UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
SHANE STEVEN SNYDER
JENNA LEE SNYDER
DEBTORS CASE NO. 96-20268
SHANE STEVEN SNYDER
JENNA LEE SNYDER PLAINTIFFS
VS. ADV. NO. 96-2015
BANK ONE, COLUMBUS, N.A. DEFENDANT
This matter is before the Court on the defendant's Motion to Dismiss filed herein on April 15, 1996. The defendant seeks dismissal of the plaintiffs' Complaint for Enforcement of Automatic Stay filed herein on April 2, 1996. This Court has jurisdiction of this matter pursuant to 28 U.S.C.'1334(b); it is a core proceeding pursuant to 28 U.S.C. '157(b)(2)(G).
The plaintiffs' Complaint alleges that the defendant repossessed their 1993 Chevrolet Cavalier automobile on December 27, 1995, more than two months before they filed their Chapter 13 petition in this Court on March 1, 1996, and that this action constituted a violation of the automatic stay. The Complaint states that the plaintiffs' Chapter 13 plan provided for payment of the defendant's claim, that they have made demand for the return of the vehicle, and that the defendant has refused to return it, thereby injuring them.
The defendant's Motion to Dismiss argues that the automatic stay was not violated since the vehicle was repossessed before the Chapter 13 petition was filed. The defendant argues that the plaintiffs should have filed a Complaint for Turnover of Property, rather than a Complaint for Enforcement of Automatic Stay. It cites In re Riding, 44 B.R. 846 (Bkrtcy.D.Utah 1984), in support of this proposition. This case also involved a vehicle which had been repossessed prior to the Chapter 13 filing. The issue before the court there, however, was not whether the debtors had filed the proper adversary proceeding, but whether turnover could be ordered on the basis of a motion.
The Riding court reviewed the history of turnover procedures, and concluded that an adversary proceeding is necessary to the determination of whether turnover will be allowed. The defendant further cites In re Estes, 185 B.R. 745 (Bkrtcy.W.D.Ky. 1995), in support of its position. This case also concerns the issue of whether it is procedurally correct for a turnover action to proceed by motion. The court agreed with the Riding court that it is not.
From a procedural standpoint, the Ridings and Estes cases make it clear that a turnover action must be in the form of an adversary proceeding, not a motion. While the plaintiffs herein did file an adversary complaint in their effort to regain possession of their vehicle, that adversary complaint does not seek the proper relief to enable this Court to order turnover. As set out by the Ridings court:
The Bankruptcy Court can order the turnover of property in which the debtor holds only a contingent possessory right, such as a right of redemption or the right to cure a default, as long as adequate protection can be afforded to the secured party. ....
Property for which turnover may be compelled under Section 542 is simply the kind of property which the debtor may 'use, sell or lease' under Section 363. Once the property is found to be of a type which the debtor could 'use, sell or lease,' turnover is appropriate under Section 542 subject only to the conditions imposed by Section 363. (Cites omitted.)
At page 848. The plaintiffs have not made any allegations concerning the nature of their property, and have couched their Complaint strictly in terms of violation of the automatic stay. This Court considers this to be a fatal flaw.
In addition, there is the consideration of adequate protection. As the defendant points out, this issue must be addressed when a turnover of property is being considered. The Estes court discussed the requirement of adequate protection:
The purpose of adequate protection is to provide a secured creditor the benefit of its bargain while enabling the debtor to use the secured property; it is not intended as an 'after the fact' method allowing creditors to obtain the full amount of secured claims. .... The adequate protection doctrine exists in essence to prevent impairment of a secured creditor's position as a result of decline in value of debtor's assets. ....
Before a debtor may receive the turn-over of property it must put forth a plan providing for adequate protection for any decline in value resulting from the use of the vehicle. (Cites omitted.)
At pages 748-749. The record in this case does not reflect that the plaintiffs have offered adequate protection to the defendant, or that they have responded to demands for same.
In consideration of all of the foregoing, it is the opinion of this Court that the defendant's Motion to Dismiss should be sustained. An order in conformity with this opinion will be entered separately.
By the Court -
Bernard W. Southgate IV, Esq.
K. Gail Russell, Esq.