Legal Case Summary

We'll hear argument first this morning in case 13, 14, 21, Bank of America versus Colquette and a consolidated case. Ms. Spinelli? Ms. Chief Justice, and may it please the Court. Respondent's position is that Section 506D of the Bankruptcy Code allows Chapter 7 debtors to keep their houses, strip their underwater mortgages, and prevent their lenders from accessing any later appreciation in the House's value. In Duce-Nip, this Court rejected that position with respect to partially underwater mortgages, and that reasoning applies with equal force to completely underwater mortgages. Duce-Nip held that Section 506D voids only leans securing disallowed claims. It does not void leans based on the current value of the collateral. That logic applies whether the current value of the collateral is a million dollars, one dollar, or zero, as virtually every court to address the question has held, and even the 11th Circuit below, all but admitted. Outside bankruptcy, the bank would be entitled to have its leans stay with the property until foreclosure or payment in full. What is the value of an under, completely underwater second mortgage? How likely is it that it will ever, that the property will ever appreciate to the extent that it will have real value? Justice Ginsburg, it's quite likely, and these two particular cases to be sure the second leans are deeply underwater. That's not true in every case, and there's no reason to think it's true in the typical case. We have Bank of America has many cases pending right now in the 11th Circuit. We have cases in which the value of the House would need to rise only by $4,000, where it would need to rise only by $5,000, and given that we're in the middle of a market upswing, it's very plausible and very likely that many of these mortgages will regain equity. We quote statistics in our opening brief that show that between 2012 and 2014, the number of underwater junior mortgages was cut in half from 4.2 million to 2.1 million. So houses are coming above water every day, and what Duce-Nepheld is that the bean holder, according to the basic non-bankruptcy bargain, is entitled to keep its lean until payment and full, or until a lender decides to foreclose. The holders of a second, assuming the second is partially or fully underwater, ever participate in negotiations with the property owner and with the holder of the first lean, and say, well, if you keep the property, we'll reduce our junior lead lean by 50%. Is there a negotiation dynamic that the rule that you propose would further? Let me be clear about this just as Kennedy, because I think this is important. In Chapter 7, Bankruptcy, there are no such negotiations. Chapter 7 is very simple. The debtor turns over his assets to the extent there are any non-exempt, non-encumbered assets, which there typically are not. The trustee will sell those assets, distribute the proceeds to creditors. The debtor then receives a discharge of all pre-petition debt. Well, let's just talk about Chapter 7, because that's what I had in mind. Suppose it's a close case, and they're thinking of maybe insisting on sale. Can the junior lean holders say, what if I'm not going to prevail on the sale, but if you don't sell, then I'll cut my lean in half on the chance that it may go up. So you couldn't ever have this negotiate in Chapter 7? In Chapter 7, Bankruptcy, those negotiations simply don't occur. If there is non-exempt equity in the House, the trustee has to sell the house and distribute the proceeds

. The trustee doesn't care. I mean, right? His job is done once the bankruptcy is over. If it goes up, it's the owner who would care. That's correct. And he's not part of the negotiation. He's out of it. That's correct. Now, if... How does this work? I'm sorry, back up. You say that the trustee sells it. How does the mortgage holder in that situation foreclose? Reading it, if the debt are no longer owns the property, this doesn't go free and clean to the purchaser? The way it works, just a sort of myore, is that if there is non-exempt equity in the House, which, of course, was not true in these two cases, the trustee will sell the house out of those proceeds. The trustee will first satisfy the claim of the senior secured lender. If there's anything left over, it will go to the junior secured lender. If there's not, the junior lender receives nothing and the junior lien is extinct. So when does do the facts of this case matter? The facts? Because this is before the finish, the wrapping up of the plan, right? In Chapter 7, there is no plan. I'm sorry. This is before the bankruptcy is terminated. I think it's important to understand that Chapter 7 bankruptcy has happened very quickly. A no-asset bankruptcy like this one will usually be wrapped up in 30 to 45 days. Whereas here, there's no equity in the property to be distributed to creditors. And there are no other non-exempt assets. There's really not very much for the trustee to do. The trustee will file a notice that the case is administered. And at that point, a house that's in the situation of these two houses in which there is no non-exempt, non-encumbered value will be abandoned to the debtor. At that point, the debtor's rights and the property are precisely what they were before bankruptcy. If the debtor is in default on his mortgage, then the lenders can foreclose. Let me follow up to something, Justice Kennedy, many of your adversary, plus many others, Amiga, and I have argued that if we rule in the way you seek that unholy, un-rewarder, junior leans are going to be a hold-up, and you're going to use it as hostage value

. And they point to various situations in which that has occurred. That, to me, is a concerning policy issue. So explain why that's not true. Just a so-to-my-or, my answer to that would be that's not a bankruptcy problem. There are not negotiations that take place in Chapter 7, as to which the junior lean holder could exercise any hold-up value. It's certainly maybe the case that later on the debtor may want to negotiate a modification with its senior lender. That happens all the time to people who have been through Chapter 7 bankruptcy and people who have not. And to the extent there's a housing policy issue, I don't think that's properly addressed through interpretation of the bankruptcy code. One of the amiki... Well, the bankruptcy code wants to give debtors a fresh start. That is true. And to the extent that Chapter 7 is an attempt to do that, if you're able to hold up that fresh start, that is the concern they're pointing to. Just a so-to-my-or, the fresh start that's given to debtors in Chapter 7 has a particular nature. The nature of the fresh start in Chapter 7 is that the debtor surrenders all of his or her assets, and in return gets a discharge of all pre-petition debt. It's never been the case that the Chapter 7 fresh start has encompassed an ability to retain property and also strip off weans on that property. If the debtor wanted, and this doesn't force the debtor to stay in a house that he or she can't afford, if the debtor, if the debtor wanted to, say, cure a default on his mortgage and keep the house, Chapter 13 is open to the debtor, which permits, curing a default on a mortgage and maintaining payments during the course of the plan. Under Chapter 7, a debtor can, if the debtor is in the situation of these debtors, and the house has been abandoned back to the debtor, if the debtor is in, is current on its loans, can keep the house, pay its mortgage going forward, and be in the same situation that he was prior to bankruptcy. The one thing that Chapter 7 gives a debtor in that situation is that it discharges the debtor of any personal liability for the mortgage debt, so the lender cannot come after the debtor personally. If the debtor decides that the house is too expensive for him to stay in, he can stop paying the mortgage and the only recourse that the lender then has is too foreclose. So there certainly is an ability for debtors to walk away from houses that they simply can't afford, and there is also an ability through Chapter 13 to hear existing defaults and reach an arrangement through which the debtor can keep the house. Mr. Spinelli, I dissented in duesnup, and I continue to believe that dissent was correct. Why should I not limit duesnup to the facts that it involved, which is partially underwater mortgage? Just as Scalia, I don't think that can be done coherently given the reasoning of the court in duesnup. What the court held in duesnup is that Section 506. Yes, I understand that, but I think the reasoning was wrong. And very often, we adhere to a prior decision that on the facts of that case, and Ducinib did say, you know, we're just limiting it to the facts of this case, and we're not saying what these terms mean elsewhere in the Bankruptcy Act. So let's take Ducinib at its word, and just limit it to what it involved, which was a partially underwater mortgage

. Now, why shouldn't I do that? I don't believe that's logically possible, even if Ducinib was wrongly decided, because Ducinib interpreted a specific phrase in a specific place in the book. And I understand that, but we often limit prior decisions to their facts, and don't follow their logic. Yes, Justice Scalia. And if we follow their logic, we would never be able to do what I'm suggesting. But we often say, you have a logic with leaders here, but it was a terrible decision, and we're not going to extend it any further. Why would that be a bad idea here? In this situation, we're talking about an interpretation of language in a specific place in a statute, and to do that would be to read the exact same language in the exact same place in a statute to mean different things. I'm just not getting through it to you. I'm willing to do that. I'm willing to do that when the language was read incorrectly the first time. Okay. But as a practical matter, I'm talking as a practical matter, and starry decisis is a very practical doctrine. Why should, as a practical matter, should I adhere to an opinion that I think was wrong? Well, I do think Clark versus Martinez would apply in this situation and prevent a barrier to doing that, but... What is the case that you decided? I apologize, Justice Ginsburg. That's one of the cases in which the court has said that the same language in the same place and the same statute cannot mean different things in different factual circumstances. There's a descending opinion in a different area of the law on taxpayer standing under the establishment clause, a brilliant descending opinion that you might want to rely on in this context. I've never been able to figure out the answer to the question he raises, which is I take a descending opinion in one case. And then when do I say, okay, forget it? And the answer is sort of personal in a way. How strongly do you feel given the need of the law to advise lawyers, advise judges, advise Congress and others? If we all keep sending all the time, it'll be chaos. If we never change, you can't stick to a principle. If you've found any way of drawing that line, I don't think there is a way... I think there is, Justice Breyer and Justice Scalia, which is that... I mean, this court has very rarely taken the step of overruling a statutory interpretation decision, certainly never in the kind of.

.. I'm talking about overruling. We're saying dousmot subsists as far as partially underwater mortgages are concerned. The issue before us is whether we should extend it to totally underwater. Now, what I thought you were going to tell me, you know, I feel strongly that dousmot was wrong, but I'm not going to upset expectations. I mean, if banks have been lending money for second mortgages on the assumption that they would not be stripped, I mean, that's what I thought you were going to tell me. You know, many expectations that have been rested upon this misspy-gotten opinion of dousmot. It's certainly been the case that since dousmot was decided until this decision by the 11th Circuit in 2012, it was well-established that dousmot applied equally to completely underwater mortgages. And are you saying, then, that there have been substantial reliance on the dousmot interpretation that you're supporting here by banks that have given second mortgages all over the country, the huge reliance that would be upset? I have been reliant. I thought that that's what she's going to say to Justice Glee. I don't hear that being argued. I believe that there has been reliance. I actually don't think that's the most compelling argument as to why the court shouldn't depart from dousmot. The language in dousmot simply can't be read to distinguish between completely part of the department. Well, but if we could go back, I mean, I kind of agree with you that it's not a very compelling argument, this reliance argument, because I find myself in the same position as Justice Scalia. I read the two dousmot opinions, and it seems to me that Justice Scalia clearly has the better of the argument. Yes. And then the question is, what do we do about that and where do we go from there? And it does strike me that if these are the most sophisticated parties that can possibly be imagined, Bank of America and other banks, and it seems to me that they would be making essentially a bet on, and they would, you know, think about, or the things of what is the probability that do snip will be extended to completely underwater mortgages. And presumably they discounted all their various calculations in order to take into account the probability that another court would say, you know, do snip is not very persuasive and we're just not willing to extend it any further. And I think that's probably what Bank of America and other banks did. As they said, you know, we think there's X percent chance that do snip will be extended and Y percent chance that it won't, and they made their cost and pricing calculations based on that calculation. So if that's the case, why should we worry about reliance? Just as Kagan, I do believe that banks have relied on the do snip decision as to whether they specifically made calculations about when it would apply, whether it would apply in these circumstances, I don't know, but I think I would go back to the premise of your question, which is that this would be extending do snuff. It wouldn't be extending do snuff, but would simply be applying do snip to a set of facts in which the interpretation the court gave in do snuff is equally applicable. You even though do snip itself said no, we're deciding this case only and not any other. I think in your brief, you did make the point that do snip is now how many do snip years old? It's almost 25 years old. And Congress could have changed it if it didn't like it, and Congress has amended the code. That's correct. I mean, Congress has amended the code substantially, both in 1994 and in 2005. In 1994, Congress overruled or modified a couple of these courts bankruptcy decisions at overruled rake versus Wade

. It modified the statute in response to the court's decision in no moment. Well, that proves that most that Congress liked do snuff as applied to partially underwater mortgages. Isn't that right? I mean, that's all it proves. They let it stay. They did not overrule do snip as far as partially underwater mortgages. It doesn't say anything about how they feel about totally underwater mortgages. Just as Scalia, there is simply no distinction that can be drawn between partially and completely underwater leans in this situation. Do you snuff held that a secured claim is a claim secured by a lean with recourse to the underlying collateral? That is equally applicable here. Likewise, I mean, the text of Section 506 certainly draws no such distinction. So it would be an odd thing to do to vindicate textualism to adopt the proposition that respondents are advancing here. You don't know how to hurt a fellow, don't you? I mean, I understand the notion and agree with it completely that if you have a decision that's wrong, you don't extend it in any way. But there are factual distinctions and there are factual distinctions. I mean, do you snuff may have been decided on a Tuesday, in this case, you could be decided on a Thursday, but you would not say, you know, we're not extending, you know, we're simply not going to extend it to other cases. Exactly, Mr. Chiefs. And in this particular instance, I assume the difference between underwater and totally partially underwater and totally underwater is a completely fluid one in the sense that at the start of the Bank of C, I didn't think of that. It was totally unintended. But the idea is that, you know, it, throughout a bankruptcy, you could have a mortgage that is a lien that's underwater than totally underwater than partially underwater. And the idea that you latch onto that is a distinction, seems to me to be a difficult proposition. That's exactly right. I mean, the non-bankruptcy right of a lien holder is to retain its lien until payment and fall or until foreclosure, which means that the lien holder is entitled to access any equity that may develop in the future due to appreciation of the process. Is this right? I want to be sure I understand. Under the, do, do, do snap. For the last 25 years, lenders and others in the Bankruptcy community have understood the way it works is the following. If you have a lien and the house is worth 500,000 and your, your lien is secured and it's worth a million and they're in chapter 7. You have a secured interest and are counted as a secured creditor only to 500,000. As to the remaining 500,000, your count is an unsecured creditor. But you keep the lien. Right

. Well, but- And therefore, if when they're out of bankruptcy someday or the house goes up or whatever it is, you still have your lien. Is that right? That's right. And let me explain that just as bright. I mean, I don't know. Section 506. I'm sorry. This one, I'm sure, is right, but if you'd like to explain it for a good view. It is right, and I would if I might. Section 506A bifurcates underscured claims into a secured portion and an unsecured portion and that determines the distribution that a creditor can get from the estate. Now, I want to be clear that nothing in the way this Court reads 506D will affect that. That is going to be true no matter what. What Duznipp said is that Section 506D does not refer back to that bifurcation in 506A. Rather, it uses the word secured in the ordinary English and ordinary legal meaning of secured by a lien with recourse to the underlying collateral. And in that situation, given that reading, 506D only strips liens securing disallowed claims. If the claim is valid, then the creditor is entitled. That means that after bankruptcy is over and you're back out of Section 7, Chapter 7, unless it falls within one of the other two exceptions there remains. Correct. And therefore, and that's the understanding. Okay, I understand. Thank you. When do trustees decide that they're not sure of the value of the home and that they're going to sew it to find out what is worth? Typically, the value is not disputed. If it's usually quite clear whether there is or is not non-exempt non-encumbered value in a house, and the trustee will sell the house only if there is non-exempt non-encumbered value, it's possible that in a situation in which it's not clear the trustee might go ahead and sell the house and see how much is realized for it because that sale price, would then by definition, establish the amount of the secured claim. Typically, in no-asset cases like this, there's simply no issue. And there's no question that the trustee is not going to be selling that. Just get him back to the reliance point or really from your argument, the non-reliance point. Your brief talked about the millions of loans and so forth that have been made, but you seem to walk away from any reliance argument. Just just Kennedy, let me be clear. Really? Because I'm surprised at that. Let me be clear

. I am not walking away from the argument that the banks have relied on Ducinope. I think that's unquestionably true. Millions of loans have been made in reliance on Ducinope's holding. Banks, when they make loans, price them and extend them based on an understanding of what their recovery is going to be given default. That is true. What I was responding to is the notion that banks may have relied on whether this court would apply Ducinope to completely underwater mortgages. I think that's a little bit less strong, although it's true that in the 25 years since Ducinope, it's until this decision by the 11th Circuit, it's been well established that Ducinope does apply to completely underwater leans. May I reserve the balance of my time? You may. Thank you. Mr. Beebees? Mr. Chief Justice, and may it please the court, a claim unsupported by any value is a completely unsecured claim under Section 5-6-A. An unsecured claim cannot be an allowed-seered claim, and its associated lean is void under Section 5-6-D. Claims with some value remain secured, claims with no value don't. They'd be wiped out in foreclosure, and bankruptcy treats them no better than foreclosure would. But before I get to text or hold up value or Ducinope, let me seize on the striking concession of my adversary. Justice Cecilia and Kagan pressed my adversary who conceded that she couldn't demonstrate reliance here. There were bankruptcy courts and district courts that foreshadowed the ruling below, and they've pointed to no evidence of reliance. There is, we challenged in our brief, to show that in the 11th Circuit lending markets are being affected. No evidence. There are eight circuits in which lean-voiding is allowed in Chapter 13. No evidence. We should clear the table of a reliance argument that my adversary all but concedes. How she didn't concede it, and it just seems, you know, it's not just homeowners, you can cure me of this misapprehension. But probably in the last 25 years or 30 years there have been trillions of dollars that have been loaned to businesses. I mean, think of Lehman Brothers, and they go bankrupt. And suddenly at stake are hundreds of billions of dollars, and a person who's made a mortgage, at least a lawyer, would say, okay, you can lend the money if things go badly. We can keep the lien. We won't collect because he's bankrupt, but markets go up and down

. Keep the secured interest. They might go back up. You might get it someday. Now, that's perfectly obvious advice. It seems to me from what I know so far. So when you do that, the mortgage lender has to decide what the interest rate is, how long the terms are, and it's pretty hard to believe there isn't some effect on the brain of the person who's making the mortgage, from the simple fact that he gets to keep that lien. It passes through bankruptcy, and eventually the market may go back up. In addition to Justice Kagan's answer, which is, the banks are well advised and can forecast. They can read the text of the statute and do some expressed research. We've had 25 years or 30 years, 23 years to be exact. And the fact is that, sure, they go to their lawyer. They don't read the lawyers, and the lawyers would read, and the lawyers would say. I direct the court to the Levitton Amicus brief. There are two empirical studies that found natural experiments. One of them involved differences in circuits before noblemen, in chapter 13, Mean Boiding, which found a very slight effect, 0.12 to 0.18 percent, on first mortgages. The other, an empirical study by Philadelphia Federal Reserve Economists, likewise found no substantial effect on markets, even when different circuits are done. It's hard for me to think that the decision in your favor wouldn't, in a sense, hurt borrowers because the market for second is going to dry up or become much more expensive. I'll read the briefs, and you can tell me about the, why that theory, economic theory, might be wrong, but it seems to me just common sense. Justice Kennedy, the Levitton Amicus brief, explains in greater detail. But there's a problem in the mortgage market, in that first mortgages and debtors often want to work out mutually beneficial resolutions. As my adversary concedes, no negotiation goes on in bankruptcy. The second can prevent this from happening, and we cited multiple studies that show that the second lenders may wind up forcing homes into foreclosure. The other point that the Levitton brief makes is that this is primarily a problem of the housing bubble. This is a problem of very high loan to value piggyback second mortgages. They found no evidence of an effect on low loan to value home improvement, home equity lines, a credit of the sort that survived, now that the regulatory term is done. I would agree that their bargaining club might be too big in some instances, the bargaining club of the second. On the other hand, it does seem to me that there's room in close cases for three-way compromise

. I'm advised that that just doesn't happen in chapter seven. I find that hard to believe, but especially in major bankruptcies, not homeowner bankruptcies. Two responses, Justice Kennedy. The first part of your question was, well, what's the effect on mortgage lending? Even if there were an effect on second mortgage lending, one has to balance that against maximize in the value of first mortgages, which are purchased money mortgages, which are helped by unclogging the housing market. The cheap economist at Moody's Analytics said resolving subordinate means was the biggest obstacle to the housing recovery. Then your second question is, well, what about loan modifications and bargaining? My answer there is, this administration had a number of programs in place after the housing bubble. The mortgage mortgage mortgage mortgage programs were very disappointing, much lower than the administration expected. Why is this all about housing? Why is it all about housing? Why is it about housing? Why is it about Lehman brothers? Why is it about businesses? Why is it about commercial property? Because currently in Chapter 11 in cram down reorganizations and similar lean voiding already happens when there's no value to secure it. That's statutorily. Where in any statute in 11 or 13 did Congress ever use the word, voiding a lean as opposed to stripping down a lean? It doesn't use the phrase stripping down, it doesn't use the phrase void just as suddenly. This is very important, the NACBA brief goes into this. There are references to retaining lean, to satisfying lean to modifying lean, but as NACBA explains, those provisions all piggyback on 506, which values a claim, it goes over for adjudication in Chapter 11, the different classes of creditors, and then back to 506D, which is the provision that says that it voids lean. And NACBA's fear is that if this court does not allow Section 506D to do what it's supposed to do, it could impair not only housing mortgage modifications, but business bankruptcies. No, I just want to understand it. I'm a housing mall. I'm a mall. I'm Lehman brothers. Yes. Like a bankrupt. There are all kinds of leans all over the place. Doesn't the same law apply to them? Well, Section 1129. It's the housing. Yes, it's a general question. There is, and if it's Lehman brothers, if it's a Chapter 11 bankruptcy reorganization. No, no, but assume a big business in Chapter 7. Yes. Businesses under Chapter 7 do not receive a discharge. And so typically the business is filing under Chapter 11. If there is a liquidation, you are right, though, that the same logic could apply there

. And whether it a business bankruptcy or it's a mortgage, a home bankruptcy, there's still the need for the bankruptcy codes policies of finality and a fresh start. You know, I'm not familiar with a widespread practice of taking a second mortgage on a business loan, unless it's your father-in-law. It's a very common practice for purchases of homes. I'm not aware that it's a common practice in businesses getting second mortgages. It seems to me quite rare. But there are different tranches of debt sometimes, senior and junior debt obligations that would be analogous. But you're right numerically, this is going to be a huge issue in the housing market. As to me, this is, I'm really not a poor loser. And you know, I lost in Ducinib. What I am concerned about is the, what should I say? The ridiculousness of saying if under Ducinib, and you haven't asked us to overrule Ducinib, under Ducinib, if there's one dollar worth of value, okay, you don't lose your lien. But if there is zero value, one dollar less, and it's stripped entirely. That seems to be a very strange outcome. Why would any intelligent system want to produce an outcome like that? I'll talk about that doctrinally, and then as a policy matter. Dr. Trinoline, the code has dozens of provisions that turn on a dollar difference in eligibility for chapter 7, or presumptions of abuse to the light. Congress draws these lines. Section 11-11B for business bankruptcies, if reorganization talks about inconsequential value, you keep your lien if it has some value. If you think this is a line that Congress drew. What might? Congress drew it. Other intentionally wanted Ducinib for partially underwater, and really doesn't want Ducinib for totally underwater. I didn't say that, Your Honor. All right. I'd remind Your Honor of your opinion in Green versus Boc laundry. If it's necessary to deviate from the text, which Fuseup admitted it was deviating from the text, pick the deviation that does the least violence to the text that minimizes the amount of the deviation. We preserve a link, and Ducinib did not completely sever the link between five or six A's requirement of it. Now, it may you take the least violence from the text, but it leaves as Justice Scalia suggests an absolutely draconian arbitrary result. Okay. As a policy matter, Justice Scalia. And his opinion didn't say that you do that. No, Your Honor. I don't believe it's draconian. If a property is one dollar above water. Okay. It is preserved under this reading of Ducinib. But we've explained in our brief that foreclosure sell at deep discounts. There are high transaction costs. So a house might have to rise by half or more in value before there's any additional money on the table. So if anything, allowing preservation of a lien that has one dollar nominal value is being somewhat overprotective, or going on the side of being generous and protective when there would be no money left in foreclosure. What it does is it clears out the leans that are nowhere close to having value in foreclosure. Isn't the question complicated by the fact that whether it's a dollar above or a dollar below is a matter of a fairly subjective valuation? On the contrary, Your Honor. Section 506A expressly provides for judicial valuation. Noblemen recognized it would be judicial valuation. The house reports recognized it would be judicial. Oh, no, I know. It's judicial valuation. But that's the problem. If you're cutting a fine line and saying it's up to the judge who can look ahead and say, well, this is going to happen in the bankruptcy. And I'm worried about that. No one's going to say a valuation at $50,000 in $1 is accurate. But $49,999 is not. But that is in control of the judge who's doing the valuation. Yes, but it's far more accurate than the realistic alternative of foreclosure. There are many more safeguards. The creditor can submit a proposed valuation. The creditor submits appraisals, expert testimony. There is a hearing. And that is far more protected than foreclosures, which have to be rushed sales, poor notice, poorly advertised, the required cash sales that leave the creditor much less protection. The realistic alternative here is throwing the house into foreclosure and outside a bankruptcy

. No, Your Honor. I don't believe it's draconian. If a property is one dollar above water. Okay. It is preserved under this reading of Ducinib. But we've explained in our brief that foreclosure sell at deep discounts. There are high transaction costs. So a house might have to rise by half or more in value before there's any additional money on the table. So if anything, allowing preservation of a lien that has one dollar nominal value is being somewhat overprotective, or going on the side of being generous and protective when there would be no money left in foreclosure. What it does is it clears out the leans that are nowhere close to having value in foreclosure. Isn't the question complicated by the fact that whether it's a dollar above or a dollar below is a matter of a fairly subjective valuation? On the contrary, Your Honor. Section 506A expressly provides for judicial valuation. Noblemen recognized it would be judicial valuation. The house reports recognized it would be judicial. Oh, no, I know. It's judicial valuation. But that's the problem. If you're cutting a fine line and saying it's up to the judge who can look ahead and say, well, this is going to happen in the bankruptcy. And I'm worried about that. No one's going to say a valuation at $50,000 in $1 is accurate. But $49,999 is not. But that is in control of the judge who's doing the valuation. Yes, but it's far more accurate than the realistic alternative of foreclosure. There are many more safeguards. The creditor can submit a proposed valuation. The creditor submits appraisals, expert testimony. There is a hearing. And that is far more protected than foreclosures, which have to be rushed sales, poor notice, poorly advertised, the required cash sales that leave the creditor much less protection. The realistic alternative here is throwing the house into foreclosure and outside a bankruptcy. And then, in fact, the creditor winds up worse off. Not just the second who has nothing to gain, nothing to lose, holds it up. The first mortgagey winds up losing value. If I might now take the court back text of the statute. Mr. P, before you do, could I go back to something that the chief has to ask about earlier, which is this question of whether a distinction between fully underwater and partially underwater is coherent at all? Here's what Ducenip said. Ducenip, on the one hand, said we're deciding this case only, but it also said this. This is how it framed its holding. We hold that 5060 does not allow petitioner to strip down respondents lien, because respondents claim is secured by a lien and has been fully allowed for pursuant to 502. So this claim, too, is secured by a lien and has been fully allowed for pursuant to 502. It seems to come within this statement of the holding. And I guess the question is, how is it that we can say that this is a sensical distinction at all, given that holding? Two ways. Let me focus on that sentence and then on things elsewhere in the opinion and then nobleman. That sentence was careful, unusually careful, to phrase the holding in terms of the particular parties. That respondent had value in the mortgage. That's why the court said respondents claim, not claims in general. Then it used the verb stripped down. That's bankruptcy jargon for a partially secured mortgage and reducing the amount, scaling down the indebtedness the court said, too. Well, I hear you, but it seems as though it's the second half of the sentence that is key here. Why are we doing this? Why are we holding this? Because the claim is secured by a lien and because the claim has been fully allowed. And both of those things also apply here. Respondents claim also had some value that made it unquestionable that it was still secured. But you're correct. I think, though, that the use of the verb stripped down and the use of the respondent particular limits into that situation, it's very important, though, to go back three sentences before that to see what the court edged. The court specifically reserved hypothetical applications, advanced the oral argument. Petitionary advanced two hypotheticals, or oral argument. One of those was of the completely underwater junior mortgage. The court said that those hypotheticals illustrate the difficulty of the broad creditors and government's rule. The same rule that Ms

. And then, in fact, the creditor winds up worse off. Not just the second who has nothing to gain, nothing to lose, holds it up. The first mortgagey winds up losing value. If I might now take the court back text of the statute. Mr. P, before you do, could I go back to something that the chief has to ask about earlier, which is this question of whether a distinction between fully underwater and partially underwater is coherent at all? Here's what Ducenip said. Ducenip, on the one hand, said we're deciding this case only, but it also said this. This is how it framed its holding. We hold that 5060 does not allow petitioner to strip down respondents lien, because respondents claim is secured by a lien and has been fully allowed for pursuant to 502. So this claim, too, is secured by a lien and has been fully allowed for pursuant to 502. It seems to come within this statement of the holding. And I guess the question is, how is it that we can say that this is a sensical distinction at all, given that holding? Two ways. Let me focus on that sentence and then on things elsewhere in the opinion and then nobleman. That sentence was careful, unusually careful, to phrase the holding in terms of the particular parties. That respondent had value in the mortgage. That's why the court said respondents claim, not claims in general. Then it used the verb stripped down. That's bankruptcy jargon for a partially secured mortgage and reducing the amount, scaling down the indebtedness the court said, too. Well, I hear you, but it seems as though it's the second half of the sentence that is key here. Why are we doing this? Why are we holding this? Because the claim is secured by a lien and because the claim has been fully allowed. And both of those things also apply here. Respondents claim also had some value that made it unquestionable that it was still secured. But you're correct. I think, though, that the use of the verb stripped down and the use of the respondent particular limits into that situation, it's very important, though, to go back three sentences before that to see what the court edged. The court specifically reserved hypothetical applications, advanced the oral argument. Petitionary advanced two hypotheticals, or oral argument. One of those was of the completely underwater junior mortgage. The court said that those hypotheticals illustrate the difficulty of the broad creditors and government's rule. The same rule that Ms. Spinelli says that the court embrace, the same rule she quoted during her argument as if it were the court's holding about, well, there's some collateral therefore it's secured. The court declined to rule on all possible facts, situations, in light of that hypothetical. And it said we therefore focus on the case before us and allow other facts to await their legal resolution. Well, why haven't you argued that we should overrule Ducinum? Is it because of reliance? Because you think that there has been a great deal of reliance on Ducinum as applied to a partially underwater mortgage, but not reliance as applied to the totally underwater? Your Honor, it's quite right that those are two different categories. It's not our burden to take on sterile decisions because we win under Ducinum. Either way, the court can do what it wants, but we have not advocated it. We've been faithful to Ducinum's holding and its reasoning, including the express limitations it put on its reasoning. Its reasoning was limited to a case with some values. But the law would be much more coherent if either Ducinum applies to the totally underwater as well as partially underwater, or Ducinum is overruled. I don't believe that's the case that in terms of, while the court could consider overruling Ducinum, we have an advocated for that because even our reading of the statute is still more faithful to the text than petitioner. I'm not sure how. I mean, you're giving the same, exactly the same phrase in the statute, two different meanings depending on whether one's underwater or not. No, you're partially. Where do you find that distinction in 506? Section 506A defines what an allowed secured claim is. No, but that's the argument that Justice Scalia made that was rejected. You're giving the same phrase two different meanings. How do you apply the meaning in Ducinum? To this case. On 506D. Ducinum was interpreting a claim that was a hybrid. It was a secured claim component and an unsecured claim component. A secured claim component had some value that value was sufficient under 506A that there was a partial secured claim. Ducinum must be read in light of noblemen a year later. Noblemen said, it's chapter 13 case, but it interprets 506 which applies across the code. Noblemen said there's a secured claim component, there's an unsecured claim component. The creditors and noblemen advance the same argument, the same argument that my adversary advances, which is 506 is just about priority and distribution. It has nothing to do with lean voiding, Ducinum resolved this issue every claim that is secured by a lean secure claim. Noblemen was not about 506, it was about 1322. And 1322 talks about bankruptcy courts power to modify the rights of any creditor, whether it's secured or unsecured. That's how it's been read by the courts

. Spinelli says that the court embrace, the same rule she quoted during her argument as if it were the court's holding about, well, there's some collateral therefore it's secured. The court declined to rule on all possible facts, situations, in light of that hypothetical. And it said we therefore focus on the case before us and allow other facts to await their legal resolution. Well, why haven't you argued that we should overrule Ducinum? Is it because of reliance? Because you think that there has been a great deal of reliance on Ducinum as applied to a partially underwater mortgage, but not reliance as applied to the totally underwater? Your Honor, it's quite right that those are two different categories. It's not our burden to take on sterile decisions because we win under Ducinum. Either way, the court can do what it wants, but we have not advocated it. We've been faithful to Ducinum's holding and its reasoning, including the express limitations it put on its reasoning. Its reasoning was limited to a case with some values. But the law would be much more coherent if either Ducinum applies to the totally underwater as well as partially underwater, or Ducinum is overruled. I don't believe that's the case that in terms of, while the court could consider overruling Ducinum, we have an advocated for that because even our reading of the statute is still more faithful to the text than petitioner. I'm not sure how. I mean, you're giving the same, exactly the same phrase in the statute, two different meanings depending on whether one's underwater or not. No, you're partially. Where do you find that distinction in 506? Section 506A defines what an allowed secured claim is. No, but that's the argument that Justice Scalia made that was rejected. You're giving the same phrase two different meanings. How do you apply the meaning in Ducinum? To this case. On 506D. Ducinum was interpreting a claim that was a hybrid. It was a secured claim component and an unsecured claim component. A secured claim component had some value that value was sufficient under 506A that there was a partial secured claim. Ducinum must be read in light of noblemen a year later. Noblemen said, it's chapter 13 case, but it interprets 506 which applies across the code. Noblemen said there's a secured claim component, there's an unsecured claim component. The creditors and noblemen advance the same argument, the same argument that my adversary advances, which is 506 is just about priority and distribution. It has nothing to do with lean voiding, Ducinum resolved this issue every claim that is secured by a lean secure claim. Noblemen was not about 506, it was about 1322. And 1322 talks about bankruptcy courts power to modify the rights of any creditor, whether it's secured or unsecured. That's how it's been read by the courts. Yes, but 1322's operative phrase is modifying the rights of holders of secured claims. In order to be a holder of secured claim, one must have a secured claim. And so in noblemen this court stressed petitioners were correct in looking to section 506A for a judicial valuation of the collateral to determine the status of the bank secured claim, whether there was a secured claim or not. There was a secured claim component. And so the court said the bank is still the holder of a secured claim because petitioners' home retains $23,500 a collateral. So the issue in noblemen as in Ducinum was, okay, we have a secured claim component under run pair. We have an unsecured claim component. Do we split the baby? Do we chop them in half? And noblemen said no, in part because it's a difficult thing to change the amortization, the loan term, the payments, et cetera. There's some value here that supports this. So we're going to leave it as an indivisible whole. This court could easily understand a loud secured claim in 560 if it wished to preserve Ducinum's holding just as a binary term. If there's a bunch of... If you can do that linguistically, I could see a difference. The part that I'm having a hard time with is if this for the earlier case survives. Let's imagine a commercial loan, and I put it in a commercial context as the numbers. The lender lends $5 million. The senior lender to a commercial building, which then goes into Chapter 7. The junior lender lends $2 million, so now he has $7 million. The property ends up being worth a million. So the senior lender under Ducinum comes in and says, OK, I have a secured interest for a million, but I can keep the mortgage here for $4 million. In case things change 10 years from now. Isn't that under Ducinum? The senior guy can. It's partly. Well, in a corporate bankruptcy, this doesn't apply to that. OK, then all it says is I just want some numbers. The senior person says, put it on whatever you want. The senior person says, oh, I get to keep my $4 million mortgage

. Yes, but 1322's operative phrase is modifying the rights of holders of secured claims. In order to be a holder of secured claim, one must have a secured claim. And so in noblemen this court stressed petitioners were correct in looking to section 506A for a judicial valuation of the collateral to determine the status of the bank secured claim, whether there was a secured claim or not. There was a secured claim component. And so the court said the bank is still the holder of a secured claim because petitioners' home retains $23,500 a collateral. So the issue in noblemen as in Ducinum was, okay, we have a secured claim component under run pair. We have an unsecured claim component. Do we split the baby? Do we chop them in half? And noblemen said no, in part because it's a difficult thing to change the amortization, the loan term, the payments, et cetera. There's some value here that supports this. So we're going to leave it as an indivisible whole. This court could easily understand a loud secured claim in 560 if it wished to preserve Ducinum's holding just as a binary term. If there's a bunch of... If you can do that linguistically, I could see a difference. The part that I'm having a hard time with is if this for the earlier case survives. Let's imagine a commercial loan, and I put it in a commercial context as the numbers. The lender lends $5 million. The senior lender to a commercial building, which then goes into Chapter 7. The junior lender lends $2 million, so now he has $7 million. The property ends up being worth a million. So the senior lender under Ducinum comes in and says, OK, I have a secured interest for a million, but I can keep the mortgage here for $4 million. In case things change 10 years from now. Isn't that under Ducinum? The senior guy can. It's partly. Well, in a corporate bankruptcy, this doesn't apply to that. OK, then all it says is I just want some numbers. The senior person says, put it on whatever you want. The senior person says, oh, I get to keep my $4 million mortgage. Maybe things will change, you know, and eventually I may be able to collect some. Right? That's Ducinum. Except. Except what? The difficulty there. So you're saying that there's a completely unsecured second mortgage that an individual. No, no, I haven't made my example yet. I see what I know if I'm right so far. So there's one mortgage. It's $5 million. The property is worth one. And so what happens to the bank X is he gets maybe as a secured credit of the million if he wants, but if he doesn't want to collect it now, he doesn't have to. And he keeps $5 million. He keeps that mortgage going as long as he wants. Yes. Yes. OK. So junior comes in and junior says, hey, he got to keep $4 million. Just in case I have my mortgage for two, why can't I? Now, I can think of some words here that might say, well, there's the difference is what you're pointing to. I just want to know in terms of commercial practice or anything else. What's the answer to his point? He got to keep $4 on the hope it'll go up eventually. Why can't I keep $2? My documents are just as good as his. My mortgage is just as good as his. I mean, why can't I? So there's a functional answer and a historical answer. I take more answers in the functional answer. Yeah, I'll start there. There's a big difference between a single credit or single debtor situation. Inducing up the debtor was just trying to stop a foreclosure so the debtor could get a better deal. Here we have a multi-creditor situation. The creditor is this junior creditor is seeking a better outcome than it would get in state law foreclosure

. Maybe things will change, you know, and eventually I may be able to collect some. Right? That's Ducinum. Except. Except what? The difficulty there. So you're saying that there's a completely unsecured second mortgage that an individual. No, no, I haven't made my example yet. I see what I know if I'm right so far. So there's one mortgage. It's $5 million. The property is worth one. And so what happens to the bank X is he gets maybe as a secured credit of the million if he wants, but if he doesn't want to collect it now, he doesn't have to. And he keeps $5 million. He keeps that mortgage going as long as he wants. Yes. Yes. OK. So junior comes in and junior says, hey, he got to keep $4 million. Just in case I have my mortgage for two, why can't I? Now, I can think of some words here that might say, well, there's the difference is what you're pointing to. I just want to know in terms of commercial practice or anything else. What's the answer to his point? He got to keep $4 on the hope it'll go up eventually. Why can't I keep $2? My documents are just as good as his. My mortgage is just as good as his. I mean, why can't I? So there's a functional answer and a historical answer. I take more answers in the functional answer. Yeah, I'll start there. There's a big difference between a single credit or single debtor situation. Inducing up the debtor was just trying to stop a foreclosure so the debtor could get a better deal. Here we have a multi-creditor situation. The creditor is this junior creditor is seeking a better outcome than it would get in state law foreclosure. That better outcome comes in part from hold up or hostage value that can limit the ability of the senior lender and the property holder to negotiate a loan modification workout that makes everybody better off, makes assets more freely transferable and improves the market. And that does come at the price of the junior lender, but that's what happens in cram down as well. In a cram down, junior interest are squeezed out so that the senior people can maximize the value of the assets and deal with them freely. Why can't you say the same thing about the only one lender? He doesn't have to keep that for, you know. But you can see, give me 30 cents extra. I'll foreclose today. And there you are, free. Never having this hanging over your head. And I'll do it for an extra 30 cents, you find it. Now, that's called the same thing you say. It's called this, what did you call it, whatever it is. You see, people with mortgages can do that. But there's not the same multi-creditor... No, there is one rather than two. And maybe two would be better than three or three would be better than four. Since you're asking specifically in functional terms and I'll get to the bankruptcy history later, there's a coordination problem when a coordination problem can be a game of chicken. Each of them holding out for more money and then two people can drive over a cliff in a game of chicken. Now, onto the bankruptcy history. Why is this relevant to the law? There's a steady trajectory in bankruptcy law of increasing lean-voiding power. In 1934, Section 77B authorized lean-voiding in business organizations. In 1938, the Chandler Act, Chapter 12, extended that to individual organizations. In 1952, the amendments broadened it. They rejected the absolute priority rule for individual debtors. So the debtor can hang on to the assets and the lean can still be avoided. Then, in 1978, the modern code enacted Section 506, which applies across the code, all chapter 7, 11, 12, and 13. So this is part of an increasing recognition over time that it's necessary to solve these hold-up problems. And the realistic alternative, my friend Ms

. That better outcome comes in part from hold up or hostage value that can limit the ability of the senior lender and the property holder to negotiate a loan modification workout that makes everybody better off, makes assets more freely transferable and improves the market. And that does come at the price of the junior lender, but that's what happens in cram down as well. In a cram down, junior interest are squeezed out so that the senior people can maximize the value of the assets and deal with them freely. Why can't you say the same thing about the only one lender? He doesn't have to keep that for, you know. But you can see, give me 30 cents extra. I'll foreclose today. And there you are, free. Never having this hanging over your head. And I'll do it for an extra 30 cents, you find it. Now, that's called the same thing you say. It's called this, what did you call it, whatever it is. You see, people with mortgages can do that. But there's not the same multi-creditor... No, there is one rather than two. And maybe two would be better than three or three would be better than four. Since you're asking specifically in functional terms and I'll get to the bankruptcy history later, there's a coordination problem when a coordination problem can be a game of chicken. Each of them holding out for more money and then two people can drive over a cliff in a game of chicken. Now, onto the bankruptcy history. Why is this relevant to the law? There's a steady trajectory in bankruptcy law of increasing lean-voiding power. In 1934, Section 77B authorized lean-voiding in business organizations. In 1938, the Chandler Act, Chapter 12, extended that to individual organizations. In 1952, the amendments broadened it. They rejected the absolute priority rule for individual debtors. So the debtor can hang on to the assets and the lean can still be avoided. Then, in 1978, the modern code enacted Section 506, which applies across the code, all chapter 7, 11, 12, and 13. So this is part of an increasing recognition over time that it's necessary to solve these hold-up problems. And the realistic alternative, my friend Ms. Spinelli and her reply brief says, well, if we hang on to this lean, 10 years from now, the first will keep getting paid down and then our second will come into the money. Well, that's not realistically what happens in these cases. In borderline cases, 105, 110% alone to value. People stay in the houses. They keep paying. It's too much cost to pick up the kids and move to a different home. When you get to 130% alone to value, the median home that's underwaters with a second that's underwaters, 135% alone to value. When you get to 150% alone to value, at those ranges, lots of people are in default. They qualify for bankruptcy because they've lost a job or they're ill. They can't make the payments and pay into a black hole in negative equity. They walk away. The home is thrown into foreclosure anyway. And the senior creditor is worse off and the junior doesn't care because the junior doesn't get anything either way. Mr. Beebe, can I take you back to Justice Alito's question, which was about Stari Decisus and why you have a dark unit? Because I tell you that my sort of reaction to this case is that these distinctions that you're drawn between partially underwater and fully underwater are not terribly persuasive. But the only thing that may be less persuasive is Ducinip itself. And so the question to me is, or at least one question, is whether we should bite the bullet and overturn Ducinip? And maybe you're right that that's for us to decide. But if you do have something relevant to say about that matter, here's your chance to say it. I think it's worth, if the court wishes to consider that, and again, that's not been the position we've advocated because we don't need it to win, it's worth starting with Justice Thomas' concurring opinion in 203 North will sell, which pointed out the massive confusion that's been sewn in the courts trying to grapple with this ruling, which Judge Gorsuch is ruling in Wolsey that says that Ducinip has lost every away game, it's played, that it doesn't fit with the other provisions of the code. There's a lot of confusion there. It has almost uniform criticism in scholarly commentary. My colleague can't point to Reliance Interest in the Markets and that empirical studies discussed in the Levitton brief suggest that there isn't substantial alliance on this. In part because you benefit some first mortgages who manage to maximize their value by voiding some of these junior ones. And so the Reliance Interest that my friend has walked away from and the uniform criticism of Ducinip might interest this court in considering revisiting it, but it's not necessary because Ducinip itself reserved the completely underwater hypothetical on the face of its opinion. It was exceptionally narrow and the lawyers could read and see that it declined to reach this issue. And I do think that it is very important to read Ducinip together with Nobleman. The Ducinip doesn't stand on the stone that Nobleman is true. It was under 1322 B2. It was a chapter 13 case

. Spinelli and her reply brief says, well, if we hang on to this lean, 10 years from now, the first will keep getting paid down and then our second will come into the money. Well, that's not realistically what happens in these cases. In borderline cases, 105, 110% alone to value. People stay in the houses. They keep paying. It's too much cost to pick up the kids and move to a different home. When you get to 130% alone to value, the median home that's underwaters with a second that's underwaters, 135% alone to value. When you get to 150% alone to value, at those ranges, lots of people are in default. They qualify for bankruptcy because they've lost a job or they're ill. They can't make the payments and pay into a black hole in negative equity. They walk away. The home is thrown into foreclosure anyway. And the senior creditor is worse off and the junior doesn't care because the junior doesn't get anything either way. Mr. Beebe, can I take you back to Justice Alito's question, which was about Stari Decisus and why you have a dark unit? Because I tell you that my sort of reaction to this case is that these distinctions that you're drawn between partially underwater and fully underwater are not terribly persuasive. But the only thing that may be less persuasive is Ducinip itself. And so the question to me is, or at least one question, is whether we should bite the bullet and overturn Ducinip? And maybe you're right that that's for us to decide. But if you do have something relevant to say about that matter, here's your chance to say it. I think it's worth, if the court wishes to consider that, and again, that's not been the position we've advocated because we don't need it to win, it's worth starting with Justice Thomas' concurring opinion in 203 North will sell, which pointed out the massive confusion that's been sewn in the courts trying to grapple with this ruling, which Judge Gorsuch is ruling in Wolsey that says that Ducinip has lost every away game, it's played, that it doesn't fit with the other provisions of the code. There's a lot of confusion there. It has almost uniform criticism in scholarly commentary. My colleague can't point to Reliance Interest in the Markets and that empirical studies discussed in the Levitton brief suggest that there isn't substantial alliance on this. In part because you benefit some first mortgages who manage to maximize their value by voiding some of these junior ones. And so the Reliance Interest that my friend has walked away from and the uniform criticism of Ducinip might interest this court in considering revisiting it, but it's not necessary because Ducinip itself reserved the completely underwater hypothetical on the face of its opinion. It was exceptionally narrow and the lawyers could read and see that it declined to reach this issue. And I do think that it is very important to read Ducinip together with Nobleman. The Ducinip doesn't stand on the stone that Nobleman is true. It was under 1322 B2. It was a chapter 13 case. But it was fundamentally about interpreting 5 or 6A. Is it just a distribution provision as my client argued? No, what the court said, I don't understand that argument. It said there's, yes, you divide it up to secure it and unsecured, but you treat it all the same. That's what it said. You treat it all the same. Exactly. You decline to cut it into pieces. And one of the reasons you decline to cut it into pieces is because the claim secured violin and compasses both. So once the court has the power on what it was saying under 1322 to modify that, then the court could change both the secured or the whole lean is what it was talking about. But the latter, the opinion pointed out that if you modify the unsecured portion, you have ripple effects upon the secured portion. You wind up changing things like the interest rate or the amortization or the fees. And so you might be viewed as sabotaging or undermining what deserves to remain a secured component in this situation. There is no such problem. So it is worth noting, by the way, my friend also says, well, this lean that can sit out there, maybe it retains value sometime in the future, isn't that enough value? And I think just a spryre was just string towards that. All eight circuits after noblemen have understood that noblemen drew a line between some value and no value. All eight circuits to confront lean voiding in chapter 13. Allow it because they recognize that the completely underwater junior qualifies as no value within the meaning of the code. Present economic values, what this course's cases have consistently focused on. The value of the claim is equal to the value of the collateral this court has said. And that's the present value of the collateral. The statute uses the present tense in section 506, whether it is or is not. It's not about forecasting or speculating into the future. That would be unworkable, but judicial valuations are workable. The bankruptcy rules rule 3,012 and 7,011 provide for it. And there's abundant case law that shows it to be both workable and fairer to creditors than the alternative, which is a foreclosure. The judgment below should be affirmed. Thank you, council. Ms. Spanelli, four minutes left

. But it was fundamentally about interpreting 5 or 6A. Is it just a distribution provision as my client argued? No, what the court said, I don't understand that argument. It said there's, yes, you divide it up to secure it and unsecured, but you treat it all the same. That's what it said. You treat it all the same. Exactly. You decline to cut it into pieces. And one of the reasons you decline to cut it into pieces is because the claim secured violin and compasses both. So once the court has the power on what it was saying under 1322 to modify that, then the court could change both the secured or the whole lean is what it was talking about. But the latter, the opinion pointed out that if you modify the unsecured portion, you have ripple effects upon the secured portion. You wind up changing things like the interest rate or the amortization or the fees. And so you might be viewed as sabotaging or undermining what deserves to remain a secured component in this situation. There is no such problem. So it is worth noting, by the way, my friend also says, well, this lean that can sit out there, maybe it retains value sometime in the future, isn't that enough value? And I think just a spryre was just string towards that. All eight circuits after noblemen have understood that noblemen drew a line between some value and no value. All eight circuits to confront lean voiding in chapter 13. Allow it because they recognize that the completely underwater junior qualifies as no value within the meaning of the code. Present economic values, what this course's cases have consistently focused on. The value of the claim is equal to the value of the collateral this court has said. And that's the present value of the collateral. The statute uses the present tense in section 506, whether it is or is not. It's not about forecasting or speculating into the future. That would be unworkable, but judicial valuations are workable. The bankruptcy rules rule 3,012 and 7,011 provide for it. And there's abundant case law that shows it to be both workable and fairer to creditors than the alternative, which is a foreclosure. The judgment below should be affirmed. Thank you, council. Ms. Spanelli, four minutes left. Thank you. Just a couple of points. Completely underwater leans are not valueless. Their value stems from the potential for appreciation in the collateral. Indeed, a lien that's completely underwater by a dollar might have more value than a lien that's supported by a dollar of equity, depending on the potential for appreciation. The value, if the houses were sold today, is simply irrelevant because the situation only arises where the debtor is keeping the house. And one could have said in Doosnab, look, the current value of the collateral is less than the amount of your loan. It's fair to give you the current value of the collateral. Doosnab held to the contrary, and that's precisely the same here. There is no distinction that supports drawing a line at completely underwater leans, given that the secured creditor has the same non-banker-dese right to have its lien stay with the collateral until foreclosure and payment in full and to realize any appreciation in the value of that collateral. This doesn't give a junior lien holder a better deal than it would receive under state law. It gives it the same deal it would receive under state law. To respond to a point that I think Justice Sotomayor made, the fact that there are specific provisions in chapters 11 and 13 that do permit stripping down leans in certain circumstances supports the Doosnab courts view of 506D. It certainly doesn't undermine it. 506D is not the provision that strips down leans in chapters 11 and 13. Rather, there are specific provisions which are in the addendum to our brief in Section 1325 for Chapter 13. And actually this is not in the addendum 1129P for Chapter 11. Those provisions would make no sense if 506D were itself a leans stripping provision. And just to take one example, if one looks at Section 1325A5, which appears on page 6A of the Blue Brief, that sets out the terms under which Chapter 13 get debtor can strip down leans. And it says that with respect to each allowed secured claim provided for by the plan, the plan provides that the holder of such claim retain the leans securing such claim until they're earlier of the payment of the underlying debt determined under non-Bankrupts law or discharge. Now, it would make no sense to permit the lender to keep its lean until payment of the full debt if the lean had already automatically been stripped down under 506D to the value of the collateral. And that's just one example. We discussed some others in our briefs, including Section 722. And we also discussed in our briefs the textual indications in Section 506 that support the Jews' nips courts holding. So, and those are all reasons why Jews' nip was correctly decided in the first instance and shouldn't be overruled. But to respond to Justice Kaden's question, beyond that, the rule of law simply doesn't allow this court in the typical situation to overrule a statutory interpretation decision in a case like this where Congress over the past 25 years has act we asked in that decision. Thank you, Council. The case is submitted.

We'll hear argument first this morning in case 13, 14, 21, Bank of America versus Colquette and a consolidated case. Ms. Spinelli? Ms. Chief Justice, and may it please the Court. Respondent's position is that Section 506D of the Bankruptcy Code allows Chapter 7 debtors to keep their houses, strip their underwater mortgages, and prevent their lenders from accessing any later appreciation in the House's value. In Duce-Nip, this Court rejected that position with respect to partially underwater mortgages, and that reasoning applies with equal force to completely underwater mortgages. Duce-Nip held that Section 506D voids only leans securing disallowed claims. It does not void leans based on the current value of the collateral. That logic applies whether the current value of the collateral is a million dollars, one dollar, or zero, as virtually every court to address the question has held, and even the 11th Circuit below, all but admitted. Outside bankruptcy, the bank would be entitled to have its leans stay with the property until foreclosure or payment in full. What is the value of an under, completely underwater second mortgage? How likely is it that it will ever, that the property will ever appreciate to the extent that it will have real value? Justice Ginsburg, it's quite likely, and these two particular cases to be sure the second leans are deeply underwater. That's not true in every case, and there's no reason to think it's true in the typical case. We have Bank of America has many cases pending right now in the 11th Circuit. We have cases in which the value of the House would need to rise only by $4,000, where it would need to rise only by $5,000, and given that we're in the middle of a market upswing, it's very plausible and very likely that many of these mortgages will regain equity. We quote statistics in our opening brief that show that between 2012 and 2014, the number of underwater junior mortgages was cut in half from 4.2 million to 2.1 million. So houses are coming above water every day, and what Duce-Nepheld is that the bean holder, according to the basic non-bankruptcy bargain, is entitled to keep its lean until payment and full, or until a lender decides to foreclose. The holders of a second, assuming the second is partially or fully underwater, ever participate in negotiations with the property owner and with the holder of the first lean, and say, well, if you keep the property, we'll reduce our junior lead lean by 50%. Is there a negotiation dynamic that the rule that you propose would further? Let me be clear about this just as Kennedy, because I think this is important. In Chapter 7, Bankruptcy, there are no such negotiations. Chapter 7 is very simple. The debtor turns over his assets to the extent there are any non-exempt, non-encumbered assets, which there typically are not. The trustee will sell those assets, distribute the proceeds to creditors. The debtor then receives a discharge of all pre-petition debt. Well, let's just talk about Chapter 7, because that's what I had in mind. Suppose it's a close case, and they're thinking of maybe insisting on sale. Can the junior lean holders say, what if I'm not going to prevail on the sale, but if you don't sell, then I'll cut my lean in half on the chance that it may go up. So you couldn't ever have this negotiate in Chapter 7? In Chapter 7, Bankruptcy, those negotiations simply don't occur. If there is non-exempt equity in the House, the trustee has to sell the house and distribute the proceeds. The trustee doesn't care. I mean, right? His job is done once the bankruptcy is over. If it goes up, it's the owner who would care. That's correct. And he's not part of the negotiation. He's out of it. That's correct. Now, if... How does this work? I'm sorry, back up. You say that the trustee sells it. How does the mortgage holder in that situation foreclose? Reading it, if the debt are no longer owns the property, this doesn't go free and clean to the purchaser? The way it works, just a sort of myore, is that if there is non-exempt equity in the House, which, of course, was not true in these two cases, the trustee will sell the house out of those proceeds. The trustee will first satisfy the claim of the senior secured lender. If there's anything left over, it will go to the junior secured lender. If there's not, the junior lender receives nothing and the junior lien is extinct. So when does do the facts of this case matter? The facts? Because this is before the finish, the wrapping up of the plan, right? In Chapter 7, there is no plan. I'm sorry. This is before the bankruptcy is terminated. I think it's important to understand that Chapter 7 bankruptcy has happened very quickly. A no-asset bankruptcy like this one will usually be wrapped up in 30 to 45 days. Whereas here, there's no equity in the property to be distributed to creditors. And there are no other non-exempt assets. There's really not very much for the trustee to do. The trustee will file a notice that the case is administered. And at that point, a house that's in the situation of these two houses in which there is no non-exempt, non-encumbered value will be abandoned to the debtor. At that point, the debtor's rights and the property are precisely what they were before bankruptcy. If the debtor is in default on his mortgage, then the lenders can foreclose. Let me follow up to something, Justice Kennedy, many of your adversary, plus many others, Amiga, and I have argued that if we rule in the way you seek that unholy, un-rewarder, junior leans are going to be a hold-up, and you're going to use it as hostage value. And they point to various situations in which that has occurred. That, to me, is a concerning policy issue. So explain why that's not true. Just a so-to-my-or, my answer to that would be that's not a bankruptcy problem. There are not negotiations that take place in Chapter 7, as to which the junior lean holder could exercise any hold-up value. It's certainly maybe the case that later on the debtor may want to negotiate a modification with its senior lender. That happens all the time to people who have been through Chapter 7 bankruptcy and people who have not. And to the extent there's a housing policy issue, I don't think that's properly addressed through interpretation of the bankruptcy code. One of the amiki... Well, the bankruptcy code wants to give debtors a fresh start. That is true. And to the extent that Chapter 7 is an attempt to do that, if you're able to hold up that fresh start, that is the concern they're pointing to. Just a so-to-my-or, the fresh start that's given to debtors in Chapter 7 has a particular nature. The nature of the fresh start in Chapter 7 is that the debtor surrenders all of his or her assets, and in return gets a discharge of all pre-petition debt. It's never been the case that the Chapter 7 fresh start has encompassed an ability to retain property and also strip off weans on that property. If the debtor wanted, and this doesn't force the debtor to stay in a house that he or she can't afford, if the debtor, if the debtor wanted to, say, cure a default on his mortgage and keep the house, Chapter 13 is open to the debtor, which permits, curing a default on a mortgage and maintaining payments during the course of the plan. Under Chapter 7, a debtor can, if the debtor is in the situation of these debtors, and the house has been abandoned back to the debtor, if the debtor is in, is current on its loans, can keep the house, pay its mortgage going forward, and be in the same situation that he was prior to bankruptcy. The one thing that Chapter 7 gives a debtor in that situation is that it discharges the debtor of any personal liability for the mortgage debt, so the lender cannot come after the debtor personally. If the debtor decides that the house is too expensive for him to stay in, he can stop paying the mortgage and the only recourse that the lender then has is too foreclose. So there certainly is an ability for debtors to walk away from houses that they simply can't afford, and there is also an ability through Chapter 13 to hear existing defaults and reach an arrangement through which the debtor can keep the house. Mr. Spinelli, I dissented in duesnup, and I continue to believe that dissent was correct. Why should I not limit duesnup to the facts that it involved, which is partially underwater mortgage? Just as Scalia, I don't think that can be done coherently given the reasoning of the court in duesnup. What the court held in duesnup is that Section 506. Yes, I understand that, but I think the reasoning was wrong. And very often, we adhere to a prior decision that on the facts of that case, and Ducinib did say, you know, we're just limiting it to the facts of this case, and we're not saying what these terms mean elsewhere in the Bankruptcy Act. So let's take Ducinib at its word, and just limit it to what it involved, which was a partially underwater mortgage. Now, why shouldn't I do that? I don't believe that's logically possible, even if Ducinib was wrongly decided, because Ducinib interpreted a specific phrase in a specific place in the book. And I understand that, but we often limit prior decisions to their facts, and don't follow their logic. Yes, Justice Scalia. And if we follow their logic, we would never be able to do what I'm suggesting. But we often say, you have a logic with leaders here, but it was a terrible decision, and we're not going to extend it any further. Why would that be a bad idea here? In this situation, we're talking about an interpretation of language in a specific place in a statute, and to do that would be to read the exact same language in the exact same place in a statute to mean different things. I'm just not getting through it to you. I'm willing to do that. I'm willing to do that when the language was read incorrectly the first time. Okay. But as a practical matter, I'm talking as a practical matter, and starry decisis is a very practical doctrine. Why should, as a practical matter, should I adhere to an opinion that I think was wrong? Well, I do think Clark versus Martinez would apply in this situation and prevent a barrier to doing that, but... What is the case that you decided? I apologize, Justice Ginsburg. That's one of the cases in which the court has said that the same language in the same place and the same statute cannot mean different things in different factual circumstances. There's a descending opinion in a different area of the law on taxpayer standing under the establishment clause, a brilliant descending opinion that you might want to rely on in this context. I've never been able to figure out the answer to the question he raises, which is I take a descending opinion in one case. And then when do I say, okay, forget it? And the answer is sort of personal in a way. How strongly do you feel given the need of the law to advise lawyers, advise judges, advise Congress and others? If we all keep sending all the time, it'll be chaos. If we never change, you can't stick to a principle. If you've found any way of drawing that line, I don't think there is a way... I think there is, Justice Breyer and Justice Scalia, which is that... I mean, this court has very rarely taken the step of overruling a statutory interpretation decision, certainly never in the kind of... I'm talking about overruling. We're saying dousmot subsists as far as partially underwater mortgages are concerned. The issue before us is whether we should extend it to totally underwater. Now, what I thought you were going to tell me, you know, I feel strongly that dousmot was wrong, but I'm not going to upset expectations. I mean, if banks have been lending money for second mortgages on the assumption that they would not be stripped, I mean, that's what I thought you were going to tell me. You know, many expectations that have been rested upon this misspy-gotten opinion of dousmot. It's certainly been the case that since dousmot was decided until this decision by the 11th Circuit in 2012, it was well-established that dousmot applied equally to completely underwater mortgages. And are you saying, then, that there have been substantial reliance on the dousmot interpretation that you're supporting here by banks that have given second mortgages all over the country, the huge reliance that would be upset? I have been reliant. I thought that that's what she's going to say to Justice Glee. I don't hear that being argued. I believe that there has been reliance. I actually don't think that's the most compelling argument as to why the court shouldn't depart from dousmot. The language in dousmot simply can't be read to distinguish between completely part of the department. Well, but if we could go back, I mean, I kind of agree with you that it's not a very compelling argument, this reliance argument, because I find myself in the same position as Justice Scalia. I read the two dousmot opinions, and it seems to me that Justice Scalia clearly has the better of the argument. Yes. And then the question is, what do we do about that and where do we go from there? And it does strike me that if these are the most sophisticated parties that can possibly be imagined, Bank of America and other banks, and it seems to me that they would be making essentially a bet on, and they would, you know, think about, or the things of what is the probability that do snip will be extended to completely underwater mortgages. And presumably they discounted all their various calculations in order to take into account the probability that another court would say, you know, do snip is not very persuasive and we're just not willing to extend it any further. And I think that's probably what Bank of America and other banks did. As they said, you know, we think there's X percent chance that do snip will be extended and Y percent chance that it won't, and they made their cost and pricing calculations based on that calculation. So if that's the case, why should we worry about reliance? Just as Kagan, I do believe that banks have relied on the do snip decision as to whether they specifically made calculations about when it would apply, whether it would apply in these circumstances, I don't know, but I think I would go back to the premise of your question, which is that this would be extending do snuff. It wouldn't be extending do snuff, but would simply be applying do snip to a set of facts in which the interpretation the court gave in do snuff is equally applicable. You even though do snip itself said no, we're deciding this case only and not any other. I think in your brief, you did make the point that do snip is now how many do snip years old? It's almost 25 years old. And Congress could have changed it if it didn't like it, and Congress has amended the code. That's correct. I mean, Congress has amended the code substantially, both in 1994 and in 2005. In 1994, Congress overruled or modified a couple of these courts bankruptcy decisions at overruled rake versus Wade. It modified the statute in response to the court's decision in no moment. Well, that proves that most that Congress liked do snuff as applied to partially underwater mortgages. Isn't that right? I mean, that's all it proves. They let it stay. They did not overrule do snip as far as partially underwater mortgages. It doesn't say anything about how they feel about totally underwater mortgages. Just as Scalia, there is simply no distinction that can be drawn between partially and completely underwater leans in this situation. Do you snuff held that a secured claim is a claim secured by a lean with recourse to the underlying collateral? That is equally applicable here. Likewise, I mean, the text of Section 506 certainly draws no such distinction. So it would be an odd thing to do to vindicate textualism to adopt the proposition that respondents are advancing here. You don't know how to hurt a fellow, don't you? I mean, I understand the notion and agree with it completely that if you have a decision that's wrong, you don't extend it in any way. But there are factual distinctions and there are factual distinctions. I mean, do you snuff may have been decided on a Tuesday, in this case, you could be decided on a Thursday, but you would not say, you know, we're not extending, you know, we're simply not going to extend it to other cases. Exactly, Mr. Chiefs. And in this particular instance, I assume the difference between underwater and totally partially underwater and totally underwater is a completely fluid one in the sense that at the start of the Bank of C, I didn't think of that. It was totally unintended. But the idea is that, you know, it, throughout a bankruptcy, you could have a mortgage that is a lien that's underwater than totally underwater than partially underwater. And the idea that you latch onto that is a distinction, seems to me to be a difficult proposition. That's exactly right. I mean, the non-bankruptcy right of a lien holder is to retain its lien until payment and fall or until foreclosure, which means that the lien holder is entitled to access any equity that may develop in the future due to appreciation of the process. Is this right? I want to be sure I understand. Under the, do, do, do snap. For the last 25 years, lenders and others in the Bankruptcy community have understood the way it works is the following. If you have a lien and the house is worth 500,000 and your, your lien is secured and it's worth a million and they're in chapter 7. You have a secured interest and are counted as a secured creditor only to 500,000. As to the remaining 500,000, your count is an unsecured creditor. But you keep the lien. Right. Well, but- And therefore, if when they're out of bankruptcy someday or the house goes up or whatever it is, you still have your lien. Is that right? That's right. And let me explain that just as bright. I mean, I don't know. Section 506. I'm sorry. This one, I'm sure, is right, but if you'd like to explain it for a good view. It is right, and I would if I might. Section 506A bifurcates underscured claims into a secured portion and an unsecured portion and that determines the distribution that a creditor can get from the estate. Now, I want to be clear that nothing in the way this Court reads 506D will affect that. That is going to be true no matter what. What Duznipp said is that Section 506D does not refer back to that bifurcation in 506A. Rather, it uses the word secured in the ordinary English and ordinary legal meaning of secured by a lien with recourse to the underlying collateral. And in that situation, given that reading, 506D only strips liens securing disallowed claims. If the claim is valid, then the creditor is entitled. That means that after bankruptcy is over and you're back out of Section 7, Chapter 7, unless it falls within one of the other two exceptions there remains. Correct. And therefore, and that's the understanding. Okay, I understand. Thank you. When do trustees decide that they're not sure of the value of the home and that they're going to sew it to find out what is worth? Typically, the value is not disputed. If it's usually quite clear whether there is or is not non-exempt non-encumbered value in a house, and the trustee will sell the house only if there is non-exempt non-encumbered value, it's possible that in a situation in which it's not clear the trustee might go ahead and sell the house and see how much is realized for it because that sale price, would then by definition, establish the amount of the secured claim. Typically, in no-asset cases like this, there's simply no issue. And there's no question that the trustee is not going to be selling that. Just get him back to the reliance point or really from your argument, the non-reliance point. Your brief talked about the millions of loans and so forth that have been made, but you seem to walk away from any reliance argument. Just just Kennedy, let me be clear. Really? Because I'm surprised at that. Let me be clear. I am not walking away from the argument that the banks have relied on Ducinope. I think that's unquestionably true. Millions of loans have been made in reliance on Ducinope's holding. Banks, when they make loans, price them and extend them based on an understanding of what their recovery is going to be given default. That is true. What I was responding to is the notion that banks may have relied on whether this court would apply Ducinope to completely underwater mortgages. I think that's a little bit less strong, although it's true that in the 25 years since Ducinope, it's until this decision by the 11th Circuit, it's been well established that Ducinope does apply to completely underwater leans. May I reserve the balance of my time? You may. Thank you. Mr. Beebees? Mr. Chief Justice, and may it please the court, a claim unsupported by any value is a completely unsecured claim under Section 5-6-A. An unsecured claim cannot be an allowed-seered claim, and its associated lean is void under Section 5-6-D. Claims with some value remain secured, claims with no value don't. They'd be wiped out in foreclosure, and bankruptcy treats them no better than foreclosure would. But before I get to text or hold up value or Ducinope, let me seize on the striking concession of my adversary. Justice Cecilia and Kagan pressed my adversary who conceded that she couldn't demonstrate reliance here. There were bankruptcy courts and district courts that foreshadowed the ruling below, and they've pointed to no evidence of reliance. There is, we challenged in our brief, to show that in the 11th Circuit lending markets are being affected. No evidence. There are eight circuits in which lean-voiding is allowed in Chapter 13. No evidence. We should clear the table of a reliance argument that my adversary all but concedes. How she didn't concede it, and it just seems, you know, it's not just homeowners, you can cure me of this misapprehension. But probably in the last 25 years or 30 years there have been trillions of dollars that have been loaned to businesses. I mean, think of Lehman Brothers, and they go bankrupt. And suddenly at stake are hundreds of billions of dollars, and a person who's made a mortgage, at least a lawyer, would say, okay, you can lend the money if things go badly. We can keep the lien. We won't collect because he's bankrupt, but markets go up and down. Keep the secured interest. They might go back up. You might get it someday. Now, that's perfectly obvious advice. It seems to me from what I know so far. So when you do that, the mortgage lender has to decide what the interest rate is, how long the terms are, and it's pretty hard to believe there isn't some effect on the brain of the person who's making the mortgage, from the simple fact that he gets to keep that lien. It passes through bankruptcy, and eventually the market may go back up. In addition to Justice Kagan's answer, which is, the banks are well advised and can forecast. They can read the text of the statute and do some expressed research. We've had 25 years or 30 years, 23 years to be exact. And the fact is that, sure, they go to their lawyer. They don't read the lawyers, and the lawyers would read, and the lawyers would say. I direct the court to the Levitton Amicus brief. There are two empirical studies that found natural experiments. One of them involved differences in circuits before noblemen, in chapter 13, Mean Boiding, which found a very slight effect, 0.12 to 0.18 percent, on first mortgages. The other, an empirical study by Philadelphia Federal Reserve Economists, likewise found no substantial effect on markets, even when different circuits are done. It's hard for me to think that the decision in your favor wouldn't, in a sense, hurt borrowers because the market for second is going to dry up or become much more expensive. I'll read the briefs, and you can tell me about the, why that theory, economic theory, might be wrong, but it seems to me just common sense. Justice Kennedy, the Levitton Amicus brief, explains in greater detail. But there's a problem in the mortgage market, in that first mortgages and debtors often want to work out mutually beneficial resolutions. As my adversary concedes, no negotiation goes on in bankruptcy. The second can prevent this from happening, and we cited multiple studies that show that the second lenders may wind up forcing homes into foreclosure. The other point that the Levitton brief makes is that this is primarily a problem of the housing bubble. This is a problem of very high loan to value piggyback second mortgages. They found no evidence of an effect on low loan to value home improvement, home equity lines, a credit of the sort that survived, now that the regulatory term is done. I would agree that their bargaining club might be too big in some instances, the bargaining club of the second. On the other hand, it does seem to me that there's room in close cases for three-way compromise. I'm advised that that just doesn't happen in chapter seven. I find that hard to believe, but especially in major bankruptcies, not homeowner bankruptcies. Two responses, Justice Kennedy. The first part of your question was, well, what's the effect on mortgage lending? Even if there were an effect on second mortgage lending, one has to balance that against maximize in the value of first mortgages, which are purchased money mortgages, which are helped by unclogging the housing market. The cheap economist at Moody's Analytics said resolving subordinate means was the biggest obstacle to the housing recovery. Then your second question is, well, what about loan modifications and bargaining? My answer there is, this administration had a number of programs in place after the housing bubble. The mortgage mortgage mortgage mortgage programs were very disappointing, much lower than the administration expected. Why is this all about housing? Why is it all about housing? Why is it about housing? Why is it about Lehman brothers? Why is it about businesses? Why is it about commercial property? Because currently in Chapter 11 in cram down reorganizations and similar lean voiding already happens when there's no value to secure it. That's statutorily. Where in any statute in 11 or 13 did Congress ever use the word, voiding a lean as opposed to stripping down a lean? It doesn't use the phrase stripping down, it doesn't use the phrase void just as suddenly. This is very important, the NACBA brief goes into this. There are references to retaining lean, to satisfying lean to modifying lean, but as NACBA explains, those provisions all piggyback on 506, which values a claim, it goes over for adjudication in Chapter 11, the different classes of creditors, and then back to 506D, which is the provision that says that it voids lean. And NACBA's fear is that if this court does not allow Section 506D to do what it's supposed to do, it could impair not only housing mortgage modifications, but business bankruptcies. No, I just want to understand it. I'm a housing mall. I'm a mall. I'm Lehman brothers. Yes. Like a bankrupt. There are all kinds of leans all over the place. Doesn't the same law apply to them? Well, Section 1129. It's the housing. Yes, it's a general question. There is, and if it's Lehman brothers, if it's a Chapter 11 bankruptcy reorganization. No, no, but assume a big business in Chapter 7. Yes. Businesses under Chapter 7 do not receive a discharge. And so typically the business is filing under Chapter 11. If there is a liquidation, you are right, though, that the same logic could apply there. And whether it a business bankruptcy or it's a mortgage, a home bankruptcy, there's still the need for the bankruptcy codes policies of finality and a fresh start. You know, I'm not familiar with a widespread practice of taking a second mortgage on a business loan, unless it's your father-in-law. It's a very common practice for purchases of homes. I'm not aware that it's a common practice in businesses getting second mortgages. It seems to me quite rare. But there are different tranches of debt sometimes, senior and junior debt obligations that would be analogous. But you're right numerically, this is going to be a huge issue in the housing market. As to me, this is, I'm really not a poor loser. And you know, I lost in Ducinib. What I am concerned about is the, what should I say? The ridiculousness of saying if under Ducinib, and you haven't asked us to overrule Ducinib, under Ducinib, if there's one dollar worth of value, okay, you don't lose your lien. But if there is zero value, one dollar less, and it's stripped entirely. That seems to be a very strange outcome. Why would any intelligent system want to produce an outcome like that? I'll talk about that doctrinally, and then as a policy matter. Dr. Trinoline, the code has dozens of provisions that turn on a dollar difference in eligibility for chapter 7, or presumptions of abuse to the light. Congress draws these lines. Section 11-11B for business bankruptcies, if reorganization talks about inconsequential value, you keep your lien if it has some value. If you think this is a line that Congress drew. What might? Congress drew it. Other intentionally wanted Ducinib for partially underwater, and really doesn't want Ducinib for totally underwater. I didn't say that, Your Honor. All right. I'd remind Your Honor of your opinion in Green versus Boc laundry. If it's necessary to deviate from the text, which Fuseup admitted it was deviating from the text, pick the deviation that does the least violence to the text that minimizes the amount of the deviation. We preserve a link, and Ducinib did not completely sever the link between five or six A's requirement of it. Now, it may you take the least violence from the text, but it leaves as Justice Scalia suggests an absolutely draconian arbitrary result. Okay. As a policy matter, Justice Scalia. And his opinion didn't say that you do that. No, Your Honor. I don't believe it's draconian. If a property is one dollar above water. Okay. It is preserved under this reading of Ducinib. But we've explained in our brief that foreclosure sell at deep discounts. There are high transaction costs. So a house might have to rise by half or more in value before there's any additional money on the table. So if anything, allowing preservation of a lien that has one dollar nominal value is being somewhat overprotective, or going on the side of being generous and protective when there would be no money left in foreclosure. What it does is it clears out the leans that are nowhere close to having value in foreclosure. Isn't the question complicated by the fact that whether it's a dollar above or a dollar below is a matter of a fairly subjective valuation? On the contrary, Your Honor. Section 506A expressly provides for judicial valuation. Noblemen recognized it would be judicial valuation. The house reports recognized it would be judicial. Oh, no, I know. It's judicial valuation. But that's the problem. If you're cutting a fine line and saying it's up to the judge who can look ahead and say, well, this is going to happen in the bankruptcy. And I'm worried about that. No one's going to say a valuation at $50,000 in $1 is accurate. But $49,999 is not. But that is in control of the judge who's doing the valuation. Yes, but it's far more accurate than the realistic alternative of foreclosure. There are many more safeguards. The creditor can submit a proposed valuation. The creditor submits appraisals, expert testimony. There is a hearing. And that is far more protected than foreclosures, which have to be rushed sales, poor notice, poorly advertised, the required cash sales that leave the creditor much less protection. The realistic alternative here is throwing the house into foreclosure and outside a bankruptcy. And then, in fact, the creditor winds up worse off. Not just the second who has nothing to gain, nothing to lose, holds it up. The first mortgagey winds up losing value. If I might now take the court back text of the statute. Mr. P, before you do, could I go back to something that the chief has to ask about earlier, which is this question of whether a distinction between fully underwater and partially underwater is coherent at all? Here's what Ducenip said. Ducenip, on the one hand, said we're deciding this case only, but it also said this. This is how it framed its holding. We hold that 5060 does not allow petitioner to strip down respondents lien, because respondents claim is secured by a lien and has been fully allowed for pursuant to 502. So this claim, too, is secured by a lien and has been fully allowed for pursuant to 502. It seems to come within this statement of the holding. And I guess the question is, how is it that we can say that this is a sensical distinction at all, given that holding? Two ways. Let me focus on that sentence and then on things elsewhere in the opinion and then nobleman. That sentence was careful, unusually careful, to phrase the holding in terms of the particular parties. That respondent had value in the mortgage. That's why the court said respondents claim, not claims in general. Then it used the verb stripped down. That's bankruptcy jargon for a partially secured mortgage and reducing the amount, scaling down the indebtedness the court said, too. Well, I hear you, but it seems as though it's the second half of the sentence that is key here. Why are we doing this? Why are we holding this? Because the claim is secured by a lien and because the claim has been fully allowed. And both of those things also apply here. Respondents claim also had some value that made it unquestionable that it was still secured. But you're correct. I think, though, that the use of the verb stripped down and the use of the respondent particular limits into that situation, it's very important, though, to go back three sentences before that to see what the court edged. The court specifically reserved hypothetical applications, advanced the oral argument. Petitionary advanced two hypotheticals, or oral argument. One of those was of the completely underwater junior mortgage. The court said that those hypotheticals illustrate the difficulty of the broad creditors and government's rule. The same rule that Ms. Spinelli says that the court embrace, the same rule she quoted during her argument as if it were the court's holding about, well, there's some collateral therefore it's secured. The court declined to rule on all possible facts, situations, in light of that hypothetical. And it said we therefore focus on the case before us and allow other facts to await their legal resolution. Well, why haven't you argued that we should overrule Ducinum? Is it because of reliance? Because you think that there has been a great deal of reliance on Ducinum as applied to a partially underwater mortgage, but not reliance as applied to the totally underwater? Your Honor, it's quite right that those are two different categories. It's not our burden to take on sterile decisions because we win under Ducinum. Either way, the court can do what it wants, but we have not advocated it. We've been faithful to Ducinum's holding and its reasoning, including the express limitations it put on its reasoning. Its reasoning was limited to a case with some values. But the law would be much more coherent if either Ducinum applies to the totally underwater as well as partially underwater, or Ducinum is overruled. I don't believe that's the case that in terms of, while the court could consider overruling Ducinum, we have an advocated for that because even our reading of the statute is still more faithful to the text than petitioner. I'm not sure how. I mean, you're giving the same, exactly the same phrase in the statute, two different meanings depending on whether one's underwater or not. No, you're partially. Where do you find that distinction in 506? Section 506A defines what an allowed secured claim is. No, but that's the argument that Justice Scalia made that was rejected. You're giving the same phrase two different meanings. How do you apply the meaning in Ducinum? To this case. On 506D. Ducinum was interpreting a claim that was a hybrid. It was a secured claim component and an unsecured claim component. A secured claim component had some value that value was sufficient under 506A that there was a partial secured claim. Ducinum must be read in light of noblemen a year later. Noblemen said, it's chapter 13 case, but it interprets 506 which applies across the code. Noblemen said there's a secured claim component, there's an unsecured claim component. The creditors and noblemen advance the same argument, the same argument that my adversary advances, which is 506 is just about priority and distribution. It has nothing to do with lean voiding, Ducinum resolved this issue every claim that is secured by a lean secure claim. Noblemen was not about 506, it was about 1322. And 1322 talks about bankruptcy courts power to modify the rights of any creditor, whether it's secured or unsecured. That's how it's been read by the courts. Yes, but 1322's operative phrase is modifying the rights of holders of secured claims. In order to be a holder of secured claim, one must have a secured claim. And so in noblemen this court stressed petitioners were correct in looking to section 506A for a judicial valuation of the collateral to determine the status of the bank secured claim, whether there was a secured claim or not. There was a secured claim component. And so the court said the bank is still the holder of a secured claim because petitioners' home retains $23,500 a collateral. So the issue in noblemen as in Ducinum was, okay, we have a secured claim component under run pair. We have an unsecured claim component. Do we split the baby? Do we chop them in half? And noblemen said no, in part because it's a difficult thing to change the amortization, the loan term, the payments, et cetera. There's some value here that supports this. So we're going to leave it as an indivisible whole. This court could easily understand a loud secured claim in 560 if it wished to preserve Ducinum's holding just as a binary term. If there's a bunch of... If you can do that linguistically, I could see a difference. The part that I'm having a hard time with is if this for the earlier case survives. Let's imagine a commercial loan, and I put it in a commercial context as the numbers. The lender lends $5 million. The senior lender to a commercial building, which then goes into Chapter 7. The junior lender lends $2 million, so now he has $7 million. The property ends up being worth a million. So the senior lender under Ducinum comes in and says, OK, I have a secured interest for a million, but I can keep the mortgage here for $4 million. In case things change 10 years from now. Isn't that under Ducinum? The senior guy can. It's partly. Well, in a corporate bankruptcy, this doesn't apply to that. OK, then all it says is I just want some numbers. The senior person says, put it on whatever you want. The senior person says, oh, I get to keep my $4 million mortgage. Maybe things will change, you know, and eventually I may be able to collect some. Right? That's Ducinum. Except. Except what? The difficulty there. So you're saying that there's a completely unsecured second mortgage that an individual. No, no, I haven't made my example yet. I see what I know if I'm right so far. So there's one mortgage. It's $5 million. The property is worth one. And so what happens to the bank X is he gets maybe as a secured credit of the million if he wants, but if he doesn't want to collect it now, he doesn't have to. And he keeps $5 million. He keeps that mortgage going as long as he wants. Yes. Yes. OK. So junior comes in and junior says, hey, he got to keep $4 million. Just in case I have my mortgage for two, why can't I? Now, I can think of some words here that might say, well, there's the difference is what you're pointing to. I just want to know in terms of commercial practice or anything else. What's the answer to his point? He got to keep $4 on the hope it'll go up eventually. Why can't I keep $2? My documents are just as good as his. My mortgage is just as good as his. I mean, why can't I? So there's a functional answer and a historical answer. I take more answers in the functional answer. Yeah, I'll start there. There's a big difference between a single credit or single debtor situation. Inducing up the debtor was just trying to stop a foreclosure so the debtor could get a better deal. Here we have a multi-creditor situation. The creditor is this junior creditor is seeking a better outcome than it would get in state law foreclosure. That better outcome comes in part from hold up or hostage value that can limit the ability of the senior lender and the property holder to negotiate a loan modification workout that makes everybody better off, makes assets more freely transferable and improves the market. And that does come at the price of the junior lender, but that's what happens in cram down as well. In a cram down, junior interest are squeezed out so that the senior people can maximize the value of the assets and deal with them freely. Why can't you say the same thing about the only one lender? He doesn't have to keep that for, you know. But you can see, give me 30 cents extra. I'll foreclose today. And there you are, free. Never having this hanging over your head. And I'll do it for an extra 30 cents, you find it. Now, that's called the same thing you say. It's called this, what did you call it, whatever it is. You see, people with mortgages can do that. But there's not the same multi-creditor... No, there is one rather than two. And maybe two would be better than three or three would be better than four. Since you're asking specifically in functional terms and I'll get to the bankruptcy history later, there's a coordination problem when a coordination problem can be a game of chicken. Each of them holding out for more money and then two people can drive over a cliff in a game of chicken. Now, onto the bankruptcy history. Why is this relevant to the law? There's a steady trajectory in bankruptcy law of increasing lean-voiding power. In 1934, Section 77B authorized lean-voiding in business organizations. In 1938, the Chandler Act, Chapter 12, extended that to individual organizations. In 1952, the amendments broadened it. They rejected the absolute priority rule for individual debtors. So the debtor can hang on to the assets and the lean can still be avoided. Then, in 1978, the modern code enacted Section 506, which applies across the code, all chapter 7, 11, 12, and 13. So this is part of an increasing recognition over time that it's necessary to solve these hold-up problems. And the realistic alternative, my friend Ms. Spinelli and her reply brief says, well, if we hang on to this lean, 10 years from now, the first will keep getting paid down and then our second will come into the money. Well, that's not realistically what happens in these cases. In borderline cases, 105, 110% alone to value. People stay in the houses. They keep paying. It's too much cost to pick up the kids and move to a different home. When you get to 130% alone to value, the median home that's underwaters with a second that's underwaters, 135% alone to value. When you get to 150% alone to value, at those ranges, lots of people are in default. They qualify for bankruptcy because they've lost a job or they're ill. They can't make the payments and pay into a black hole in negative equity. They walk away. The home is thrown into foreclosure anyway. And the senior creditor is worse off and the junior doesn't care because the junior doesn't get anything either way. Mr. Beebe, can I take you back to Justice Alito's question, which was about Stari Decisus and why you have a dark unit? Because I tell you that my sort of reaction to this case is that these distinctions that you're drawn between partially underwater and fully underwater are not terribly persuasive. But the only thing that may be less persuasive is Ducinip itself. And so the question to me is, or at least one question, is whether we should bite the bullet and overturn Ducinip? And maybe you're right that that's for us to decide. But if you do have something relevant to say about that matter, here's your chance to say it. I think it's worth, if the court wishes to consider that, and again, that's not been the position we've advocated because we don't need it to win, it's worth starting with Justice Thomas' concurring opinion in 203 North will sell, which pointed out the massive confusion that's been sewn in the courts trying to grapple with this ruling, which Judge Gorsuch is ruling in Wolsey that says that Ducinip has lost every away game, it's played, that it doesn't fit with the other provisions of the code. There's a lot of confusion there. It has almost uniform criticism in scholarly commentary. My colleague can't point to Reliance Interest in the Markets and that empirical studies discussed in the Levitton brief suggest that there isn't substantial alliance on this. In part because you benefit some first mortgages who manage to maximize their value by voiding some of these junior ones. And so the Reliance Interest that my friend has walked away from and the uniform criticism of Ducinip might interest this court in considering revisiting it, but it's not necessary because Ducinip itself reserved the completely underwater hypothetical on the face of its opinion. It was exceptionally narrow and the lawyers could read and see that it declined to reach this issue. And I do think that it is very important to read Ducinip together with Nobleman. The Ducinip doesn't stand on the stone that Nobleman is true. It was under 1322 B2. It was a chapter 13 case. But it was fundamentally about interpreting 5 or 6A. Is it just a distribution provision as my client argued? No, what the court said, I don't understand that argument. It said there's, yes, you divide it up to secure it and unsecured, but you treat it all the same. That's what it said. You treat it all the same. Exactly. You decline to cut it into pieces. And one of the reasons you decline to cut it into pieces is because the claim secured violin and compasses both. So once the court has the power on what it was saying under 1322 to modify that, then the court could change both the secured or the whole lean is what it was talking about. But the latter, the opinion pointed out that if you modify the unsecured portion, you have ripple effects upon the secured portion. You wind up changing things like the interest rate or the amortization or the fees. And so you might be viewed as sabotaging or undermining what deserves to remain a secured component in this situation. There is no such problem. So it is worth noting, by the way, my friend also says, well, this lean that can sit out there, maybe it retains value sometime in the future, isn't that enough value? And I think just a spryre was just string towards that. All eight circuits after noblemen have understood that noblemen drew a line between some value and no value. All eight circuits to confront lean voiding in chapter 13. Allow it because they recognize that the completely underwater junior qualifies as no value within the meaning of the code. Present economic values, what this course's cases have consistently focused on. The value of the claim is equal to the value of the collateral this court has said. And that's the present value of the collateral. The statute uses the present tense in section 506, whether it is or is not. It's not about forecasting or speculating into the future. That would be unworkable, but judicial valuations are workable. The bankruptcy rules rule 3,012 and 7,011 provide for it. And there's abundant case law that shows it to be both workable and fairer to creditors than the alternative, which is a foreclosure. The judgment below should be affirmed. Thank you, council. Ms. Spanelli, four minutes left. Thank you. Just a couple of points. Completely underwater leans are not valueless. Their value stems from the potential for appreciation in the collateral. Indeed, a lien that's completely underwater by a dollar might have more value than a lien that's supported by a dollar of equity, depending on the potential for appreciation. The value, if the houses were sold today, is simply irrelevant because the situation only arises where the debtor is keeping the house. And one could have said in Doosnab, look, the current value of the collateral is less than the amount of your loan. It's fair to give you the current value of the collateral. Doosnab held to the contrary, and that's precisely the same here. There is no distinction that supports drawing a line at completely underwater leans, given that the secured creditor has the same non-banker-dese right to have its lien stay with the collateral until foreclosure and payment in full and to realize any appreciation in the value of that collateral. This doesn't give a junior lien holder a better deal than it would receive under state law. It gives it the same deal it would receive under state law. To respond to a point that I think Justice Sotomayor made, the fact that there are specific provisions in chapters 11 and 13 that do permit stripping down leans in certain circumstances supports the Doosnab courts view of 506D. It certainly doesn't undermine it. 506D is not the provision that strips down leans in chapters 11 and 13. Rather, there are specific provisions which are in the addendum to our brief in Section 1325 for Chapter 13. And actually this is not in the addendum 1129P for Chapter 11. Those provisions would make no sense if 506D were itself a leans stripping provision. And just to take one example, if one looks at Section 1325A5, which appears on page 6A of the Blue Brief, that sets out the terms under which Chapter 13 get debtor can strip down leans. And it says that with respect to each allowed secured claim provided for by the plan, the plan provides that the holder of such claim retain the leans securing such claim until they're earlier of the payment of the underlying debt determined under non-Bankrupts law or discharge. Now, it would make no sense to permit the lender to keep its lean until payment of the full debt if the lean had already automatically been stripped down under 506D to the value of the collateral. And that's just one example. We discussed some others in our briefs, including Section 722. And we also discussed in our briefs the textual indications in Section 506 that support the Jews' nips courts holding. So, and those are all reasons why Jews' nip was correctly decided in the first instance and shouldn't be overruled. But to respond to Justice Kaden's question, beyond that, the rule of law simply doesn't allow this court in the typical situation to overrule a statutory interpretation decision in a case like this where Congress over the past 25 years has act we asked in that decision. Thank you, Council. The case is submitted