UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
ROBERT EUGENE THOMAS
NIKKI LYN THOMAS
DEBTORS CASE NO. 99-10591
This matter is before the Court on the debtors Objection to the Motion of Ruby Tuesday, Inc. (treated as a Motion to Alter, Amend or Vacate Order Granting Creditor Ruby Tuesday, Inc. Relief from Automatic Stay)(Doc. # 27). The Court should point out that this pleading was filed on behalf of both debtors in this case, but the matter at hand involves only Robert Thomas. The Order referred to above was entered on March 24, 2000 (Doc. # 26). The creditor has filed a Response (Doc. #43), and the matter has been submitted for decision. For the reasons set out below, the Motion to Alter, Amend or Vacate Order will be overruled.
Ruby Tuesday, Inc. (Ruby Tuesday) filed a Motion for Relief from Stay on March 6, 2000 (Doc. #24), seeking relief not in this case, but in an earlier case, No. 99-10203, filed by these debtors on April 8, 1999 and later dismissed. Ruby Tuesday represented that at the time Case No. 99-10203 was filed, the debtor Robert Thomas was a party in a lawsuit pending in the Southern District of Indiana styled Ruby Tuesday, Inc. v. C.R. Thomas Corp., et al., Case No. NA 98-12-C G/D. Ruby Tuesday further represented that neither it nor the U.S. District Court in Indiana was informed of the filing of the bankruptcy. Ruby Tuesday was not named as a creditor in that case. The debtor declined to participate in the Indiana case and judgment was rendered against him there on May 20, 1999 in the amount of $308,236.48.
The judgment obtained by Ruby Tuesday in Indiana was for debts owed by the debtor under a guarantee agreement. Because the judgment was obtained after Case No. 99-10203 was filed, it constituted (at least technically) a violation of the automatic stay. Ruby Tuesday maintained, however, that it was entitled to a modification of the stay in that case in order to validate its judgment under an equitable exception articulated in Easley v. Pettibone Michigan Corp., 990 F.2d 905 (6th Cir. 1993). There the court recognized that while a judgment entered against a debtor while the automatic stay was in effect is invalid, bankruptcy courts may modify the automatic stay pursuant to 11 U.S.C. §362(d) to allow an otherwise invalid or voidable action to be cured.
The court in Easley held that the stay may be modified to validate an otherwise invalid action under
...limited equitable circumstances. We suggest that only where the debtor unreasonably withholds notice of the stay and the creditor would be prejudiced if the debtor is able to raise the stay as a defense, or where the debtor is attempting to use the stay unfairly as a shield to avoid an unfavorable result, will the protections of section 362(a) be unavailable to the debtor.
At 911. Ruby Tuesday contends, and this Court agrees, that the actions of the debtor herein fall squarely within the scenario set out above. The debtor knew when Case No. 99-10203 was filed that he was a party to a pending action in the Southern District of Indiana, yet he failed to list Ruby Tuesday on the schedules in that case, and it was then dismissed. Ruby Tuesday further contended that the sole purpose of the filing of that bankruptcy case was to avoid creditors. Before the debtor filed his Objection (Motion to Alter, Amend or Vacate), this Court agreed and entered an Order granting Ruby Tuesday its requested relief. Now that the debtor has responded and failed to provide any effective argument in opposition, this Court must once again agree.
The debtors Objection (Motion to Alter, Amend or Vacate) is completely unresponsive to Ruby Tuesdays arguments concerning its entitlement to relief. The debtor argues that he would be willing to have the stay modified in this case in order to go forward with litigation that he has commenced in the Boyd Circuit Court, and brought up any number of other issues that have little or nothing to do with Ruby Tuesdays position on modification of the stay in Case No. 99-10203.
For instance, the debtor argues that Ruby Tuesday should be required pursuant to FRBP 7001 to file an adversary proceeding to determine the validity, priority or extent of the judgment entered by the Indiana Court and any subsequent judgment lien against property of the estate. The Court should not have to point out that determinations of validity, priority and extent are not made in regard to judgments, but only in regard to liens and other security interests. In any event, contrary to the debtors suggestion, the fairness, propriety, or even constitutionality of the Indiana judgment is not at issue here, nor was Ruby Tuesdays judgment lien. The only issue is whether or not its judgment should be validated pursuant to the principles enunciated in Easley v. Michigan Pettibone Corp., supra and the debtor did not address that issue.
Having considered the arguments of the parties, the Court comes to the conclusion that the debtors Objection to the Motion of Ruby Tuesday, Inc. (treated as a Motion to Alter, Amend or Vacate Order Granting Creditor Ruby Tuesday, Inc. Relief from Automatic Stay) should be overruled. An order in conformity with this opinion will be entered separately.
By the Court -
Judge William S. Howard
Paul Steward Snyder, Esq.
Trevor L. Earl, Esq.