587 B.R. 195
Bankr. M.D. Ga.2018Background
- Debtor signed a December 5, 2016 "Rental Purchase Agreement" for a portable storage shed; payments were monthly and the contract described a path to ownership after recurring payments.
- Debtor used the shed exclusively for household storage and filed Chapter 13 on February 7, 2017; her confirmed Chapter 13 plan included a payment provision referencing the portable building creditor.
- The Movant (RentalAccess LLC) later moved for relief from the automatic stay, arguing the contract was a lease that the Debtor failed to assume and thus was deemed rejected under the Bankruptcy Code.
- The Plan was served on Premier Portable Buildings (an entity named on some documents), but the Movant contends it did not receive sufficient notice of the Plan’s treatment of its claim.
- The Agreement contained a Tennessee choice-of-law clause; the court applied Georgia choice-of-law principles and concluded Tennessee law governs.
- Under Tennessee law (including the Rental-Purchase Agreement Act), the contract qualifies as a rental-purchase agreement (a lease), not a security interest, so rejection of the lease supported relief from the automatic stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether confirmation of the Chapter 13 Plan bars Movant from seeking stay relief | Plan confirmation binds creditors to plan terms, so Movant is bound | Movant lacked notice of plan treatment and thus is not bound | Confirmation did not bind Movant because it lacked sufficient notice |
| Which state law governs contract interpretation | Tennessee choice-of-law clause governs | Debtor did not dispute clause | Court enforces clause under Georgia choice-of-law rules; Tennessee law applies |
| Whether the Agreement is a lease (rental-purchase) or a security interest under UCC § 1-203 | Movant argues transaction is a lease and Movant seeks stay relief after rejection | Debtor treated it as a lease in the plan and used item for household purposes | Agreement is a rental-purchase agreement under Tennessee law and is not a security interest |
| Whether rejection of the lease creates cause for relief from the automatic stay | Rejection removes the lease from the estate and leaves Movant inadequately protected | Debtor’s plan payment did not assume the lease | Rejection of the lease creates cause for relief from the automatic stay; motion granted (subject to order) |
Key Cases Cited
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010) (confirmation order has res judicata effect binding creditors who had notice)
- Rando v. Government Employees Ins. Co., 556 F.3d 1173 (11th Cir. 2009) (federal courts apply forum state choice-of-law rules)
- In re Calvert, 907 F.2d 1069 (11th Cir. 1990) (creditor not bound by confirmation when lacking sufficient notice of plan treatment)
- In re Rodall, 165 B.R. 506 (Bankr. M.D. Fla. 1994) (rejection of lease results in abandonment and removal from estate)
- Central Rents v. Johnson (In re Johnson), 203 B.R. 498 (Bankr. S.D. Ga. 1996) (month-to-month rent-to-own contract not a security interest where lessee can cancel and term is not the full economic life)