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SUPREME COURT OF THE UNITED STATES
_________________
Nos. 13–1421 and 14–163
_________________
BANK OF AMERICA, N. A.,
PETITIONER
13–1421
v.
DAVID B. CAULKETT
BANK OF AMERICA, N. A.,
PETITIONER
14–163
v.
EDELMIRO TOLEDO-CARDONA
on writs of certiorari to the united states
court of appeals for the eleventh circuit
[June 1, 2015]
Justice Thomas delivered the opinion of the
Court.[
1]*
Section 506(d) of the Bankruptcy Code allows a
debtor to void a lien on his property “[t]o the extent that [the]
lien secures a claim against the debtor that is not an allowed
secured claim.” 11 U. S. C. §506(d). These consolidated
cases present the question whether a debtor in a Chapter 7
bankruptcy proceeding may void a junior mortgage under §506(d) when
the debt owed on a senior mortgage exceeds the present value of the
property. We hold that a debtor may not, and we therefore reverse
the judgments of the Court of Appeals.
I
The facts in these consolidated cases are
largely the same. The debtors, respondents David Caulkett and
Edelmiro Toledo-Cardona, each have two mortgage liens on their
respective houses. Petitioner Bank of America (Bank) holds the
junior mortgage lien—
i.e., the mortgage lien subordinate to
the other mortgage lien—on each home. The amount owed on each
debtor’s senior mortgage lien is greater than each home’s current
market value. The Bank’s junior mortgage liens are thus wholly
underwater: because each home is worth less than the amount the
debtor owes on the senior mortgage, the Bank would receive nothing
if the properties were sold today.
In 2013, the debtors each filed for Chapter 7
bank-ruptcy. In their respective bankruptcy proceedings, they moved
to “strip off”—or void—the junior mortgage liens under §506(d) of
the Bankruptcy Code. In each case, the Bankruptcy Court granted the
motion, and both the District Court and the Court of Appeals for
the Eleventh Circuit affirmed.
In re Caulkett, 566 Fed.
Appx. 879 (2014) (
per curiam);
In re
Toledo-Cardona, 556 Fed. Appx. 911 (2014) (
per curiam).
The Eleventh Circuit explained that it was bound by Circuit
precedent holding that §506(d) allows debtors to void a wholly
underwater mortgage lien.
We granted certiorari, 574 U. S. ___
(2014), and now reverse the judgments of the Eleventh Circuit.
II
Section 506(d) provides, “To the extent that a
lien secures a claim against the debtor that is not an
allowed
secured claim, such lien is void.” (Emphasis added.)
Accordingly, §506(d) permits the debtors here to strip off the
Bank’s junior mortgages only if the Bank’s “claim”—generally, its
right to repayment from the debtors, §101(5)—is “not an allowed
secured claim.” Subject to some exceptions not relevant here, a
claim filed by a creditor is deemed “allowed” under §502 if no
interested party objects or if, in the case of an objection, the
Bankruptcy Court determines that the claim should be allowed under
the Code. §§502(a)–(b). The parties agree that the Bank’s claims
meet this requirement. They disagree, however, over whether the
Bank’s claims are “secured” within the meaning of §506(d).
The Code suggests that the Bank’s claims are not
secured. Section 506(a)(1) provides that “[a]n allowed claim of a
creditor secured by a lien on property . . . is a
secured claim to the extent of the value of such creditor’s
interest in . . . such property,” and “an
unsecured
claim to the extent that the value of such creditor’s interest
. . . is less than the amount of such allowed claim.”
(Emphasis added.) In other words, if the value of a creditor’s
interest inthe property is zero—as is the case here—his claim
cannot be a “secured claim” within the meaning of §506(a). And
given that these identical words are later used in the same section
of the same Act—§506(d)—one would think this “presents a classic
case for application of the normal rule of statutory construction
that identical words used in different parts of the same act are
intended to have the same meaning.”
Desert Palace, Inc. v.
Costa, 539 U. S. 90, 101 (2003) (internal quotation
marks omitted). Under that straightforward reading of the statute,
the debtors would be able to void the Bank’s claims.
Unfortunately for the debtors, this Court has
already adopted a construction of the term “secured claim” in
§506(d) that forecloses this textual analysis. See
Dewsnup
v.
Timm, 502 U. S. 410 (1992) . In
Dewsnup, the
Court confronted a situation in which a Chapter 7 debtor wanted to
“ ‘strip down’ ”—or reduce—a partially underwater lien
under §506(d) to the value of the collateral.
Id., at
412–413. Specifically, she sought, under §506(d), to reduce her
debt of approximately $120,000 to the value of the collateral
securing her debt at that time ($39,000).
Id., at 413.
Relying on the statutory definition of “ ‘allowed secured
claim’ ” in §506(a), she contended that her creditors’ claim
was “secured only to the extent of the judicially determined value
of the real property on which the lien [wa]s fixed.”
Id., at
414.
The Court rejected her argument. Rather than
apply the statutory definition of “secured claim” in §506(a), the
Court reasoned that the term “secured” in §506(d) contained an
ambiguity because the self-interested parties before it disagreed
over the term’s meaning.
Id., at 416, 420. Relying on policy
considerations and its understanding of pre-Code practice, the
Court concluded that if a claim “has been ‘allowed’ pursuant to
§502 of the Code and is secured by a lien with recourse to the
underlying collateral, it does not come within the scope of
§506(d).”
Id., at 415; see
id., at 417–420. It
therefore held that the debtor could not strip down the creditors’
lien to the value of the property under §506(d) “because [the
creditors’] claim [wa]s secured by a lien and ha[d] been fully
allowed pursuant to §502.”
Id., at 417. In other words,
Dewsnup defined the term “secured claim” in §506(d) to mean
a claim supported by a security interest in property, regardless of
whether the value of that property would be sufficient to cover the
claim. Under this definition, §506(d)’s function is reduced to
“voiding a lien whenever a claim secured by the lien itself has not
been allowed.”
Id., at 416.
Dewsnup’s construction of “secured claim”
resolves the question presented here.
Dewsnup construed the
term “secured claim” in §506(d) to include any claim “secured by a
lien and . . . fully allowed pursuant to §502.”
Id., at 417. Because the Bank’s claims here are both secured
by liens and allowed under §502, they cannot be voided under the
definition given to the term “allowed secured claim” by
Dewsnup.
III
The debtors do not ask us to overrule
Dewsnup,[
2]† but instead
request that we limit that decision to partially—as opposed to
wholly—underwater liens. We decline to adopt this distinction. The
debtors offer several reasons why we should cabin
Dewsnup in
this manner, but none of them is compelling.
To start, the debtors rely on language in
Dewsnup stating that the Court was not addressing “all
possible fact situations,” but was instead “allow[ing] other facts
to await their legal resolution on another day.”
Id., at
416–417. But this disclaimer provides an insufficient foundation
for the debtors’ proposed distinction.
Dewsnup considered
several possible definitions of the term “secured claim” in
§506(d). See
id., at 414–416. The definition it settled
on—that a claim is “secured” if it is “secured by a lien” and “has
been fully allowed pursuant to §502,”
id., at 417—does not
depend on whether a lien is partially or wholly underwater.
Whatever the Court’s hedging language meant, it does not provide a
reason to limit
Dewsnup in the manner the debtors
propose.
The debtors next contend that the term “secured
claim” in §506(d) could be redefined as any claim that is backed by
collateral with
some value. Embracing this reading of
§506(d), however, would give the term “allowed secured claim” in
§506(d) a different meaning than its statutory definition in
§506(a). We refuse to adopt this artificial definition.
Nor do we think
Nobelman v.
American
Savings Bank, 508 U. S. 324 (1993) , supports the debtors’
proposed distinction.
Nobelman said nothing about the
meaning of the term “secured claim” in §506(d). Instead, it
addressed the interaction between the meaning of the term “secured
claim” in §506(a) and an entirely separate provision, §1322(b)(2).
See 508 U. S.
, at 327–332.
Nobelman offers no
guidance on the question presented in these cases because the Court
in
Dewsnup already declined to apply the definition in
§506(a) to the phrase “secured claim” in §506(d).
The debtors alternatively urge us to limit
Dewsnup’s definition to the facts of that case because the
historical and policy concerns that motivated the Court do not
apply in the context of wholly underwater liens. Whether or not
that proposition is true, it is an insufficient justification for
giving the term “secured claim” in §506(d) a different definition
depending on the value of the collateral. We are generally
reluctant to give the “same words a different meaning” when
construing statutes,
Pasquantino v.
United States, 544
U. S. 349, 358 (2005) (internal quotation marks omitted), and
we decline to do so here based on policy arguments.
Ultimately, embracing the debtors’ distinction
would not vindicate §506(d)’s original meaning, and it would leave
an odd statutory framework in its place. Under the debtors’
approach, if a court valued the collateral at one dollar more than
the amount of a senior lien, the debtor could not strip down a
junior lien under
Dewsnup, but if it valued the property at
one dollar less, the debtor could strip off the entire junior lien.
Given the constantly shifting value of real property, this reading
could lead to arbitrary results. To be sure, the Code engages in
line-drawing elsewhere, and sometimes a dollar’s difference will
have a significant impact on bankruptcy proceedings. See,
e.g., §707(b)(2)(A)(i) (presumption of abuse of provisions
of Chapter 7 triggered if debtor’s projected disposable income over
the next five years is $12,475). But these lines were set by
Congress, not this Court. There is scant support for the view that
§506(d) applies differently depending on whether a lien was
partially or wholly underwater. Even if
Dewsnup were deemed
not to reflect the correct meaning of §506(d), the debtors’
solution would not either.
* * *
The reasoning of
Dewsnup dictates that
a debtor in a Chapter 7 bankruptcy proceeding may not void a junior
mortgage lien under §506(d) when the debt owed on a senior mortgage
lien exceeds the current value of the collateral. The debtors here
have not asked us to overrule
Dewsnup, and we decline to
adopt the artificial distinction they propose instead. We therefore
reverse the judgments of the Court of Appeals and remand the cases
for further proceedings consistent with this opinion.
It is so ordered.
