The Paddock, LLC v. Benjamin Matthew Bennett and Teresia Robin Bennett

Nov 12, 2018

On Wednesday, November 14, 2018, Siobhan Briley will argue before the United States Court of Appeals for the Eighth Circuit on an issue of first impression in Iowa: whether a manufactured home that has been attached to the ground in a manufactured home community is a fixture, and therefore real property, for purposes of section 1322(b)(2) the Bankruptcy Code. The case is The Paddock, LLC v. Benjamin Matthew Bennett and Teresia Robin Bennett, No. 18-2098.

Under the Bankruptcy Code, if the value of collateral securing a creditor’s claim is less than the amount of the claim, a debtor may “strip down” or “cram down” the claim. See 11 U.S.C. § 506(a)(1). The practical effect of a strip-down is to cap the creditor’s claim at the value of the collateral, allowing discharge of the remaining debt owed—with one exception: if the collateral is “real property” that is the debtor’s “principal residence.” 11 U.S.C. § 1322(b)(2). The Bennetts’ manufactured home is their principal residence. Whether the home is real property is determined by a three-part test under Iowa common law: 1) the home is “actually annexed” to the land, or to something attached to the land; 2) the home is put to the same use as the real estate it sits on; and 3) the party that annexed the home to the real estate intended to make it a “permanent accession to the freehold.” Ford v. Venard, 340 N.W.2d 270, 271 (Iowa 1983).

The United States Bankruptcy Court for the Northern District of Iowa held that the Bennetts’ home did not meet the third part of the test because it does not rest on a “permanent” foundation. The Paddock appealed to the Bankruptcy Appellate Panel for the Eighth Circuit, which affirmed the Bankruptcy Court. Because Iowa law does not require that a structure be attached to a permanent foundation to be a fixture, the Paddock further appealed.


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