In re Koresko

• Decision Date: 04 November 1988
• Docket Number: Adv. No. 88-0430S.,Bankruptcy No. 87-06424S
• Citation: 91 BR 689
• Parties: In re John J. KORESKO, V, Bonnie Jean Koresko, Debtors. John J. KORESKO, V, Bonnie Jean Koresko, Plaintiffs, v. CHASE MANHATTAN FINANCIAL SERVICES, INC., Manheim Auto Auction, American Lenders Service Co., Inc., Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

91 B.R. 689 (1988)

In re John J. KORESKO, V, Bonnie Jean Koresko, Debtors.

John J. KORESKO, V, Bonnie Jean Koresko, Plaintiffs, v. CHASE MANHATTAN FINANCIAL SERVICES, INC., Manheim Auto Auction, American Lenders Service Co., Inc., Defendants.

Bankruptcy No. 87-06424S, Adv. No. 88-0430S.

United States Bankruptcy Court E.D. Pennsylvania.

September 30, 1988.

As Amended November 4, 1988.

COPYRIGHT MATERIAL OMITTED

Carl N. Weiner, Lansdale, Pa.

John Shawde, Miami, Fla.

Edward Sparkman, Philadelphia, Pa., Standing Chapter 13 trustee.

OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

A. INTRODUCTION

The instant adversary proceeding causes us to explore several issues which arise when borrower-debtors file a Chapter 13 bankruptcy case in the midst of a secured lender's efforts to repossess and sell the Debtors' personal automobile due to a payment delinquency. We conclude that, as long as the sale of the vehicle has not been consummated prior to the filing, the Debtors are empowered to recover the vehicle if they adequately protect the interests of the secured lender, and that clearly their interest in the auto is property of the estate. In any event, since recovery of the vehicle is no longer practical here, the Debtors' causes of action to recover damages for violations of state law in the repossession and sale process, as well as any claims of violation of the automatic stay in the process, are property of the estate. Thus, such claims are "related" to the Debtors' bankruptcy case and within the jurisdiction of this court.

Given the stipulation of the Defendants that we may determine this proceeding, even if it is non-core, we proceed to enter judgment in favor of the Debtors on two of their claims. We hold the Defendant-lender only liable for $14,289.03 in statutory damages for selling the Debtors' vehicle without providing them prior written notice and $100.00 in damages for failing to provide the Debtors with requisite post-repossession notice. We decline to award damages against any of the Defendants for violation of the automatic stay in effecting a post-petition sale of the vehicle because of the Debtors' failure to clearly establish that any of the Defendants had knowledge of their bankruptcy when they acted or that they suffered damages thereby, and because the damages awarded on the other counts appear quite sufficient. Due also to the liberal recovery of damages by the Debtors for the notice violations and considering their lack of proof of financial loss due to the Defendants' actions, we make no further award of damages to them.

B. PROCEDURAL HISTORY

The Debtors, a practicing attorney acting as counsel for the Debtors and his wife, filed the underlying Chapter 13 case on December 24, 1987. This adversary proceeding was filed on March 21, 1988. Just prior to the date of the second listing of this proceeding for trial on July 7, 1988, the parties agreed to submit the matter on a Stipulation of Facts, to be filed on or before August 1, 1988, and Briefs to be submitted by the Debtors and the Defendants, on or before August 22, 1988, and September 12, 1988, respectively. Although the Stipulation of Facts was filed one day late and was supplemented thereafter, the Briefs were timely filed and the case was submitted as projected. These factual stipulations make it unnecessary for us to render Findings of Fact, and permit us to resort to the narrative form in addressing the rather interesting issues presented.

C. FACTS

The contract underlying this transaction is a Security Agreement of December 30, 1983, pursuant to which the Debtors, then residents of Miami, Florida, financed the purchase of a new 1984 Porsche automobile. In this transaction, the Debtors received the sum of $22,934.50 from Defendant CHASE MANHATTAN FINANCIAL SERVICES, INC. t/a CHASE MANHATTAN OF FLORIDA (hereinafter referred to as "Chase") and finance charges of $11,995.58 were imposed to finance this sum received over six (6) years. Total payments of $34,930.08 were to be made in 72 installments of $485.14. The Debtors subsequently relocated to the Philadelphia, Pennsylvania area. We are reluctant to paraphrase and therefore quote directly from the salient portions (paragraphs 10-27) of the parties' Stipulation of Facts:

10. As of September 11, 1987, Plaintiffs also referred to herein as "the Debtors" were in arrears under the Note accompanying the Security Agreement in the amount of $2,475.75 (five payments).

11. On Thursday, September 24, 1987, Howard Wiley, an employee of Defendant AMERICAN LENDERS SERVICE COMPANY, INC., a company engaged in the repossession of automobiles in the Philadelphia area, to which the Debtors had relocated (hereinafter "ALSC"), telephoned Plaintiff John J. Koresko, V at his place of employment, informed Plaintiff that Wiley was enforcing the security interest of Chase, and asked Plaintiff to voluntarily surrender the automobile.

12. Plaintiff informed Wiley that he would not surrender the automobile.

13. On September 25, 1987, Defendant Chase, by its employee Bob Calder, caused ALSC, by its employee Howard Wiley, to repossess Plaintiff\'s automobile from Plaintiff\'s place of employment in Norristown, Montgomery County, PA.

14. The costs of repossession were $438.35.

15. On the date of repossession, the automobile was transported to and thereafter held at ALSC\'s place of business, 338 Gov. Printz Blvd., Lester, Delaware County, Pennsylvania, until Chase, by its employee Robert (Bob) Calder, ordered ALSC to deliver the automobile to Defendant MANHEIM AUTO AUCTION (hereinafter "MAI"), Route 72, Manheim, PA 17505, on or about January 11, 1988, after the automatic stay was in effect.

16. On September 24, 1987, Defendant ALSC sent a letter to said Bob Calder advising him of the repossession. A copy of said letter is attached hereto as Exhibit "B".

17. John J. Koresko, V contacted ALSC on September 26, 1988 sic, and independent of any information from Defendants, located and photographed the vehicle on September 27, 1988 sic.

18. Defendants ALSC and MAI never furnished Plaintiffs with any written notice, either in person or by mail, concerning collection of Chase\'s debt, the repossession, or requirements for redemption of the automobile. Defendant Chase has no record of sending any such written notice to Plaintiffs. Plaintiffs received no such written notice from Chase, MAI, or ALSC.

19. John J. Koresko, V spoke to both Todd Reed and Bob Calder, employees of Chase who were responsible for the repossession, during telephone calls made to Chase in September, 1987, and January, 1988.

20. On September 25, 1988, sic, and in January, 1988, Chase informed John K. Koresko, V that all communications concerning the automobile should be referred to John Shawde, Esquire, of Mershon, Sawyer, Johnston, Donwoddy & Cole, attorneys with offices in Miami, Florida.

21. Prior to instituting the present action, Plaintiffs demanded from Defendants and their counsel that they turn over to the Trustee or Debtors said automobile, which Plaintiffs alleged to be property of the estate, but the Defendants refused to turn over said property or disclose any information relating to the whereabouts of said property, except that an employee of ALSC informed Plaintiffs in January, 1988 that the automobile had been removed to MAI.

22. The automobile had a fair and reasonable value of approximately $11,000 at the time of filing of the Chapter 13 Petition, which was less than the principal balance of the Note and the secured claim of Chase listed on Plaintiffs\' Chapter 13 Petition and Plan.

23. Between January 11, 1988 and February 12, 1988, MAI took various steps to prepare the automobile for sale.

24. Plaintiffs did not at any time after default sign a statement renouncing or modifying their rights to a sale of the automobile.

25. Defendants did not send to Plaintiffs notice of the time and place of any public sale, or notification of the time after which any private sale or other intended disposition of the automobile would take place.

26. Neither Chase, ALSC or MAI ever received a written request from Plaintiffs to cure any default or redeem the automobile.

27. The automobile was sold at a wholesale auto auction by Joseph Lyons for MAI on February 12, 1988. MAI remitted $9,450 of proceeds to Chase.

We can infer that, since payments were made for only 40 months at most out of 72 months of payments at $485.14, that at least thirty-two (32) payments of $485.14 were due, or a sum of at least $15,500.00 was due on the contract at the time of repossession and sale, leaving a deficiency in excess of $6,000.00.

D. THIS COURT HAS JURISDICTION TO HEAR THIS MATTER AND BY AGREEMENT OF THE PARTIES WILL DETERMINE IT

The initial issue which the parties dispute is the jurisdiction of this court to hear at least some of the five counts of the Debtors' Complaint, which are as follows:

I. Turnover of the value of the vehicle.

II. Violation of the automatic stay in the sale process.

III. Violation of 13 Pa.C.S. § 9504(c) of the Pennsylvania Uniform Commercial Code (hereinafter "UCC").¹

IV. Violation of 69 P.S. §§ 623, 625 of the Pennsylvania Motor Vehicle Sales Finance Act, 69 P.S. § 601, et seq. (hereinafter "MVSFA").

V. Violation of 15 U.S.C. § 1692g of the federal Fair Debt Collection Practices Act (hereinafter "FDCPA").

The parties agree that Counts I and II are core proceedings, and we agree with the Defendants that the Debtors have failed to prosecute their asserted claims under Count V.² The Debtors contend that Counts III and IV are core claims pursuant to 28 U.S.C. §§ 157(b)(2)(B) and (b)(2)(K).³ The Defendants contend that they are "unrelated" claims, but stipulated that, if they were deemed "related" and non-core, this court may determine them. See 28 U.S.C. § 157(c)(2). This stipulation reduces our burden to that of merely ascertaining whether these claims are "related" or not because, whether or not they are non-core, we are thus...