In Matter of Graham, Adversary Proceeding Number 07-4124 (Bankr. S.D. Ga. 2/19/2009)
| Decision Date | 19 February 2009 |
| Docket Number | Adversary Proceeding Number 07-4124. |
| Parties | In the matter of: KURT E. GRAHAM, (Chapter 12 Case 07-40427). Debtor. KURT E. GRAHAM, Plaintiff, v. CAREY GRAHAM, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Georgia |
Debtor's Chapter 12 was filed on March 22, 2007. The Meeting of Creditors held pursuant to 11 U.S.C. § 341 was conducted on April 25, 2007. At the time of filing, Debtor contended that he was the holder of a lease over Farm Number 791 in Effingham County, Georgia, sometimes referred to as the "Turf Farm." The real estate located on the Turf Farm is family property formerly owned by Debtor's grandmother and now owned in three undivided shares by his father, Ralph Graham (hereinafter referred to as "Ralph"), his aunt, Julie Weddle (hereinafter referred to as "Julie"), and his uncle, Carey Graham (hereinafter referred to as "Carey"). Debtor entered into a lease for the Turf Farm with Carey, Ralph and Julie in 2004. Carey's son, Loy Graham (hereinafter referred to as "Loy"), has an interest in farming some of the property located on the Turf Farm, and at some previous time, approximately 55 acres of land, identified as Tracts H and G, was carved out for Loy to conduct farming operations on. See 2004 Lease Agreement, Exhibit D-9; 2005 Lease Agreement, Exhibit D-11; 2006 Lease Agreement, Exhibit D-13.
The 2004 lease agreement that Debtor obtained provided that he would rent approximately 551.1 acres beginning January 1, 2004, through December 31, 2004. The lease also provided that Debtor would have "the right to farm the land next year," but the Lessors have "the right to cancel agreement for nonpayment or for not following good management practices." 2004 Lease Agreement, Exhibit D-8. That lease has never been cancelled by the Lessors. Instead, it was renewed in 2005 and in 2006. The 2006 Lease Agreement provided Debtor with approximately 547.1 acres of farm land. It commenced on January 1, 2006, and ended on December 31, 2006. Unlike the 2004 Lease Agreement, it provided the lease was for one year, but could "be renewed for the next year at the approval of the Lessors." 2006 Lease Agreement, Exhibit D-12.
In late 2006, Loy, who was desirous of obtaining an additional 55 acres to farm, made a proposal to Debtor to take over an additional portion of Turf Farm, labeled as Tract D. Proposal, Exhibit D-14. His proposal was signed by Debtor and initialed by Carey on Loy's behalf on February 5, 2007. On the same day, Debtor delivered a check payable to Carey in the amount of $9,348.00 for one-third of the rental cost of the farm. The written lease agreement was also circulated among the parties for execution. Carey negotiated the check, and it cleared the bank. Ralph and Julie each also received rent checks for their one-third interest in the land and later cashed the checks. Debtor entered possession of the property prior to the bankruptcy filing and has attempted to continue his farming operations.
As a result of Ralph's objection to Loy's acquisition of the additional 55 acres, the 2007 Lease Agreement apparently was torn up prior to the time that signed copies were distributed among the parties. Nevertheless, I found in previous proceedings that Debtor had effectuated a lease over Turf Farm, less the two 55 acre tracts that Loy had an interest in, by virtue of Carey's receipt and negotiation of the check (Exhibit D-16) and by Ralph and Julie's subsequent acceptance of similar checks delivered to them. Carey did not present any persuasive evidence at the recent hearing to alter this previous finding. See Order on Preliminary Injunction, Dckt. No. 10 (July 23, 2007); Interim Order on Motion to Assume Lease, Case No. 07-40427, Dckt. No. 190 (Sept. 21, 2007). Pursuant to the Interim Order to Assume the Lease, Debtor assumed the lease obligation as to Turf Farm with the exception of Tracts G, H, and D which were reserved for Loy.
Notwithstanding Carey's knowledge that Debtor had filed a Chapter 12, as evidenced by notices issued by this Court mailed to him and by his attendance at the § 341 meeting in April 2007, Carey subsequently entered upon Tract C, one of the tracts of land that was subject to lease, and began "harrowing up" land that had been prepared and bedded for Debtor's intended planting of a peanut crop for 2007. Upon discovering Carey's activity, Debtor contacted his attorney, Lehman Franklin, who wrote a letter to Carey informing him that his activities constituted a violation of the automatic stay of bankruptcy and demanding that he cease any further activity.1 See Exhibit D-17. Debtor and Ralph picked up the original of that letter at Mr. Franklin's office, drove to the Turf Farm, and discovered Carey in the act of harrowing Debtor's leased land. Carey initially ignored them, but ultimately Debtor physically delivered Franklin's letter to Carey, and Carey read the letter. Carey does not deny that he thereafter resumed harrowing the land thus rendering it unsuitable for planting the peanut crop.
Because of Carey's interference with Debtor's leasehold rights, Debtor was unwilling to risk planting a peanut crop on that tract or any of the other tracts within the Turf Farm, believing that to do so would risk destruction of the crop at Carey's hands. Carey explains his activities by asserting that when Ralph tore up the 2007 Lease Agreement which granted the additional 55 acres to Loy, Carey believed that the lease with Debtor was terminated, and that Debtor had no rights in the property. Debtor brings this adversary proceeding seeking damages for Carey's willful violation of the automatic stay under 11 U.S.C. § 362(k), including the anticipated profit he believes would have been earned from a successful 2007 peanut crop.
Debtor's lease interest in Tract C of the Turf Farm is property of the estate under 11 U.S.C. § 541(a)(1). As stated in the Findings of Fact, Debtor had effectuated a lease over Farm Number 791 for 2007, less the two 55 acre tracts that Loy had an interest in, prior to Debtor's filing on March 22, 2007. Therefore, Debtor had a valid lease interest in the Turf Farm at the time of his Chapter 12 filing.
Section 541(a)(1) provides that an estate is created upon the commencement of a case and that such estate is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." The scope of this paragraph is broadly interpreted because "Congress intended a broad range of property . . . to be included in the estate." United States v. Whiting Pools, Inc., 462 U.S. 198, 204, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983). "An unexpired lease is such an interest in property, and therefore qualifies as property of the estate." 410 Park Ave. Assoc., Corp. v. Am. Banknote Corp. (In re American Banknote Corp.), slip op. 2000 WL 815910, at *2 (S.D.N.Y. June 22, 2000); see also In re Rickel Home Centers, Inc., 209 F.3d 291, 300 (3d Cir. 2000); In re Lucre, Inc., 339 B.R. 648, 653 (Bankr. W.D. Mich. 2006); In re Palace Quality Services Indus., Inc., 283 B.R. 868, 880 (Bankr. E. D. Mich. 2002); Cohen v. Drexel Burnham Lambert Group, Inc. (In re Drexel Burnham Lambert Group, Inc.), 138 B.R. 687, 700-01 (Bankr. S.D.N.Y. 1992).2
Furthermore, any crops grown on land which Debtor has leased is considered property of the estate. See Teel v. State, 7 Ga.App. 600, 67 S.E. 699 (Ga. Ct. App. 1910)("Where the relation of landlord and tenant exist, the title to crops grown on the rented land is the tenant, and not in the landlord.").
Section 362(a) states that the filing of a Chapter 12 petition "operates as a stay, applicable to all entities, of — (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate . . . " 11 U.S.C. § 362(a)(3). All the landlords were well aware of Debtor's continued occupancy and use of their land, and In re Nordyke, 43 B.R. 856, 864 (Bankr.Or. 1984).
Section 362(k), formerly § 362(h) prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, authorizes damage awards for a violation of the automatic stay. Section 362(k)(1) provides that "an individual injured by any willful violation of the automatic stay provided by this section shall recover actual damages, including costs and attorney's fees, and, in appropriate circumstances, may recover punitive damages." 11 U.S.C. § 362(k)(1).
Debtor "must demonstrate by a preponderance of the evidence that the violator had knowledge of the filing of the bankruptcy case." In re Davis, 374 B.R. 366, 369 (Bankr.S.D.Ga. 2007)(citing In re Robinson, 228 B.R. 75, 81 (Bankr.E.D.N.Y. 1998)). "Notice of the bankruptcy filing need not be formal or official to put a creditor on notice." In re Johnson, 501 F.3d 1163, 1172 (10th Cir. 2007). In the present case, Carey had notice of the bankruptcy filing at the time he attended the § 341 meeting. Therefore, at the time he harrowed Tract C of the Turf Farm, an event which occurred after he attended the § 341 meeting, Carey had knowledge of Debtor's bankruptcy filing.
Despite having knowledge of the bankruptcy, Carey argues that he did not have the intent to violate the automatic stay since he did not believe at the time of the harrowing that Debtor had a valid lease. Even if true, this does not excuse his actions since a "willful" violation does not require specific intent to violate the automatic...
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