In re Honaker
Decision Date | 10 June 1980 |
Docket Number | 80-0001.,Bankruptcy No. 79-00404 |
Citation | 4 BR 415 |
Parties | In re Tommye Lee HONAKER, Debtor. SECOND NATIONAL BANK OF SAGINAW, Plaintiff, v. Tommye Lee HONAKER, Defendant. |
Court | U.S. Bankruptcy Court — Eastern District of Michigan |
William S. Koepke, II, Koepke, Titus & Dill, Saginaw, Mich., for plaintiff.
Arthur J. Spector, Pergande, Shaw & Spector, Bay City, Mich., for defendant.
This matter came before the Court for trial on March 11, 1980, on the Complaint of Second National Bank of Saginaw, seeking to assert its rights as a secured creditor. The Complaint is sufficient to give the Defendant notice of the nature of the claim and the facts relied upon, although it technically should request relief from the stay rather than reclamation. To do substantial justice the Court will construe the Complaint as though the proper relief were requested. F.R.Civ.P. 8; Bankruptcy Rule 708.
This case arises out of three separate related transactions between the Bank and Tommye Lee Honaker, whereby monies were advanced to Honaker in exchange for promissory notes secured by two snowmobiles and a tractor.1 Based upon the documentary evidence submitted, the Court finds that the Bank's security interest was duly perfected. Subsequent to the last of these transactions, Honaker filed a Petition under Chapter 13, on November 21, 1979. This Court ordered, on December 4, 1979, that all secured creditors must file proofs of their claims by the date of the Section 341 Hearing, on December 19, 1979, in order to be treated as secured creditors for purposes of voting and priority of distribution under the plan. On December 19, 1979, this Court ordered that pursuant to its earlier order, Household Finance Company would be deemed the only holder of an allowed secured claim for purposes of this case. The Bank filed a proof of its claim on January 7, 1980, and on January 16, 1980, the Bank filed its Complaint, referred to above.
The first issue that must be resolved is whether the Bank has any rights to the collateral which are affected by the stay. The Defendant asserts that the Bank is now a mere unsecured creditor in all respects. This is clearly not so. This court has determined that the Bank will be treated as an unsecured creditor for purposes of voting and priority of distribution under the plan. However, the Bank still retains its lien upon the collateral, as can be seen from Section 506(d) of the Code.2 (All references herein, unless stated otherwise, are to sections of the Bankruptcy Code: 11 U.S.C. § 101, et seq.)
An objection under Section 502 is an adversary proceeding under Part VII of the Bankruptcy Rules, and requires the filing of a Complaint. Bankruptcy Rules 701 and 703. No such Complaint has been filed in this case, so even if the Bank had filed no proof of claim at all, its lien would still be unimpaired by the bankruptcy proceeding.3
The second basis relied upon by Defendant in opposing the relief sought is Code Section 1327.4 This also avails him nothing. Section 1327 relates only to property of the estate, as defined in Sections 541 and 1306(a). In the instant case, Section 541(a)(1) is the operative portion.
The reading of Section 1327 urged by Defendant would have the Debtor materially improve his financial position, by unencumbering pledged assets, through the simple expedient of passing his property through the estate. This result has little to recommend it.
Therefore, the Court finds that the lien of the Bank upon the 2 snowmobiles and the tractor is not invalidated by the Chapter 13 proceedings herein, and now turns to the question of whether the automatic stay should be lifted. The issue is governed by Section 362(d).5
Under Section 362(g) the party opposing the relief has the burden of proof on all issues except the Debtor's equity in property. In this case it is apparent from the plan filed by the Debtor that no equity of the Debtor exists, or is claimed, in the collateral in question. No other grounds being found for denying relief from the stay, IT IS, THEREFORE, ORDERED that the stay be lifted to the extent necessary to allow the Bank to assert its non-bankruptcy remedies to recover the 2 snowmobiles and the tractor.
1 The security agreement in question also purports to cover collateral described as a "snowmobile trailer." The Court expresses no opinion as to the validity of the security interest with respect to this item of collateral, since it appears from the face of the security agreement that there may be a question regarding the sufficiency of the description thereof (M.C.L.A. § 440.9110, M.S.A. § 19.9110), which neither party has brief or argued.
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