444 B.R. 306
Bankr. E.D. Pa.2011Background
- Debtor Rafail Theokary filed a chapter 7 bankruptcy on Feb 16, 2007 and owned leasehold interests in three standardbred horses leased from Highland Group (previously McCord Farms).
- Shay and Abbatiello trained the horses and boarded them at Showplace Farms and Gaitway Farms, with unpaid trainer and boarding charges.
- Two days after the bankruptcy filing, Shay and Abbatiello conducted stableman’s lien sales against the Horses, terminating Highland’s ownership.
- The New Jersey stableman’s liens were later approved nunc pro tunc by state court; ownership of the Horses transferred to Shay and Abbatiello.
- The Debtor claimed the lien sales violated the automatic stay under 11 U.S.C. § 362(a)(3); the court bifurcated liability and damages and ruled on liability first.
- The court held Shay and Abbatiello violated § 362(a)(3); Showplace and Gaitway did not violate the stay; damages are to be determined at a later hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the stableman’s lien sales terminated the Debtor’s leasehold interests under § 362(a)(3). | The lien sales destroyed the Debtor’s leasehold by terminating Highland’s ownership. | The sales were against the owner (Highland) and did not affect the Debtor’s lease. | Yes; the sales divested the Debtor of his leasehold and violated § 362(a)(3). |
| Whether the lien sales were willful violations of § 362(k). | Abbatiello and his agent knowingly proceeded despite notice of the stay. | Plaintiff contends no willful knowledge; Abbatiello asserts error in stay analysis. | Abbatiello willfully violated § 362(k); Shay liable through agency; secondarily, agency principles apply to Shay. |
| Whether Showplace Farms violated the stay by interference with possession rights or other actions. | Showplace prevented the Debtor from taking possession of two horses after filing. | Showplace did not take any action to enforce a lien or possess property post-petition. | Showplace did not violate the automatic stay. |
| Whether Gaitway Farms violated the stay. | Gaitway was involved in the sale during the stay. | Gaitway did not take post-petition action to enforce a lien or possess estate property. | Gaitway did not violate the automatic stay. |
| Whether the post-sale nunc pro tunc motions affected the stay independently. | First post-sale motions violated the stay; second post-sale motions did not. | Not separately addressed beyond the record. | First post-sale motions violated; second did not because leases had been rejected. |
Key Cases Cited
- 48th Street Steakhouse, Inc. v. Fox, 835 F.2d 427 (2d Cir.1987) (expansive view of § 362(a)(3) protecting estate interests when action against related party affects debtor’s property)
- Krystal Cadillac Oldsmobile GMC Truck, Inc. v. Krystal Cadillac-Oldsmobile, Inc., 142 F.3d 631 (3d Cir.1998) (defining willfulness under § 362(k) and knowledge of the stay as the trigger for liability)
- Acands, Inc. v. Travelers Cas. & Sur. Co. of Am., 435 F.3d 252 (3d Cir.2006) (recognizes that § 362(a)(3) can apply to actions against third parties when it affects the estate)