                                                          FILED
                                                           DEC 14 2012
                                                       SUSAN M SPRAUL, CLERK
 1                                                       U.S. BKCY. APP. PANEL
                                                         OF THE NINTH CIRCUIT
 2
 3                 UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                           OF THE NINTH CIRCUIT
 5   In re:                             ) BAP No. CC-12-1164-PaMkBe
                                        )
 6   ALVIN LABOSTRIE and                ) Bankr. No. LA 12-11261-RN
     SANDRA LABOSTRIE,                  )
 7                                      )
                    Debtors.            )
 8   ___________________________________)
                                        )
 9   ALVIN LABOSTRIE; SANDRA LABOSTRIE, )
                                        )
10                  Appellants,         )
                                        )
11   v.                                 ) M E M O R A N D U M1
                                        )
12   L.A. FINANCIAL CREDIT UNION;       )
     ROSENDO GONZALEZ, Chapter 7        )
13   Trustee,2                          )
                                        )
14                  Appellees.          )
     ___________________________________)
15
                        Submitted Without Oral Argument
16                           on November 15, 20123
17                         Filed - December 14, 2012
18              Appeal from the United States Bankruptcy Court
                    for the Central District of California
19
              Hon. Richard M. Neiter, Bankruptcy Judge, Presiding
20
21
          1
22           This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may have
23   (see Fed. R. App. P. 32.1), it has no precedential value. See 9th
     Cir. BAP Rule 8013-1.
24
          2
             Chapter 7 trustee, Rosendo Gonzalez, was named as an
25   appellee in this case. However, the trustee did not file a brief
     or otherwise participate in this appeal.
26
          3
             After examination of the briefs and record, and after
27   notice to the parties, the Panel unanimously determined that oral
     argument was not needed in an order entered October 4, 2012. Fed.
28   R. Bankr. P. 8012.

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 1
 2   Appearances:    Appellants Alvin LaBostrie, Sr. and Sandra
                     LaBostrie pro se on brief; Bruce Paul Needleman,
 3                   Esq. on brief for appellee L.A. Financial Credit
                     Union.
 4
 5   Before: PAPPAS, MARKELL, and BEESLEY,4 Bankruptcy Judges.
 6
 7        Appellants, chapter 75 debtors Alvin and Sandra LaBostrie
 8   (“Debtors”), appeal the decision of the bankruptcy court
 9   determining the redemption value of their 2005 Ford Freestyle SE
10   (the “Vehicle”) pursuant to § 722 to be $7,500, and granting stay
11   relief to their creditor, appellee L.A. Financial Credit Union
12   (“Creditor”).   We AFFIRM.
13                                  FACTS
14        On January 13, 2012, Debtors filed a pro se petition for
15   relief under chapter 7.   In their schedule D filed with the
16   petition, Debtors listed Creditor as a secured creditor for a
17   “vehicle loan” in the amount of $13,000.   They listed the value of
18   the Vehicle securing Creditor’s debt as $1,400.
19        On February 6, 2012, Creditor filed a motion for relief from
20   the automatic stay seeking leave of the bankruptcy court to
21   enforce the security interest it claimed in the Vehicle.    In the
22   motion, Creditor, presumably relying on Debtors’ schedules, also
23   listed the value of the Vehicle at $1,400.   A hearing on the
24
25
          4
             The Honorable Bruce T. Beesley, U.S. Bankruptcy Judge for
26   the District of Nevada, sitting by designation.
27        5
             Unless otherwise indicated, all chapter, section and rule
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
28   to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.

                                     -2-
 1   motion was set for March 13, 2012.
 2        On February 22, 2012, Debtors filed a motion to redeem the
 3   Vehicle pursuant to § 722.   In the motion, Debtors alleged that
 4   the redemption value of the Vehicle was $1,265 based on an online
 5   Kelley Blue Book report, less the amount of Debtors’ California
 6   state law exemption in the Vehicle of $2,500.    Creditor opposed
 7   Debtors’ motion arguing that, according to a different Kelley Blue
 8   Book online report, the value of the Vehicle was actually $11,056.
 9   Creditor also disputed Debtors’ suggestion that their exemption in
10   the Vehicle would reduce the amount they were required to pay to
11   redeem the Vehicle.   Debtors’ motion was also set for hearing on
12   March 13, 2012.
13        At the hearing on Debtors’ motion for redemption and
14   Creditor’s motion for stay relief, the bankruptcy court questioned
15   Mr. LaBostrie about the valuation of the Vehicle in Debtors’
16   redemption motion of $1,265.   Mr. LaBostrie explained that he used
17   an online version of Kelley Blue Book which valued the Vehicle at
18   $3,990 to $5,265.   He then subtracted from that value Debtors’
19   California automobile exemption of $2,500.6    The court advised
20   Mr. LaBostrie that he could not deduct an exemption from the value
21   of collateral in which he held no equity.     In response,
22   Mr. LaBostrie stated that he would pay $3,990 to Creditor to
23   redeem the Vehicle, which he characterized as a fair value.    He
24   then described the Vehicle, representing to the bankruptcy court
25   that it had been driven over 155,000 miles and that it needed
26
          6
             Using the lowest value provided by Debtors of $3,990, and
27   subtracting the exemption amount of $2,500, even if this had been
     proper, it is unclear from the record how Debtors concluded that
28   $1,265 was the value of the Vehicle.

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 1   repairs.   The bankruptcy court advised Mr. LaBostrie that it was
 2   required to determine the retail value of the Vehicle, and Debtors
 3   would be required to pay that amount to Creditor in order to
 4   redeem it.   Mr. LaBostrie argued that, although the $3,990
 5   represented the trade-in value in the report, in his view, it was
 6   also the retail value of the Vehicle.
 7        Creditor’s counsel argued that, considering the age,
 8   condition, and mileage for the Vehicle, as described by
 9   Mr. LaBostrie, its value was $9,500.    At that point, the court
10   asked the parties to confer outside the courtroom, suggesting that
11   they should reach a compromise for the value.   If the parties were
12   unable to agree on a value after a conference, the court stated
13   that it would determine the value.    The parties were unable to
14   agree on a value.
15        The court found the value of the Vehicle to be $7,500,
16   explaining that the trade-in value of $3,990, as argued by
17   Debtors, was not the correct valuation.   Rather, the court
18   concluded, retail value was the appropriate valuation.    The court
19   then noted that when the condition and mileage of the Vehicle as
20   described by Mr. LaBostrie was considered, an appropriate retail
21   value was $7,500.   The court informed Debtors that they could
22   redeem the Vehicle for that amount within ten days, but if they
23   failed to do so, Creditor would be allowed to pursue its state law
24   rights in the Vehicle.   The court granted Creditor’s motion for
25   relief from the automatic stay, but allowed Debtors ten days to
26   redeem the Vehicle for the retail value of $7,500.
27        The bankruptcy court entered an order setting the redemption
28   value of the Vehicle at $7,500 on March 15, 2012.    On the same

                                     -4-
 1   day, the court entered an order granting relief from the automatic
 2   stay providing Debtors ten days to redeem the vehicle for $7,500
 3   before the automatic stay order became effective.
 4        Debtors filed a notice of appeal on March 22, 2012.
 5                               JURISDICTION
 6        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
 7   and 157(b)(2)(K) and (O).   We have jurisdiction under 28 U.S.C.
 8   § 158.
 9                                   ISSUE
10        Whether the bankruptcy court erred in valuing the Vehicle at
11   $7,500 for purposes of redemption under § 722.
12                            STANDARD OF REVIEW
13        “The determination of value is a factual finding.    It is
14   reviewed under the clearly erroneous standard.”    Tuma v. Firstmark
15   Leasing Corp. (In re Tuma), 916 F.2d 488, 491 (9th Cir. 1990)
16   (internal citations omitted).   “Clearly erroneous review is
17   significantly deferential, requiring that the appellate court
18   accept the [trial] court’s findings absent a definite and firm
19   conviction that a mistake has been made.”     United States v. Syrax,
20   235 F.3d 422, 427 (9th Cir. 2000).
21        To the extent that this appeal requires the Panel to review
22   the bankruptcy court’s interpretation of § 506(a)(2), its decision
23   is reviewed de novo.   Nash v. Clark Cnty. Dist. Atty’s Office, et
24   al. (In re Nash), 464 B.R. 874, 878 (9th Cir. BAP 2012) (citing
25   Smith v. Rojas (In re Smith), 435 B.R. 637, 642-43 (9th Cir. BAP
26   2010)).
27                                DISCUSSION
28        On appeal, Debtors argue that the bankruptcy court abused its

                                      -5-
 1   discretion in setting the redemption value of the Vehicle because
 2   the court: (1) did not consider the value of the Vehicle listed in
 3   Creditor’s motion for relief from the automatic stay; (2) did not
 4   set the value of the Vehicle based on Debtors’ schedules and other
 5   exhibits; (3) did not consider Debtors’ exemptions in fixing the
 6   value of the Vehicle; (4) did not properly apply § 506(a) in
 7   valuing the Vehicle; and (5) did not make adequate findings of
 8   fact based on all the evidence presented.       Debtors’ arguments lack
 9   merit.
10   I.   Applicable Law: Sections 722 and 506(a)
11         Section 722 provides:
12            An individual debtor may, whether or not the
              debtor has waived the right to redeem under
13            this   section,   redeem   tangible   personal
              property intended primarily for personal,
14            family, or household use, from a lien securing
              a dischargeable consumer debt, if such
15            property is exempted under section 522 of this
              title or has been abandoned under section 554
16            of this title, by paying the holder of such
              lien the amount of the allowed secured claim
17            of such holder that is secured by such lien in
              full at the time of redemption.
18
19   A lien is a “charge against or interest in property to secure
20   payment of a debt or performance of an obligation.”       § 101(37).
21   The amount of an “allowed secured claim” that must be paid to a
22   secured creditor to redeem collateral from a lien is determined by
23   reference to § 506(a).     In re Morales, 387 B.R. 36, 39 (Bankr.
24   C.D. Cal. 2008).     Section 506(a) provides:
25            (a)(1) An allowed claim of a creditor secured
              by a lien on property in which the estate has
26            an interest . . . is a secured claim to the
              extent of the value of such creditor's
27            interest in the estate's interest in such
              property . . . and is an unsecured claim to
28            the extent that the value of such creditor's

                                   -6-
 1         interest . . . is less than the amount of such
           allowed claim . . . .
 2
           (2) If the debtor is an individual in a case
 3         under chapter 7 or 13, such value with respect
           to personal property securing an allowed claim
 4         shall be determined based on the replacement
           value of such property as of the date of the
 5         filing of the petition without deduction for
           costs of sale or marketing. With respect to
 6         property acquired for personal, family, or
           household purposes, replacement value shall
 7         mean the price a retail merchant would charge
           for property of that kind considering the age
 8         and condition of the property at the time
           value is determined.
 9
10        Determining the replacement value of collateral for purposes
11   of § 506(a) is done on a case-by-case basis.   Taffi v. United
12   States (In re Taffi), 96 F.3d 1190, 1193 (9th Cir. 1996); see also
13   In re Morales, 387 B.R. at 41.   “[T]he proper measure of the
14   replacement value of a vehicle is its retail value [but] an
15   adjustment to that value may be necessary:   A creditor should not
16   receive portions of the retail price, if any, that reflect the
17   value of items the debtor does not receive when he retains his
18   vehicle . . . .”   Assocs. Commercial Corp. v. Rash, 520 U.S. 953,
19   965 n.6 (1997).
20        Methods used by bankruptcy courts for determining the
21   replacement value for vehicles vary, but consideration of the
22   Kelley Blue Book retail values, at least as a starting point, has
23   been endorsed by courts.   See In re De Anda-Ramirez, 359 B.R. 794,
24   796-97 (10th Cir. BAP 2007) (noting that Kelley Blue Book is not
25   determinative of retail replacement value but holding that the
26   bankruptcy court’s reliance on Kelley Blue Book for the retail
27   replacement value was not clearly erroneous); see also In re
28   Araujo, 464 B.R. 15, 21 (Bankr. N.D. Cal. 2011); In re Martinez,

                                      -7-
 1   409 B.R. 35, 40 (Bankr. S.D.N.Y. 2009); In re Cook, 415 B.R. 529,
 2   535 (Bankr. D. Kan. 2009); In re Morales, 387 B.R. at 47-48.
 3        Because the language of § 506(a)(2) is arguably
 4   contradictory,7 the timing of determining the replacement value of
 5   collateral under § 722 is subject to some debate.        See In re
 6   Morales, 387 B.R. at 43 (discussing cases holding that the
 7   petition date is the correct date to determine the replacement
 8   value, those holding that the date of the hearing on value is the
 9   valuation date, and holding that the petition date is the most
10   appropriate date); but see 6 COLLIER   ON   BANKRUPTCY ¶ 722.05[1] (Alan
11   N. Resnick & Henry J. Sommer eds., 16th ed., 2012) (stating “most
12   courts have held that, for purposes of redemption, valuation
13   should ordinarily be as of the date of the redemption proceeding”
14   and noting that conclusion is supported by the second sentence of
15   § 506(a)(2)); In re Cook, 415 B.R. at 534 (disagreeing with
16   Morales and stating that the appropriate time for determination of
17   the replacement value is the time of the hearing on value).          Here,
18   Debtors and Creditor both submitted evidence presumably to show
19   the value of the Vehicle as of the date of the hearing in the
20   bankruptcy court.   Therefore, whether the valuation of the Vehicle
21   should have been made as of the petition date or hearing date is
22   not at issue.
23
24
          7
             The first sentence of § 506(a)(2) states that “value with
25   respect to personal property securing an allowed claim shall be
     determined based on the replacement value of such property as of
26   the date of filing the petition . . . .” However, in the next
     sentence, the statute provides that “replacement value shall mean
27   the price a retail merchant would charge for property of that kind
     considering the age and condition of the property at the time
28   value is determined.” (emphasis added).

                                     -8-
 1   II.   Analysis and Disposition.
 2           Creditor does not dispute that its lien on the Vehicle is
 3   subject to redemption by Debtors under § 722.    The sole issue on
 4   appeal is whether the bankruptcy court erred in its valuation of
 5   the Vehicle for redemption purposes and in the order granting
 6   relief from the automatic stay.    As a question of fact, we review
 7   the bankruptcy court’s determination of the Vehicle’s value under
 8   the clearly erroneous standard.    As to the bankruptcy court’s
 9   interpretation of § 506(a)(2), we review de novo.
10           Debtors assign five different types of error at the
11   bankruptcy court’s conclusion as to the value of the Vehicle for
12   § 722 purposes and in the order granting relief from the automatic
13   stay.    Each will be addressed in turn.
14           A. The value in creditor’s motion for relief from the
             automatic stay is not dispositive.
15
16           The fact that Creditor stated the value of the Vehicle to be
17   $1,400 in its motion for relief from the automatic stay, and later
18   changed it to $11,056 in opposition to Debtors’ redemption motion,
19   is of little consequence in this case.     The bankruptcy court, as
20   the fact-finder, is the arbiter of the redemption value under
21   § 722 and the value of a lien pursuant to § 506(a)(2).    See
22   § 105(a); Rules 3012 and 6008; see also In re Lopez, 224 B.R. 439,
23   443 (Bankr. C.D. Cal. 1998) (holding that the bankruptcy court
24   determines the value of the collateral pursuant to § 722
25   regardless of other valuation processes).    That the bankruptcy
26   court did not adopt Creditor’s allegations concerning the value of
27   the Vehicle does not render the bankruptcy court’s decision
28   concerning value clearly erroneous.

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 1        B. The value placed by Debtors on the Vehicle in
          their Schedules and Exhibits was properly considered
 2        by the bankruptcy court and rejected.
 3        The bankruptcy court considered Debtors’ motion to redeem and
 4   the values provided for the Vehicle in that motion.   The court
 5   determined that the values provided by Debtors were not the
 6   replacement value as required by § 506(a)(2).   The court then
 7   adjusted the retail book value to account for the age and
 8   condition of the Vehicle in reaching its final conclusion
 9   concerning the value of the Vehicle.
10        The bankruptcy court did not commit clear error when it
11   considered the values offered by Debtors in their motion and
12   schedules but rejected them in favor of a higher valuation for
13   § 722 purposes.
14        C. The bankruptcy court properly held that exemptions
          do not apply to collateral in which debtors have no equity.
15
16        A debtor may not claim an exemption in property that is
17   wholly encumbered by a consensual lien.   See Owen v. Owen,
18   500 U.S. 305, 308 (1991) (stating, “since the equitable interest
19   does not pass to the estate, neither can it pass to the debtor as
20   an exempt interest in property.”) (and citing Long v. Bullard,
21   117 U.S. 617 (1886)).   Under § 506(a)(2), Creditor’s allowed claim
22   was the “replacement value” of the Vehicle which means “the price
23   a retail merchant would charge for property of that kind
24   considering the age and condition of the property at the time
25   value is determined.”   Because there was no dispute that the debt
26   owed by Debtors to Creditor exceeded the value of the Vehicle,
27   Debtors’ claim of an exemption in the Vehicle is of no import in
28   determining the amount of Creditor’s allowed secured claim.    In

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 1   other words, since they lacked any equity in the Vehicle, nothing
 2   in the Code would allow Debtors to utilize their state law
 3   exemptions to reduce the value of the Vehicle for § 722 purposes.
 4   See, e.g., In re Longmore, 273 B.R. 633, 635 (Bankr. D. Nev. 2001)
 5   (stating “[w]here a vehicle is over-encumbered and thus has no
 6   equity, there is no exemptible interest.”).    Therefore, the
 7   bankruptcy court did not err when it rejected Debtors’ attempt to
 8   use their statutory exemption to reduce the value of the Vehicle
 9   for § 722 purposes.
10        D. The bankruptcy court applied the correct legal
          standard under § 506(a).
11
12        As the bankruptcy court correctly observed at the hearing on
13   March 13, and as the Supreme Court instructed in Rash, § 506(a)(2)
14   requires that replacement value be used to determine the amount of
15   Creditor’s allowed secured claim in the Vehicle.    In determining
16   that replacement value, the bankruptcy court considered the
17   evidence presented by the parties.     The court reviewed the Kelley
18   Blue Book information submitted by each of the parties, and
19   listened to Mr. LaBostrie’s description of the current condition
20   of the Vehicle.   When the parties were unsuccessful in privately
21   resolving this value issue, the court adopted a value different
22   from that urged by either party.    The court declined to adopt the
23   low, trade-in book value offered by Debtors; it also reduced the
24   value as submitted by Creditor after taking into consideration the
25   age and condition of the Vehicle.    In arriving at its value, the
26   court expressly noted the condition and mileage of the Vehicle as
27   represented by Mr. LaBostrie, and that the Vehicle needed repairs.
28   It is unclear from the record at what point in time the bankruptcy

                                     -11-
 1   court was determining the value – whether the court fixed the
 2   Vehicle’s value as of the hearing date or the petition date.
 3   However, because the parties also did not offer different values
 4   for the Vehicle for each of the two possible dates, we presume the
 5   court properly determined the value of the Vehicle at the time of
 6   the hearing.   Regardless, the bankruptcy court correctly
 7   interpreted § 506(a)(2) to require replacement value to be
 8   determined as the retail value and there is no basis to conclude
 9   that the bankruptcy court clearly erred in assessing the value of
10   the Vehicle under that standard.
11        E. The bankruptcy court made adequate findings of
          fact and its valuation of the vehicle was not
12        clearly erroneous.
13        Debtors argue that, “[t]he Trial Judge erred with its
14   decision not to remain partial [sic]” in deciding the value of the
15   vehicle pursuant to § 506(a).    Debtors’ Br. at 4.   Debtors claim
16   further error in the bankruptcy court’s ruling based on the
17   negotiations of the parties before the court determined the value
18   of the Vehicle.   We disagree.
19        Rule 6008 provides that, “[o]n motion by the debtor . . . and
20   after hearing on notice as the court may direct, the court may
21   authorize the redemption of property from a lien . . . .”
22   Rule 9014, governing contested matters, supplied the procedural
23   rules applicable to resolving the issues raised by Debtors’ motion
24   to redeem the Vehicle.
25        Regardless of the parties’ prior negotiations, the bankruptcy
26   court is the finder of fact.     Under the Code and Rules, the court
27   conducted a hearing at which the parties submitted evidence and
28   were otherwise heard.    The court then entered oral findings of

                                       -12-
 1   fact on the record in accordance with Rule 7052.   Williams v. Eli
 2   Levi et al. (In re Williams), 323 B.R. 691, 700 (9th Cir. BAP
 3   2005); In re Harris, 279 B.R. 254, 260 (9th Cir. BAP 2002).    From
 4   the hearing transcript, it is evident that the bankruptcy court
 5   properly interpreted § 506(a)(2) and considered the Kelley Blue
 6   Book information submitted by the parties as a starting point in
 7   fixing the value of the Vehicle.   It concluded that neither book
 8   value represented the correct replacement value based upon its
 9   findings concerning the Vehicle’s condition and mileage, and its
10   need of repairs.   The bankruptcy court then decided, as its
11   ultimate finding of fact, that the replacement value of the
12   Vehicle was $7,500.    In this process, the bankruptcy court
13   correctly interpreted § 506(a)(2) and committed no clear error in
14   valuing the Vehicle.
15                                 CONCLUSION
16        We AFFIRM the order of bankruptcy court.
17
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