601 B.R. 351
Bankr. M.D. Penn.2019Background
- Debtor (David Velez) leased a 2012 Chrysler 200 from EZ Rent A Car under an Agreement characterized as a "true lease."
- Debtor filed a voluntary Chapter 7 petition on September 14, 2018 and timely filed a statement of intention to retain the vehicle and keep making payments.
- EZ Rent A Car debited a third party (Amber Jo Derk) for a post-petition payment on October 29, 2018, disabled the vehicle on November 20, 2018, and repossessed it on November 21, 2018.
- Debtor sued for violations of the automatic stay under 11 U.S.C. § 362(a); moved for summary judgment on liability; trial set for damages matters.
- Court deemed defendant’s late responses to Requests for Admission amendable under Fed. R. Bankr. P. 7036(b) and allowed withdrawal of default admissions where necessary to permit adjudication on the merits.
- Court treated the Agreement as an unexpired lease and held that lease language purporting to declare bankruptcy a default (and authorize repossession despite the stay) is unenforceable as an ipso facto clause under 11 U.S.C. § 365(e)(1)(B).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether disabling and repossessing the vehicle violated § 362(a)(3) | Velez: repossession and disabling occurred during the stay and thus violated § 362(a)(3) | EZ Rent: lease paragraph 13 waived stay protections; repossession permitted | Held for Velez: repossession/disabling within the protected period violated the stay; lease clause is an unenforceable ipso facto clause |
| Whether post-petition debit of Derk’s account violated the stay | Velez: debit on Oct 29, 2018 was collection of prepetition claim and violated the stay | EZ Rent: Derk is a third party (not debtor or co-obligor); stay does not protect third parties | Held for EZ Rent on this point: no liability — third party account debit did not violate § 362 as to Debtor |
| Whether repossession with Debtor’s possessions inside violated the stay | Velez: personalty was in the car and was estate property; repossession deprived estate of property | EZ Rent: denies knowledge or existence of Debtor’s personal property in vehicle | Held: disputed fact remains whether possessions were in vehicle; summary judgment on that sub-issue denied (trial to resolve) |
| Whether Debtor’s Requests for Admission were deemed admitted and dispositive | Velez: late responses should be deemed admitted, supporting summary judgment | EZ Rent: court may permit withdrawal/amendment under Fed. R. Bankr. P. 7036(b) to allow merits to be decided | Held: Court permitted withdrawal/amendment — default admissions not fatal because withdrawal promotes merits and Debtor was not prejudiced |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, 477 U.S. 242 (genuine dispute and materiality principles for summary judgment)
- Beard v. Banks, 548 U.S. 521 (summary judgment burden language referenced)
- In re Dunn, 589 B.R. 253 (stay termination timing under § 362(h) and § 521 interplay)
- In re W.R. Grace & Co., 475 B.R. 34 (ipso facto clauses and § 365(e)(1) analysis)
- In re Wolf, 556 B.R. 676 (permitting withdrawal/amendment of admissions under Rule 7036(b))
- In re D'Ambrosio, 452 B.R. 562 (effect of deemed admissions under Rule 7036)