In re Anderson, Bankruptcy No. 83-00068-R

• Decision Date: 18 April 1983
• Docket Number: Bankruptcy No. 83-00068-R,Adv. No. 83-0017-R.
• Citation: 29 BR 563
• Court: U.S. Bankruptcy Court — Eastern District of Virginia
• Parties: In re Junius ANDERSON, Jr., Debtor. Junius ANDERSON, Jr., Plaintiff, v. ASSOCIATES COMMERCIAL CORPORATION, Defendant.

29 B.R. 563 (1983)

In re Junius ANDERSON, Jr., Debtor Junius ANDERSON, Jr., Plaintiff, v. ASSOCIATES COMMERCIAL CORPORATION, Defendant.

Bankruptcy No. 83-00068-R, Adv. No. 83-0017-R.

United States Bankruptcy Court, E.D. Virginia, Richmond Division.

April 18, 1983.

George W. Sadler, Jr., Richmond, Va., for plaintiff.

David C. Dorset, Richmond, Va., for defendant.

MEMORANDUM OPINION

BLACKWELL N. SHELLEY, Bankruptcy Judge.

This matter comes on upon the filing by Junius Anderson, Jr., the debtor herein, of a complaint to compel turnover of property in the possession of Associates Commercial Corporation. After notice and hearing and upon the submission of briefs this Court makes the following determination.

STATEMENT OF FACTS

Junius Anderson, Jr. (Anderson) executed a conditional sales contract and security agreement with Truck Enterprises Richmond, Inc. on April 13, 1981, in which he purchased a 1979 Kenworth tractor. Subsequently, Truck Enterprises Richmond, Inc. (Truck Enterprises) assigned its interest in the contract to Associates Commercial Corporation (Associates) and Associates perfected its security interest in the vehicle.

Anderson defaulted in making the installment payments pursuant to the sales contract and Truck Enterprises repossessed the vehicle on December 27, 1982. On December 29, 1982, Associates gave Anderson notice that they would sell the tractor on January 25, 1983. Anderson filed a petition under Chapter 13 of the Bankruptcy Code on January 18, 1983, and the sale of the vehicle was enjoined by the operation of 11 U.S.C. § 362.

The parties agree $38,555.00 is the fair market value of the tractor. Anderson must pay $39,951.31 to redeem it. This amount includes not only the outstanding balance due under the sales contract, but also $260.00 Truck Enterprises spent in repossessing the vehicle and returning it to Richmond and $4,160.23 Truck Enterprises spent repairing the vehicle in order to return it to Richmond. Anderson is a truck driver and needs the truck in order to carry on his business and thereby effectuate his Chapter 13 plan.

CONCLUSIONS OF LAW

Anderson brings this complaint pursuant to 11 U.S.C. § 542 which provides in pertinent part

". . . an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate."¹

Anderson contends that his interest in the tractor is property of the estate which may be recovered and brought into the estate through these provisions of the Bankruptcy Code. Outside of the purview of the bankruptcy laws, Anderson's sole interest in the truck after its repossession and prior to its sale is that of redemption.² 11 U.S.C. § 541 defines "property of the estate" broadly and includes as property of the estate ". . . all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). The debtor's right of redemption is clearly within the purview of this section and is property of the estate which a bankruptcy court may compel an entity in possession to turn over. Anderson, as a Chapter 13 debtor, retains the right in the instant case to redeem the tractor by tendering fulfillment of all the obligations secured by the collateral plus reasonable expenses incurred by the secured creditor in repossessing and transporting the vehicle. In re Gunder, 8 B.R. 390, 393 (Bkrtcy.S.D. Ohio 1980).

Associates contends that the vehicle is no longer property of the estate and therefore is not subject to a turnover order of this Court. Associates relies on Cross Electric Company, Inc. v. United States, 664 F.2d 1218 (4th Cir.1981) in which a Chapter 11 debtor sought to obtain a turnover order to recover accounts receivables which had been levied upon by the Internal Revenue Service prior to the filing of the debtor's reorganization petition. In Cross Electric the court concluded that the Internal Revenue Service's levy on the debtor's accounts receivables resulted in a transfer to the government of the indebtednesses those accounts represented. The debtor's interest in the accounts receivables was property of the estate, and the court concluded the Chapter 11 debtor's rights to a turnover order were limited by the debtor's interest in the accounts receivables at the time the debtor filed his bankruptcy petition. The court held that the debtor was not entitled to a turnover order because he had no intent to redeem the accounts receivables.³ Associates' reliance on Cross Electric Company is misplaced. The court refused to grant the requested turnover order because the debtor did not propose to redeem the property. In the instant case, unlike in Cross Electric,⁴ the debtor has the opportunity to de-accelerate the secured note, and cure default and is not limited solely to pursuing the redemption method to recover the vehicle. See, 11 U.S.C. § 1322(b)(3).

The defendant also cites In re Haines, 10 B.R. 856 (Bkrtcy.E.D.Pa.1981) in which, in fact situation similar to the one found in the instant case, the court concluded that the debtor could obtain a turnover order requiring the repossessing creditor to return her automobile only if the debtor tendered payment to the creditor of the redemption value of the automobile. The court based its decision on Pennsylvania law which provides that the title holder of a repossessed automobile has only the option of redeeming the automobile by paying full value to the creditor or by treating the sales contract as terminated. In Haines, the court ignored the right of Chapter 13 debtors to provide in their plans for the curing of defaults. 11 U.S.C. § 1322(b)(3) provides debtors with the right to cure defaults and thereby negates the effect of acceleration clauses. Gunder at 393. The right to cure default and reinstate an accelerated note is granted by federal bankruptcy law and cannot be frustrated by the law of any state. In re Taddeo, 685 F.2d 24, 28 (2d Cir.1982). By allowing debtors to cure defaults in cases in which there is still a right of redemption under state law, this section furthers the intent of Chapter 13 which is to facilitate debtor rehabilitation while protecting the rights of creditors. Taddeo at 29; In re Kokkinis, 22 B.R. 353, 355 (Bkrtcy. N.D.Ill.1982). Other courts with factual situations identical to that found in the instant case are in accord. See, In re King, 14 B.R. 316 (Bkrtcy.M.D.Tenn.1981); In re Brickel, 11 B.R. 353 (Bkrtcy.D.Me.1981); In re Williams, 6 B.R. 789 (Bkrtcy.E.D.Mich. 1980). In each of these cases the courts concluded that the debtors'...