UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
ASHLAND DIVISION
IN RE:
ROBERT EUGENE THOMAS
NIKKI LYN THOMAS
DEBTORS CASE NO. 99-10591
MEMORANDUM OPINION
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.
Dated:
By
the Court -
Judge
William S. Howard
Copies to:
Debtors
Paul Steward Snyder, Esq.
Trevor L. Earl, Esq.