ORDER DENYING MOTION FOR RELIEF FROM STAY
[ City Mortgage Corp. ]

The motion for relief from stay filed by City Mortgage Corp. duly came before the court for a hearing on November 20, 1998. Thomas Yerbich appeared on behalf of the debtor. Richard Ullstrom appeared on behalf of City Mortgage Corp. After hearing the arguments of counsel and reviewing their memoranda, IT IS ORDERED:

City Mortgage Corp.'s motion for relief from stay is denied.

Analysis

City Mortgage Corp. (CMC) seeks relief from stay so that it may enforce its deed of trust lien against the debtor's home. CMC has commenced foreclosure proceedings against the debtor three times, recording a notice of default against the debtor on each occasion. The debtor cured his defaults twice and filed for chapter 13 after CMC recorded its third notice of default. A.S. 34.20.070(b) provides that after two notices of default and cures by the debtor, the trustee of a deed of trust may elect to refuse further payments from a debtor and proceed to sale. The issue present here is whether this provision precludes the debtor's ability to cure the residential mortgage in chapter 13 under 11 U.S.C. § 1322.

Section 1322 provides, in part:

6 ABR 37(c)      Notwithstanding subsection (b)(2) and applicable nonbankruptcy law--

(1) a default with respect to, or that gave rise to, a lien on the debtor's principal residence may be cured under paragraph (3) or (5) of subsection (b) until such residence is sold at a foreclosure sale that is conducted in accordance with applicable nonbankruptcy law; and

(2) in a case in which the last payment on the original payment schedule for a claim secured only by a security interest in real property that is the debtor's principal residence is due before the date on which the final payment under the plan is due, the plan may provide for the payment of the claim as modified pursuant to section 1325(a)(5) of this title.

. . .
(e) Notwithstanding subsection (b)(2) of this section and sections 506(b) and 1325(a)(5) of this title, if it is proposed in a plan to cure a default, the amount necessary to cure the default, shall be determined in accordance with the underlying agreement and applicable nonbankruptcy law.

Under CMC's interpretation of § 1322(e), the amount necessary to cure the default on the mortgage cannot be determined because, under applicable state law, the trustee of the deed of trust has elected to refuse a third cure from the debtor. CMC says this precludes the debtor's ability to cure under § 1322(c), and concludes it is entitled to relief from stay. In other words, § 1322(e)'s reference to applicable state law effectively voids the debtor's ability to cure a third default under § 1322(c)(1).

I will not adopt CMC's interpretation of § 1322. When a statute is susceptible of two constructions, one of which will give effect to the act, while the other defeat it, the former construction is preferred. ⁽¹⁾ Where it is possible to do so, it is the court's duty to adopt a construction that harmonizes and reconciles laws. An act cannot 6 ABR 38      be held to destroy itself. ⁽²⁾

CMC's construction of § 1322(e) effectively destroys the 1994 Bankruptcy Reform Act's amendments to § 1322(c). Subsection (c) liberalized a chapter 13 debtor's ability to cure defaults on home mortgages. Subsection (c)(1) allows a debtor to cure a default on his home mortgage until a sale at foreclosure has occurred. Subsection (c)(2) allows a debtor to payout a balloon mortgage. The remedies provided in both subsections (c)(1) and (c)(2) are available to a debtor "notwithstanding . . . applicable nonbankruptcy law." In other words, cures of residential mortgages are permitted in chapter 13 notwithstanding state law provisions such as A.S. 34.20.071(b), which prohibits a debtor's cure after the recordation of three notices of default.

11 U.S.C. § 1322(e) deals solely with the amount necessary to cure default. CMC's contention is that the cure amount cannot be determined because under applicable state law, the trustee of the deed of trust has elected to refuse a third cure from the debtor. Such a restrictive interpretation of § 1322(e) would necessarily destroy § 1322(c) and the purpose of the 1994 Act. I find that the amount necessary for a cure is the amount provided by the loan agreement between the debtor and CMC and A.S. 34.20.070(b) (payment of the sum in default, attorney's fees and court costs). This cure amount is to be determined without regard to the final sentence of AS 34.20.070(b) [ "If under the same trustee notice of default under this subsection has been recorded two or more times previously and the default has been cured under this subsection, the trustee may elect to refuse payment and continue the sale." ] This final sentence has no application in a chapter 13 case. Section § 1322(c) allows a cure notwithstanding applicable state law. The adoption of CMC's construction would effectively create 6 ABR 39      a Catch-22 situation for debtors entitled to cure defaults on their home mortgages. CMC's motion will be denied.

DATED: December 8, 1998.


BY THE COURT

DONALD MacDONALD IV

United States Bankruptcy Judge

1. 6ABR37      Anniston Mfg. Co. v. Davis, 301 U.S. 337, 351 (1937); 73 Am Jur 2d, Statutes, § 249 (1974).

2. 6 ABR 38      Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 20 (1995), citing Texas and Pacific R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 446 (1907); 73 Am Jur 2d, Statutes, § 254 (1974).