40 B.R. 335 | Bankr. D. Vt. | 1984
In re AIR VERMONT, INC., North Atlantic Airlines, Inc., Debtors.
United States Bankruptcy Court, D. Vermont.
Kevin Truland of Gallagher & Gallagher, P.C., Boston, Mass., for Hansman McAvoy & Co., Inc.
Joseph C. Palmisano, Barre, Vt., for debtors.
Douglas J. Wolinsky, Burlington, Vt., for Gene R. Kazlow.
John S. Rodman, Boston, Mass., for Creditors' Committee.
MEMORANDUM AND ORDER ON MOTION OF HANSMAN McAVOY & CO., INC., FOR RELIEF FROM STAY
CHARLES J. MARRO, Bankruptcy Judge.
*336 The Motion of Hansman McAvoy & Co., Inc., for Relief from Stay came on for continued hearing, after notice, on April 13, 1984. In lieu of an evidentiary hearing, the Movant, Hansman McAvoy & Co., Inc., and the Debtors, through their attorneys, Kevin Truland, Esquire, and Joseph C. Palmisano, Esquire, stipulated as follows:
"1. Hansman McAvoy & Co., Inc., (hereinafter Hansman McAvoy) is a Massachusetts business corporation duly licensed as an insurance agency pursuant to Massachusetts General Laws c. 175 section 172 and is also a duly licensed premium finance agency (hereinafter Hansman d/b/a Lloyds Credit of Hingham) pursuant to Massachusetts General Laws c. 255C, section 1 et seq.
"2. Air Vermont, Inc., filed on January 30, 1984, a Petition in this Court seeking relief under Title 11, United States Code, Article 11.
"3. On or about September 29, 1983, Air Vermont, Inc. purchased Aircraft Fleet and Liability Insurance to be placed with Associated Aviation Underwriter's, Inc., (Associated Aviation). In connection therewith, Air Vermont, Inc., executed a Premium Finance Agreement by which it promised to pay to Hansman McAvoy the amount advanced or to be advanced under the agreement to Associated Aviation in payment of the premiums on said policies, all in accordance with Massachusetts General Laws, c. 255C. A copy of the Premium Finance Agreement is attached hereto.[1]
"4. In addition to the policies reflected in said Agreement endorsements were added to said policies at the request of Air Vermont, Inc., resulting in a premium change of $39,365 in addition to the amounts due under the Agreement. Prior to the filing of the within Petition, Air Vermont, Inc., defaulted on the Agreement and has not given adequate protection to Hansman McAvoy d/b/a Lloyds Credit of Hingham.
"5. Because of the financing reflected in the attached Agreement, Air Vermont, Inc., was enabled to obtain Aircraft Fleet and Liability Insurance with Associated Aviation as Hansman d/b/a Lloyds Credit of Hingham advanced to this insurer the premiums necessary to maintain the policies in force.
"6. As of the date of the filing of the Petition herein, the return premiums on said policies amounted to $147,801.50 exclusive of interest, penalties and costs."
DISCUSSION
The issue here is whether Hansman McAvoy is entitled to a termination of the automatic stay prescribed under § 362 of the Bankruptcy Code so that it may recover the premiums advanced to Associated Aviation in which it has a security interest under the aforesaid Premium Financing Agreement. Under § 362(d) of the Bankruptcy Code, the court may terminate the stay:
(1) for cause, including the lack of adequate protection of an interest in property by a party in interest; or
(2) with respect to a stay of an action against property if
(A) the debtor does not have any equity in such property; and
(B) such property is not necessary to an effective reorganization.
The stipulated facts recite that the Debtor has not given Hansman McAvoy adequate protection. Further, as of now, the Debtor has filed a Plan for Liquidation under Chapter 11 and, therefore, the premiums are not necessary for an effective reorganization. In addition, the Debtor does not have any equity in them.
The Premium Finance Agreement between the debtor whose address appears as Logan International Airport, Boston, Mass., and Hansman McAvoy and Company, Inc., a Massachusetts corporation, was executed at Logan International Airport, Boston, Mass., and, therefore, is a Massachusetts contract.
Paragraph "3" of the stipulated facts recites that the Agreement was executed "all in accordance with Massachusetts General Laws c. 255C."
*337 This indicates that the Debtor recognizes the Premium Finance Agreement as a Massachusetts contract.
Under Massachusetts General Laws c. 255C, Section 12, a filing of a premium financing agreement is not necessary to perfect the validity of such an agreement as a secured transaction. In view of this, the position of the Debtor that the security interest in the premiums is not perfected because of failure to file a financing statement in the State of Vermont is without merit.
Even if the Premium Financing Agreement were a Vermont contract and subject to the Uniform Commercial Code, the Debtor's position would still not be sustained. Under the Uniform Commercial Code as adopted in this state, a transfer of an interest or claim in or under any policy of insurance is excluded from Article 9 relating to SECURED TRANSACTIONS. See 9A V.S.A. § 9-104(g).
Case law also supports Hansman McAvoy. See In Re Auto-Train Corporation (Bankr. District of Columbia 1981), 9 B.R. 159, 164, in which the Court struck down the trustee's argument that the interest of the secured party in unearned insurance premiums was unperfected because of its failure to properly perfect its security interest by the filing of a financing statement. The Bankruptcy Court pointed out that all rights under a policy of insurance were excluded under Article 9 § 9-104(g). And in Premium Financing Specialists, Inc., v. Lindsey, 11 B.R. 135 (D.C.1981), 31 U.C.C.Rep.Ser. 674, the U.S. District Court on appeal from the Bankruptcy Court held that an insurance premium financing company had an enforceable security interest in unearned premiums upon the bankruptcy of the insured. It reasoned that the transaction was exempted from Article 9 coverage as "a transfer of an interest or claim in or under any policy of insurance" and since no other Arkansas law required filing in order to perfect a security interest, the failure to file did not mean that the security interest was not enforceable against the trustee in bankruptcy. The result is the same as to a debtor in possession under Chapter 11 who, under section 1107 of the Bankruptcy Code, has the same rights, powers and duties as a trustee.
It follows that Hansman McAvoy is entitled to termination of the stay and to the insurance premiums covered by its security interest.
ORDER
Now, therefore, upon the foregoing,
IT IS ORDERED:
1. The automatic stay prescribed by § 362 of the Bankruptcy Code is terminated.
2. Hansman McAvoy & Co., Inc., is entitled to possession of the return premiums amounting to $147,801.50.
3. The insurance policies issued by Associated Aviation Underwriters, Inc., may be cancelled.
APPENDIX
*338
NOTES
[1] A copy of the Premium Finance Agreement is attached at the end of Memorandum.
