In re Denby-Peterson

• Decision Date: 20 October 2017
• Docket Number: Case No.: 17–15532–ABA
• Citation: 576 B.R. 66
• Parties: IN RE: Joy R. DENBY–PETERSON, Debtor.
• Court: U.S. Bankruptcy Court — District of New Jersey

576 B.R. 66

IN RE: Joy R. DENBY–PETERSON, Debtor.

Case No.: 17–15532–ABA

United States Bankruptcy Court, D. New Jersey.

Signed October 20, 2017

Thomas G. Egner, Ellen M. McDowell, Daniel L Reinganum, McDowell Posternock Apell & Detrick, PC, Maple Shade, NJ, for Debtor.

Isabel C. Balboa, Chapter 13 Standing Trustee, Cherry Hill, NJ, for Trustee.

MEMORANDUM DECISION

Andrew B. Altenburg, Jr., United States Bankruptcy Judge

I. INTRODUCTION

This court has been asked to decide a dispute between a debtor seeking return of a vehicle that she needs to drive to work and her personal property from inside the vehicle, and the creditor that repossessed it prepetition and refused to return it because it believed that the debtor had surrendered it. The debtor seeks turnover of the vehicle under 11 U.S.C. § 542(a) and damages for violation of the automatic stay under 11 U.S.C. § 362(a)(3).

In applying section 362(a)(3) to the retention of the car postpetition, this court must determine whether the debtor had an interest in the vehicle, an issue of mixed facts and law. After a review of the deficient record and evidence, the compiled facts of this case show that there was not a violation of the automatic stay with regard to the failure of the creditor to return the vehicle. Nevertheless, the vehicle must be returned to the debtor pursuant to section 542 and the debtor may redeem the vehicle through her chapter 13 plan, subject to confirmation requirements.

Regarding the personal property, which the creditor denies having, the court finds it more likely than not that the creditor did not return the property. It must be returned within seven days of the date of that order. As agreed prior to the hearing on the matter, the court will determine the appropriate relief under sections 362 and/or 542 in a separate hearing.

II. JURISDICTION AND VENUE

The court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(a)(2)(A), (E), (O) and the Standing Order of the United States District Court July 23, 1984, as amended on September 18, 2012, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(L). Venue is proper in this Court pursuant to 28 U.S.C. § 1408. The statutory predicates for the relief sought herein are 11 U.S.C. §§ 362(a)(3) and 542(a)(1). Pursuant to Fed. R. Bankr. P. 7052, the court issues the following findings of fact and conclusions of law.

III. PROCEDURAL HISTORY

The debtor, Joy R. Denby–Peterson ("Debtor"), filed an emergency petition under chapter 13 of the Bankruptcy Code on March 21, 2017. Three days later she filed a Motion for Return of Repossessed Auto¹ and for Sanctions for Violation of Automatic Stay against Pine Valley Motors ("Pine Valley") on shortened time. Doc. Nos. 5, 6. Pine Valley filed opposition on April 3, 2017. Doc. No. 17. At the hearing held April 4, 2017, the parties agreed that a plenary hearing was necessary. The court also ordered Pine Valley to return the Debtor's personal property that day. The court scheduled the plenary hearing for April 13, 2017, but it was adjourned at the request of the parties to May 12, 2017. On May 11, 2017, the court held a telephonic hearing where, on request of the Debtor, the plenary hearing was again adjourned, to a date to be determined, to allow discovery to be completed. The court instructed Pine Valley not to dispose, use, sell, lease, or otherwise transfer possession or ownership of the vehicle pending final resolution of the Debtor's motion. On August 7, 2017, the parties filed a Joint Statement of Undisputed Material Facts. Doc. No. 42 ("JS"). Finally, a plenary hearing was commenced on August 16, 2017 and concluded on August 17, 2017. The court having received the parties' post-hearing briefs, this matter is now ripe for disposition.

IV. FINDINGS OF FACT

Preliminarily, the court notes that it had difficulty determining the facts in this case as the parties presented very different stories through unconvincing testimony of unbelievable witnesses, focusing on issues the court did not find relevant.² But based on the shifting burdens, some testimony against interest, and what it hopes is sound reasoning, the court has constructed what it believes most likely occurred. At the damages phase of this contested matter, the parties will be estopped from challenging any of the findings of fact made here.

The Debtor is a practical nurse who primarily earns income on an independent contractor basis. 1T, at p. 15, 45.³ She is contracted out to "different facilities," such as the correctional system, and rehabilitation and long term care facilities. Id.She attends to patients throughout New Jersey. Id., at pp. 15, 43.

Pine Valley and NU2U Auto World ("NU2U") (collectively, "the Creditors") are car dealerships that offer "buy here, pay here" financing services. JS, at ¶ 8. Anthony Pinto and Kenneth Cohen are informal partners agreeing to equally share in ownership of Pine Valley. 2T, at pp. 10, 109. Mr. Cohen owns NU2U, a limited liability company. 2T, at p. 10. Pine Valley routinely accepts installment sales payments on behalf of NU2U. JS, at ¶ 9. The two companies share the same computer system. 2T, at p. 41. Any employee can go into the computer system to authorize a repossession. 2T, at p. 140–41.

Mr. Pinto is the "primary" employee at Pine Valley. 2T, at p. 11. There is only one other employee there, but sometimes NU2U employees will help out. 2T, at p. 11. Similarly, Mr. Pinto is not employed by NU2U, but "helps out" there sometimes, using its mechanic, and going to auctions with its employees. 2T, at p. 140.

The Debtor testified that after her Mercedes was destroyed in a flash flood on July 1, 2016 she went to Pine Valley to purchase a "new" used car. 1T, at pp. 39, 43, 46. She had met Mr. Pinto three to five years prior and "had continuously told him [she] wanted a Corvette." 1T, at p. 43. See1T, at pp. 46, 115. On July 21, 2016, the Debtor and Pine Valley entered into a Buyer's Order whereby the Debtor bought and Pine Valley sold a yellow 2008 Chevrolet Corvette (the "Vehicle"). JS, at ¶¶ 1, 2. The parties entered into a Precomputed Retail Installment Contract (the "Contract") dated July 21, 2016, to supply financing to the Debtor through Pine Valley. JS, at ¶ 3; ex. D–2. Pine Valley simultaneously assigned the Contract to NU2U. JS, at ¶ 7; ex. D–2. The total to be paid by the Debtor was $53,382.33.

The Contract required a $3,000 down payment and then a "deferred down payment" of $2,491 to pay taxes and obtain permanent license plate tags ("taxes and tags") to be paid by August 11, 2016. JS, at ¶ 4; ex. D–2.⁴ The Creditors retained full responsibility for processing this through the Department of Motor Vehicles. 1T, at p. 146. The Contract also required regular weekly payments of $200 beginning July 29, 2016 for 212 weeks, with a payment in week 213 of $0.03. Ex. D–2. Mr. Pinto testified that the interest rate was also 23.99 percent. 2T, at p. 110. Every customer who finances a vehicle through Pine Valley is charged that rate. Id.The Contract designated that the sale was a "consumer creditor contract" with the Vehicle being for "Personal, Family or Household Use." Ex. D–2, at ¶¶ 32, 3. Regarding repossession, the Contract provided that "Personal property found in the vehicle will be stored at your expense and may be returned to you if you identify it. We will dispose of such property after we have given you any notice and time to recover it that the law requires." Ex. D–2, at ¶ 17. Mr. Pinto was completely unaware of this provision. 1T, at 114.

Another document signed by the Debtor and Mr. Pinto provided that if the Debtor failed to pay the taxes and tags balance within the allotted temporary tag time, then the Creditors would apply all regular Vehicle payments toward the taxes and tags until they were paid in full. Ex. D–4. Pine Valley recommended in this document that payments be made on the deferred down payment "so it is not all due at one time." Id.Pine Valley warned that if this deferred down payment was not paid in full by the due date, then the Vehicle would be subject to repossession. Id.It also warned that it would be illegal for the Debtor to drive the Vehicle until she received her plates. Id.It stated that additional fees would apply "after 14 days," id., but nowhere is it specified what these fees would be. A document titled "Pick–Up Note Acknowledgement," initialed by the Debtor, also stated that she owed one deferred payment of $2,491, due on August 11, 2016. Ex. C–2.

Between July 21, 2016 and February 16, 2017, the Debtor made payments totaling $9,200 under the Contract, including the $3,000 down payment applied on the day of the sale. JS, at ¶ 10. She did not make the lump sum payment of $2,491 on August 11, 2016, or ever make a $2,491 lump sum payment. JS, at ¶ 6. She testified that she did not know about the $2,491 payment requirement until she visited Pine Valley about a month after purchasing the vehicle to ask when she would receive her permanent tags. 1T, at pp. 18–19. She did not read any documents at the time she signed them. 1T, at pp. 19, 43, 49–51, 63, 74. She testified that she was not given copies of the documents she signed. 1T, at pp. 19–20, 75.

The Creditors applied $3,000 of the Debtor's payments to the down payment and $5,700 of regular payments to installment payments due under the Contract. JS, at ¶ 11, ex. D–3. They also applied $400 of her regular payments to taxes and tags on September 16, 2016 and $100 to taxes and tags on January 18, 2017. Ex. D–3. Reviewing the transaction history, the Debtor made payments over 28 weeks.⁵ In week 7, her payments exceeded the $200 a week she owed, with her having paid $800 extra by week 28, excluding the deferred down payment. Therefore, at a minimum the Creditors should have applied $800 to the deferred down payment. Consequently, by not applying all of the Debtor's payments first to the taxes and...