Page:United States Reports 502 OCT. TERM 1991.pdf/589

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Cite as: 502 U. S. 410 (1992)

431

Scalia, J., dissenting

IV I must also address the Tenth Circuit’s basis for the decision affirmed today (alluded to by the Court, ante, at 414, but not discussed), that § 506 does not apply to property abandoned by the bankruptcy trustee under § 554, see 11 U. S. C. § 554. Respondents’ principal argument before us was a modified (and less logical) version of the same basic point—viz., that although § 506(a) applies to abandoned property, § 506(d) does not. I can address the point briefly, since the plain-language obstacles to its validity are even more pronounced than those raised by the Court’s approach. The Court of Appeals’ reasoning was as follows: § 506(d) effects lien stripping only with respect to property subject to § 506(a); but by its terms § 506(a) applies only to property “in which the estate has an interest”; since “[t]he estate has no interest in, and does not administer, abandoned property,” § 506(a), and hence § 506(d), does not apply to it. In re Dewsnup, 908 F. 2d 588, 590–591 (CA10 1990). The fallacy in this is the assumption that the application of § 506(a) (and hence § 506(d)) can be undone if and when the estate ceases to “have an interest” in property in which it “had an interest” at the outset of the bankruptcy proceeding. The text does not read that way. Section 506 automatically operates upon all property in which the estate has an interest at the time the bankruptcy petition is filed.4 Once § 506(a)’s grant of secured-creditor rights, and § 506(d)’s elimination of the right to “underwater” liens and liens securing unallowed claims have occurred, they cannot be undone by later abandonment of the property. Nothing in the statute expressly permits such an unraveling, and it would be absurd to imagine it. If, upon the collateral’s abandonment, the claim bi4

The estate “has an interest,” of course, even in its overencumbered property. See 11 U. S. C. § 541(d) (providing that property for which the debtor holds legal title alone is “property of the estate” to the extent of that legal title). See also § 541(a)(1) (defining the bankruptcy estate to include “all legal or equitable interests of the debtor in property as of the commencement of the [bankruptcy] case”).