In re Deakle

• Decision Date: 24 June 2020
• Docket Number: Case No. 19-11820
• Parties: IN RE: Jennifer L. DEAKLE, Debtor.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Alabama

617 B.R. 709

IN RE: Jennifer L. DEAKLE, Debtor.

Case No. 19-11820

United States Bankruptcy Court, S.D. Alabama.

Signed June 24, 2020

William J. Casey, Mobile, AL, for Debtor.

Daniel B. O'Brien, Chapter 13 Trustee, Mobile, AL, for U.S. Trustee.

ORDER DENYING MOTION TO CONFIRM TERMINATION OR ABSENCE OF STAY

HENRY A. CALLAWAY, CHIEF U.S. BANKRUPTCY JUDGE

Perhaps the most important aspect of chapter 13 is that confirmation of a chapter 13 plan binds both creditors and debtors. The question in this case is: can a title pawnshop's failure to object to a confirmed chapter 13 plan constitute waiver of the pawned vehicle's forfeiture under the Alabama Pawnshop Act?

The pawnshop here, TitleMax of Alabama ("TitleMax"), clearly and admittedly waives forfeiture of pawned vehicle titles in other contexts. Its corporate representative testified in another case before this court that outside bankruptcy TitleMax routinely allows borrowers to enter into new pawn agreements after the redemption period has run under the Pawnshop Act. This court ruled in TitleMax's favor, holding that TitleMax had waived forfeiture and thus had not (as the debtor there contended) illegally accepted several thousand dollars of payments on a car it already owned. And TitleMax frequently files secured claims based on postredemption title pawns in chapter 13 cases (see the many cases cited in footnote 3).

Having reviewed TitleMax's "motion to confirm termination or absence of stay (doc. 55), the briefs of the parties,¹ and the relevant law, this court finds that TitleMax can likewise waive forfeiture of a pawned vehicle title by failing to object to confirmation or otherwise speak up in opposition to a chapter 13 plan which proposes to treat the loan as a secured claim. As a result, the court denies TitleMax's motion (doc. 55).

Background

The pertinent facts are not in dispute. On January 15, 2019, the debtor Jennifer Deakle pawned a 2003 Honda Pilot to TitleMax that required the repayment of $1,889.27 plus a $226.52 pawnshop charge for a total of $2,115.79. (See doc. 55-2). The Pilot remained in the debtor's possession and TitleMax was listed as a lienholder on the Pilot's certificate of title. (See id. ). The pawn matured on February 14, 2019. Under § 5-19A-6 of the Alabama Pawnshop Act, the debtor had until March 16, 2019 to redeem the Pilot but did not do so.

On May 31, 2019, the debtor filed this chapter 13 bankruptcy case, listing TitleMax as a creditor with respect to the Pilot. In her chapter 13 plan also filed on May 31, 2019, she proposed to pay TitleMax $1,500 through the trustee over the life of the case. The court entered an order confirming the debtor's plan, and the proposed treatment of TitleMax, on October 2, 2019.

The record reflects, and TitleMax has not disputed, that it had notice of the bankruptcy and of the applicable deadlines, including for objections to confirmation. See, e.g. , In re Iliceto , 706 F. App'x 636, 643 (11th Cir. 2017). TitleMax did not object to confirmation of the debtor's plan or take any other action in the bankruptcy case until three months after the confirmation order was entered, when it filed the pending motion to confirm termination or absence of stay. TitleMax contends that it was not required to object to confirmation, that 11 U.S.C. § 1327(a) and the Supreme Court's decision in United Student Aid Funds, Inc. v. Espinosa do not apply to the situation at hand, and that it is not bound by the confirmed plan because the Pilot was never property of the debtor's chapter 13 bankruptcy estate.

Legal Analysis

The basic principle underlying the parties' dispute is not novel. Under Bankruptcy Code § 1327(a), "[t]he provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan." Even legally suspect plans bind the parties once confirmed. See United Student Aid Funds, Inc. v. Espinosa , 559 U.S. 260, 275, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010) ; In re Bateman , 331 F.3d 821, 829-30 (11th Cir. 2003).

Alabama law defines what rights, if any, the debtor has in relation to the Pilot. See In re Northington , 876 F.3d 1302, 1310 (11th Cir. 2017). Under the Pawnshop Act, "[p]ledged goods not redeemed within 30 days following the originally fixed maturity date shall be forfeited to the pawnbroker and absolute right, title, and interest in and to the goods shall vest in the pawnbroker." Ala. Code § 5-19A-6. However, as discussed in more detail below, the court finds that TitleMax can waive that forfeiture and has done so in this case.

In a recent case decided by this court, the court agreed with TitleMax that a pawnshop can waive § 5-19A-6's forfeiture of "absolute right, title, and interest in and to the" vehicle after the statutory 30-day grace period has expired. In In re Eldridge , No. 19-12443, ––– B.R. ––––, 2020 WL 2844358 (Bankr. S.D. Ala. Feb. 13, 2020),² the debtor Christopher Dawan Eldridge pawned the title to a 2002 Jeep Cherokee with TitleMax in 2015. Mr. Eldridge did not redeem the title by the pawn's maturity date. Instead, he entered into numerous successive pawn transactions with TitleMax related to the Jeep. In several of these transactions, Mr. Eldridge did not redeem the Jeep before the maturity date or enter into another pawn within the statutory grace period. Instead, he signed a new pawn ticket outside of the statutory grace period – beyond the redemption period – a practice TitleMax's corporate representative testified that TitleMax routinely allows.

Mr. Eldridge argued that, pursuant to Alabama Code § 5-19A-6, TitleMax obtained "absolute right, title, and interest" to the Jeep the first time he did not redeem the Jeep or enter into another pawn transaction within the grace period because that statutory provision cannot be waived – that is, after 60 days (the pawn's 30-day maturity date plus the 30-day grace period), the only remedy a pawnshop has is repossession. He contended that as a result TitleMax had accepted thousands of dollars of payments from him on a vehicle it already owned. TitleMax opposed this argument and contended that it had waived automatic forfeiture under § 5-19A-6 by agreeing to subsequent pawn transactions. Ultimately, this court agreed with TitleMax.

In contrast to its position in Eldridge , TitleMax argues here that there was no waiver of § 5-19A-6 even though TitleMax did not object to confirmation or take any action until three months after the court confirmed the debtor's plan. TitleMax contends that this case is different than Eldridge because that case

involved a mutual decision by the customer and TitleMax to waive forfeiture, and to execute a new pawn agreement.... This case does not involve any mutual determination by TitleMax and the Debtor to waive forfeiture. This case involves the unilateral decision by the Debtor to include TitleMax in a bankruptcy proceeding (after forfeiture), and subsequent inaction by TitleMax.

(TitleMax br., doc. 80, p.9). TitleMax then argues that its "mere failure" to object prior to confirmation is not a waiver of forfeiture of § 5-19A-6. The court rejects TitleMax's argument for several reasons.

"[I]t is a well-settled principle of Alabama law that a waiver is generally defined as the intentional relinquishment of a known right." See Edwards v. Kia Motors of Am., Inc. , 8 So. 3d 277, 281 n.5 (Ala. 2008) (citation, quotation marks, and brackets omitted); see also , e.g. , Stewart v. Bradley , 15 So. 3d 533, 543 (Ala. Civ. App. 2008) ("Waiver is defined as the voluntary surrender or relinquishment of some known right, benefit, or advantage.") (citation and quotation marks omitted). Alabama law is likewise clear that waiver may be implied from conduct. See, e.g. , Hughes v. Mitchell Co. , 49 So. 3d 192, 201-03 (Ala. 2010) ; see also Bd. of Trustees of the Univ. of Ala. v. Houndstooth Mafia Enters. LLC , 163 F. Supp. 3d 1150, 1165 (N.D. Ala. 2016) ; Reynolds v. Ala. Dep't of Transp. , No. 2:85-cv-665-WKW, 2014 WL 3517773, at *9 (M.D. Ala. July 16, 2014).

This court, not TitleMax, is the judge of when and if there is a waiver. Waiver does not require a mutual decision between two parties, as TitleMax argues; if it did, there would be no place for waiver jurisprudence. Instead, "a party's intention to waive a right is to be ascertained from the external acts manifesting the waiver. This intention to waive a right may be found where one's course of conduct indicates the same or is inconsistent with any other intention." See Hughes , 49 So. 3d at 202-03 (citations and quotation marks omitted).

"Alabama precedent establishes that many significant rights may be waived by failing to either timely or property assert them." Ex parte Cowley , 43 So. 3d 1197, 1199 (Ala. 2009). For example, criminal defendants can waive numerous statutory rights, "even some that contain mandatory language[,]" see Lay v. State , 82 So. 3d 9, 13 (Ala. Crim. App. 2011), as well as "many of the most fundamental protections afforded by the Constitution." See United States v. Mezzanatto , 513 U.S. 196, 201, 115 S.Ct. 797, 130 L.Ed.2d 697 (1995). If a criminal defendant can waive statutory and even fundamental rights by failing to assert those rights, then surely TitleMax can waive the (non-fundamental) statutory right to claim absolute ownership under § 5-19A-6 by failing to timely asserts that right in a debtor's bankruptcy.

TitleMax's conduct in this case established a clear waiver of its statutory right to assert absolute ownership under § 5-19A-6 and demonstrated its acceptance of being treated instead as a secured creditor. TitleMax is a bankruptcy-savvy creditor which often accepts treatment as a secured creditor for its title pawns. This court has numerous cases on its docket in which TitleMax has waived forfeiture under § 5-19A-6 and is content for its claim to be treated as a secured claim.³

This ruling will...