, the debtors filed

their Chapter 13 petition after the mortgagee had ob-

tained a foreclosure judgment but before the property

was sold. In In re Ralph Miller, No. 83-1585, and In re

Edward J. Pigloski, No. 83-1316, the debtors filed their

petitions after the properties had been sold at foreclosure

sales but before the statutory redemption periods had

run. The debtors in all three cases seek to protect their

interests in the real estate by paying off any arrearages

through their Chapter 13 plans and resuming the regu-

lar mortgage payments. The mortgagee in each case has

objected that this treatment is contrary to the provi-

sions of 11 U.S.C. § 1822(b).

3a

Each appeal also raises at least one additional issue.

In Glenn, the debtors argue that, pursuant to 11 U.S.C.

§ 1822(b) (2), their Chapter 13 plan may modify the

rights of their creditor because the creditor’s security in-

terest is in a parcel that includes not only their prin-

cipal residence, but also fifty acres of adjoining farm-

land. Should they not be permitted to reinstate the terms

of their mortgages, the debtors in Miller and Pigloski

seek a ruling that would toll the running of the statutory

redemption periods for the duration of their Chapter 13

plans. The Pigloskis also claim that they should be al-

iowed to spread the payment of the redemption amount

over the entire length of their Chapter 13 plan while the

debtor in Miller argues that the expiration of the re-

demption period following the foreclosure sale would con-

stitute a preferential transfer that may be avoided under

11 U.S.C. § 547(b).

I.

GERALD DAVID and JANICE SUE GLENN (82-3821)

In October 1978 the Glenns bought their home and the

fifty acres of land on which it is located in Fayetteville,

Ohio. They made a $20,000.00 down payment and gave

a first mortgage promissory note to the Federal Land

Bank of Louisville to finance the balance of the purchase

price. The Glenns also delivered a mortgage deed to the

bank. The note required the payment of $2850.00 every

six months and contained an acceleration clause giving

the bank the option to declare the entire debt due and

payable immediately should the Glenns fail to make any

payments.

The Glenns subsequently failed to make some of the

mortgage payments, and the bank accelerated the debt.

When the Glenns failed to pay the accelerated amount,

the bank commenced foreclosure proceedings. On De-

cember 18, 1981, the Court of Common Pleas of Brown

County, Ohio entered a foreclosure judgment against the

4a

Glenns for $51,991.95. Later that same day, the Glenns

filed their Chapter 138 petition with the bankruptcy court.

Under the terms of their Chapter 13 plan, the Glenns

proposed to pay the bank the arrearage on the mortgage

over a period of twenty-one months while maintaining

current payments outside the plan under the original

terms of the note. The bank objected to the plan, arguing

that the note and mortgage had been merged and reduced

to judgment and that the Glenns currently owed not just

the amount they were in arrears but the entire judg-

ment amount. The bankruptcy court overruled the bank’s

objection and confirmed the plan. Relying upon the ra-

tionale of the Second Circuit in In re Taddeo, 685 F.2d

24 (2d Cir. 1982), the court held that 11 U.S.C. § 1322

(b) (5) permitted the Glenns to “deaccelerate” their

mortgage and reinstate the original payment schedule.

The parties agreed to a direct appeal to our court pur-

suant to 28 U.S.C. § 1293(b).

RALPH MILLER (83-1585)

On August 5, 1980, Ralph Miller purchased a house in

Detroit, Michigan, subject to an existing first mortgage,

dated April 17, 1978, held by First Federal of Michigan.

The sale price was $26,500.00, and the balance on the

mortgage note was approximately $20,900.00.

Following repeated, lengthy lay-offs from his employ-

ment, Miller defaulted on the mortgage in 1981. First

Federal commenced a foreclosure by advertisement in

March 1982, and a sheriff’s sale was held on May 14,

1982. First Federal purchased the property for a bid of

the balance owing on the mortgage.

On November 2, 1982, before the statutory redemption

period expired, Miller filed a Chapter 13 petition and

plan. In his plan, Miller proposed to pay the arrearage

on the mortgage and to maintain current payments on

the note. Miller also moved the bankruptcy court to issue

5a

a stay order tolling the redemption period. The bank-

ruptey court denied the motion, denied confirmation of

the plan, and lifted the automatic stay as to First Fed-

eral, allowing the mortgagee to pursue eviction.

Miller appealed these decisions to the district court,

and the parties entered into a stipulation to stay pro-

ceedings pending appeal. Judge Thornton reversed the

bankruptcy court, holding that 11 U.S.C. § 1322(b) (5)

permits a Chapter 13 debtor to set aside a foreclosure

sale, pay any arrearage, and reinstate the terms of the

mortgage when the petition is filed before the redemption

period expires.

The parties entered into another stipulation to stay

proceedings pending First Federal’s appeal of Judge

Thornton’s decision.

EDWARD J. and Mary L. PIGLOSKI (83-1316)

In May 1981, Edward and Mary Pigloski sought to

refinance their house by entering into a loan agreement

arranged by Manor Mortgage Company. The house was

encumbered by an existing mortgage of $14,500.00, which

the mortgagee, Standard Federal Savings & Loan Asso-

ciation, had threatened to foreclose. Following the direc-

tions of Manor Mortgage Company, the Pigloskis incor-

porated themselves and signed a wrap-around mortgage

and note to Maxine Wynn. The parties dispute the

amount owed on the note, and the Pigloskis claim that

it is actually usurious. In any event, the Pigloskis failed

to make mortgage payments to Maxine Wynn.

Mrs. Wynn commenced foreclosure by advertisement

under Michigan law in October 1981, and a sheriff’s sale

was held on November 20, 1981.

On April 30, 1982, before the statutory redemption

period expired, the Pigloskis filed a Chapter 13 petition

and plan. Under their plan, the Pigloskis proposed to

pay, over a period of two and one half years, all the

6a

amounts they believed were legally due and owing to Mrs.

Wynn. The Pigloskis also filed a motion for a stay order

tolling the redemption period. The bankruptcy court

eventually held that it had no authority to toll the statu-

tory redemption period.

The Pigloskis appealed the decision to the district

court. Judge Boyle held that the automatic stay of 11

U.S.C. § 362(a) does not toll the statutory redemption

period and that 11 U.S.C. § 105 does not authorize a

bankruptcy court to toll the redemption period. Judge

Boyle also held that a foreclosure sale extinguishes the

mortgage and, as a result, is not subject to cure under

section 1322(b) (5).

II.

11 U.S... $ 1822(b) outlines the permissible contents

of a wage earner plan under Chapter 13 of the Bank-

ruptecy Code. The relevant portions of that section pro-

vide:

(b) Subject to subsections (a) and (c) of this

section the plan may—

(2) modify the rights of holders of secured

claims, other than a claim secured only by a

security interest in real property that is the

debtor’s principal residence, or of holders of un-

secured claims;

(3) provide for the curing or waiving of any

default;

(5) notwithstanding paragraph (2) of this

subsection, provide for the curing of any default

within a reasonable time and maintenance of

payments while the case is pending on any un-

secured claim or secured claim on which the last

payment is due after the date on which the final

payment under the plan is due;

7a

The mortgagees do not dispute that subsection (b) (5)

permits a Chapter 13 debtor to cure a default on a long-

term mortgage on the debtor’s principal residence. How-

ever, they contend that once the long-term debt has been

accelerated, or a foreclosure judgment has been obtained,

or a foreclosure sale has occurred, the claim is no longer

one “on which the last payment is due after the date on

which the final payment under the plan is due” and,

therefore, is not subject to cure under subsection (b) (5).

Moreover, they argue that allowing the debtor to cure the

default and reinstate the terms of the mortgage after any

of these events would violate the language of subsection

(b) (2), which prohibits modification of the rights of

holders of claims “secured only by a security interest in

real property that is the debtor’s principal residence.”

The courts disagree over whether and under what cir-

cumstances section 1322(b) allows a cure once a default

on a mortgage has triggered acceleration of the debt, a

jugment or a sale. The bankruptcy court in Jn re Ivory,

32 Bankr. 788 (Bankr. D. Or. 1983), grouped the differ-

ing viewpoints into the following general categories:

(1) Courts that hold that a debtor may not cure

a default once a mortgage debt has been accelerated:

In re Wilson, 11 B.R. 986 (Bkrtcy.S.D.N.Y.1981) ;

Matter of LaPaglia, 8 B.R. 9387 (Bkrtcy.E.D.N.Y.

1981) ; In re Allen, 17 B.R. 119, 8 BCD 945 (Bkrtcy.

N.D.Ohio 1981).

(2) Courts that hold that a debtor may cure a

default where the mortgage debt has been accelerated

provided that no foreclosure judgment has been en-

tered: Percy Wilson Mortgage & Finance Corp. v.

McCurdy, 21 B.R. 535 (Bkrtcy.S.D. Ohio W.D.1982) ;

In re Maiorino, 15 B.R. 254 (Bkrtcy.D.Conn.1981) ;

In re Pearson, 10 B.R. 189 (Bkrtcy.E.D.N.Y.1981).

(3) Courts [that] hold that a debtor may cure a

default where a state court judgment of foreclosure

has been entered provided that no sale has taken

8a

place: In re Acevedo, 26 B.R. 994 (D.E.D.N.Y.1982) ;

In re James, 20 B.R. 145, 9 BCD 208 (Bkrtcy.E.D.

Mich. 1982); In re Brantley, 6 B.R. 178 (Bkrtcy.

N.D.Fla. 1980).

(4) Courts that place no express limitation on the

debtor’s right to cure a default after acceleration:

In re Taddeo, 685 F.2d 24 (2nd Cir. 1982); In re

Sapp, 11 B.R. 188 (Bkrtcy.S.D.Ohio E.D. 1981) ; In

re Davis, 16 B.R. 478 (D.Kan.1981). Or after a

judgment has been entered: In re Young, 22 B.R.

620 (Bkrtcy.N.D.II1.E.D.1982) ; In re Breuer, 4 B.R.

499, 6 BCD 136 (Bkrtcy.S.D.N.Y.1980).

(5) Courts that hold that a debtor may cure a

default where a foreclosure sale has been held pro-

vided that the debtor’s right of redemption under

state law has not expired: In re Johnson, 29 B.R.

104 (Bkrtcy.S.D.Fla.1983) ; In re Chambers, 27 BR.

687 (Bkrtcy.S.D.Fla.1983); In re Taylor, 21 B.R.

179 (Bkrtcy.W.D.Mo.1982); In re Thompson, 17

B.R. 748 (Bkrtcy.W.D.Mich.1982).

32 Bankr. at 790. To the fourth group we add the fol-

lowing recent opinions by the Fifth and Seventh Circuits;

Grubbs v. Houston First American Savings Association,

730 F.2d 236 (5th Cir. 1984) (en banc) (holding that a

debtor may cure a default after acceleration, but express-

ing no limit on the right) ; Matter of Clark, 738 F.2d 869

(7th Cir. 1984) (holding that a debtor may cure a de-

fault after a judgment of foreclosure that does no more

than judicially confirm the acceleration under state law,

but expressing no opinion whether the right to cure sur-

vives a sale or a judgment of foreclosure in states where

the effect of the judgment is different).

Most courts agree that section 1322(b) (5) allows the

debtor to cure a default when the mortgagee has not yet

accelerated the debt, see, e.g., In re Pearson, 10 Bankr.

at 193; In re Hartford, 7 Bankr. 914 (Bankr. D. Me.

1981), and that the debtor may not reinstate the mort-

9a

gage if the bankruptcy petition is filed after the state

redemption period has expired, see, e.g., In re Ivory, 33

Bankr. at 791; In re Thompson, 17 Bankr. at 751.

The legislative history of section 1322(b) is ambigu-

ous about the scope of the right afforded the debtor to

cure a mortgage default. To encourage consumer debtor

rehabilitation rather than liquidation, Congress designed

Chapter 13 of the Bankruptcy Code to provide greater

relief than was available under the former Bankruptcy

Act. H.R. Rep. No. 595, 95th Cong., 1st Sess. 116-17

(1977), reprinted in 1978 U.S. Code Cong. & Ad. News

5963, 6076-78. The House Report further explains the

chapter’s general purpose:

The purpose of chapter 13 is to enable an indi-

vidual, under court supervision and protection, to

develop and perform under a plan for the repayment

of his debts over an extended period. In some cases,

the plan will call for full repayment. In others, it

may offer creditors a percentage of their claims in

full settlement. During the repayment period, cred-

itors may not harrass [sic] the debtor or seek to col-

lect their debts. They must receive payments only

under the plan. This protection relieves the debtor

from indirect and direct pressures from creditors,

and enables him to support himself and his depend-

ents while repaying his creditors at the same time.

The benefit to the debtor of developing a plan of

repayment under chapter 13, rather than opting for

liquidation under chapter 7, is that it permits the

debtor to protect his assets. In a liquidation case, the

debtor must surrender his nonexempt assets for

liquidation and sale by the trustee. Under chapter

13, the debtor may retain his property by agreeing

to repay his creditors. Chapter 18 also protects a

debtor’s credit standing far better than a straight

bankruptcy, because he is viewed by the credit indus-

try as a better risk. In addition, it satisfies many

debtors’ desire to avoid the stigma attached to

10a

straight bankruptcy and to retain the pride attend-

ant on being able to meet one’s obligations. The ben-

efit to creditors is self-evident: their losses will be

significantly less than if their debtors opt for straight

bankruptcy.

Id. at 118.

One of the significant specific changes introduced by

Congress .a the new legislation was to allow modification

of the contract rights of secured. creditors under a Chap-

ter 13 plan. H.R. Rep., supra, at 124; Bankruptcy Laws

Commission’s Report, H.R. Doc. 137, pt. 2, 93rd Cong.,

lst Sess. 205 (1973). Nevertheless, it is evident upon

examining the final language of section 1322(b) (2) that

Congress contemplated a different treatment of debts

secured only by mortgages on the debtor’s principal

residence.

One would think that when trying to liberalize the

relief to debtors under Chapter 13, Congress would be

particularly solicitous of the individual wage earner’s

ability to save his home. However, it is apparent from

the language of section 1322(b) that Congress intended

to give a preferred status to certain types of home mort-

gagees and lienholders, a policy which at first blush

would seem at odds with the general thrust of the new

act. The question naturally arises: why?

The legislative history says little in terms of political

or social philosophy as such. However, it does reveal that

the final language of section 1322(b) evolved from earlier

language, incorporated in the bill apparently at the behest

of representatives of the mortgage market,’ that would

1 This language appeared in the Senate version of the bil, S. 2266,

95th Cong., 2d Sess. § 1322 (1978), not long after Senate committee

hearings at which Edward J. Kulik, representing the Real Estate

Division of Massachusetts Mutual Life Insurance Company, testified

that Chapter 13, as then proposed, might have the unintended effect

of restricting the flow of home mortage money. See Bankruptcy

Reform Act of 1978: Hearings on S. 2266 and H.R. 8200 Before the

lla

have prohibited modification of the rights of all creditors

whose claims were wholly secured by morigages on real

property. Although the earlier language did not survive,

Subcomm. on Improvements in Judicial Machinery of the Senate

Comm. on the Judiciary, 95th Cong., 1st Sess. 707, 714-15 (1977)

(statement of Edward J. Kulik, Senior Vice-President, Real Estate

Division, Massachusetts Mutual Life Ins. Co.). Specifically, Mr.

Kulik was concerned that provisions (1) allowing i.cdification of

rights of holders of secured claims and (2) protecting guarantors

and codebtors as well as the Chapter 13 debtor might have this

effect. He urged:

Serious consideration should be given to modifying both

bills so that, at the least: One, a mortgage on real property

other than investment property may not be modified, and two,

providing that the stay of actions against a guarantor or other

codebtor is applicable only to guarantees executed after the

effective date of the new legislation.

Id. at 714.

In response to Senator DeConcini’s comments questioning the

severity of the problem, Robert E. O’Malley, Mr. Kulik’s counsel,

stated :

With respect to the savings and loans, in particular, and the

future prospects for loans to individuals under the proposed

bills, there is really only one basic problem. That is, the pro-

vision in both bills that provides for modification of the rights

of the secured creditor on residential mortgages, a provision

that is not contained in present law.

I think the answer to your question is that, of course, savings

and loans will continue to make loans to individual homeown-

ers, but they will tend to be, I believe, extraordinarily con-

servative and more conservative than they are row in the flow

of credit.

It seems to me they will have to recognize that there is an

additional business risk presented by either or both of these

two bills if the Congress enacts chapter XIII in the form pro-

posed, thus providing for the possibility of modification of the

rights of the secured creditor in the residential mortgage area.

I think the answer is that they will be much more conserva-

tive than they have been in the past.

Id. at 715 (statement of Robert E. O’Malley, Attorney, Covington

& Burling).

12a

the statute as finally enacted by Congress clearly evi-

dences a concern with the possible effects the new bank-

ruptcy act might have upon the market for homes. If any

other policy objective of Congress was adequate to com-

pete against the objective of protecting wage earners gen-

erally, it was a policy to encourage the increased produc-

tion of homes and to encourage private individual owner-

ship of homes as a traditional and important value in

American life. Congress had to face the reality that in

a relatively free society, market forces and the profit

motive play a vital role in determining how investment

capital will be employed. Every protection Congress

might grant a homeowner at the expense of the holders

of security interests on those homes would decrease the

attractiveness of home mortgages as investment opportu-

nities. And as home mortgages decrease in attractiveness,

the pool of money available for new home construction

and finance shrinks.

On the other hand, Congress was determined not to

depart too far from its expressed policy of making wage

earner plans more attractive to debtors, especially as an

alterantive to full bankruptcy proceedings under Chap-

ter 7. Therefore, the preferred status granted some cred-

itors under section 1322(b) (2) was limited to holders of

claims secured only by a security interest in the debtor’s

principal residence. No preferential treatment was given

debts secured by property in addition to the debtor’s prin-

cipal residence. Such debts normally are incurred to

make consumer purchases unrelated to the home or to

enable the debtor to engage in some form of business ad-

venture. In such circumstances the home is mortgaged

not for its own sake, but for other purposes, and often is

only one of several forms of security given. In a con-

sumer purchase the creditor may also take a security in-

terest in the goods purchased, or in a business transac-

tion, the value of the home may be an insufficient security

and, therefore, form only a part of the security package.

Congress granted no extra protection for holders of these

13a

types of secured claims, presumably because any impact

the bankruptcy laws might have upon them would not

seriously affect the money market for home construction

or purchase.

Furthermore, in sections 1322(b)(3) and (5), which

permit the debtor’s Chapter 13 plan to cure defaults, Con-

gress provided no special exceptions for creditors whose

claims are secured by a security interest in the debtor’s

residence. Congress expressly provided that subsection

(b) (5), which allows the debtor to cure any default on

mortgages that extended beyond the life of the Chapter

13 plan, is to operate “notwithstanding paragraph (2)

of this subsection.” ?

We wish Congress had spoken its specific intent more

clearly with respect to cases involving acceleration, judg-

ments, or sales. It did not but instead saw fit to speak

only in broad termis.* As is so obvious from the broad

range of the cited lower court decisions, any particular

result often reflects the value judgment of the particular

court as to which of the two competing values should pre-

dominate, or at least which is more attractive under the

specific facts of the case at hand. All courts agree that

at some point in the foreclosure process, the right to cure

?The Senate added the “Ootwithstanding paragraph (2)” lan-

guage to subsection (b) (5) when it amended subsection (b) (2) to

prohibit modification of the rights of creditors whose claims are

secured only by a security interest in the debor’s principal residence.

There is some disagreement about whether the “notwithstanding”

clause was necessary. Compare Grubbs v. Houston First American

Savings Association, 730 F.2d 236, 246 (5th Cir. 1984), with In re

Williams, 11 Bankr. 504, 506 (Bankr. S.D. Tex. 1981). Whether the

clause was necessary or not, it does indicate that Congress did not

want the language of subsection (b) (2) to interfere with a debtor’s

right to cure default on a long-term mortgage under subsection

(b) (5).

% One justification may be found in the fact that state laws, prac-

tices and even terminology vary extensively. Any effort to be more

specific in one context may only brew uncertainty elsewhere.

l4a

a default is irretrievably lost; however, the statute itself

provides no clear cut-off point except that which the

courts may see fit to create. The closer that point of

finality is to the beginning of the process, the greater is

the protection accorded the mortgage holder, and, hence,

the more attractive the home mortgage becomes as an in-

vestment. Conversely, the further down the line the court

can reach to protect the debtor from the consequences of

his default, the better the debtor’s needs are met by the

Chapter 13 proceedings, and the more attractive those

proceedings become to such debtors.*

We despair of finding any clear-cut statutory language

or legislative history that points unerringly to a construc-

tion of the statute that is free from challenge. Each of

the cases and each result reached therein is subject to

some objection either in theory or in practice. The result

we reach here is, therefore, primarily a pragmatic one—

one that we believe not only works the least violence to

the competing concerns evident in the language of the

statute but also one that is most readily capable of use.

The event we choose as the cut-off date of the statutory

right to cure defaults is the sale of the mortgaged pre-

mises. We pick this in preference to a number of other

potential points in the progress of events ranging from

the date of first default to the day the redemption period

expires following sale. We do so for the following rea-

sons, which admittedly may form a large target for

criticism:

(a) The language of the statute is, to us, plainly a

compromise, as we have earlier mentioned. Pick-

ing a date between the two extremes, is likewise

a compromise of sorts.

4 We think that the other provisions of section 1322(b) indirectly

assist the debtor in his quest to salvage his home. By modifying

the terms of some debts and curing defaults generally over a longer

period of time without incurring more adverse consequences, a

Chapter 13 plan may free up additional money to aid the debtor in

curing a default on his home mortgage.

(b)

(¢)

(d)

(e)

(f)

15a

The sale of the mortgaged property is an event

that all forms of foreclosure, however, denomi-

nated, seem to have in common. Whether fore-

closure is by judicial proceeding or by advertise-

ment, and regardless of when original accelera-

tion is deemed to have occurred, the date of sale

is a measurable, identifiable event of importance

in the relationship of the parties. It is at the

heart of realization of the security.

Although the purchaser at the sale is frequently

the security holder itself, the sale introduces a

new element—the change of ownership and,

hence, the change of expectations—into the rela-

tionship which previously existed.

The foreclosure sale normally comes only after

considerable notice giving the debtor opportunity

to take action by seeking alternative financing

or by negotiating to cure the default or by tak-

ing advantage of the benefits of Chapter 13.

Therefore, setting the date of sale as the cut-off

point avoids most of what some courts have

described as the “unseemly race to the court-

house.” Concededly no scheme can avoid that

possibility altogether, but the time and notice

requirements incident to most sales at least pro-

vide breathing room and should deter precipitate

action that might be expected if the cut-off date

were measured by the fact of notice of accelera-

tion or the fact of filing suit.

Any earlier date meets with the complaint that

the rights conferred by the statute upon debtors

to cure defaults have been frustrated.

Any later date meets with the objection that it

largely obliterates the protection Congress in-

tended for mortgagees of private homes as dis-

tinguished from other secured lenders.

16a

(g) Any later date also brings with it the very

serious danger that bidding at the sale itself,

which should be arranged so as to yield the most

attractive price, will be chilled; potential bid-

ders may be discouraged if they cannot ascertain

when, if ever, their interest will become

finalized.

In so ruling we avoid any effort to analyze the trans-

action in terms of state property law. Modern practice

varies so much from state to state that any effort to

satisfy the existing concepts in one state may only create

confusion in the next. Thus, in construing this federal

statute, we think it unnecessary to justify our construc-

tion by holding that the sale “extinguishes” or “satisfies”

the mortgage or the lien, or that the mortgage is somehow

“merged” in the judgment or in the deed of sale under

state law.

III.

A. Section 362(a)—Automatic Stay

The debtors in Miller and Pigloski argue that the auto-

matic stay provisions of 11 U.S.C. § 862(a) operate to

toll the running of the statutory period for redeeming

real estate sold at a foreclosure sale. Section 362(a) pro-

vides in pertinent part:

(a) Except as provided in subsection (b) of this

section, a petition filed under section 301, 302 or

303 of this title, or an application filed under sec-

tion 5(a) (3) of the Securities Investor Protection

Act of 1970 (15 U.S.C. 78eee(a) (3) ), operates as a

stay, applicable to all entities, of—

(1) the commencement or continuation, in-

cluding the issuance or employment of process,

of a judicial, administrative, or other proceed-

ing against the debtor that was or could have

17a

been commenced before the commencement of

the case under this title, or to recover a claim

against the debtor that arose before the com-

mencement of the case under this title;

(2) the enforcement, against the debtor or

against property of the estate, of a judgment

obtained before the commencement of the case

under this title;

(3) any act to obtain’possession of property

of the estate or of property from the estate;

(4) any act to create, perfect, or enforce any

lien against property of the estate;

(5) any act to create, perfect, or enforce

against property of the debtor any lien to the

extent that such lien secures a claim that arose

before the commencement of the case under this

title;

An oft-quoted excerpt from the legislative history of sec-

tion 3862(a) indicates the provision’s major purposes:

The automatic stay is one of the fundamental

debtor protections provided by the bankruptcy laws.

It gives the debtor a breathing spell from his credit-

ors. It stops all collection efforts, all harassment,

and all foreclosure actions. It permits the debtor to

attempt a repayment or reorganization plan, or

simply to be relieved of the financial pressures that

drove him into bankruptcy.

The automatic stay also provides creditor protec-

tion. Without it, certain creditors would be able to

pursue their own remedies against the debtor’s prop-

erty. Those who acted first would obtain payment

of the claims in preference to and to the detriment

of other creditors. Bankruptcy is designed to pro-

vide an orderly liquidation procedure under which

18a

all creditors are treated equally. A race of diligence

by creditors for the debtor’s assets prevents that.

H.R. Rep. No. 595, 95th Cong., Ist Sess. 340 (1977),

reprinted in 1978 U.S. Code Cong. & Ad. News 5963,

6296-97.

The district courts and bankruptcy courts disagree

concerning whether the automatic stay provisions of sec-

tion 362(a) toll state statutory foreclosure redemption

periods. One line of cases has held that the limited auto-

matic extension of time available under 11 U.S.C. § 108

(b)® precludes relief under section 362(a). Section 108

(b) provides:

(b) Except as provided in subsection (a) of this

section, if applicable law, an order entered in a

proceeding, or an agreement fixes a period within

which the debtor or an individual protected under

section 1301 of this title may file any , eading, de-

mand, notice, or proof of claim or loss, cure a de-

fault, or perform any other similar act, and such

period has not expired before the date of the filing

of the petition, the trustee may only file, cure, or

perform, as the case may be, before the later of—-

(1) the end of such period, including any sus-

pension of such period occurring on or after the

commencement of the case; and

(2) 60 days after the order for relief.*

In Bank of Commonwealth v. Bevan, 13 Bankr. 989

(E.D. Mich. 1981), the mortgagor filed a petition for

5 Neither Miller nor the Pigloskis have claimed any benefit from

the provisions of section 108 (b).

6 In a voluntary case, the entry of the order for relief is the filing

of the petition commencing the case. S. Rep. No. 598, 95th Cong.,

Ast Sess. 28 (1977), reprinted in 1978 U.S. Code Cong. & Ad. News

5787, 5814.

19a

reorganization under Chapt. 11 of the Bankruptcy Code

following a foreclosure sa:- 2* his home. The bankruptcy

court had entered an order pursuant to section 362(a),

indefinitely extending the statutory redemption period.

In reviewing the bankruptcy court’s order, the district

court noted that “the language of § 362(a) fails to ex-

plicitly address the running of time periods,” id. at 992,

while section 108 explicitly grants the trustee additional

time in which to perform acts such as redemption. Read-

ing the two sections together, the court held that the

automatic stay provisions of section 362(a) do not over-

ride the extension of time provision in section 108(b).

The court reasoned :

An interpretation of § 362(a) as an indefinite stay

of the statutory period of redemption would render

§108(b) superfluous. If § 362(a) automatically

stays the running of the statutory right to redeem

until the stay is lifted pursuant to § 362(c) or (d),

the pertinent time allotments of § 108(b) are com-

pletely extraneous as statutory time periods de-

signed to control the trustee’s activity. Moreover, if

§ 362(a) is interpreted to provide for the automatic

stay of time periods for an indefinite amount of

time, then subsections (a) and (b) of § 108, which

define minimum and maximum time periods for the

trustee to act, directly conflict with § 362(a).

Id. at 994. The court concluded that “where one section

of the Bankruptcy Code explicitly governs an issue, an-

other section should not be interpreted to cause an

irreconcilable conflict.” * Jd.

7 Although it determined that the bankruptcy court incorrectly

cited section 362(a) as the basis for its order tolling the redemption

period, the district court affirmed the bankruptcy court’s action,

holding that the stay was a permissible exercise of the broad grant

of discretionary authority embodied in section 105. 18 Bankr. at

996. That aspect of the Bevan opinion is discussed at Part III.B.,

post, at 24.

20a

Several courts have agreed with the Bevan court's

interpretation of sections 108(b) and 362(a). See, e.g.,

Johnson v. First National Bank, 719 F.2d 270, 278 (8th

Cir. 1983), cert. denied, 104 S. Ct. 1015 (1984); In re

Cucumber Creek Development, Inc., 33 Bankr. 820 (D.

Colo. 1983); In re Martinson, 26 Bankr. 648 (D. N.D.

1983); Matter of Markee, 31 Bankr. 429 (Bankr. D.

Idaho 1983); In re Construction Leasing & Investment

Corp., 20 Bankr. 546 (Bankr. M.D. Fla. 1982); In re

Murphy, 22 Bankr. 663 (Bankr. D. Colo. 1982).

In a recent case, the Bankruptey Court for the Western

District of Michigan considered whether the automatic

stay of section 362(a) tolls the statutory redemption

period in the context of Chapter 13. In re Wallace, 33

Bankr. 29 (Bankr. W.D. Mich. 1983). The debtor in

Wallace had filed her Chapter 13 petition and plan fol-

lowing the foreclosure sale of her residence. In her pian,

which was confirmed by the bankruptcy court, the debtor

had proposed to make current payments on the mortgage

on her residence outside the plan and to cure the default

by rnaking payments on the arrearage within the plan.

When the debtor failed to make her payments under the

plan, the bankruptcy case was dismissed. Approximately

a month after the dismissal, the mortgagee notified the

debtor that the redemption period had expired and asked

her to vaeate the house. The debtor refused, and the

mortgagee sought a declaratory judgment that it was

entitled to immediate possession of the property. The

debtor argued, inter alia, that the automatic stay of sec-

tion 362(a) had tolled the redemption period until the

stay terminated upon dismissal of the case. The bank-

ruptcy judge noted his earlier decision in /n re Thomp-

son, 17 Bankr. 748 (Bankr. W.D. Mich. 1982), that a

Chapter 13 debtor could cure an arrearage and reinstate

his mortgage even though a foreclosure sale had occurred

before the petition was filed. However, he held that the

right to cure and reinstate a mortgage was not based on

2la

any tolling of the redemption period. The bankruptcy

judge concluded:

To adopt the tolling theory as proposed by Wallace

could lead to results in Chapter 13 cases never in-

tended by Congress. Thus, following the cases cited

by her, the tolling period would cease when the dis-

charge was granted in a completed case and there-

after when the redemption time had expired, even

though a debtor were current in payments, the fore-

closure sale would be final.

Therefore, I would hold that upon filing the peti-

tion, the automatic stay would only prevent action to

recover possession and upon completion of the plan,

the default would be cured and the position of the

debtor and creditor would be the same as though the

foreclosure had never occurred. If, however, the plan

is not completed on dismissal, the mortgagee would

have the same rights that he would have had if no

Chapter 13 petition had been filed.

33 Bankr. at 32.

Another line of cases, anchored by In re Jenkins, 19

Bankr. 105 (D. Colo. 1982), and In re Johnson, 8 Bankr.

371 (Bankr. D. Minn. 1981), takes the position that the

automatic stay provisions of section 362(a) should be

liberally construed to suspend the running of a statutory

period of redemption. In Johnson an involuntary petition

under Chapter 7 was filed against the mortgagor after

three pieces of his real estate had been sold at a foreclo-

sure sale. Following a hearing on a motion to prevent

the running and termination of the redemption period,

tle bankruptcy court held that the automatic stay of sec-

tion 862(a) operated to toll the redemption period. Be-

cause the legislative history of section 362(a) indicated

that Congress intended to alter the scone of protection

afforded by the stay provisions under the old Bankruptcy

22a

Act,® the court reasoned that the scope of section 362(a)

could not be determined by reliance on cases decided

under old law. Finding that the provisions of section

362(a) should be construed liberally “to give full protec-

tion to the debtor and creditors,” 8 Bankr. at 374, the

court held that the redemption period was tolled by three

separate subsections of section 362(a): subsection (a)

(2), which stays “the enforcement, against the debtor or

against property of the estate, of a judgment obtained

before the commencement of the case”; subsection (a)

(3), which stays “any act to obtain possession of prop-

erty of the estate or of property from the estate”; and

subsection (a) (4), which stays “any act to create, per-

fect, or enforce any lien against property of the estate.”’

The court found no conflict between its interpretation of

section 362(a) and the language of section 108(b). It

held that the specific language of section 108(b) allowing

the trustee time to act before “the end of such period,

including any suspension of such period occurring on or

after the commencement of the case,” (emphasis added)

expressly recognizes that the running of time may be

suspended under section 362(a). Therefore, the Johnson

court reasoned that section 108(b) did not govern the

issue.

8 The court relied specifically on this statement from House Re-

port No. 595:

The provisions in the current Bankruptcy Act for a stay of

actions against the debtor and his property upon the com-

mencement of a bankruptcy, reorganization, or repayment plan

case are inadequate ... The stay is an important aspect of

bankruptcy protection, and is an element of the debtor’s fresh

start...

. The automatic stay in H.R. 8200 differs in some ways

from the stays provided by the Rules of Bankruptcy Procedure

today. The new stay expands coverage in some areas, reduces

it in others, and clarifies many uncertain aspects of the current

provisions.

H.R. Rep. No. 595, 95th Cong., Ist Sess. 174 (1977), reprinted in

1978 U.S. Code Cong. & Ad. News 5787, 6135 (footnotes omitted).

23a

In Jenkins, the district judge did not discuss the rela-

tionship between section 108 and section 362; however, he

did hold that in the context of a Chapter 11 proceeding,

the automatic stay provisions of section 362(a)(1) and

(a) (4) tolled the Colorado redemption period and pro-

hibited the purchaser at the foreclosure sale from apply-

ing for a public trustee’s deed on the property involved.

The district judge in Jenkins has subsequently altered

his position on the automatic stay issue. In In re Cucum-

ber Creek Development, Inc., 33 Bankr. 820 (D. Colo.

1983), he specifically considered whether the automatic

stay provisions of section 362 could apply tc toll a statu-

tory redemption period in the face of the more specific

provisions of section 108:

I have had an opportunity in the past to address

this question in a slightly different context. In Re

Jenkins, 19 B.R. 105 (D.C. Colo. 1982). There, I

ruled that § 362(a)’s automatic stay tolled the state

redemption period to preserve “those property rights

which I have found to be possessed by the debtor at

the time of filing.” 19 B.R. at 110. In Jenkins,

however, I did not discuss or consider the applica-

bility of 11 U.S.C. § 108 to such a case. Given an

opportunity to consider the question here and to re-

view the body of case law which has developed, I

now conclude that § 362(a) is inapplicable, and that

state redemptive rights may be preserved and ex-

tended only to the extent provided by § 108.

33 Bankr. at 821.

Both Johnson and Jenkins were expressly disapproved

by the only court of appeals to consider whether section

362(a) might apply to toll a statutory redemption period.

Johnson v. First National Bank, 719 F.2d 270, 275 (8th

Cir. 1983), cert. denied, 104 S. Ct. 1015 (1984). In First

National Bank, the mortgagors filed a joint petition for

reorganization under Chapter 11 approximately three

24a

weeks before the expiration of the redemption period on

their property that been sold at a foreclosure sale. Rely-

ing upon 11 U.S.C. § 105, the bankruptcy court enjoined

the mortgagee from taking any further action to fore-

close the property and ordered that the running of the

statutory redemption period be stayed until further order

or until the bankruptcy cases concerning the property

were closed. The district court affirmed, and the mort-

gagee appealed. On appeal the debtors argued that al-

though the district court relied solely upon section

105(a), the provisions of section 362(a) and section

108(b) also supported the bankruptcy court’s order. With

respect to section 362(a), the Eighth Circuit accepted the

reasoning in Bank of Commonwealth v. Bevan and ex-

pressly rejected the position taken in In re Jenkins and

In re Johnson. The court found that the “clear majority”

of cases decided under various automatic stay provisions

of the old Bankruptcy Act held that the filing of a peti-

tion in bankruptcy did not toll or extend the running of

a statutory period of redemption. Finding no clear mani-

festation of congressional intent to change the law on the

issue, the court assumed that the newly-enacted statute,

whose language was substantially identical to that of the

previous statutes, was harmonious with existing law and

its judicial construction. Moreoy. , the court found that

the presence of section 108(b) in the Code supported its

determination that section 362(a) did not apply to toll

the Minnesota statutory redemption period.

We find ourselves in agreement with the reasoning of

the Eighth Circuit in First National Bank and are rein-

forced in our conclusion by the belief that inter-circuit

conflicts should be avoided wherever it is possible to do

so in good faith and in reason.

B. Section 105(a)

The debtors in Miller and Pigloski also contend that 11

U.S.C. §105(a) empowers bankruptcy courts to issue

25a

separate stay orders tolling statutory redemption periods.

That section provides:

(a) The bankruptcy court may issue any order,

process, or judgment that is necessary or appropriate

to carry out the provisions of this title.

The minority position on this issue is set forth in Bank

of Commonwealth’v. Bevan, 13 Bankr. 989 (E.D. Mich.

1981). See also Bank of Ravenwood v. Patzold, 27

Bankr. 542 (N.D. Ill. 1982). After holding that section

362(a) did not apply, the district court in Bevan upheld

the bankruptcy court’s order tolling the statutory re-

demption period as a permissible exercise of authority

under section 105. Relying on two cases decided under

the Bankruptcy Act, the court found that the broad grant

of power in section 105 authorized a bankruptcy judge,

in appropriate situations, to grant the trustee “a greater

period of time in which to act than § 108 initially au-

thorizes.” 13 Bankr. at 996.

Several courts have taken a contrary position, holding

that section 105(a) may not be invoked to toll or sus-

pend the running of a statutory redemption period ab-

sent fraud, mistake, accident, or erroneous conduct on

the part of the foreclosing officer. Johnson v. First Na-

tional Bank, 719 F.2d at 274; In re Martinson, 26 Bankr.

648, 654 (D. N.D. 1983); Matter of Markee, 31 Bankr.

429, 432 (Bankr. D. Idaho 1983); In re James, 20

Bankr. 145, 150-51 ‘Bankr. E.D. Mich. 1982); In re

Headley, 13 Bankr. 295, 297-98 (Bankr. D. Colo. 1981).

In First National Bank, the Eighth Circuit reversed a

district court judgment that had affirmed a bankruptcy

court order entered under section 105(a) tolling the

Minnesota redemption period. The court found that the

equitable powers granted a bankruptcy court by section

105(a) are quite broad, but not unlimited. Specifically,

the court found that, “absent a specific grant of author-

ity from Congress or exceptional circumstances, a bank-

26a

ruptcy court may not exercise its equitable powers to

create substantive rights which do not exist under state

law.” 719 F.2d at 274. The court concluded that to

allow a bankruptcy court, as a matter of course, to sus-

pend the running of a statutory period of redemption

under section 105(a) would enlarge the debtor’s prop-

erty rights “beyond those specifically set forth by the

Minnesota legislature and by Congress in § 108(b).” Id.

The Eighth Circuit was further persuaded by the fact

that there was no claim of wrongdoing that adversely

affected the debtor’s ability to redeem the property within

the statutory period:

“TE]quity is available to protect property rights of

the innocent debtor from the wrongful acts of other

persons; however, equity does not extend to situa-

tions in which the debtor is simply unable to make

the required payment within the prescribed time.”

Id: at 275 (quoting In re Headley, 138 Bankr. 295, 297

(Bankr. D. Colo. 1981) ).

The bankruptcy court in In re James, 20 Bankr. 145

(Bankr. E.D. Mich. 1982), offered another reason for

not interpreting, section 105(a) to permit a bankruptcy

court to toll state redemption periods as a matter of

course. The court found it “clear” that section 105(a)

and its predecessor, section 2(a) (15) of the Bankruptcy

Act, were intended to affect parties’ actions rather than

state statutes:

“The chief test under... § 2(a) (15) appeared to

be whether or not the proceeding in the nonbank-

ruptey court sought to be enjoined interfered with

the possession or custody of the bankruptcy court or

unduly impeded or embarrassed the court in its ad-

ministration under the Act.”

20 Bankr. at 149-50 (quoting 2 Collier on Bankruptcy

7 105.02 (15th ed.)). Absent some compelling justifica-

tion, the court declined to use its equitable powers to

27a

interfere with state law by extending the redemption

period.

Once again we are persuaded by the reasoning in First

National Bank, and we note that the trend in the laws

seems to be away from allowing bankruptcy courts to

issue orders tolling statutory redemption periods under

authority of section 105(a). We also observe that the

cases construing section 105(a) to confer no power to

toll redemption periods absent exceptional circumstances

appear to be more carefully reasoned than those holding

to the contrary.

IV.

The debtors in each of these appeals have raised ad-

ditional separate issues which we now address.

A. The Farm Property Claim.

Our decision on the principal issue in this appeal likely

will moot the question whether the residence of the Glenns

should be treated separately from the fifty acres of farm-

land upon which it is located because the Glenns will be

able to pursue their Chapter 13 plan as they propose.

However, in the interest of completeness we address it

briefly.

The Glenns’ argument rests on the language of section

1322(b) (2). According to that section a plan may “mod-

ify the rights of holders of secured claims, other than a

claim secured only by a security interest in real prop-

erty that is the debtor’s principal residence .. .” (em-

phasis added). The Glenns argue that since the creditors

have a security interest in all of the land the Glenns own,

including the fifty acres of farmland surrounding the

house, the creditors do not have a claim secured only by

real property that is the debtor’s principal residence. The

Glenns maintain, in other words, that the fifty acres of

land on which their house is located are not part of their

principal residence.

28a

The only case we have found to address this issue is

In re Ballard, 4 Bankr. 271 (Bankr. E.D. Va. 1980).

After noting that neither of the debtors was engaged in

farming and that the debtors received only $40 a month

of income from the farm, the court in Ballard said that

“in the absence of a showing that the Debtors clearly

use the farm for any principal purpose other than their

residence, [this court] must consider the entire .. .

property as their principal residence.” Jd. at 276.

This reasoning is even more persuasive here. It is un-

disputed that the Glenns do not use the fifty acres for

any purpose other than as their principal residence. If

the Glenns do not in fact put the land to any other use,

it is difficult to see why the land should be found to be

anything but a part of their residence for the purposes

of Chapter 13.

B. Redemption Under the Chapter 13 Plan

The debtors in Pigloski claim that even if they are not

allowed to reinstate the terms of their mortgage under

11 U.S.C. § 1822(b) (5), they are permitted, under sec-

tion 1322(b) (3) to spread payment of the redemption

price over the entire length of their Chapter 13 plan.

The Pigloskis cite In re Kokkinis, 22 Bankr. 353 (Bankr.

N.D. Ill. 1982), to support this proposition.

In Kokkinis the mortgagors filed their Chapter 13 peti-

tion after their residence had been sold at a foreclosure

sale and one day before the statutory redemption period

expired. The debtors proposed to pay both the arrearage

and the entire remaining balance owed to the mortgagee

over the life of their plan. The primary issue was

whether the provic.cus of section 1322(b) allowed the

debtors to cure default after pre-petition acceleration of

the mortgage debt. The court held that they did. The

court distinguished two cases in which the debtors had

been precluded from curing arrearages following fore-

closure sales because the debtors in those cases wanted

29a

to reinstate the original payment plans under mortgages

while the debtors in Kokkinis proposed to pay off the

entire debt during the life of their plan.

Although it is possible in theory, to hold that a Chapter

13 debtor is entitled to pay the redemption amount over

the life of his plan and also to hold that the statutory

redemption period is not tolled by the bankruptcy proceed-

ings,’ the practical effect of allowing the debtor to pay

the redemption amount over an extended period would

in many respects be the same as a suspension of the

redemption period. Furthermore, most of the considera-

tions that cut against allowing the debtor to reinstate

the mortgage terms after a foreclosure sale also argue

against allowing the debtor to pay off the redemption

amount over the life of the plan. We, therefore, decline

to accept this view.

C. Preferential Transfer Under 11 U.S.C. § 547(b)

As an alternative basis for affirming the district court

in his case, the debtor in Miller argues that the expira-

tion of the redemption period following a foreclosure sale

would constitute a preferential transfer that may be

avoided under 11 U.S.C. §547(b). The mortgagee in

Miller argues that this is a new issue not raised or briefed

in the lower courts and that it ought not to be decided

without a full opportunity for briefing and litigation in

the lower courts. The mortgagee also argues that the

debtor violated court rules by raising an issue in his

appellee brief when he had not given notice that the issue

would be raised before the briefs were written.

This is a novel issue at best and one which was neither

raised nor briefed in the lower courts. It implicates en-

® See In re Wallace, 33 Bankr. 29 (Bankr. W.D. Mich. 1983), in

which the bankruptcy judge rejected a tolling theory even though

he had held in an earlier case that section 1322(b) allows a Chapter

13 debtor to cure a default and reinstate the terms of a mortgage

after a foreclosure sale has occurred.

30a

tirely new provisions of the Bankruptcy Code and factual

issues which were neither developed nor otherwise ad-

dressed in that context. It would be entirely inappropri-

ate for us to consider that issue in this appeal. Bannert

v. American Can Company, 525 F.2d 104, 111 (6th Cir.

1975).

V.

In summary, we hold that under 11 U.S.C. § 1822(b) a

Chapter 13 debtor may cure a default on a mortage on

his principal residence even when the debt has been ac-

celerated and a judgment of foreclosure has been en-

tered provided that no foreclosure sale has taken place.

Once the property has been sold, the right to cure the

default and reinstate the terms of the mortgage under

section 1822(b) ceases. We also hold that the automatic

stay provisions of 11 U.S.C. § 362(a) do not toll or

extend the running of state statutory periods of redemp-

tion following foreclosure sales. Moreover, 11 U.S.C.

§ 105(a) does not empower the courts to issue separate

orders tolling statutory redemption periods absent ex-

ceptional circumstances such as fraud, mistake, accident,

or erroneous conduct. Finally, we hold that section 1322

(b) (8) does not permit debtors to spread payment of

redemption amounts over the entire life of their Chapter

13 plans.

Applying the foregoing principles to the specific cases

on appeal, we reach the following dispositions:

GLENN (82-3821). While the mortgagee had succeeded

in obtaining a judgment of foreclosure, sale of the prem-

ises had not occurred at the time the Chapter 13 petition

was filed. Accordingly, the judgment of the bankruptcy

court overruling the bank’s objections and confirming the

plan of the debtors is AFFIRMED.

MILLER (83-1585). Because the sheriff’s sale had al-

ready been held before the Chapter 13 petition was filed,

the bankruptcy court was correct in lifting the auto-

3la

matic stay as to First Federal. Therefore, the judgment

of the district court is VACATED and we REMAND to the

district court with directions to remand to the bankruptcy

court for reinstatement of the order from which appeal

was taken to the district court and for further proceed-

ings consistent with this opinion. :

PIGLOSKI (83-1316). As in Miller, the sheriff’s sale in

this case was held before the debtors filed their Chapter

13 petition. District Judge Boyle was, therefore, correct

in ruling that the automatic stay provisions of 11 U.S.C.

§ 862(a) did not toll the statutory redemption period and

in holding that, following the foreclosure sale, the mort-

gage default was not subject to cure under section 1322

(b) (5) apart from paying the redemption price within

the period prescribed by state law. Accordingly, the judg-

ment of the district court is AFFIRMED.

32a

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

No. 83-1585

IN RE: RALPH MILLER,

Debtor.

RALPH MILLER,

Plaintiff-Appellee,

FIRST FEDERAL OF MICHIGAN,

Defendant-A ppeliant.

[Filed Jun. 3, 1985]

Before: ENGEL and KRUPANSKY, Circuit Judges, and

WEICK, Senior Circuit Judge

ORDER

The Court having received a petition for rehearing en

banc, and the petition having been circulated not only to

the original panel members but also to all other active

judges of this Court, and no judge of this Court having

requested a vote on the suggestion for rehearing en banc,

the petition for rehearing has been referred to the origi-

nal hearing panel.

The panel has further reviewed the petition for rehear-

ing and concludes that the issues raised in the petition

were fully considered upon the original submission and

decision of the case. Accordingly, the petition is denied.

ENTERED BY ORDER OF THE COURT

/s/ JohnP. Hehman

JOHN P. HEHMAN

Clerk

33a

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

No. 83-1316

EDWARD J. PIGLOSKI and MARY L.PIGLOSKI,

Plaintiffs-A ppeliants,

V.

MAXINE WYNN and MANOR MORTGAGE COMPANY,

Defendants-A ppellees

[Filed Jun. 3, 1985}

Before: ENGEL and KRUPANSKY, Circuit Judges, and

WEICK, Senior Circuit Judge

ORDER

The court having received a petition for rehearing en

banc, and the petition having been circulated not only to

the original panel members but also to all other active

judges of this Court, and no judge of this Court having

requested a vote on the suggestion for rehearing en banc,

the petition for rehearing has been referred to the origi-

nal hearing panel.

The panel has further reviewed the petition for rehear-

ing and concludes that the issues raised in the petition

were fully considered upon the original submission and

decision of the case. Accordingly, the petition is denied.

ENTERED BY ORDER OF THE COURT

/s/ JohnP. Hehman

JOHN P. HEHMAN

Clerk

34a

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

No. 83-1585

IN RE: RALPH MILLER,

Debtor.

FIRST FEDERAL OF MICHIGAN,

Appellant,

Vv.

RALPH HENRY MILLER,

Appellee.

| Tiled Apr. 16, 1985]

Before: ENGEL and KRUPANSKY, Circuit Judges, and

WEICK, Senior Circuit Judge

JUDGMENT

ON APPEAL from the United States District Court

for the Eastern District of Michigan.

THIS CAUSE came on to be heard on the record from

the said District Court and was argued by counsel.

ON CONSIDERATION WHEREOF, It is now here

ordered and adjudged by this court that the judgment

of the said District Covrt in this case be and the same

is hereby vacated and the case is remanded to the said

district court with directions to remand to the bankruptcy

court for reinstatement of the order from which appeal

35a

was taken to the district court and for further proceed-

ings consistent with this opinion.

It is further ordered that Appellant recover from Ap-

pellee the costs on appeal, as itemized below, and that

execution therefor issue out of said District Court, if

necessary.

ENTERED BY ORDER OF THE COURT

/s/ JohnP. Hehman

JOHN P. HEHMAN

Clerk

Issued as Mandate: June 11, 1985

COSTS: None

t

36a

APPENDIX B

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Bankruptcy No. 82-06216

Consolidated Civil Nos. 82-74539 - 83-0335

IN RE: RALPH MILLER

RALPH MILLER,

Debtor-Appellant,

—

FIRST FEDERAL OF MICHIGAN,

Appellee.

OPINION

These cases are before the Court on appeal from an

Order Denying a Stay Tolling the State Redemption

Period entered by the Bankruptcy Judge on November

9, 1982, and an Order Denying Confirmation of the

Debtor’s Chapter 13 Plan entered January 24, 1983.

The November 9, 1982 Order denied extension of a six-

month statutory redemption period that began to run

following a sheriff’s foreclosure sale of the residential

property of the debtor on May 14, 1982. When the re-

demption period ran on November 14, 1982, this then

became the basis for the denial of the debtor’s Chapter 13

plan. Debtor appellant contends on appeal that the Bank-

ruptey Reform Act of 1978 permits a debtor to cure a

default, even after foreclosure, so long as the default in-

volves property of the estate subject to the Bankruptcy

etapa

37a

Court’s jurisdiction, and, that the redemption period

following a foreclosure sale under Michigan law may ©

be tolled pursuant to provisions of the Bankruptcy Re-

form Act of 1978.1

The undisputed facts as set forth by the debtor-

appellant are:

On or about August 5, 1980, the Debtor, RALPH

MILLER, purchased a house and lot located at 18645

Teppert, in the City of Detroit, State of Michigan,

subject to an existing first mortgage, dated April

17, 1973, held by First Federal of Michigan. The

sales price was $26,500.00, and the balance on the

mortgage note was approximately $20,900.00.

Primarily due to repeated and lengthy lay-offs from

his employment with Chrysler Corporation, the

Debtor defaulted on this mortage in late 1981. He

was thereafter unable to cure the default under

the terms mandated by the mortgagee. A foreclosure

by advertisement was commenced in March, 1982.

The sheriff’s sale was held on May 14, 1982. First

Federal of Michigan was the only bidder at the sale;

their bid was the balance owing on the mortgage.

Prior to the expiration of the redemption period, the

Debtor, on November 2, 1982, filed a Chapter 13

Petition and Plan. The Plan proposed by the Debtor

would provide payments to the mortgage company

to cure the default and current monthly mortgage

payments.

Immediately upon filing the Chapter 13 Petition,

Debtor filed a Motion for Stay Order Tolling Re-

demption Period and Restraining Order, in which he

requested the Bankruptcy Court to issue a Stay

1 For clarification, this Court follows the now common practice

of referring to the Bankruptcy Act of 1898 as the “Act” and the

Bankruptcy Reform Act of 1978 as the “Code”.

38a

Order Tolling the Redemption Period under Bank of

the Commonwealth v. Bevan, 18 Bankr. Rptr. 989

(E.D. Mich. 1981). The Bankruptcy Court heard

and denied the Motion on November 9, 1982. The

Court adopted the opinion set forth in, Jn re James,

20 Bankr. Rptr. 145 (Bankr. E.D. Mich. 1982),

holding that § 105 does not authorize a bankruptcy

court to toll a state statutory period of redemption.

At the Confirmation Hearing held on January 11,

1983, the Court also denied confirmation of the

Debtor’s Chapter 13 Plan. The Court further ordered

that the automatic stay as to First Federal of Michi-

gan was lifted, allowing the mortgagee to pursue

eviction. Finally the Court ruled that 11 U.S.C.

§ 362 did not toll the redemption period and the

debtor could not cure a default after a sheriff’s sale.

Upon stipulation of the parties, this Court entered an

Order on December 21, 1982, Staying Proceedings pend-

ing this appeal for which oral arguments were heard

March 2, 1983.

The residential property involved in this action consti-

tutes “property of the estate” and is therefore within the

jurisdiction of the Bankruptcy Court. 11 U.S.C. § 541;

4 Collier on Bankruptcy { 541.07[1] (15th Ed. 1980).

This is so because the debtor’s interest in real property

subsequent to a foreclosure sale includes the right of re-

demption which allows the debtor a statutorily prescribed

period of time to “redeem” the property from the pur-

chaser at the sale. MCLA §8§ 600.3101 et. seqg., 600.3201

et. seqg.; MSA §$§ 27A.3101 et seg., 27A.3201 et seg. This

interest of the debtor includes retention of legal title in

the premises by the mortgagor until the expiration of

the period of redemption. Bankers Trust Company of

Detroit v. Rose, 322 Mich. 256 (1948).

While the nature and extent of the debtor’s interest in

real property is determined by application of state law,

39a

the Bankruptcy Code defines those interests in property

which become the “property of the estate” and hence

within the Bankruptcy Court’s jurisdiction. As the pe-

riod of redemption had not expired at the time the Chap-

ter 13 petition was filed in this case, the right to redeem

became property of the estate by operation of 11 U.S.C.

541 ? as of the time of filing.

The first issue this Court is confronted with is whether

an acclerated mortgage debt falls within § 1332(b) (5)

of the Bankruptcy Code which allows a debtor to pay off

a mortgage arrearage (cure a default), during the life

of the debtor’s reorganization plan while maintaining

current payments.

Section 1322 (b) reads in pertinent part:

(b) Subject to subsections (a) and (c) of this Sec-

tion, the [Chapter 13] Plan may-—

* * * 7

(2) modify the rights of holders of secured claims,

other than a claim secured only by a security

interest in real property that is the debtor‘s

principal residence, or of holders of unsecured

claims;

(5) notwithstanding paragraph (2) of this sub-

section, provide for the curing of any default

within a reasonable time and maintenance of

payments while the case is pending on any

unsecured claim or secured claim on which the

last payment is due after the date on which the

final payment under the plan is due...

2 Section 541 of the Bankruptcy Code defines “property of the

estate” as follows:

(a) The commencement of a case under Section 301, 302, or

303 of this title creates an estate. Such estate is com-

prised of all of the following property, wherever located:

(1) except as provided in subsections (b) and (c) (2) of this

section, all legal or equitable interests of the debtor in

property as of the commencement of the case.

40a

The analysis which has made § 1322(b) unavailable to

debtors in the position of Ralph Miller * is that a default

cannot be cured under this section because the last pay-

ment of the accelerated mortgage is due before the time

in which the final payment is due under the reorganiza-

tion plan. Bankruptcy Courts have therefore held that an

accelerated mortgage debt is not within § 1322(b) (5).

In re Paglia, 8 Bankr. 987 (BCED N.Y. 1981); In re

Butchman, 4 Bankr. 379 (BCSD N.Y. 1980); In re

Rutterbush, Civ. Ac. No. 81-40270 (decided September

24, 1982, E.D. Mich.) (Newblatt J.)

The Court of Appeals of the Second Circuit has ad-

dressed the issue within the context of accelerated mort-

gages without specifically addressing a post-foreclosure

sale situation. In re Taddeo, 685 F.2d 24 (2nd Cir.

1982) However, in Taddeo the Court rejected the mort-

gagee’s claim that the debtors could not use § 1322(b) (5)

to cure their default and maintain payments in that (b)

(5) applies only to claims whose last payment is due

after that under the plan, by holding that the concept

of “cure” in § 1322(b)(5) contains the power to de-

accelerate. 685 F.2d at 26, 28. As to the mortgagee’s

contention that to allow a debtor to cure the defaulé as

proposed would violate vrohibitions against modification

of home mortgages set forth in § 1322(b) (2), the Court

pointed out that in light of legislative history and legis-

lative purpose, the “notwithstanding paragraph (2)”

clause was added to § 1322(b) (5) to emphasize that de-

faults in mortgages could be cured notwithstanding

§ 1322(b) (2). Id at 27, (citing 124 Cong. Rec. H 11,

1106 (Sept. 28, 1978); S.17, 423 (Oct. 6, 1978)). The

Court pointed out, however, that the clause was not nec-

cessary as the Senate protected home mortgages from

modification in its bill $.2266, 95th Cong. 2d. Sess., but

evinced no intent to protect these mortgages from cure.

%The debtor Ralph Miller defaulted on mortgage containing a

standard acceleration clause.

4la

Id. at 27-28. The Court further noted that the few cases

under the successor Chapter XIII of the old Bankruptcy

Act distinguish modifying a claim from maintaining pay-

ments thereon, and indicate that curing a default and

maintaining payments on a claim did not modify a plan.

Id. at 28, (citing Hallenbeck v. Penn Mutual Life Insur-

ance Co. 323 F.2d 566 (4th Cir. 1963) ).

Two Bankruptcy Courts in Michigan have reached con-

trary results in addressing the issue of the ability to cure

a default under § 13822(b) (5). In Jn re James, 20 Bankr.

145 (BCED Mich. 1982), Judge Graves stated that “be-

cause a foreclosure sale under Michigan law extinguishes

the mortgage and transfers legal title to the purchaser”,

(citing, Ledyard v. Phillips, 47 Mich. 305 (1882)*], “the

mortgagor is left with its statutory right to redeem from

the sale within six months thereof pursuant to MCLA

§ 600.3140.” 20 Bankr. at 149. Therefore, because pay-

ment can no longer occur in accordance with the due date

on the mortgage, but, at the most, can only be made with-

in six months from the date of foreclosure, Judge Graves

concluded that, “by its own terms § 1322(b) (5) is inap-

plicable” since the statute requires fulfillment of the

terms of the reorganization plan prior to the date of the

final payment under the mortgage. Jd. Without further

analysis of the treatment of secured debts under the

Bankruptcy Act of 1898, or legislative history and pur-

pose, or the intent of Congres, Judge Graves eliminated

the remedies contained in § 1322(b) (5) for debtors whose

mortgages had been accelerated and were the subject of

foreclosure sales.

In In re Thompson, 17 Bankr. 748 (BCWD Mich.

1982), the Court accurately noted that while Michigan

*It is clear that since the establishment of a redemption period

under Michigan law, the prevalant view is that legal title remains

with the mortgagor. Bankers Trust Company of Detroit v. Rose,

supra.

42a

law limits a mortgagor’s ability to cure a default where

a debt has been accelerated or a sale held, case law under

§ 1322(b) is in disagreement on the question of whether

the Bankruptcy Code deviates from state law in allowing

a post-default cure. 17 Bankr. at 751. The Thompson

Court adopted the view that § 1322(b)(5) allows the

cure of arrearages and the reinstating of the original

mortgage terms where the debtor files a petition prior to

such time as state law cuts off the debtor’s interest in the

mortgaged property, i.e. the running of the statutory

redemption period under Michigan law. 7d. In so ruling,

the Court reviewed provisions of the Bankruptcy Act

which allowed that secured creditors need not be required

to participate in Chapter XIII plans without their con-

sent and that real estate mortgages were not “claims” for

Chapter 13 purposes, (§§ 652,606). The Court noted,

however, that subsequent case law held that secured credi-

tors could be delayed in the enforcement of their liens

where the effectuation of the Chapter XIII plan so re-

quired, (Hallenbeck v. Penn Mutual Life Insurance Co.,

supra). 17 Bankr. at 751-52. The Court then noted that

the legislative history of 11 USC § 1322 nowhere indi-

cates that this approach has been altered, and the Court

therefore found that the protections given the secured

creditor under the Bankruptcy Code are confined to that

specified in the Code and identified in Hallenbeck. Id.;

see also, Taddeo, 685 F.2d at 27-28. These protections,

for a debt secured by real estate where the last payment

is due after the last plan payment, include that the debt

must be brought current within a reasonable time, § 1322

(b) (5); that the mortgagee is to receive regular puy-

ments at the contract rate, § 1322(b) (2); and that the

mortgagee receive the assurance of continued security,

§§ 362(d) (1), 1322(b) (2). In Thompson, as in the pres-

ent case, the creditor had not alleged that its security

would be impaired by the debtor’s plan, and the plan

proposed to bring the mortgages -vrrent and to continue

regular payments.

43a

The mortgage in the present case strenuously argues

that the decisions in Taddeo and Thompson misconstrue

the relationship between the Bankruptcy Code and state

law and ignore the mandate that property rights must be

defined under the laws of Michigan. Appellee contends

that under Michigan law, after the foreclosure sale the

note and mortgage have merged into the sheriff’s deed and

cease to exist; that the mortgagor retains only a right of

redemption during the statutory period of redemption

after a foreclosure sale and the equity of redemption

passes to the purchaser, which he may assign or transfer.

(Appellee’s Brief on Appeal, at 10, 11). The mortgagee

questions the Court’s ability to impair the rights of the

bidder if the Court “reinstates a mortgage which ceased

to exist” or “orders the successful bidder to reconvey this

interest in the property to the mortgagor.” (/d. at 12).

This arguy ent fails to account for the interest the

debtor retains until the expiration of the redemption

period, and, whether legal title in fact becomes property

of the estate of a Chapter 13 petition, the legal) title has

not vested in the purchaser until such time as the period

allowed for redemption expires. Bankers Trust Company

of Detroit v. Rose, 322 Mich. 256 (1948). The debtor’s

power to cure a default on a mortgage by application of

§ 1322(b) (5) continues until such time as state law cuts

off the debtor’s interest in the property, and is not limited

by the contract terms which allow for acceleration or even

foreclosure sale until the redemption period expires.

This is consistent with the rehabilitative purposes

which underlie Chapter 13. And, as pointed out in

Thompson:

Furthermore such a reading as is proposed by the

mortgagees would virtually eliminate subsection (b)

(5) from the Code. In nearly every instance in

which a homeowner debtor files a petition in Chapter

13, the mortgage debt has been accelerated. To sug-

gest that such a debtor’s remedy is limited to pay-

ment of the full amount of the mortgage debt is to

44a

render the remedy in § 1322(b) (5) unavailable to

all but a select number of debtors. Furthermore,

such a reading would encourage mortgagees to accel-

erate a debt as soon as possible after any default

occurs in order to improve their position should the

mortgagor file Chapter 13 proceedings.

17 Bankr. at 753.

The argument of the mortgagee herein is that the

Court in Thompson fails to understand Michigan fore-

closure laws and the significance of pre and post-foreclo-

sure rights of the creditor. This argument amounts to

that put forth by the mortgagee in Taddeo, i.e. that be-

cause a mortgagee can accelerate a mortgage, or, in this

case, sell by foreclosure, the debtor can only cure as pro-

vided by state law. As the Court in Taddeo pointed out,

“this interpretation of § 1322(b) would leave the debtor

with fewer rights under the Bankruptcy Code than under

the old Bankruptcy Act of 1898,”° and “[dJefaulting

mortgag[ors] would forfeit their right to cure even be-

fore the start of foreclosure proceedings, before they have

hired lawyers and therefore before they knew anything

about their rights under Chapter 13.” 685 F.2d at 29.

Application of state law as proposed by the mortgagee

herein would override the rehabilitative purpose of Chap-

ter 13.

This being the case, we will not address the issue of the

tolling of the statutory redemption period beyond that

automatically invoke! upon the filing of the Chapter 13

petition.* Once filed, a Chapter 13 petitioner has avail-

5 See, In re Freed & Co., 534 F.2d 1235, 1239 (6th Cir. 1976).

® Section 362(a) of the Bankruptcy Code provides in pertinent

part:

(a) Except as provided in Subsection (b) of this section, a

petition filed under Section 301, 302, or 303 of this title

operates as a stay applicable to all entities, of—

(1) the commencement or continuation, including the is-

suance or employment of process, of a judicial, ad-

ob Rn vital. WigeSA\. Bienen.

45a

able the protection of § 1822(b) (5) upon the Court’s con-

sideration of the proposed reorganization plan and within

the confines of the section itself as it protects creditors.’

In accordance with the above reasoning the Court finds

that the Bankruptcy Court erred in its denial of the

appellant’s Motion for Stay and rejection of the proposed

reorganization plan. Accordingly, this Court will vacate

the decision of the Bankruptcy Court and remand this

ease for proceedings consistent with this Opinion. An

appropriate Order will be entered.

/s/ Thomas P. Thornton

THOMAS P. THORNTON

United States District Judge

Dated: July 18, 1983

ministrative, or other proceedings against the debtor

that was or could have been commenced before the

commencement of the case under the title, or to re-

cover a claim against the debtor that arose before the

commencement of the case under this title; * * *

(3) any act to obtain possession of property of the estate

or of property from the estate;

(4) any act to create, perfect, or enforce any lien against

property of the estate;

7 While we decline to stay this matter pending clarification from

the Court of Appeals for the Sixth Circuit, we are mindful that

twe decisions of this Court, In re Rutterbush, civ. ac. no. 81-40270

(decided September 24, 1982, E.D.Mich) (Newblatt J.) and In re

Johnson, civ ac. no. 82-73814 (decided December 15, 1982) (Boyle

J.) have taken the contrary view of the effect of § 1322(b) (5) in

post-foreclosure sale cases on appeal from denials of stay by the

Bankruptcy Court.

46a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Bankruptcy No. 82-06216

Consolidated Civil Nos. 82-74539 and 83-0335

IN RE: RALPH MILLER

RALPH MILLER,

Debtor-Appellant,

—

FIRST FEDERAL OF MICHIGAN,

Appellee.

ORDER

This matter having come kefore the Court on appeal

from a decision of the Bankruptcy Court, and the Court

having reviewed the briefs of the parties and heard the

oral arguments of counsel, being otherwise fully advised

in the premises and for the reasons set forth in the

Opinion herein attached

The decision of the Bankruptcy Court is hereby VA-

CATED and IT IS ORDERED that this case be RE-

MANDED to the Bankruptcy Court for proceedings

consistent with the attached Opinion.

/s/ Thomas P. Thornton

THOMAS P. THORNTON

United States District Judge

Dated: July 18, 1983

“a,

47a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Honorable Patricia J. Boyle

Civil Action No. 82-71868

Bankruptcy No. 82-02536-G

EDWARD J. PIGLOSKI and MARY L. PIGLOSKI,

Debtors-A ppellants,

—

MAXINE WYNN and MANOR MORTGAGE COMPANY,

Appellees.

MEMORANDUM OPINION AND ORDER

AFFIRMING ORDER OF BANKRUPTCY

This is an appeal from a bankruptcy decisiun of Judge

Graves denying appellant’s request to stay or toll the

statutory redemption period for payment under a wrap-

around mortgage. Appellants are consumer debtors who

secured a mortgage in June, 1981. After four months of

accumulated arrearage, appellants defaulted, and ap-

pellee commenced a foreclosure by advertisement, and a

sheriff’s sale was conducted on November 20, 1981. On

April 30, 1982, appellants filed a motion for a stay order

tolling the redemption period. The redemption period was

due to expire on May 20, 1982. Judge Graves granted

the motion and conducted a hearing on May 18, 1982, at

which time the court considered appellants’ contention

that the automatic stay provision of 11 U.S.C. § 362(a)

applies to toll the running of the redemption period, and

in the alternative that under the authority of Bank of the

Commonwealth v. Bevan, 18 Bankr. 989 (E.D. Mich.

48a

1981) (Guy, J.), the bankruptcy court has the authority

to issue a separate stay order tolling the redemption

period pursuant to 11 U.S.C. § 105. Pursuant to its own

opinion in In re James, 20 Bankr. 145 (Bankr. E.D.

Mich. 1982), the court rejected both contentions. Appel-

lant now appeals that decision. Judge Graves issued a

stay pending appeal as to this ruling.

First with respect to the automatic stay provision, sec-

tion 362(a) provides in relevant part:

Except as provided in ‘subsection (b) of this sec-

tion, a petition filed under section 301, 302, or 303

of this title, . . . operates as a stay, applicable to

all entities, of—

(1) the commencement or continuation, including

the issuance or employment of process, of a

judicial, administrative, or other proceeding

against the debtor that was or could have been

commenced before the commencement of the case

under this title, or to recover a claim against

the debtor that arose before the commencement

of the case under this title;

(3) any act to obtain possession of property of the

estate or of property from the estate;

(4) any act to create, perfect, or enforce any lien

against property of the estate... .

While I recognize the important function served by this

automatic stay provision in the Bankruptcy Code, that

of giving the “debtor a breathing spell from his creditors,”

see H.R. Rep. No. 95-595, 95th Cong., 2d Sess. 340

(1977), 1978 U.S. Code Cong. & Ad. News, pp. 5968,

6296-97, I join with Judge Guy and with the judges of

the bankruptcy court in concluding that this section does

not apply to the “act” of the running of the redemption

Ne ile tt al Onis hil

an we ee =

_ wee oe Dem fe ots

49a

period in that section 108 speaks explicity to suspension

of time periods. See Bevan, supra. As was noted in

Bevan:

Section 108(b), as it effects [sic] the amount of

time given the trustee to file “any pleading, de-

mand, notice, or proof of claim or loss, cure a de-

fault, or perform any other similar act,” grants the

trustee a minimum of sixty days or the running of

the period, whichever is longer, in which to act.

Under the language of § 362(a), an automatic

stay applies to “acts”, “proceedings”, and their “con-

tinuation”, and “enforcement” of judgments against

the debtor or property of the estate, and does not

effect the running of specific time periods unlike

§ 108 which speaks explicitly. to that issue... .

... While a stay tolling the running of the statu-

tory period would give the debtor greater protection

than that contemplated by § 108, this court finds

that where one section of the Bankruptcy Code ex-

plicitly governs an issue, another section should not

be interpreted to cause an irreconcilable conflict.

Richards v. United States, 369 U.S. 1, 11 (1969).

Id, at 993-94. The court concluded that to give effect to

the automatic stay provisions of section 362(a) and to

hold that an indefinite and automatic stay is applicable

to toll the running of the redemption period would render

the explicit limitations of section 108 “superfluous.” I

agree with that reasoning and conclude, as the bank-

ruptey courts have (at least implicitly), pursuant to the

James decision, that section 362(a) does not toll the

runing of the statutory period of redemption.

Appellant argues alternatively that section 105 of the

Code prov... a means to toll the redemption period.

Under 11 U.3.C. § 105, “(a) The bankruptcy court may

issue any order, process, or judgment that is necessary

50a

or appropriate to carry out the provisions of this title.”

This court finds, however, that this broad grant of au-

thority under section 105 must be read in conjunction

with the limiting provisions of 11 U.S.C. § 108(b), which

provide:

[I]f applicable law, an order entered in a proceed-

ing, or an agreement fixes a period within which the

debtor or an individual protected under section 1301

of this title may file any pleading, demand, notice, or

proof of claim or loss, cure a default, or perform any

other similar act, and such period has not expired

before the date of the filing of the petition, the

trustee may only file, cure, or perform, as the case

may be, before the later of—

(1) the end of such period, including any suspen-

sion of such period occurring on or after the com-

mencement of the case; and

(2) 60 days after the order for relief.

Consistent with the analysis which underpins the holding

in Bevan, the broad remedial provisions of section 105

must give way to the explicit sixty-day limitations period

in section 108 so as to avoid an irreconcilable conflict be-

tween these two sections. As was noted by Judge New-

blatt recently in In re Rutterbush, No. 81-40270 (E.D.

Mich. Sept. 24, 1982):

Section 108(b) is a clear Congressional command

that the rights of a redemption purchaser can be

stayed for no longer than sixty days. It is a basic

Constitutional Article III premise that Congress can

regulate the range of judicial review provided that

Congress acts within the bounds of the Constitution.

Nobody would seriously contend that it is unconsti-

tutional for Congress to limit the tolling period with

respect to redemption purchasers to a mere sixty

days. Accordingly, section 108(b) must be given

5la

effect [notwithstanding appellant’s request for a

thirty-month stay pursuant to section 105].

Slip op. at 3. Appellant in the instant matter prayed

for a Bevan-type stay, pursuant to section 105, presum-

ably for an indefinite period of time. Having concluded

that section 105 is limited, if not overruled, by section

108, che order of the bankruptcy court denying appel-

lant’s request for a stay pursuant to 11 U.S.C. § 105 is

hereby affirmed.

Appellant argues further that, pursuant to 11 U.S.C.

§ 13822, the trustee may cure the “consequences” of de-

fault even after the expiration of the redemption period

and that the “consequences” may include the acceleration

of the mortgage and the “curing” of the foreclosure sale.

An analysis of the question of whether a trustee may

cure the consequences of a mortgagor default, including

a foreclosure sale, must begin with an analysis of what

occurs upon a foreclosure sale. The title conveyed by

foreclosure sale is all the right, title, and interest in and

to the mortgaged premises which the mortgagor pos-

sessed at the time the mortgage was executed, or which

was subsequently acquired by him. Stolte v. Krentel, 271

Mich. 98, 105 (1935) cited in James, 20 Bankr. at 148.

A foreclosure of a mortage extinguishes it. When

the amount due under the mortgage is paid to the

mortgagee by the purchaser at the sheriff’s sale, the

lien is destroyed, and the purchaser becomes the

owner of an equitable interest in the mortgaged

premises which ripens into a legal title if not de-

feated by redemption as provided by law.

Dunitz v. Woodford Apartments Co., 236 Mich. 45, 49

(1926). While it is clear that a mortgagor retains the

right to redeem until the redemption period runs, see

Heimerdinger v. Heimerdinger, 299 Mich. 149 (1941),

this statutory provision vests in the mortgagor only the

52a

right to redeem by depositing with the mortgagee or

purchaser “the sum which was bid therefor, with in-

terest from the time of the sale at the rate per cent,

borne by the mortgage... .” M.C.L.A. § 600.3240. The

right to redeem is distinct, however, from the right to

cure a default, which is the right to resume the normal

payment schedule upon the payment of arrearages owing.

A foreclosure sale is most analogous to a judgment by

foreclosure in that it vests in the purchaser of the mort-

gage, or the mortgagee, an expectation of fuil title upon

the expiration of the redemption period if the mortgagor

fails to redeem. James, 20 Bankr. at 148. A foreclosure

sale and final judgment by foreclosure are essentially in

the same category, distinct from an acceleration of the

mortgage, as consequences of default. The former oc-

currences extinguish the mortgage and are, hence, not

subject to cure under section 1322(b) (5). In re Taddeo,

9 Bankr. 299 (Bankr. E.D.N.Y. 1981), aff'd, 685 F.2d 24

(2d Cir. 1982). Contra In re Thompson, 17 Bankr. 748

(Bankr. W.D. Mich. 1982).

In sum, I conclude, as the court did in James, that

there is indeed a distinction between the acceleration of a

debt and a foreclosure sale in that the latter terminates

the mortgage and consequently terminates the mortgagor’s

rights under the mortgage, other than that of redemption.

As was noted in James, where the mortgage is no longer

in existence and where title in the mortgage has passed

to the purchaser, the requirement under section 1322(b)

(5) that “the last payment is due after the date on which

the final plan is due” is not satisfied for the simple reason

that there is no longer a mortgage, and hence, no pay-

ments are “due”. As Judge Graves described in James,

“{djebtors cannot reactivate a mortgage that was already

merged into a judgment of foreclosure before the debtors

filed their Chapter 13 petition. . . . [A] Bankruptcy

Court ‘cannot cultivate rights where none can grow....’”

In re James, 20 Bankr. 149 (ellipsis in original).

58a

Accordingly, this court concluding that the trustee may

not cure the default after a foreclosure sale pursuant to

section 1322(b) (5), that aspect of the order of the

bankruptcy court is likewise affirmed.

IT IS SO ORDERED.

/s/ Patricia J. Boyle

PATRICIA J. BOYLE

United States District Judge

Date: 29 Mar. 1983

Detroit, Michigan

54a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

Docket Number 82-71868

Hon. Patricia J. Boyle

EDWARD J. PIGLOSKI, et al.

v.

MAXINE WYNN and MANOR MORTGAGE Co.

JUDGMENT IN A CIVIL CASE

C1) Jury Verdict. This action came before the Court and

a jury with the judicial officer named above presiding.

The issues have been tried and the jury has rendered

its verdict.

Decision by Court. This action came to trial or hear-

ing before the Court with the judge (magistrate)

named above presiding. The issues have been tried or

heard and a decision has been rendered.

IT IS ORDERED AND ADJUDGED that the decision

of the Bankruptcy Court is affirmed; that the Appellants

Edward J. Pigloski and Mary L. Pigloski take nothing;

and that the action be dismissed on the merits.

ROBERT A. MOSSING

Clerk

/s/ Mary W. Farin

Deputy Clerk

Date—3-31-83

Detroit, Michigan

\

\

EE

55a

APPENDIX C

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Chapter 13 No. 82-06216-W

IN RE: RALPH MILLER,

Soe. Sec. No. 369-28-7174

Debtor.

ORDER DENYING DEBTOR’S MOTION FOR STAY

ORDER TOLLING REDEMPTION PERIOD AND

RESTRAINING THE WAYNE COUNTY SHERIFF

FROM ISSUING A SHERIFF’S DEED

At a session of said Court, held in the City of

Detroit, County of Wayne and State of Michi-

gan. On: Dec. 2, 1982

Present: HONORABLE GEORGE E. Woops,

Bankruptcy Court Judge

Debtor’s Motion for Stay Order Tolling Redemption

Period and Restraining the Wayne County Sheriff from

Issuing a Sheriff’s Deed came on for hearing before the

Honorable George Woods on November 9, 1982. Debtor,

appeared through his attorney Mary Ann Zito, Esq., and

Defendant, through William Stanley Fambrough, Esq.

Upon consideration of the pleadings filed herein and

the argument of counsel,

56a

IT IS HEREBY ORDERED that Debdtor’s motion is

denied for the reasons stated in Jn Re: Troy Lee James,

et al, Bankruptcy Reporter (1982).

/s/ George E. Woods

Bankruptcy Court Judge

Approved as to form:

/s/ W. Stanley Fambrough

W. STANLEY FAMBROUGH

/s/ Matthew J. Mason

MATTHEW J. MASON

57a

UNITED STATES BANKnUPTCY COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Chapter 13 No. 82-06216-W

IN RE: RALPH MILLER,

Debtor,

RALPH MILLER,

Appellant,

¥,

FIRST FEDERAL OF MICHIGAN,

Appellee.

ORDER GRANTING RELIEF FROM AUTOMATIC

STAY AND DENYING CONFIRMATION

At a session of said Court, held in the City of

Detroit, County of Wayne, State of Michigan.

ON: 24 Jan. 1983

Present: HONORABLE GEORGE E. Woops,

Bankruptcy Court Judge

The matter having come on for confirmation hearing

on January 11, 1983, and it appearing that First Federal

of Michigan has filed objections to the Plan because it

had foreclosed the mortgage in question by Sheriff’s sale

on May 14, 1982 prior to the date of filing the Chapter

13, and the court finding that 11 USC 362 does not toll

the redemption period, and that the debtor may not cure

a mortgage default after Sheriff’s sale;

IT IS HEREBY ORDERED THAT the objection filed

by First Federal of Michigan is sustained.

AG icy cht hn Pi Sica A tte in ne ne

58a

IT IS FURTHER ORDERED that the automatic stay

is lifted.

IT IS FURTHER ORDERED that Debtor’s motion

for confirmation is denied.

/s/ George E. Woods

Bankruptcy Court Judge

Approved as to form and content:

/s/ Matthew J. Mason

MATTHEW J. MASON (P-29678)

ttorney for Debtor

UAW LEGAL SERVICES PLAN

200 New Center Building

Detroit, Michigan 48202

/s/ W. Stanley Fambrough

W. STANLEY FAMBROUGH

Attorney for First Federal of Mich.

1001 Woodward Avenue

Detroit, Michigan 48226

ne) eRe atte ent er ee ea

WR i iin Wa i 9 2. v2

59a

TRANSCRIPT OF PROCEEDINGS

MAY 18, 1982

[19] I'd like to say that the briefs were so well done

that it makes the job easy but because they’re so good,

it makes it harder, and this is an issue that’s been ar-

gued almost every other week since I’ve become a Judge.

At the first of this year, and as the parties are aware,

I have had a number of cases on the docket that are

under advisement on this issue, and these people were

contacted, and directed to be here this morning for the

announcement of an Opinion, and for the sake of moving

this matter along, and other matters. that are under

advisement.

It appears that the matter of Edward J. and Mary L.

Pigloski will be the first one to be disposed [20] of in

this fashion.

The ruling that the Court is now about to announce

is taken from the Opinion that will be issued today in the

matter of Troy Lee James, 81-04754-G; McDavid Ha-

thorn 81-04163-G; Marilyn Blacksher, 81-06484-G; Re-

becca R. Brown, 81-07213-G, Adversary Number 82-

0172. This Opinion will be in final form today, and will

be available for the both of you, and for Counsel in those

cases that I’ve just put into the record.

As far as the four cases just announced, I’m not going

to discuss the facts in those cases. The facts in this case

are equally applicable to the Opinion, and I see no reason,

based on what I’ve heard and read, to change what I’m

now about to announce.

The question presented by the consolidated cases that

I’ve referred to, as well as the matter of Edward

Pigloski and Mary Pigloski, as simply stated, turn to a

single issue.

Does the United States Bankruptcy Court have author-

ity to issue an order pursuant to 11 U.S.C., Section 105,

and my other stautory Sections that may be restated, to

toll a stautory period of redemption, so as to allow a

60a

Chapter 13 Debtor to reinstate the terms of the mortgage

legally in default in a plan pursuant to 11 U.S.C., Sec-

tion 1322 (b) (5).

This point concerns Section 105, and the other statutory

Sections presented in the arguments in this [21] in this

case, and in the other cases. Section 105 does not em-

power a Bankruptcy Court to toll a state stautory period

of redemption so as to enable the Chapter 13 Debtor to

reinstate the terms of the mortgage in default in the plan

pursuant to 11 U.S.C., Section 1322 (b) (5).

Section 1322 (b)(5) allows the cure of any default

within a certain period of time. Subject to subsections

(a) and (b) of this Section, the plan may: (5) notwith-

standing paragraph (2) of this subsection, provide for

the curing of any default within a reasonable time, and

maintenance of payments while the case is pending on

any unsecured claim, or secured claim on which the last

payment is due after the date on which the final payment

under the plan is due.

Section 105 allows the Court to issue any Order,

process, or judgment that is necessary or appropriate to

carry out the provisions of this title.

The Debtors would have this Court believe that Sec-

tions 1322 (b) (5) and 105 (a) support the proposition

that a mortgage allegedly in default, but which, in fact,

has been foreclosed, may properly be revived, and the

original terms reinstated in the plan of reorganization,

especially where it is averred that the properties are

necessary to an effective reorganization. This proposition,

however, finds no basis in law or in equity.

First and foremost Section 1322 (b)(5) [22] directly

affects state-created property rights which were to be

arranged under the support of 440, United States, Report

48. at page 55: property interests are created and de-

fined by state law. Unless some federal interest requires

a different result, t’.ere is no reason why such interests

should be analyzed diff- differently simply because an

interested party is involved in a Bankruptcy proceeding.

Uniform treatment of property interests by both State

Wai et a

6la

and Federal Courts, within a State, serves to reduce

uncertainty, to discourage forum shopping, and to pre

vent a party from receiving a windfal! merely by reason

of the happenstance of bankruptcy.

Under Michigan law, a purchaser at a foreclosure sale

takes the property subject to the mortgagor’s right of

statutory redemption. That is Ledyard versus Phillips,

47 Mich. 305, a decision made a hundred years ago, 1882,

which is still the law of this state.

The title thus conveyed to the purchaser is all the right,

title and interest in the mortgaged premises which the

mortgagor possessed when the mortgage was executed.

In Stolte versus Krentel, 271 Mich. 98, this title vests

in the purchaser only upon the expiration of the stautory

redemption period.

Bankers Trust Company of Detroit versus Rose, 322

Mich. 256. The mortgagor still retains a [23] significant

amount of interest in the premises, in addition to its

stautory right of redemption; specifically, the right to

possession, and the right to rents and profits, until the

redemption period expires. You might add that the pur-

chaser has an interest to proceed in that regard.

The purchaser at the foreclosure sale also has an in-

terest to be protected. Section 1322 (b)(5) apparently

allows a mortgage allegedly in default to be cured, and

the original terms to be reinstated in the plan when the

last payment on the mortgage is due after the date on

which the final payment under the plan is due.

The legislative history states that a claim secured by

the Debtors principal residence may be treated with un-

der 1322 (b) (5). This section is applicable only where

the debtor/mortgagor’s equity of redemption has not been

foreclosed. Because a foreclosure sale under Michigan

law extinguishes the mortgage and transfers legal title to

the purchaser, Ledyard versus Phillips, the mortgagor is

left with its stautory right to redeem from the sale

within six months pursuant to M.C.L.A. 600.3140, as

amended by 1970 Public Act 86.

62a

Therefore, payment can no longer occur in accordance

with the due date on the mortgage but, at the most, can

only be made within six months from the date of fore-

closure as statutorily prescribed.

Hence, by it’s own terms, 1322 (b) (5) [24] is inappli-

cable, since that statute requires fulfillment of the terms

of the plan prior to the date of the final payment under

the mortgage.

Th principle has been most succinctly stated that

debtors cannot reactivate a mortgage that was already

merged into a judgment of foreclosure before the Debtors

filed their Chapter 13 petition. A i= 1kruptcy Court

cannot cultivate rights where none can grow.

As to the individual Debtors in the cases under advise-

ment, and in this case, their properties were sold at fore-

closure sales, and their mortgages extinguished thereby,

all occurring prior to the filing of their Chapter 13 peti-

tions.

Because payments can no longer be made in accordance

with the due dates on the mortgages, the inevitable con-

clusion is that the terms of their respective mortgages

cannot be reinstated in the proposed plans of reorganiza-

tion under 1322 (b) (5).

Counsel for Debtors in other cases, and in this case,

have argued that even if Section 1322 (b) (5) precludes

an opportunity for cure, this Court should, nevertheless,

exercise its equitable powers under 11 U.S.C., Section 105,

and issue an Order tolling Michigan’s statute of redemp-

tion in order to allow the Debtors to make current their

arrearages, and to continue to make monthly mortgage

payments while under the [25] protective umbrella of

Chapter 13.

This Court is unwilling to transcend the boundaries

within which we may exercise our equity powers and,

therefore, we find that Section 105 does not authorize

this Court to toll a state stautory period of redemption.

Although a Bankruptcy Court is a Court of equity, and

as such may invoke equitable principles, limitations on

the exercise of those equitable powers do, in fact, exist.

ee Sr. oe

63a

Section 105, upon which the Debtors in part rely, provide

that the Bankruptcy Court may issue any Order, process,

or judgment that is necessary or appropriate to carry out

the provisions of this title.

The legislative history to this code provision states that

Section 105 is derived from Section 2a(15) of the Act.

The same principles of equity and limitations thereon

that exist under the Code, also existed under the Act. “A

Bankruptcy Court is a Court of equity, and is guided by

equitable doctrines and principles, except insofar as they

are inconsistent with the Act.”

Section 2a(15) of the Bankruptcy Act was viewed as

an express legislative sanction of the Bankruptcy Courts

power to enjoin actions of parties.

That Section 2a(15) was intended to effect parties’

actions rather than state statutes is clear: “the chief test

under section 2a(15) appeared to be whether or [26] not

the proceeding in the non-bankruptcy Court. sought to be

enjoined interfered with the possession or custody of the

Bankruptcy Court or unduly impeded or embarassed the

Court in its administration under the Act.” That lan-

guage is from 2 Collier on Bankruptcy at 105-4, fifteenth

edition.

Section 105 of the Bankruptcy Code retained this broad

grant of equitable powers, but at the same time, caution

is urged. The basic intention of the section is to enable

the Bankruptcy Court to do whatever is necessary to aid

its jurisdiction, anything arising in, or relating to, a

Bankruptcy case.

Debtors at bar do not put forth any evidence of inter-

ference with, or impairment of, this Courts jurisdiction.

Rather, the argument is the Debtors would have this

Court interfere with a States legisiative judgments con-

cerning the rights of parties to a mortgage agreement,

and no compelling justifications for such interference

exist.

The Debtors in these cases, and in the case today, are

asking the Court to enter into a revision of State law

that is properly the concern of the Michigan Legislature.

64a

If the State of Michigan wishes to extend the time for

redemption of property after a foreclosure sale, it is well

within the province of the Michigan Legislature to pass

such a bill. It is well within the power of the Governor

of the State of Michigan to sign it into law.

[27] The Legislatures silence on this issue is a clear

indication to the Court of a disinclination to change the

six month redemption period, and this Court is not about

to step into the arena and revise the statute.

Cases invoking equitable principles and relief generally

involve situations where fraudulent conduct has occurred,

or where a manifest injustice would occur absent equi-

table relief.

Equity is available to protect property rights of the

innocent debtor from the wrongful acts of other persons,

however, equity does not extend to situations in which

the debtor is simply unable to make the required payment

within the prescribed time. That language is from

Headley, 13 Bankruptcy Reports, 295, a decision of the

Bankruptcy Court in Colorado in 1981.

The decision of the United States District Court for

the Eastern District of Michigan, in Bank of the Com-

monwealth versus Bevan, 13 Bankruptcy Report, 989,

decided i’: 1981, holds, in part, that Sections 105 and 108

of the Code grant Bankruptcy Courts the authority to

stay the running of the redemption period for sixty days.

Bevan does not discuss the ordinary meaning of the

words contained in Section 108 (b) or its effect on Mich-

igan’s Statutory Redemption Period.

An ordinary reading of Section 108 (b) [28] reveals

no express or specific provision granting Bankruptcy

Courts the authority to stay the running of the States

redemption period for sixty days, as suggested in Bevan,

or indefinitely, as urged by the Debtors in the instant

cases.

It may be argued that Section 108 (b) gives this Court

the authority to enter a sixty day stay so that the Debtor

may cure a default, but this argument must give way to

65a

the State protected property interest, and the deference

Federal Courts must give to State Law in this case.

Under State Law there is no default to be cured after

the mortgaged premises have been sold at a foreclosure

sale. The Debtors only remedy is to make full payment

of the price of the successful bid at the foreclosure sale.

The opportunity to sure the default exists after foreclo-

sure, but before foreclosure sale.

Section 108 (b) cannot be read to revive the opportu-

nity to cure a default after the foreclosure sale without

abrogating clearly established State Law. We are not

willing to rewrite the foreclosure statute, or try to revive

the opportunity to cure a default when done after the

foreclosure sale.

With respect to the cases under consideration, no

wrongful acts, fraud, or unfairness have been established

by anything that’s been presented in Court. The Debtors

freely entered into mortgage agreements with their

[29] respective creditors. At the time the notes and

mortgages were executed, the Plaintiff creditors expected

that payments would be timely made, while the Debtors

expected that they would possess their premises condi-

tioned upon the abilit:’ to satisfy the loan obligations.

Upon foreclosure sa :, Michigan law allows the Debtors,

as a matter of privilege, six months to redeem from the

sale. The purchasers at the sale in the cases under ad-

visement, the Plaintiffs, have the right to expect either

repayment of the bid price together with accrued interest

during the redemption period, cr the vesting of legal title

at the expiration of the redemption period.

Action by this Court which would thwart state policy,

and diminish the parties expectations, is not warranted

by the facts presented in the cases under advisement, or

this case.

Thus, this Court may not issue an Order pursuant to

11 U.S.C., Section 105 (a) which tolls Michigan’s statu-

tory redemption period.

I’ll have your Order entered in accordance with this

Opinion.

a * e 6

66a

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Chapter 13 No. 82-02536-G

IN THE MATTER OF EDWARD J. PIGLOSKI

Soe. Sec. No. 382-36-4484

MARY L. PIGLOSKI

Soe. See. No. 373-42-7067

Debtors.

ORDER DISSOLVING TEMPORARY RESTRAINING

ORDER AND PROHIBITING THE INCLUSION OF

DEBTORS’ PERSONAL RESIDENCE IN A FILED

CHAPTER 13 PLAN NUNC PRO TUNC TO MAY 18,

1982 AND STAYING EFFECT

At a session of said Court, held in the City of

Detroit, Wayne County, State of Michigan, 27

Aug. 1982.

Present: Honorable RAY REYNOLDS GRAVES, Judge in

Bankruptcy

The matter having come before this Court on a Motion

of the Debtors herein, both parties having submitted

written briefs and oral arguments heard on both May 12,

1982 and May 18, 1982, the Court having been fully ad-

vised in the premises and the Court having found that

the Court is without the authority over the Debtors’

principal residence to allow its inclusion in the Debtors’

Chapter 13 Plan, or to issue an injunction staying the

running of the state statutory right of redemption where

the residence has been foreclosed, sold at sheriff sale and

that the Debtors’ only remaining right is that of a statu-

tory right of redemption;

67a

IT IS HERBEY ORDERED that the Temporary Re-

straining Order issued May 38, 1982, by the Honorable

Ray Reynolds Graves be hereby dissolved;

IT IS FURTHER ORDERED that the Court does not

have the authority to affect or modify the mortgagee’s

rights in the principal residence of the Debtors or to issue

an injunction tolling the running of the state statutory

right of redemption;

IT IS FURTHER ORDERED that Maxine Wynn and

Manor Mortgage Company, their attorneys, agents, as-

signs or any person acting on their behalf are entitled

to, and may therefore commence or continue any further

summary proceedings for eviction against Edward J. and

Mary L. Pigloski from the property in question at 35503

Marroco Drive, Mt. Clemens, Michigan;

IT IS FURTHEF ORDERED that in accordance with

Stay Order Pending Appeal and Restraining Order, en-

tered by this Court on May 20, 1982, the effect of this

Order is stayed pending appeal.

/s/ Ray Reynolds Graves

RAY REYNOLDS GRAVES

Judge in Bankruptcy

Approved as to Notice and Form:

/s/ Mary Ann Zito

Mary ANN ZITO (P24951)

UAW Legal Services Plan

7430 Second Avenue

200 New Center Building

Detroit, Michigan 48202

/s/ Ronald T. Barrows

RONALD T. BARROWS (P30558)

Ronald T. Barrows & Associates

19925 Vernier Road

Harper Woods, Michigan 48225