In re Atlantic Ambulance Associates, Inc., Bankruptcy No. 91-41225-T. Contested Matter No. 94-87.
| Decision Date | 06 April 1994 |
| Docket Number | Bankruptcy No. 91-41225-T. Contested Matter No. 94-87. |
| Citation | 166 BR 613 |
| Court | U.S. Bankruptcy Court — Eastern District of Virginia |
| Parties | In re ATLANTIC AMBULANCE ASSOCIATES, INC., Chapter 7 Debtor. Antoinette ATKINS, Movant, v. ATLANTIC AMBULANCE ASSOCIATES, INC., Debtor. |
S. Keith Barker, Richmond, VA, for movant.
Samuel M. Walker, Jr., Midlothian, VA, for debtor.
Gary J. Spahn, Mays & Valentine, Richmond, VA, for Travelers Ins. Co.
Preliminary hearing on Antoinette Atkins' motion for relief from stay was held in Richmond, Virginia, on March 14, 1994. At this hearing the court also considered the motion to intervene of Travelers Insurance Company. On the relief from stay motion, the sole issue is whether the court will annul the automatic stay so as to validate a state court default judgment obtained by movant.
At the conclusion of the hearing the court ruled from the bench that Travelers' motion to intervene would be granted and set the relief from stay motion for final hearing.
Subsequent to the hearing of March 14, 1994, the court has concluded that the motion for relief from stay will be granted without further hearing; however, movant's request for annulment of the stay will be denied.
The facts, which are undisputed, are drawn primarily from movant's motion for relief from stay.
Debtor filed a chapter 7 petition on June 11, 1991, and the company's assets have been liquidated by the trustee in bankruptcy. However, the bankruptcy case remains open on this court's docket.
On February 19, 1987, movant Antoinette Atkins was injured in an automobile accident; she received ambulance services, during the course of which the ambulance crew dropped her stretcher and caused her allegedly serious injuries. Travelers Insurance Company was the liability insurance carrier to the ambulance company involved.
In August 1988 Atkins sued the ambulance company in Virginia circuit court for her injuries. Later, that ambulance company was merged into the debtor corporation, and suit papers were amended to name the debtor. The amended suit papers were served on debtor in December 1990, and debtor's registered agent forwarded the papers to debtor's liability insurance broker. However, debtor's insurance carrier had no liability for Atkins' injuries suffered at the hands of the other ambulance service prior to its merger with debtor.
Travelers, the actual liability carrier for the prior company, was not notified of the claim until after the appeal period had expired on a default judgment against debtor in the amount of $250,000.00 entered in early 1991.
After Travelers denied coverage of the claim because of the insured's failure to notify it of the law suit, Atkins brought a declaratory judgment action against Travelers. This suit was removed by Travelers to federal court.
Ultimately, in July 1993, the Court of Appeals for the Fourth Circuit in held that Travelers was not liable for payment of Atkins' default judgment which Travelers had not had the opportunity to challenge. The appeals court held, however, that Travelers' insurance contract was not voided and that it was obliged to defend Atkins' claim and provide coverage.
After the ruling by the court of appeals, Atkins' counsel filed a motion in Virginia circuit court to vacate the previous 1991 default judgment order. Counsel gave notice of the filing of the motion to debtor's counsel but did not notice Travelers or its counsel. Neither did counsel seek relief from the automatic stay of 11 U.S.C. § 362 prior to filing the motion. On December 9, 1993, the circuit court entered a default order vacating the prior default judgment and granting Atkins leave to file an amended motion for judgment against the debtor and Travelers. Travelers did not learn of Atkins' actions in obtaining the default judgment until afterwards.
On February 18, 1994, Atkins filed the instant motion for relief from stay by which she asks this court to annul the automatic stay and effectively validate the circuit court's default order of December 9, 1993.
Travelers, although apparently not served with the relief from stay motion, learned of the motion and responded by filing a motion to intervene.
Antoinette Atkins moves the court to annul the automatic stay with respect to a default order entered on December 9, 1993, by the Virginia circuit court at the request of her counsel. This default order vacated a previous default judgment against the debtor in the amount of $250,000.00 for personal injuries suffered by Atkins in 1987; the default order also authorized Atkins to file an amended motion for judgment against debtor and Travelers Insurance Company, the liability carrier responsible to defend any new suit.
Travelers, which has been held not to have liability under the original $250,000.00 judgment, believes it has grounds to prevent Atkins from vacating the earlier judgment and starting over against Travelers. Travelers therefore opposes the vacation of this judgment and wants the opportunity to contest this result before the...
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