California Bankruptcy Court Holds Debtor Cannot Argue Real Property Had Lower Value Than What Was Attributed To Debtor's Schedules And Sworn Testimony

Given the court's reliance on the scheduled value of the property in connection with the motion to value, the scheduled value of the real property that is the subject of a valuation motion should be consistent with any other evidence to be presented by the debtor in connection with the valuation motion.

On November 5, 2015, the United States Bankruptcy Court for the Northern District of California issued a "Memorandum re Plan Confirmation" in In re Bowie, Case No. 15-10144 (Bankr. N.D. Cal. Nov. 5, 2015), holding, among other things, that a debtor was precluded from arguing that real property had a value lower than the value attributed to the property in the debtor's schedules and sworn testimony, notwithstanding the value attributed to the property by an appraiser.

Facts

In 2011, James Bowie ("Bowie") purchased certain real property from an elderly widow (the "Seller"). The Seller took back a note in favor of her revocable trust for a majority of the purchase price, secured by a first priority deed of trust encumbering the property. The maturity date of the note was August 1, 2016.

In 2015, Bowie defaulted under the note and filed under chapter 11 after the Seller refused to modify the terms of the note and commenced foreclosure proceedings. Bowie filed his chapter 11 plan seeking, among other things, to reduce the Seller's secured claim to the value of the property and to pay back the reduced debt at a "Market Rate of Interest" amortized over 30 years and all due and payable in 12 years.

Bowie initially scheduled the property as being worth $500,000, but a week later amended his schedules to assert a value of the property at $450,000. A little more than five months later, in conjunction with a motion to determine the value of the Seller's secured claim, Bowie filed a declaration restating his belief that the real property's value was $450,000. The Seller ultimately did not contest this figure. At about the same time he filed his motion to value the secured claim, Bowie filed his plan of reorganization and related disclosure statement, the latter which also valued the property at $450,000.

Shortly before the plan confirmation hearing, Bowie filed a declaration restating his belief that the property had a value of $450,000, but also filed the declaration of an appraiser stating that the value of the property was $300,000a $150,000 reduction from what Bowie asserted in his amended schedule, his disclosure statement and declaration. The...