In re Wright

657 B.R. 26

IN RE: Samuel WRIGHT, Sr., Debtor(s).

C/A No. 23-03428-EG

United States Bankruptcy Court, D. South Carolina

Signed January 12, 2024

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, 2023¹ and the Response thereto filed by Samuel Wright, Sr. ("Debtor") on December 5, 2023.² 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:

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.³ To finance the purchase, Debtor borrowed $49,228.50, with monthly payments of $964.73 to begin April 3, 2023.⁴ The contract provides either party may elect to submit any dispute under the contract to arbitration.⁵ 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.⁶ 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.⁷ Further, Debtor alleges he sent the International Bill of Exchange directly to Capital One.⁸

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.⁹ 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. § 15-41-30.¹⁰ 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.

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, 2024.¹¹ On January 3, 2024, Chapter 7 Trustee Michelle L. Vieira filed a Notice indicating the meeting of creditors had been continued to January 26, 2024.¹²

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.¹³ 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.

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...