In re Sharon
| Decision Date | 30 July 1996 |
| Docket Number | Bankruptcy No. 96-31035. |
| Citation | 200 BR 181 |
| Parties | In re Rosemary SHARON dba Sharon's Janitorial, Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
COPYRIGHT MATERIAL OMITTED
Harold Jarnicki, Lebanon, OH, Stephen D. Miles, Dayton, OH, Phyllis A. Ulrich, Cleveland, OH, for Debtor.
George W. Ledford, Chapter 13 Trustee, Englewood, OH.
DECISION CONFIRMING PLAN, DETERMINING RELIEF FROM STAY, VALUATION, AND ADEQUATE PROTECTION ISSUES, FINDING STAY VIOLATION AND FIXING DAMAGE AWARD
This proceeding, which arises under 28 U.S.C. § 1334(b) in a case referred to this court by the Standing Order of Reference entered in this district on July 30, 1984, is determined to be a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) — matters concerning the administration of the estate, (B) — allowance or disallowance of claims against the estate, (C) — counterclaims by the estate against persons filing claims against the estate, (E) — orders to turn over property of the estate, (G) — motions to terminate, annul, or modify the automatic stay, (K) — determinations of the validity, extent, or priority of liens, (L) — confirmation of plans and (O) — other proceedings affecting the adjustment of debtor-creditor relations.
The issues presented by this proceeding have generated an abundance of case law with varied analyses and results. This court has determined that it is appropriate to publish its determination of the issues presented, not to add additional weight to an arguably unnecessarily large body of case law, but to clarify current positions on these issues and provide guidance to interested parties who will repeatedly encounter them in chapter 13 practice. The following issues will be addressed in the order listed: 1) Where a vehicle is repossessed prepetition, does a secured creditor violate the automatic stay by failing to comply with a chapter 13 debtor's postpetition request for its return, specifically when proof of insurance on the vehicle has been provided; and what are the appropriate standards governing relief from stay and adequate protection in such circumstances?; 2) What are the appropriate standards for resolving disputed valuation of a vehicle where the debtor proposes to retain it as part of a chapter 13 reorganization?; 3) What are the applicable standards governing confirmation of a proposed plan where a chapter 13 petition is filed a short time after the debtor has purchased and taken possession of a vehicle pursuant to an installment sales contract, but does not propose to pay the claim in full or in accordance with the interest rate specified in the installment sales contract?; and 4) What is the appropriate burden of proof and measure of damages for violations of the automatic stay?
The debtor's uncontroverted testimony, which the court finds credible, and the documents introduced without objection, establish the following facts. Rosemary Sharon dba Sharon's Janitorial (the "Debtor") filed a voluntary petition for relief under 11 U.S.C. § 13011 et seq. on March 11, 1996. The plan provides the Debtor will pay $1,000 per month for a sixty (60) month period, pursuant to a pot plan2 which projects a 24% distribution to unsecured creditors. TranSouth Financial Corporation ("TranSouth") financed the Debtor's purchase of a 1995 Mitsubishi 3000 GT automobile (the "Vehicle") and was listed in the Debtor's schedules as a creditor holding a claim secured by the Vehicle. The Debtor paid $3,450 as a down payment, signed a Retail Installment Contract and Security Agreement dated November 30, 1995 (the "Agreement") and granted a security interest in the Vehicle to TranSouth. TranSouth perfected its interest in the Vehicle and is listed as the first lienholder on the Ohio Certificate of Title. The Agreement required the Debtor to remit to TranSouth monthly payments of approximately $984 with the first payment due on January 1, 1996. The Debtor made the first payment pursuant to the Agreement, and a check for the second payment was tendered. The Debtor was in the process of changing banks when the second payment became due. Because the check for the second payment did not clear prior to the Debtor's former bank account being closed, the Debtor was in default under the terms of the Agreement. A TranSouth representative contacted the Debtor to advise her that she was in default and that the Vehicle would be repossessed unless TranSouth received two (2) payments, one for the month of February 1996 and one for the month of March 1996. Although the Debtor submitted the two (2) payments in a check drawn on her new bank account, TranSouth repossessed the Vehicle before the check could clear. In response to the repossession, the Debtor stopped payment on the check and contacted counsel.
On the same day the Debtor filed her chapter 13 petition, counsel for the Debtor advised TranSouth representative Davey Havenor ("Havenor") by telephone of the Debtor's filing and requested the return of the Vehicle. Counsel for the Debtor also telephoned Ed Rogers, a TranSouth customer service representative on March 11, 1996, relayed the same information regarding the Debtor's filing of a bankruptcy petition, and requested the return of the Vehicle. In a second telephone conversation between counsel for the Debtor and Havenor on the same date, Havenor requested a copy of the Debtor's schedules and verification of insurance. The Debtor complied with the request by faxing a copy of the insurance declaration and the name of the Debtor's insurance agent to TranSouth. Counsel for the Debtor verified TranSouth's receipt of the requested information and renewed his request for the return of the Vehicle in a third telephone call made to Havenor on March 11, 1996. Counsel for the Debtor also telephoned TranSouth's attorney, Wade Holliday ("Holliday"), on March 11, 1996 and left a message at his Dallas, Texas office. The following day, counsel for the Debtor made two (2) telephone calls to Holliday requesting the return of the Vehicle, and faxed Holliday a copy of the Debtor's schedules.
Although the Debtor provided TranSouth with the case number, copies of the filed schedules, and proof of insurance, the Vehicle was not returned. The Debtor filed a Motion for Contempt and Sanctions for Violation of the Automatic Stay (Doc. 5-1) ("Debtor's Motion") on March 15, 1996 together with a Motion for an Expedited Hearing (Doc. 6-1).
A hearing was scheduled (Doc. 7-1) for March 21, 1996 on the Debtor's Motion. On the day of the scheduled hearing, TranSouth filed a Motion for Relief from Automatic Stay Imposed Under Section 362 or in the Alternative for Adequate Protection and Brief in Opposition to Motion for Contempt and Sanctions for Violation of Automatic Stay ("TranSouth's Motion for Relief from Stay or Adequate Protection") (Doc. 8-1).3 As the basis for its Motion for Relief from Stay or Adequate Protection, TranSouth alleged that the Vehicle was not necessary for an effective reorganization, and that its interest in the Vehicle was not adequately protected. Noting the of the Vehicle, TranSouth's Motion for Relief from Stay or Adequate Protection requested that the Debtor be required to provide TranSouth with adequate protection payments and proof of insurance in the event that the court should require TranSouth to return the Vehicle to the Debtor. TranSouth additionally contended that the Vehicle was a luxury car "beyond contemplation of the protection of the bankruptcy code" and that the Debtor could "easily afford an alternative, far less expensive, form of transportation than a Mitsubishi 3000 GT" to travel to and from her job.
After the March 21, 1996 hearing, this court entered an Order Requiring Return of Vehicle (Doc. 10-1), which provided that issues related to damages of the Debtor would be heard at the same time as the hearing on TranSouth's Motion for Relief from Stay or Adequate Protection. The Vehicle was returned to the Debtor on March 22, 1996.
On March 26, 1996, this court entered a subsequent Order Setting Hearing and Requiring Filings (Doc. 13-1) which scheduled a hearing on TranSouth's Motion for Relief from Stay or Adequate Protection for April 18, 1996. At the request of the Debtor, the hearing was rescheduled to April 22, 1996. The March 26, 1996 order also required counsel for the Debtor to file with the court a specific listing of actual damages claimed on behalf of the Debtor, as well as a specific listing of attorney fees and costs claimed.
Pursuant to this court's March 26, 1996 order, Debtor's List of Damages Sought for Stay Violation and Other Relief (Doc. 18-1) ("Debtor's List of Damages") was filed on April 2, 1996. Attached to the Debtor's List of Damages was a log of time spent and attorney fees claimed by the counsel for the Debtor as a result of TranSouth's refusal to return the Vehicle4. Also enumerated in the Debtor's List of Damages were claims for storage and towing fees amounting to $154 and punitive damages of $7,500. On April 16, 1996, a Brief of TranSouth Financial Corporation in Opposition to Debtor's List of Damages Sought for Violation and Other Relief Sought ("Brief in Opposition") (Doc. 23-1) was filed. In the Brief in Opposition, TranSouth argued that it did not refuse to return the Vehicle and therefore did not willfully violate the automatic stay. Instead, TranSouth asserted that negotiation for return of the Vehicle in exchange for adequate protection was contemplated by § 362(e) and that the return of the Vehicle could be conditioned upon same. If the Debtor incurred expenses due to its actions, TranSouth contended that such expenses resulted from "Debtor's misinterpretation of TranSouth's attempt to obtain adequate insurance". TranSouth also disputed the Debtor's claim for punitive damages and alleged that the itemization of the...
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