In re Attinello
Decision Date | 05 April 1984 |
Docket Number | Adv. No. 83-0547.,Bankruptcy No. 83-00651 T |
Citation | 38 BR 609 |
Parties | In re James J. ATTINELLO and Elizabeth Attinello, Debtors. ASSOCIATES COMMERCIAL CORP., Plaintiff, v. James J. ATTINELLO and Elizabeth Attinello and Frederick L. Reigle, Trustee, Defendants. |
Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Gary P. Lightman, Fellheimer, Eichen & Goodman, Philadelphia, Pa., for plaintiff.
James J. Narlesky, Easton, Pa., for debtors.
At issue in this adversary proceeding is the right to possession of a 1980 Freightliner tractor (hereinafter "tractor"), which is currently in the possession of the plaintiff as a result of the plaintiff's pre-petition repossession of it from the Chapter 13 debtors-defendants. The plaintiff seeks, pursuant to Section 362(d) of the Bankruptcy Code, 11 U.S.C. ž 362(d), relief from the automatic stay so that it may pursue its state law remedies with regard to the tractor. The debtors seek turnover of the tractor to them pursuant to Sections 542 and 543 of the Bankruptcy Code, 11 U.S.C. žž 542 and 543. For the reasons hereinafter given, we shall deny the plaintiff relief from the automatic stay and grant the debtors' request for turnover.1
The facts essential to our resolution of this matter are as follows. Pursuant to a Transfer and Assumption Agreement (hereinafter "security agreement"), dated January 22, 1982, the debtors became jointly liable to the plaintiff for payment of the $36,639.37 balance due on the aforementioned tractor while the plaintiff retained its perfected security interest in the tractor. The security agreement provided, inter alia, for the debtors to make a payment of $890.83 on January 25, 1982, followed by 27 consecutive monthly installment payments of $1,324.02. The monthly installment payments were to be paid on the 25th of each month, beginning with February 25, 1982. The debtors made the required payments through September 25, 1982, but did not make any payments thereafter. Therefore, on January 28, 1983, the plaintiff lawfully repossessed the tractor. At that time and prior thereto, debtor James Attinello had been using the tractor in his employment as a long-haul independent truck driver.
On February 2, 1983, pursuant to the security agreement, the debtors received notification from the plaintiff that the tractor would be sold on February 22, 1983 unless the debtors redeemed the tractor by payment of the $31,157.71 redemption price before the scheduled sale.
The sale was stayed, however, by the debtors' filing of their Chapter 13 bankruptcy petition in our Court on February 15, 1983.
Subsequently, a combined hearing was held on the plaintiff's request for relief from the automatic stay and the debtors' request for turnover of the tractor. The evidence presented at the hearing chiefly concerned the fair market value of the tractor. The plaintiff's valuation witness testified that she believed that the tractor had a fair market value of $28,965.00. The debtors' valuation witness expressed his belief that $38,000.00 was the fair market value.
The evidence adduced at the hearing established a debt of $31,157.71 owing from the debtors to the plaintiff for the tractor. There are no liens against the tractor other than the plaintiff's lien. The tractor is still in the plaintiff's possession.
In order to resolve this matter, we must first determine the nature of the debtors' interest in the tractor immediately upon their filing of their Chapter 13 bankruptcy petition.
In United States v. Whiting Pools, Inc., ___ U.S. ___, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983), the Supreme Court held that a Chapter 11 reorganization estate includes property of the debtor that has been repossessed by a secured creditor prior to the filing of the Chapter 11 bankruptcy petition. Such property, therefore, is subject to turnover pursuant to ž 542 of the Bankruptcy Code. The Court's analysis was based, in part, on the congressional goal of encouraging and facilitating Chapter 11 reorganizations. The Court declined to express its view as to the applicability of its holding in Chapter 7 or Chapter 13 cases. ___ U.S. ___, n. 17, 103 S.Ct. 2315, n. 17, 76 L.Ed.2d 524, n. 17.
We see no reason, however, why the holding in Whiting Pools should not apply in Chapter 13 cases. The only possible reason for non-applicability, we believe, is if Congress' desire to encourage and facilitate Chapter 13 reorganization and rehabilitation was found to be of a significantly lesser degree than its desire to encourage and facilitate Chapter 11 reorganization and rehabilitation. However, our review of both the Bankruptcy Code and its legislative history convinces us that such is not the case. The aforementioned congressional desire is of the same general magnitude with respect to both Chapter 13 and Chapter 11 cases. In considering the same issue and reaching the same result, the Court in In re Robinson, 36 B.R. 35, 37-38 (Bkrtcy. E.D.Ark.1983), offers an excellent analysis of the strong congressional desire, as manifested by both the Bankruptcy Code and the legislative history of Chapter 13, to encourage debtor rehabilitation through Chapter 13. We agree with that analysis (which will not be repeated here) and with its conclusion, at 36 B.R. 38:
The only other reported post-Whiting Pools case which considered this issue, In re Radden, 35 B.R. 821 (Bkrtcy.E.D.Va. 1983), also applied the holding in Whiting Pools in a Chapter 13 case.
Therefore, we find that the repossessed tractor is part of the debtors' Chapter 13 estate and is subject to turnover pursuant to ž 542.2
The plaintiff argues, however, apart from the question of the applicability of Whiting Pools in Chapter 13 cases, that Whiting Pools is not controlling in the present case because the Internal Revenue Service was the secured creditor in Whiting Pools and its repossession of the debtor's personal property was accomplished pursuant to the Internal Revenue Code, whereas, in our case, the plaintiff's repossession was accomplished pursuant to Pennsylvania state law. Therefore, argues the plaintiff, the debtors' interest in the tractor immediately upon the filing of their bankruptcy petition, must be determined according to Pennsylvania law. According to Pennsylvania law, continues the plaintiff, the debtors' interest at that time was merely the right to redemption of the tractor upon full payment of the $31,157.71 redemption price, and not any type of possessory interest. The plaintiff further argues that the case of Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979), requires that we look to state law and not federal law to determine the debtors' property interest in the tractor.
The plaintiff's interpretation of Whiting Pools is incorrect. The analysis and holding in Whiting Pools clearly applies to a debtor's interest in repossessed property in general, whether repossessed under state law or federal law, and whether repossessed by the Internal Revenue Service or some other secured creditor. On this matter, the scope of the Court's decision is broad. For example, the Court states at ___ U.S. ___ - ___, 103 S.Ct. 2314-15, 76 L.Ed.2d 522-23:
"While there are explicit limitations on the reach of ž 542(a), none requires that the debtor hold a possessory interest in the property at the commencement of the reorganization proceedings."
The Court later states at ___ U.S. ___, 103 S.Ct. 2315, 76 L.Ed.2d 524:
We also note that the plaintiff's reliance on Butner v. United States, supra, is misplaced. Butner held that, in bankruptcy cases, the courts should look to state law to determine a debtor's property interests unless Congress or some other federal interest requires otherwise. In the present context, the Whiting Pools decision clearly requires us to be governed by the Bankruptcy Code, particularly ž 542, and not by state law, in determining the debtors' interest in the tractor.
The two cases which have considered this issue subsequent to the Whiting Pools decision, In re Robinson, supra, and In re Radden, supra, have also concluded that Whiting Pools applies fully to interests in property repossessed by secured creditors pursuant to state law.
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