Boodrow, In re

Citation126 F.3d 43
Decision Date12 September 1997
Docket NumberD,No. 1042,1042
Parties38 Collier Bankr.Cas.2d 1397, 31 Bankr.Ct.Dec. 554, Bankr. L. Rep. P 77,523 In re Brian K. BOODROW, Debtor. CAPITAL COMMUNICATIONS FEDERAL CREDIT UNION, Plaintiff-Appellant, v. Brian K. BOODROW, Defendant-Appellee. ocket 96-5078.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Douglas M. Fisher, Albany, NY (Solomon and Solomon, P.C., of Counsel), for Plaintiff-Appellant.

William M. McCarthy, Albany, NY (McCarthy & Evanick, of Counsel), for Defendant-Appellee.

Rudolph J. Meola, Richard J. Miller & Associates, P.C., Key Bank of New York, Albany, NY, Amicus Curiae for Key Bank of New York.

Kenneth R. Hiller, Law Office of Jeffrey M. Freedman, Buffalo, NY; John Rao, National Consumer Law Center, Boston, MA, Amicus Curiae for National Association of Consumer Bankruptcy Attorneys.

Before: FEINBERG and PARKER, Circuit Judges, and SHADUR, * District Judge.

FEINBERG, Circuit Judge:

This case presents an issue of first impression in this circuit: whether a bankruptcy court may allow a debtor, who files for bankruptcy and is "current" on a car-purchase loan, to retain the collateral securing the loan and continue making monthly payments under the original loan agreement. Creditor Capital Communications Federal Credit Union (Capital) moved in the United States Bankruptcy Court for the Northern District of New York for, among other things, relief from the automatic stay imposed by 11 U.S.C. § 362 when debtor Brian K. Boodrow filed for bankruptcy under Chapter 7 of the Bankruptcy Code. In December 1995, Bankruptcy Judge Littlefield, Jr. denied that motion. In re Brian Boodrow, 192 B.R. 57 (Bankr.N.D.N.Y.1995). In June 1996, the United States District Court for the Northern District of New York, Thomas J. McAvoy, C.J., affirmed the decision of the bankruptcy court. Capital Communications Federal Credit Union v. Boodrow (In re Boodrow), 197 B.R. 409 (N.D.N.Y.1996). Capital appeals from that ruling; for reasons stated below, we affirm.

I. Facts and Prior Proceedings

The material facts in this case are not in dispute. In May 1995, Boodrow filed for relief pursuant to Chapter 7. Prior to filing, Boodrow had borrowed $15,900 from Capital to purchase a 1992 Pontiac Grand Am. As of the petition date, Boodrow owed Capital $8,820, which sum was secured by a first priority lien on the vehicle. Capital agrees that the market value of the vehicle on that date was $9,650.

After filing his Chapter 7 petition, Boodrow filed a statement of intention pursuant to 11 U.S.C. § 521(2), 1 indicating that he intended to retain the vehicle and reaffirm his debt to Capital. However, Boodrow, who had been receiving workmen's compensation and disability payments for an injury, discovered sometime thereafter that he was permanently disabled and would not be able to return to full-time employment. For this reason, Boodrow says, he did not execute a reaffirmation agreement with Capital but rather retained the car, remained "current" on his monthly installment payments and maintained adequate insurance on the car. Apparently, as part of the loan contract with Capital, Boodrow had purchased disability insurance, which was the source of the monthly payments due under the loan. Indeed it is undisputed that at all times up to the argument of this case before us, Boodrow has remained current on his payments and maintained adequate insurance for the vehicle.

In July 1995, Capital moved to lift the automatic stay and for other relief on the ground that Boodrow had not complied with § 521(2), and that this failure constituted cause under 11 U.S.C. § 362(d)(1) for lifting the stay to enable Capital to recover the vehicle. Capital maintained that Boodrow was required under § 521(2) to either enter into a reaffirmation agreement, surrender the vehicle to Capital, or redeem it by immediately paying Capital the market value of the vehicle.

Bankruptcy Judge Littlefield conducted a hearing on Capital's motion in August 1995 and reserved decision. See 192 B.R. at 58. In September, he granted Boodrow a discharge from bankruptcy. Thereafter in December, Judge Littlefield denied Capital's motion for relief from the automatic stay. The court held that Capital had not demonstrated cause for lifting the stay because § 521(2) allowed a debtor in Boodrow's position to retain the collateral and continue making monthly payments. 192 B.R. at 59. The court concluded that Capital had not demonstrated that it would suffer harm if the stay was not lifted. Id. at 60.

Capital appealed to the district court, and Chief Judge McAvoy affirmed the bankruptcy court in an opinion filed in June 1996. The judge held that § 521(2) allowed Boodrow to retain the collateral and continue to perform under the original loan agreement, and therefore the bankruptcy court had properly denied Capital's motion. This appeal followed.

II. Discussion
A. Mootness

We turn to the issue of mootness because our dissenting colleague takes the position that this case became moot when the bankruptcy court granted Boodrow a discharge from bankruptcy on September 5, 1995--a few months before it issued its opinion denying Capital relief from the automatic stay. Neither party raised the issue of mootness at any stage of the case, but we asked for and received supplemental briefing on that issue. After reviewing those briefs, we agree with Boodrow, Capital and amicus curiae Key Bank of New York (Key Bank) that the case is not moot. 2

It is clear that under Article III of the Constitution, we lack jurisdiction over a case "when the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome." Murphy v. Hunt, 455 U.S. 478, 481, 102 S.Ct. 1181, 1183, 71 L.Ed.2d 353 (1982) (per curiam) (internal quotations and citations omitted); South Street Seaport Ltd. Partnership v. Burger Boys, Inc. (In re Burger Boys, Inc.), 94 F.3d 755, 759 (2d Cir.1996). The Supreme Court has instructed that a case becomes moot only when it is "impossible for the court to grant 'any effectual relief whatever' to a prevailing party." Church of Scientology of Cal. v. United States, 506 U.S. 9, 12, 113 S.Ct. 447, 449, 121 L.Ed.2d 313 (1992) (citing Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 133, 40 L.Ed. 293 (1895)) (emphasis added); see also Fox v. Board of Trustees of the State Univ. of N.Y., 42 F.3d 135, 140 (2d Cir.1994) (case moot when "it becomes impossible for the courts, through the exercise of their remedial powers, to do anything to redress the injury").

Judge Shadur argues in his dissent that the automatic stay, which protects a debtor's assets during the administration of a bankruptcy case, see 11 U.S.C. § 362(a), terminated completely as a matter of law when Boodrow received his discharge. With regard to Capital's right to try to reclaim the vehicle, this seems questionable. The bankruptcy judge, who obviously knew that he had granted Boodrow a discharge three months earlier, noted in denying Capital's motion that "the stay (as it applies to property of the estate) terminates by operation of law upon the closing of the Chapter 7 case or sooner if the property is affirmatively abandoned by the trustee." 192 B.R. at 60 (emphasis added). Indeed, 11 U.S.C. § 362(c)(1) states that "the stay of an act against property of the estate ... continues until such property is no longer property of the estate," not merely until discharge. Id.; see Collier on Bankruptcy, p 362.06 at 362-72 (Lawrence P. King ed., 15th ed. rev.1996) (property is no longer part of the estate if sold, abandoned, exempted, or a reorganization plan confirmed). Boodrow's supplemental brief states that the trustee in this case did not "formally abandon any potential interest" in the vehicle. We have no information to indicate that Boodrow's bankruptcy case is closed, despite his discharge. See Collier p 350.01 at 350-2 (case is closed after the estate is fully administered and the trustee is discharged). It thus seems that Boodrow's discharge did not completely terminate the stay.

In any event, even if the automatic stay did terminate completely with respect to Boodrow's vehicle upon his discharge, it seems clear that Capital did not seek to lift the automatic stay as an end in itself. Rather, Capital essentially sought to recover Boodrow's vehicle or an equivalent sum. In its motion papers, Capital argued that the automatic stay should be lifted "to allow [it] to recover the vehicle" because Boodrow had not, pursuant to § 521(2), redeemed or surrendered the vehicle or entered into a reaffirmation agreement. Capital maintained that "[a]bsent a reaffirmation, the entire balance [outstanding on the loan] is due immediately. The Court by allowing continuation of monthly payments is forcing a quasi-reaffirmation upon the creditor." Finally, Capital asked for "such other and further relief as the Court deems just and proper." Capital filed the motion to prevent Boodrow from simply retaining the vehicle and continuing to make monthly payments. Indeed, Capital did and still does argue that § 521(2) prohibits such action barring reaffirmation of the loan.

By granting a discharge while Boodrow was still in possession of the car, the bankruptcy court in effect continued the harm of which Capital had already complained. At present, Boodrow retains possession of the vehicle and is making monthly payments to Capital, the very injury that Capital attempted to redress in its motion. See New England Health Care Employees Union v. Mount Sinai Hosp., 65 F.3d 1024, 1029 (2d Cir.1995) (challenge to repealed legislation not moot because "collateral" injury suffered while legislation was in effect could be redressed); Michel v. Federated Dep't Stores, Inc. (In re Federated Dep't Stores, Inc.), 44 F.3d 1310, 1316 (6th Cir.1995) (case not moot when "collateral consequences" of court order create a live...

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