On October 19, 2015, Judge Brendan L. Shannon issued an opinion defining the value of a “mobile” asset; in this case, a mobile home. In an adversary proceeding Welch v. Sun National Bank, docketed as Adversary Case No. 14-50777, Judge Shannon issued a letter opinion analyzing the valuation appropriate for a mobile home (the “Opinion”). A link to the Opinion is here.
While Sun National Bank (“Sun”) argued that the value of the home should be based on the value of the real property as well as the mobile home, the debtors did not have an ownership claim to the real property. Rather, the debtors held a lease on the real property, and owned the mobile home. The parties agreed on all aspects of this case except for whether the mobile home should be valued using the replacement cost of the building, or on the value of the building in-place with the real property.
Ultimately, Judge Shannon relied upon a number of persuasive authorities in reaching his decision: Delaware law requires a mobile home owner to have a Title, like an automobile; the Supreme Court adopted the replacement value approach in Associates Commercial Corp. v. Rash, 520 U.S. 953 (1997); and 11 U.S.C. 506(a)(2) values personalty at its replacement value.
Unfortunately for Sun, their mortgage was many times greater than the value of the mobile home. Following the lead of the Supreme Court’s Rash decision, Judge Shannon held that replacement value was appropriate, and the majority of Sun’s security interest will soon become unsecured.