In re Ramkaran

• Decision Date: 07 October 2004
• Docket Number: No. CIV.A.DKC 2004-2007.,CIV.A.DKC 2004-2007.
• Citation: 315 B.R. 361
• Parties: In re Doodnauth RAMKARAN. The Fairville Company, L.P., Appellant, v. Doodnauth Ramkaran, Appellee.
• Court: U.S. District Court — District of Maryland

315 B.R. 361

In re Doodnauth RAMKARAN.

The Fairville Company, L.P., Appellant, v. Doodnauth Ramkaran, Appellee.

No. CIV.A.DKC 2004-2007.

United States District Court, D. Maryland.

October 7, 2004.

Stuart R. Blatt, Towson, MD, for Plaintiff.

Barbara Gail Curry, Pro Se.

Alvin George Curry, Pro Se.

MEMORANDUM OPINION

CHASANOW, District Judge.

This case is before the court on appeal from the order of Bankruptcy Judge Paul Mannes, denying the motion of Appellant creditor The Fairville Company for relief from the automatic stay imposed, pursuant to 11 U.S.C. § 362(a), in the Chapter 13 bankruptcy of Appellee debtor Doodnauth Ramkaran. Oral argument is deemed unnecessary because the facts and legal arguments are adequately presented in the briefs and record, and the decisional process would not be significantly aided by oral argument. See Fed. R. Bankr.P. 8012. For the reasons that follow, the court will affirm the bankruptcy court's ruling.

I. Background

When a Chapter 13 bankruptcy petition is filed, most actions against the debtor, including acts to perfect or enforce any lien against property of the debtor's estate, are automatically stayed. See 11 U.S.C. § 362(a)(4). The automatic stay gives the bankruptcy court an opportunity to harmonize the interests of both debtor and creditors while preserving the debtor's assets for subsequent repayment and reorganization of his or her obligations. In re Robbins, 964 F.2d 342, 345 (4th Cir.1992).

Section 362(d)(1) of the Bankruptcy Code, 11 U.S.C. § 362(d)(1), provides that the bankruptcy court may lift the stay "for cause." ¹ The Code, however, provides no definition of what constitutes "cause," so courts must determine whether relief is appropriate on a case-by-case basis. In re Robbins, 964 F.2d at 345. The decision to lift an automatic stay under Section 362 is within the discretion of the bankruptcy judge. Id.

In April 2001, Appellee Doodnauth Ramkaran purchased a dump truck ("the Truck") from Elliott Wilson Trucks for use in his dump trucking business, "Ram's Trucking." Purchase of the Truck was financed with a secured loan of $133,000 from Appellant The Fairville Company. Appellee signed a security agreement and a personal guaranty for repayment. A second personal guaranty was to be signed by Mrs. Ramkaran as a condition of the loan. Unbeknownst to Appellant, however, Appellee signed his wife's name to the second guaranty; Mrs. Ramkaran did not sign.

It is disputed whether Sam Keaton, the employee of Elliott Wilson Trucks who provided to Appellee the paperwork for the loan, encouraged Appellee to sign for his wife. Appellee alleges that he telephoned his wife, and, after obtaining her permission, signed his wife's name instead of procuring her signature, "in front, and with the blessing of sic Mr. Keaton." Paper no. 5, at 5. Appellant, on the other hand, alleges that Mr. Keaton "did not tell Mr. Ramkaran to sign his wife's signature," that Mr. Keaton "would not have done the deal had he known it," and that "Mr. Ramkaran pulled a hoodwink on ... Mr. Keaton." Tr. at 4, 6.

In August 2003, Appellee filed a Chapter 13 bankruptcy petition. Appellee then filed a motion to value collateral on the Truck, asserting an appraised value of $71,550. Appellant did not contest this valuation, allegedly because it believed itself to be adequately protected for the full balance of the loan by the personal guaranty of Mrs. Ramkaran.

Appellee's bankruptcy plan was confirmed by the bankruptcy court in March 2004. Appellee had made regular payments to Appellant until March 2004, but then ceased direct payments to Appellant in accordance with his bankruptcy plan. Appellant estimates that at that time, Appellee still owed approximately $90,000 on the loan. See Tr. at 6.

Shortly after confirmation of the bankruptcy plan, Appellant contacted Mrs. Ramkaran to initiate collection from her in accordance with her personal guaranty. Mrs. Ramkaran informed Appellant that her husband, and not she, had signed her name to the guaranty, and that she would not guarantee the loan. In April 2004, Appellant filed a motion for relief from the stay.² In May 2004, the bankruptcy court denied Appellant's motion, reasoning that other creditors would be hurt if he were to lift the stay. See Tr. at 12. Appellant then appealed to this court.

II. Standard of Review

When a district court reviews a bankruptcy court's decision to decline to lift an automatic stay, the district court acts as an appellate court, reviewing the bankruptcy court's findings of fact for clear error and conclusions of law de novo. See Canal Corp. v. Finnman (In re Johnson), 960 F.2d 396, 399 (4th Cir.1992); Travelers Ins. Co. v. Bryson Prop., XVIII (In re Bryson Prop., XVIII), 961 F.2d 496, 499 (4th Cir.), cert, denied sub nom., Bryson Prop., XVIII v. Travelers Ins. Co., 506 U.S. 866, 113 S.Ct. 191, 121 L.Ed.2d 134 (1992); Consumer Prot. Div., Office of the AG v. Luskin's, Inc. (In re Luskin's, Inc.), 213 B.R. 107, 110 (D.Md.1997). The law is well-settled that a bankruptcy court's discretionary determination on whether to lift an automatic stay will be overturned only upon a showing of abuse of that discretion. In re Luskin's, Inc., 213 B.R. at 110 (quoting Frederick County Nat'l Bank v. Lazerow, 139 B.R. 802, 804 (D.Md.1992)); see Claughton v. Mixson, 33 F.3d 4, 5 (4th Cir.1994) ("We will reverse a decision to lift the automatic stay `for cause' only when an abuse of discretion has occurred.") (citing In re Robbins, 964 F.2d at 345).

Abuse of discretion analysis in this context was explained in McDow v. Official Comm. of Equity Sec. Holders of Criimi Mae, Inc. (In re Criimi Mae, Inc.), 247 B.R. 146, 151 (D.Md.1999):

An abuse of discretion occurs only when the bankruptcy court relies upon clearly erroneous findings of fact or uses an erroneous legal standard. Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir.1999). However, even if a bankruptcy court applies the correct legal principles to adequately supported facts, the discretion of the bankruptcy judge "is not boundless and subject to automatic affirmance." Id. (citing Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 506 (4th Cir.1977)). "This court is obligated to review the record and reasons offered by the bankruptcy court and to reverse if the `court has a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors.'" Id. (quoting Wilson, 561 F.2d at 506).

III. Analysis

When deciding whether cause has been shown, "the court must balance potential prejudice to the bankruptcy debtor's estate against the hardships that will be incurred by the person seeking relief from the automatic stay if relief is denied." In re Robbins, 964 F.2d at 345 (citing In re Peterson, 116 B.R. 247, 249 (D.Colo.1990)). Here, the Judge Mannes' ruling indicates that he concluded that the potential for hardship to Appellee's other creditors outweighed any potential prejudice to Appellant.

The bankruptcy court concluded that the rights of other creditors would be seriously harmed if Appellant were allowed to foreclose on the Truck at this time. See Tr. at 12 ("if the Court relieves the stay the Chapter 13 is gone and other creditors are going to be hurt too."). This finding of fact was not clear error. Ram's Trucking's "fleet" consists of two dump trucks and a pickup truck. If the court were to lift the stay, Appellant would foreclose on the Truck, with obviously likely dire consequences for Appellee's business, and therefore for his ability to meet his obligations under the confirmed bankruptcy plan.

Against this likelihood, the court was to balance "the hardships that will be incurred by Appellant if relief is denied." In re Robbins, 964 F.2d at 345. Appellant, however, did not then and has not since asserted any significant hardship. Appellant's loan is secured by a first priority, perfected lien in the Truck. At best, Appellant will be repaid through Appellee's bankruptcy plan payments; at worst, Appellant will have to wait before recovering the Truck. If necessary, Appellant can pursue a separate claim against Mrs. Ramkaran. In sum, it is not unreasonable to surmise that this hardship is not as great as that imposed on Ram's Trucking by the loss of one of its two dump trucks. Therefore the bankruptcy court did not abuse its discretion in concluding that the balance of hardships favored denying Appellant's motion for relief from the stay.

Appellant, however, argues that the court should nonetheless lift the automatic stay because Appellee's bad faith constitutes cause under § 362(d)(1). Specifically, Appellant contends it was defrauded by Appellee, in that it would never have loaned Appellee the money had Mrs. Ramkaran not signed as a personal guarantor. Appellant further argues that Appellee and Mrs. Ramkaran defrauded Appellant a second time by waiting until after the "cram down" collateral valuation of the truck before revealing the forgery.

Bad faith in filing for bankruptcy is sometimes grounds for lifting an automatic stay under Section 362, but a finding of bad faith alone does not constitute per se cause for relief from a stay. More than twenty years ago, the bankruptcy court wrote that "courts have concluded that a lack of good faith or misconduct in filing a petition under Chapter 11 entitles a secured creditor to relief from the stay of § 362." In re Corporation Deja Vu, 34 B.R. 845, 846 (Bankr.D.Md.1983) (Mannes, J.) (citing cases). In Corporation Deja Vu, the court granted relief from the stay because it concluded that the entire bankruptcy petition was a sham:

Clearly, the debtor entity was created for the sole purpose of buying time for its principal to broker the transaction. Reorganization was neither contemplated nor possible. The petition was filed in bad faith. This bad faith constitutes cause to allow the secured creditor relief from the stay.

Id. at 850....