In re Theokary

• Decision Date: 14 February 2011
• Docket Number: Adversary No. 09–051.,Bankruptcy No. 07–11008 ELF.
• Citation: 65 Collier Bankr.Cas.2d 139,444 B.R. 306
• Parties: In re Rafail THEOKARY, Debtor.Rafail Theokary, Plaintiff,v.Eric Abbatiello, et al., Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

444 B.R. 306

65 Collier Bankr.Cas.2d 139

In re Rafail THEOKARY, Debtor.Rafail Theokary, Plaintiff,

v.Eric Abbatiello, et al., Defendants.

Bankruptcy No. 07–11008 ELF.

Adversary No. 09–051.

United States Bankruptcy Court, E.D. Pennsylvania.

Feb. 14, 2011.

Kenneth A. Sandler, Attorney at Law, Marlton, NJ, Michael J. Rutenberg, Attorney at Law, Philadelphia, PA, for Plaintiff.Jeffrey R. Pocaro, Attorney at Law, Fanwood, NJ, Keith D. Sklar, Law Offices of Sklar Smith–Sklar, Ewing, NJ, for Defendants.

OPINION

ERIC L. FRANK, Bankruptcy Judge.

I. INTRODUCTION

In this adversary proceeding, the Plaintiff–Debtor Rafail Theokary (“the Debtor”) asserts that Defendants Eric Abbatiello (“Abbatiello”), Tom Shay (“Shay”), Showplace Farms (“Showplace”) and Gaitway Farms, Inc. (“Gaitway”), willfully violated the automatic stay, 11 U.S.C. § 362(a), during the course of his no-asset bankruptcy case. The Debtor seeks monetary damages from the Defendants. See 11 U.S.C. § 362(k). Trial of the liability issues was bifurcated from the damages issues.

The crux of the dispute as to liability can be summarized concisely.

When the Debtor filed this bankruptcy case on February 16, 2007, he held a leasehold interest in three standardbred race horses ¹ (when referred to collectively, “the Horses”). The Highland Group (“Highland”) was the owner-lessor of the Horses. After leasing the Horses, the Debtor engaged Shay or Abbatiello to train the horses and, at one time or another, boarded them at Gaitway and Showplace. The Debtor then failed to pay everything due to Shay, Abbatiello, Showplace and Gaitway for the services they provided.

Two days after the commencement of this bankruptcy case, and with notice of the filing, Shay and Abbatiello enforced their respective statutory liens against the Horses by conducting stableman's lien sales of the Horses. See N.J.S.A. §§ 2A:44–51 to 2A:44–52. The stableman's lien sales, which were later confirmed by order of the New Jersey Superior Court, terminated Highland's ownership of the Horses. The Debtor contends that the liens sales also terminated his leasehold interests in the Horses, thereby violating the automatic stay. In addition, the Debtor contends that Showplace violated the automatic stay by interfering with his attempt to take possession of two of the Horses after commencement of the bankruptcy case. Showplace denies this allegation.

As explained below, I conclude that the stableman's lien sales terminated the Debtor's leasehold interests in the Horses and therefore, Shay and Abbatiello violated the automatic stay, 11 U.S.C. § 362(a)(3), by conducting the sales. I also find that neither Showplace nor Gaitway took any action while the automatic stay was in place that interfered with the Debtor's rights under the pre-petition leases or that otherwise violated the automatic stay.

Consequently, I will:

(1) enter judgment in favor of the Debtor against Shay and Abbatiello;

(2) enter judgment in favor of Showplace and Gaitway and against the Debtor; and

(3) schedule a damages hearing at the earliest possible date on the Debtor's claims against Shay and Abbatiello.

II. PROCEDURAL HISTORY

The Debtor commenced a chapter 7 bankruptcy case on February 16, 2007. In the course of the case, the Debtor filed an Amended Schedule G in which he disclosed his leasehold interest in the Horses. (Bky. No. 07–11008, Doc. # 49). On September 12, 2007, the chapter 7 Trustee (“the Trustee”) filed a no-asset report. On January 14, 2008, the court entered the Debtor's chapter 7 discharge and an order directing the Clerk to close the case. (Bky. No. 07–11008, Doc. # 's 52, 53). The docket reflects that the Clerk did so on January 17, 2008.²

On August 27, 2008, the Debtor filed a Motion to Reopen the bankruptcy case. (Bky. No. 07–11008, Doc. # 56). The court held a hearing on the Motion to Reopen on November 4, 2008 and shortly thereafter, issued a Memorandum Opinion and Order granting the Motion. See In re Theokary, 2008 WL 5329310 (Bankr.E.D.Pa. Dec.19, 2008).

On February 20, 2009, the Debtor commenced this adversary proceeding by filing a Complaint. The Defendants answered the Complaint on February 24, 2009. ³ The pretrial process was singularly contentious, marked by numerous dispositive, discovery and sanction motions filed by both sides, many of which were filed without complying with the rules of court and all of which were denied.⁴ At the final pretrial conference on September 10, 2009, I decided to bifurcate the liability and damages phases of the trial.

The trial on liability commenced on November 9, 2009. After the Plaintiff completed presentation of his case-in-chief on the first day of trial, the Defendants moved for entry of judgment in their favor. See Fed.R.Civ.P. 52(c) and 54(b) (incorporated by Fed. R. Bankr.P. 7052 and 7054). ⁵ I orally granted the motion as to Gaitway and denied it as to the other Defendants. On November 23, 2009, the Clerk docketed a written order entering judgment in favor of Gaitway and against the Plaintiff. (Adv. No. 09–051, Doc. # 112). The Plaintiff appealed that order to the district court on December 7, 2009.⁶ I will discuss the disposition of the appeal at the end of this recitation of the procedural history.

The trial concluded (initially) after a second day of testimony on November 30, 2009, after which the court established a schedule for the filing of post-trial submissions by the parties. (Adv. No. 09–051, Doc. # 117). However, on December 7, 2009, the Defendants filed a Motion to Re–Open the Trial and Permit Additional Testimony as a Result of Defendants Obtaining Newly Discovered Evidence After Completion of the Trial. (Adv. No. 09–051, Doc. # 121). After a hearing held on January 20, 2010, I granted that motion, in part,⁷ by order dated January 26, 2010. (Adv. No. 09–051, Doc. # 141). Consequently, a third and final day of trial was held on February 22, 2010, after which I established a new schedule for the filing of post-trial submissions by the parties. (Adv. No. 09–051, Doc. # 162). The last post-trial submission was filed on June 15, 2010.

On July 1, 2010, the district court remanded the Plaintiff's appeal from the November 23, 2009 order dismissing the Plaintiff's claims against Gaitway for the issuance of a “more detailed opinion” explaining the reasons for the dismissal of Gaitway. (Adv. No. 09–051, Doc. # 172). This Opinion is intended to comply with the district court's mandate as well as Fed.R.Civ.P. 52(a).⁸

III. FINDINGS OF FACT

After consideration of the testimony presented at trial,⁹ the documentary evidence, the pleadings, the facts stipulated to by the parties and the parties' post-trial submissions, and based upon my assessment of the credibility of the testifying witnesses, I make the following findings of fact. To the extent the witnesses at trial offered conflicting testimony on issues relevant to the disposition of this adversary proceeding, my findings of fact reflect my resolution of those conflicts based on my assessment of the witnesses' demeanor, motivations, credibility, and related factors.

the parties

1. Plaintiff Rafail Theokary is the debtor in this bankruptcy case.

2. Shay is an individual who is in the business of training horses.

3. Abbatiello is an individual who is in the business of training horses. He conducts business under the name “Abbatiello Racing Stables.”

4. Gaitway is a corporation that is in the business of boarding horses. It is located at 355 Highway # 33, Manalapan, New Jersey.

5. Showplace is a limited liability company that is in the business of boarding horses. It is located at 505 Highway # 33, Manalapan, New Jersey.

the First Leases and training agreements

6. On June 1, 2005, the Debtor entered into two lease agreements with McCord Farms pursuant to which he leased two horses for a twenty-four month term: Mac Only VP, Mac's Emily BJ. (Exs. P–5, P–6).

7. On July 23, 2005, the Debtor entered into a lease agreement with McCord Farms pursuant to which he leased another horse for a twenty-four month term, Mac's Derrick T. (Ex. P–4).

8. All three of the leases (collectively, “the First Leases”):

a. stated the parties' intention to race each horse with a final intention to sell the horse;

b. provided for purse distributions of 70% to the Debtor and 30% to McCord Farms;

c. provided for a division of the final sale price of 20% to the Debtor and 80% to McCord Farms; and,

d. imposed on the Debtor all responsibility for costs incurred in maintaining the horse.

9. In January 2006, the Debtor entered into separate oral agreements with Shay and Abbatiello to train and feed the Horses.

10. The Debtor retained Shay to train Mac's Derrick T and Mac Only VP.

11. The Debtor retained Abbatiello to train Mac's Emily BJ.¹⁰

12. The Debtor's agreements with Shay and Abbatiello required him to pay the trainer's fees for their services and to pay the boarding bills for the Horses.

the boarding of Mac's Derrick T and Mac Only VP and Mac's Emily BJ

13. Initially, Shay boarded Mac's Derrick T and Mac Only VP at Showplace.

14. In May 2006, Shay took Mac's Derrick T and Mac Only VP from Showplace Farms to Pocono Downs, a racing facility in Wilkes–Barre, PA.

15. In October 2006, Shay took Mac's Derrick T and Mac Only VP to Magical Acres Farm (“Magical Acres”), where they remained through February 18, 2007. ¹¹

16. Initially, Abbatiello boarded Mac's Emily BJ at Gaitway.

17. In August 2006, Abbatiello transported Mac's Emily BJ from Gaitway to his father's farm, about twenty miles away in Colt's Neck, NJ, where the horse remained prior to the February 18, 2007 stableman's lien sale.

18. On February 18, 2007, Abbatiello transported Mac's Emily BJ to Gaitway for the purpose of exposing the horse to a stableman's lien sale. After the conclusion of the sale that day, Abbatiello brought the horse back to his father's farm.

the initial state court litigation and the Debtor's New Jersey bankruptcy filing

19. After entering into the...