In re Greene, Bankruptcy No. 99-04505-TBB-13. Adversary No. 99-00282.

CourtUnited States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama
Writing for the CourtTHOMAS B. BENNETT
Citation248 BR 583
Docket NumberBankruptcy No. 99-04505-TBB-13. Adversary No. 99-00282.
Decision Date18 May 2000
PartiesIn the Matter of John W. GREENE, Debtor. John W. Greene, Plaintiff, v. The Associates, Defendant.

248 B.R. 583 (2000)

In the Matter of John W. GREENE, Debtor.
John W. Greene, Plaintiff,
v.
The Associates, Defendant.

Bankruptcy No. 99-04505-TBB-13. Adversary No. 99-00282.

United States Bankruptcy Court, N.D. Alabama, Southern Division.

May 18, 2000.


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COPYRIGHT MATERIAL OMITTED
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Jeffery Van Hood, Bessemer, Al, for plaintiff

Marvin E. Franklin, Birmingham, Al, for defendant.

Memorandum Opinion

THOMAS B. BENNETT, Bankruptcy Judge.

I. Equivalency or Inequality, Binding or Not

Sometimes our system of common law jurisprudence fails. Sometimes there is one reason for its failure and only a few individuals are adversely impacted. Other times a fusion results in erroneous precedent with far reaching consequences affecting numerous people. This matter involves the last of these and requires this Court to consider whether a holding of a higher court controls the outcome of this matter. If stare decisis mandates that that set forth in Charles R. Hall Motors, Inc. v. Elgin Lewis, 137 F.3d 1280 (11th Cir.), reh'g. denied en banc, 149 F.3d 1197 (1998) governs, the debtor in this case will be one more of what is an ever increasing number who have been and continue to be denied what the laws of the United States and those of Alabama provide for them. This is because—and there is no subtle way to say this—the Hall Motors precedent is wrong in its holding on what property interest a defaulted debtor retains in a motor vehicle under Alabama law following its repossession, but before its sale. It is also due to ramifications of broader scope: the undoing in Alabama by Hall Motors of statutes having nationwide application, one federal and the other the law of secured transactions under Article 9 of the Uniform Commercial Code.

A component of what this Court must consider to reach a resolution of the legal issues before it is whether the law as applied to the facts in Hall Motors (i) binds this Court because of an equivalency to this adversary proceeding, or (ii) is not applicable due to an inequality in the decisional

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equation. Should there be appropriate fact variation and/or law deviation, stare decisis may not require this Court to follow the Hall Motors holding. This is the precedential aspect of Hall Motors which this Court is obligated to critically, though respectfully, scrutinize as part of its task of resolving legal issues arising from facts which appear as an equivalency, but are in reality an inequality

II. The Greene Facts

On September 6, 1996, John Greene purchased for his personal use a 1994 Ford Mustang (the Mustang) from Jim Skinner Ford, Inc. for $15,002.13. A portion of the purchase price was financed by Jim Skinner Ford, Inc. The terms of the purchase and the financing of a portion of the purchase price are set forth in the "Retail Installment Contract and Security Agreement" dated September 6, 1996, by and between John W. Greene and Jim Skinner Ford, Inc. (hereinafter sometimes the Mustang Contract). Jim Skinner Ford, Inc. then assigned all of its interests in and to the contract to Transouth Financial Corporation which has been represented to this Court by counsel for The Associates and by a witness called by The Associates to now be The Associates.

The contract between Mr. Greene and The Associates evidences, among other things, the terms of repayment of Mr. Greene's debt and that The Associates received as collateral securing repayment of the note a security interest in the Mustang. It is uncontested that The Associates perfected its security interest by having its lien recorded on the certificate of title issued to Mr. Greene as the owner and holder of legal title. The certificate of title for the Mustang was at all relevant times in the possession of The Associates.

Additionally, there is not in the Mustang Contract any provision for retention of title, right of possession pre-default, or transfer of ownership of the vehicle to The Associates as the assignee of the seller's interest. Under the Mustang Contract's terms, The Associates obtained only a security interest. This is the wording:

SECURITY INTEREST: You give us a security interest in the vehicle and the goods being purchased which are described above. The security interest extends to all proceeds of and accessions to such vehicle and goods. You also assign to us any proceeds not in excess of the unpaid balance under this contract which may become payable through insurance on the property or written in connection with this contract, including returned or unearned premiums.

By July, 1999, The Associates contended that Mr. Greene was in default under the terms of the Mustang Contract. Accordingly on July 27, 1999, it exercised its rights under the Mustang Contract and Alabama's Uniform Commercial Code and (i) repossessed the Mustang, and (ii) sent Mr. Greene a notice of private sale.

John Greene's response was to file (i) his petition in bankruptcy seeking relief under Chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 1301 et seq., and (ii) this adversary proceeding seeking the turnover of the Mustang under § 542 of the Bankruptcy Code, 11 U.S.C. § 542, and a determination that The Associates violated the automatic stay of § 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a) (the Greene Adversary Proceeding). Fearing a sale of the Mustang, Mr. Greene's bankruptcy petition was filed on an emergency basis without all the required schedules and the statement of financial affairs, among other documentation. A hearing was held by this Court on the deficiencies in the filing of mandated schedules which was not attended by either Mr. Greene or his counsel. On August 26, 1999, Mr. Greene's case was dismissed for his failure to file the required documents. Based on a motion filed August 29, 1999, to reconsider the dismissal, the order dismissing Mr. Greene's Chapter 13 case was vacated due to this Court's clerk not having properly served notice of the hearing on dismissal.

The parry to the Adversary Proceeding is The Associates' motion to dismiss. During hearings held on two occasions, The Associates presented evidence in the form of testimony and documents regarding the

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how and when of the sale of the Mustang, its repossession, and its resale. An employee of The Associates testified that the Mustang was sold August 26, 1999. However, there has not been sufficient evidence to enable this Court to establish whether the sale was before or after entry of the now set aside order of dismissal.1 At a subsequent hearing held on this matter, The Associates called as a witness the general manager of Cleveland Auto Sales which had sold the Mustang for The Associates. His testimony and the documentary evidence presented through him is that the bill of sale for the Mustang was dated August 30, 1999, and that the sale was not by public auction. Rather, five (5) bids for the purchase of the Mustang had been received by Cleveland Auto Sales over an unspecified period of time. Cleveland Auto Sales sold the Mustang for $3,650.00 to a third party. The date of the sale set by The Associates employee at the Court's first hearing and the different one asserted at the second by use of the bill of sale were not reconciled by The Associates. Because of this evidence and other matters presented which go beyond the pleadings, The Associates' motion to dismiss is treated as one for summary judgment under Fed.R.Civ.P. 56. See Fed.R.Civ.P. 12(b) & (c); Garcia v. Copenhaver, Bell & Assoc., M.D's, P.A., 104 F.3d 1256, 1266 n. 11 (11th Cir.1997); Jones v. Automobile Ins. Co. of Hartford, Conn., 917 F.2d 1528, 1532 (11th Cir.1990); Marine Coatings of Ala., Inc. v. United States of America, 792 F.2d 1565, 1567 (11th Cir.1986)

The reasons The Associates believes it is entitled to summary judgment are that (i) no stay under § 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a), existed to prevent the sale of the Mustang and (ii) under the authority of Hall Motors, Mr. Greene did not have any interest in the Mustang at any time during which the Chapter 13 case has been pending. The asserted result is that the vehicle has never been property of Mr. Greene's bankruptcy estate and his only interest is a right of redemption under Alabama's version of the Uniform Commercial Code, Ala.Code § 7-9-506 (1997). In order to understand why (i) The Associates' motion is malapropos, (ii) Hall Motors is bad law, and (iii) Hall Motors is not binding precedent in this case, one must first know the requisites of a turnover request and a stay violation under the Bankruptcy Code conjoined with how Alabama law treats the sale of motor vehicles and what rights a defaulting debtor has, if any, in a repossessed motor vehicle. This requires resort to (i) the Bankruptcy Code, 11 U.S.C. §§ 101 et seq., and (ii) Alabama's version of the Uniform Commercial Code and knowing how this statute treats trust receipts, chattel mortgages, conditional sales agreements, and similar title retention devices which purport to have title to goods held by one other than a debtor.

III. The Perimeters of the Dismissal Request

A. Turnover, Stay Violation and Property or Not

To determine whether Mr. Greene may obtain turnover of the Mustang under § 542 of the Bankruptcy Code, 11 U.S.C. § 542, or whether its sale by The Associates violated the automatic stay imposed under § 362 of the Bankruptcy Code, 11 U.S.C. § 362, one needs to read the explicit language of Alabama's Uniform Commercial Code, Ala.Code §§ 7-1-101 et seq. (1997), in conjunction with the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. For purposes of turnover under § 542, the property must be that of the bankruptcy estate as defined under § 541 of the Bankruptcy Code. As of the filing of his bankruptcy case, Mr. Greene must have had a right to use, sell, or lease this property. Lastly,

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the interest of The Associates in the property, upon request, is to be adequately protected. See 11 U.S.C. §§ 362(c)...

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