Opinion
C/A No. 23-03428-EG
2024-01-12
IN RE: Samuel WRIGHT, Sr., Debtor(s).
Samuel Wright, Sr., Charleston, SC, Pro Se. Michelle L. Vieira, Myrtle Beach, SC, for Trustee. US Trustee's Office, Columbia, SC, for U.S. Trustee.
Samuel Wright, Sr., Charleston, SC, Pro Se. Michelle L. Vieira, Myrtle Beach, SC, for Trustee. US Trustee's Office, Columbia, SC, for U.S. Trustee.
ORDER GRANTING RELIEF FROM STAY TO THE EXTENT NECESSARY
Elisabetta G. M. Gasparini, United State Bankruptcy Judge
THIS MATTER is before the Court on the Motion for Relief from Stay filed by Capital One Auto Finance, a division of Capital One, N.A. ("Capital One") on November 22, 2023 and the Response thereto filed by Samuel Wright, Sr. ("Debtor") on December 5, 2023. The Court held a hearing on this matter on December 19, 2023, which was attended by Debtor and Lawrence Johnson ("Movant's Counsel"), counsel for Capital One, and continued to January 10, 2024. The January 10, 2024 hearing was attended by Movant's Counsel and Debtor, and the Court admitted into evidence or took judicial notice of several documents described below. After careful consideration of the record, applicable law, and arguments of the parties, the Court makes the following findings of fact and conclusions of law:
ECF No. 17.
ECF No. 22. See also Debtor's Affidavit of Facts in Support of Debtor's Objection to Capital One Auto Finance ('COAF'), a Division of Capital One, N.A.'s ('CONA') Motion to Modify Stay or for Adequate Protection (the "Supporting Affidavit") filed on Jan. 2, 2024, at ECF No. 24.
FINDINGS OF FACT
On March 4, 2023, Debtor and Hudson Nissan of Charleston entered into a Retail Installment Sale Contract for the sale of a 2023 Nissan Pathfinder (VIN: 5N1DR3CB0PC250400) (the "Vehicle") to Debtor. To finance the purchase, Debtor borrowed $49,228.50, with monthly payments of $964.73 to begin April 3, 2023. The contract provides either party may elect to submit any dispute under the contract to arbitration. On June 5, 2023, Debtor appears to have sent an "International Bill of Exchange" to the Secretary of Treasury, U.S. Department of Treasury Bank (the "Department of Treasury"), appearing to demand that it pay $50,675.91 towards Debtor's obligation to Capital One. On the same day, Debtor appears to have filed a UCC Financing Statement Amendment, apparently trying to assign the $50,675.91 supposedly owed him by the Department of Treasury to Capital One. Further, Debtor alleges he sent the International Bill of Exchange directly to Capital One.
Capital One's Ex. 2.
Id.
Id.
Debtor's Response.
Id.
Debtor's Ex. B.
On November 8, 2023 (the "Petition Date"), Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code, pro se. On November 27, 2023, Debtor filed his schedules and statements. Debtor lists the Vehicle on Schedule A/B, with the "current value of the entire property" listed as $31,221.00 and the "current value of the portion you own" listed as $53,613.63. On Debtor's Schedule C, he attempts to exempt 100% of the fair market value of the Vehicle pursuant to S.C. Code Ann. § 15-41-30. The "current value of the portion you own" is listed as $53,613.63. Debtor's Schedule D lists Capital One as having a $53,613.63 claim secured by the Vehicle, which is valued at $31,221.00. No other secured creditors are listed.
ECF No. 20.
S.C. Code Ann. § 15-41-30 provides specific dollar amount exemptions and does not provide for 100% of fair market value exemptions.
Schedule G (Executory Contracts and Unexpired Leases) lists the contract with Capital One for the Vehicle. Debtor's Schedule I reflects that he is employed at DoorDash and Grubhub, two food delivery services. Part 4, Question 10 of Debtor's Statement of Financial Affairs indicates the Vehicle was repossessed on November 1, 2023. On Debtor's Statement of Intention for Individuals Filing Under Chapter 7, Debtor indicates he intends to retain the Vehicle and "discharge the debt". At the January 10, 2024 hearing, Debtor indicated he discharged the debt through the "International Bill of Exchange".
On November 22, 2023, Capital One filed the Motion for Relief from Stay. In the Motion, Capital One asserts it holds a claim against Debtor in the amount of $53,613.63 (as of November 16, 2023) secured by the Vehicle. Capital One asserts the total arrearage is $7,717.84, as, according to the Certification of Facts, Debtor has not made payments from April 2023 to November 2023 (i.e., has not made a single payment). The Certification of Facts asserts the fair market value of the Vehicle—based on N.A.D.A.—is $40,050.00, leaving equity of ($13,563.63). Capital One requests relief from stay pursuant to 11 U.S.C. § 362(d)(1), or, in the alternative, adequate protection pursuant to 11 U.S.C. § 363(e).
On December 5, 2023, Debtor filed a timely Response. Debtor contends Capital One has not shown that it has a perfected security interest in the Vehicle in accordance with S.C. Code Ann. § 36-9-310(a). Further, Debtor asserts cause does not exist to grant relief from stay pursuant to 11 U.S.C. § 362(d)(1) because Debtor has provided Capital One with value. At the January 10, 2024 hearing, Debtor clarified that he has provided value to Capital One through the International Bill of Exchange. Debtor also asserts the Motion for Relief from Stay improperly seeks to bypass the mandatory arbitration clause in the Retail Installment Sale Contract. Additionally, Debtor makes a request that Capital One produce certain records pursuant to the Freedom of Information Act, 5 U.S.C. § 552 ("FOIA"), but failed to present any factual or legal grounds to support the request. In the Certification of Facts attached to his response, Debtor values the Vehicle at $40,000.00 based on N.A.D.A., values Capital One's lien at $0.00, and therefore estimates his equity in the Vehicle is $40,000.00.
In his Supporting Affidavit, Debtor asserts that Capital One has "not validated the alleged debt" because it has not presented a "comprehensive general ledger statement," citing a case from the Supreme Court of Hawaii in support. Debtor also contends that Capital One has failed to comply in certain respects with Fed. R. Bankr. P. 3001.
The first date set for the meeting of creditors pursuant to 11 U.S.C. § 341 was January 2, 2024. On January 3, 2024, Chapter 7 Trustee Michelle L. Vieira filed a Notice indicating the meeting of creditors had been continued to January 26, 2024.
ECF No. 3, entered Nov. 8, 2023.
ECF No. 25.
The Court held a hearing on this matter on January 10, 2024. At the hearing, the Court admitted into evidence or took judicial notice of several documents. The Court admitted into evidence a certified copy of a Title Information Inquiry showing Capital One has an outstanding lien on the Vehicle as of March 4, 2023 and that a registration suspension was issued on October 19, 2023 for failure to pay property tax. The Court also admitted into evidence a N.A.D.A. valuation of the Vehicle dated November 17, 2023 that estimates the Vehicle has a retail value of $40,050.00. Further, the Court admitted into evidence the Vehicle's Certificate of Title from the State of South Carolina showing Capital One as the first lienholder.
The Court sustained Debtor's objection to one document Capital One sought to introduce into evidence. There were no other objections.
CONCLUSIONS OF LAW
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157, this matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(G), and the Court may enter a final order.
The filing of a bankruptcy petition "operates as a stay, applicable to all entities, of" a number of actions, including "the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title" and "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate[.]" 11 U.S.C. § 362(a). Capital One seeks relief from the automatic stay pursuant to 11 U.S.C. § 362(d)(1), which provides that the Court shall grant relief from stay "for cause, including the lack of adequate protection of an interest in property of such party in interest . . . ." "The party requesting relief has the initial burden of proving cause exists for relief from the automatic stay, including lack of adequate protection, and lack of equity in the property." In re Hamilton, 651 B.R. 499, 504 (Bankr. D.S.C. 2023) (quoting In re Morgan, 630 B.R. 476, 479 (Bankr. D.S.C. 2021)). To establish a prima facie case for relief, the movant must demonstrate that the debtor owes a debt to it, that it possesses a valid security interest securing the debt, and that the collateral securing the debt is declining in value. In re Jeff Benfield Nursery, Inc., 565 B.R. 603, 610 (Bankr. W.D.N.C. 2017). "Once the creditor makes a prima facie case, the burden shifts to the debtor on all other issues." Hamilton, 651 B.R. at 504 (quoting Morgan, 630 B.R. at 479).
The Court determines whether a creditor's interest in the property is adequately protected on a case-by-case basis. R&J Contractor Servs., LLC v. Vancamp, 652 B.R. 237, — (D. Md. 2023) (citing In re Robbins, 964 F.2d 342, 345 (4th Cir. 1992)). While "adequate protection" is not defined in the Bankruptcy Code, 11 U.S.C. § 361 provides that adequate protection for purposes of Section 362 may be provided by (1) "a cash payment or periodic cash payments" to the creditor to the extent that the automatic stay results in a decrease in value of the creditor's interest; (2) providing an additional or replacement lien to the creditor to the extent that the Section 362 stay results in a decrease in value of the creditor's interest; or (3) "granting such other relief . . . as will result in the realization by [the creditor] of the indubitable equivalent of [the creditor's] interest in such property." "The absence of a definition of adequate protection in the Code coupled with the 'flexibility' of § 361(3) suggests that adequate protection may be shown in a variety of ways." Suntrust Bank v. Den-Mark Constr., Inc., 406 B.R. 683, 696 (E.D.N.C. 2009) (quoting In re Reading Tube Indus., 72 B.R. 329, 333 (Bankr. E.D. Pa. 1987)). "[A] judicial determination" of adequate protection "is a question of fact rooted in measurements of value and the credibility of witnesses." Vancamp, 652 B.R. at 244 (quoting In re Snowshoe Co., Inc., 789 F.2d 1085, 1088 (4th Cir. 1986)).
Section 521 of the Bankruptcy Code requires an individual debtor in a Chapter 7 case to file a statement of intention with respect to the retention or surrender of property of the estate securing a debt "and, if applicable, specifying that such property is claimed as exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm debts secured by such property" within the earlier of thirty days of the petition date or on or before the 11 U.S.C. § 341 meeting of creditors. 11 U.S.C. § 521(a)(2)(A). Section 521 further requires such a debtor to perform his intention with respect to such property within 30 days after the first date set for the 11 U.S.C. § 341 meeting of creditors. 11 U.S.C. § 521(a)(2)(B). In turn, section 362 of the Bankruptcy Code provides that if an individual debtor fails, within the applicable time set by section 521(a)(2), to either (a) file timely any statement of intention required under section 521(a)(2) with respect to personal property of the estate or of the debtor securing in whole or in part a claim; (b) indicate in the statement of intention that the debtor will either surrender such personal property or retain it and, if retaining such personal property, either redeem such personal property pursuant to section 722 or enter into a reaffirmation agreement in accordance with section 524(c) with respect to the debt secured by such personal property; or (c) take timely the action specified in such statement, the automatic stay will terminate with respect to such personal property and such personal property shall no longer be property of the estate. 11 U.S.C. § 362(h)(1). The stay will not necessarily terminate under section 362(h)(1) just because the debtor states an intention to take an action that is not specifically listed in section 362(h)(1)(A) provided the intention is consistent with the options listed in section 521(a)(2). See 3 Collier on Bankruptcy ¶ 362.11 (2023). "For example, with respect to personal property which secures a consumer debt, the debtor may state an intention to claim the secured property as exempt and the lien voidable under section 522(f) or (h), an option that is perfectly permissible under section 521(a)(2), though not listed in section 362(h)(1)(A)." Id.
Debtor appears to indicate that Capital One is adequately protected by the "International Bill of Exchange". His arguments appear to rely on "redemptionist" or "sovereign citizen" theories that have been found to have no foundation in the law and have been consistently rejected by federal courts. See In re Hayes, No. 11-04722-JW, 2011 WL 4566378, at *3 (Bankr. D.S.C. Sept. 22, 2011); Nunez v. D.T.C., No. 4:13-244-TMC, 2013 WL 5409219, at *3 (D.S.C. Sept. 25, 2013); Dooly v. Deutsche Bank Nat'l Tr. Co., No. 7:22-cv-00395-DCC-JDA, 2022 WL 2668454, at *3 (D.S.C. Apr. 1, 2022).
At the outset, while such argument was not raised by Capital One, the Court notes that it appears that the automatic stay is no longer in place with respect to the Vehicle. Debtor indicated in his statement of intention that he intends to retain the Vehicle and "discharge the debt", apparently pursuant to theories and arguments which are inconsistent with legal authorities applicable to this bankruptcy proceeding. Debtor has thus failed to indicate in his statement of intention that he will redeem the Vehicle pursuant to section 722, enter into a reaffirmation agreement in accordance with section 524(c) with respect to the debt he owes to Capital One, or another intended action that is consistent with the options listed in section 521(a)(2). Accordingly, it appears the automatic stay has terminated with respect to the Vehicle and the Vehicle is no longer property of the estate.
Assuming the automatic stay is in place with respect to the Vehicle and the Vehicle is property of the estate, "cause" exists to grant relief from stay pursuant to section 362(d)(1). Capital One has made a prima facie case that Debtor owes a debt to it, that it possesses a valid security interest securing the debt, and that the collateral securing the debt—the Vehicle—is declining in value. While Debtor has characterized the debt as "alleged," he has not disputed the validity of the Retail Installment Sale Contract, has not disputed that he has made no payments under the contract in a form recognized by law, and has implicitly acknowledged the existence of the debt by attempting to wipe out the debt through the International Bill of Exchange and listing the debt to Capital One in his schedules. Further, Debtor did not object to the introduction into evidence of a certified copy of a Title Information Inquiry showing Capital One has an outstanding lien on the Vehicle as of March 4, 2023, nor of the Vehicle's Certificate of Title showing Capital One as the first lienholder. Finally, the Vehicle is declining in value, as motor vehicles decline in value over time and with use, and Debtor's work in food delivery and apparent lack of ownership of other vehicles suggest he is likely using the Vehicle extensively. Capital One's prima facie showing thus indicates Debtor has no equity in the Vehicle and is not providing Capital One adequate protection for its interest in the Vehicle.
Capital One having made a prima facie case for relief from stay, the burden shifts to the Debtor to show relief from stay should not be granted. Debtor's arguments in opposition to stay relief are unavailing. First, Debtor's FOIA request is not relevant to whether relief from stay should be granted, Debtor did not present any factual or legal grounds in support of the request, and the Court does not have the authority to act on FOIA requests. Second, a general ledger statement is not required to validate a debt and Debtor has not alleged that he has tendered cash or any other form of valid payment to Capital One but has only asserted that he has given value to Capital One through the "International Bill of Exchange". Third, the requirements of Fed. R. Bankr. P. 3001 apply to proofs of claim, and Capital One has not filed a proof of claim and a proof of claim is not at issue.
Nor was Capital One required to file a proof of claim, as a creditor is only required to file a proof of claim in a Chapter 7 case if the Chapter 7 Trustee declares it to be an asset case—which is not the case here.
Further, to the extent Debtor attempts to rely on the arbitration provision in the contract as a defense to stay relief, such reliance is misplaced, as arbitration is something for which stay relief is sought rather than being a defense to stay relief. See, e.g., Camac Fund, L.P. v. McPherson (In re McPherson), 630 B.R. 160 (Bankr. D. Md. 2021); In re Argon Credit, LLC, No. 16-39654, 2018 WL 4562542 (Bankr. N.D. Ill. Sept. 21, 2018). Moreover, motions for relief from stay are core proceedings, 28 U.S.C. § 157(b)(2)(G), and it is within the Court's discretion to refuse arbitration of core proceedings. As this Court has previously explained:
While the Fourth Circuit follows the strong policy favoring arbitration, it also recognizes "[a]t the same time, however, 'Congress intended to grant comprehensive jurisdiction to bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate.' " Moses v. CashCall, Inc., 781 F.3d 63, 71 (4th Cir. 2015) (quoting Celotex Corp. v. Edwards, 514 U.S. 300, 308, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995)). Upon discovery of congressional intent to preserve judicial remedies for the statutory rights at issue, the bankruptcy court has the discretion to withhold arbitration. See id. at 71-72. In general, the bankruptcy court does not have the discretion to decline to enforce an arbitration agreement relating to a non-core proceeding. Id. at 84-85 (Gregory, J., concurring). However, arbitration of constitutionally core claims may "inherently conflict with the purposes of the Bankruptcy Code," and the bankruptcy court is generally within its discretion to refuse arbitration of such claims. Id.In re Oaktree Medical Centre, P.C., 640 B.R. 649, 661-62 (Bankr. D.S.C. 2022). Accordingly, to the extent Debtor requests this matter be submitted to arbitration, the Court denies such request.
Finally, Debtor has not shown he has provided adequate protection to Capital One. The only form of "payment" Debtor has asserted he provided to Capital One is the International Bill of Exchange, which is apparently based on theories which have not been accepted by federal courts and which this Court is not willing to adopt. Accordingly, Debtor has failed to show relief from stay should not be granted.
IT IS, THEREFORE, ORDERED:
1. The Motion for Relief from Stay filed by Capital One Auto Finance, a division of Capital One, N.A. on November 22, 2023 is granted, and relief from the automatic stay of 11 U.S.C. § 362(a) is granted to the extent necessary as to the Vehicle; and
2. Any relief requested by Debtor Samuel Wright, Sr. in his Response filed on December 5, 2023 or in his Affidavit of Facts in Support of
Debtor's Objection to Capital One Auto Finance ('COAF'), a Division of Capital One, N.A.'s ('CONA') Motion to Modify Stay or for Adequate Protection filed on January 2, 2024 is hereby denied.