In re Beeman

268 B.R. 268, 2001 Bankr. LEXIS 1335, 2001 WL 1203046
CourtUnited States Bankruptcy Court, D. Kansas
DecidedFebruary 21, 2001
DocketNo. 98-23158-7-JTF
StatusPublished
Cited by1 cases

This text of 268 B.R. 268 (In re Beeman) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Beeman, 268 B.R. 268, 2001 Bankr. LEXIS 1335, 2001 WL 1203046 (Kan. 2001).

Opinion

MEMORANDUM OPINION 1

JOHN T. FLANNAGAN, Bankruptcy Judge.

This dispute calls for the court to decide whether under § 522(f) a hen is nonposses-[269]*269sory and avoidable or whether it is posses-sory and nonavoidable. The court holds that the lien here is possessory and nonavoidable because § 349(b) leads to that conclusion and because the parties agreed that the lien’s possessory status would be preserved.

I. Background

The First Case.

In January 1998, debtor Randall Ray Beeman petitioned for Chapter 13 bankruptcy relief in the Wichita Division of this court.2 Before filing the petition, he had pledged his 1973 Chevrolet pickup and 1996 mobile box trailer (with air compressor) to Jack R. Klotz d/b/a Trailer and Equipment Sales3 to secure a debt. Consequently, when Beeman commenced the Chapter 13 case, Klotz possessed the pickup and trailer.4

To regain possession of this property, Beeman moved the court for turnover. Negotiations resulted in Klotz agreeing to redeliver the vehicles if Beeman would assure that Klotz’s status as a prepetition possessory hen holder would be preserved for later litigation, if necessary. Beeman agreed, and their accord was memorialized in the following order, which they presented to the court for approval:

THEREUPON the parties announce to the Court that they have reached an agreement with regard to the Motion for Turnover the essence of which is as follows:
2. As Mr. Klotz is claiming a posses-sory lien in and to the subject property, the turnover of the property to the Debtor pursuant to this Order shall in no way impair Klotz’s secured claim and any issues relating to perfection or the nature and/or extent of Klotz’s lien are hereby preserved by Klotz for determination at a future date and time in the event litigation of such issues become [sic] necessary .5

The Honorable John K. Pearson signed the order, which bore the approval signatures of Steven L. Speth, Beeman’s attorney; James M. Immel, Klotz’s attorney; and Royce E. Wallace, the standing Chapter 13 trustee.

However, Beeman’s plan failed confirmation, and on October 7, 1998, Judge Pearson dismissed the Chapter 13 case. At that time the parties had not litigated the validity of Klotz’s hen in the Chapter 13 case.

This case.

Approximately two weeks later, on October 22, 1998, Beeman commenced this Chapter 7 case. In his schedules, Beeman listed the 1973 Chevrolet pickup and the 1996 mobile box trailer (with air compressor) as exempt “tools of the trade.”

[270]*270II. Discussion

The question now before the court arises from Beeman’s amended motion for summary judgment to avoid Klotz’s lien under § 522(f).6 The procedural trail leading to the motion for summary judgment is buried in a confusing series of duplicative pleadings and briefs. The details of that trail are unnecessary to an understanding of this decision, but they could be helpful to a reviewing court. Therefore, those details appear in the attached Appendix “A.”

Section 522(f).

Holding physical possession of the vehicles and claiming them exempt as tools of his trade, Beeman now relies on § 522(f) to avoid Klotz’s lien. Indeed, this statute would avoid the lien if (1) the lien impairs an exemption to which Beeman would have been entitled, and (2) the lien is nonposses-sory:

[T]he debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is — ...
(B) a nonpossessory, nonpurchase-money security interest in any...
(ii) implements, professional books, or tools, of the trade of the debtor 7

Section 349(b).

Beeman argues that § 349(b) establishes the nonpossessory prong of § 522(f). He claims § 349(b) invested him with possession of the pickup and trailer when Judge Pearson dismissed the Chapter 13 case. If Beeman were correct, Klotz’s lien would have been nonpossessory at the commencement of this Chapter 7 case and therefore avoidable under § 522(f).

To the contrary, however, upon dismissal of a case, § 349(b)(3) revests property of the estate in the person in whom it was vested before the case began:

(b) Unless the court, for cause, orders otherwise, a dismissal of a case other than under section 742 of this title'—
(3) revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case under this title.

As the legislative history of the subsection confirms, its purpose was to put the parties back in the legal position they occupied before the case was filed:

The basic purpose of the subsection is to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case.8

The 1983 Kansas bankruptcy case of In re Groves9 followed this reasoning. In that case, the Honorable James A. Pusa-teri held that a creditor’s security interest is a property right that § 349(b) revested in the creditor when the debtors’ Chapter [271]*27113 case was dismissed before completion of a confirmed plan and discharge.10

Thus, rather than destroying Klotz’s property right to possession of the vehicles, § 349(b) revested him with that right when Judge Pearson dismissed the Chapter 13 case.

The Agreement.

Another reason for finding that Klotz holds an unavoidable possessory lien is the parties’ agreement.

When Beeman filed for Chapter 13 relief, he moved the court for turnover of the vehicles. He apparently felt they were necessary to the success of his Chapter 13 plan. Somehow Beeman convinced Klotz to turn over the vehicles voluntarily, perhaps by promising to repay Klotz’s secured claim liberally under the plan. But Klotz would only cooperate if an order proclaimed that the turnover would “... in no way impair [his] secured claim.”11 Beeman agreed and, according to customary bankruptcy practice and the requirements of Fed. R. Bankr. P. 9019, the parties memorialized the settlement in an order that Judge Pearson approved.12

Yet, approximately two weeks after Judge Pearson dismissed the Wichita Chapter 13 case, disregarding the agreement, Beeman traveled the approximately 200 miles from Wichita to Kansas City, hired a new lawyer, filed this Chapter 7 case, and claimed the collateral as exempt. When Klotz sought stay relief to foreclose his security interest, Beeman’s new attorney asserted Klotz’s lien was nonpossesso-ry and avoidable under § 522(f).

Would Klotz’s lien be possessory outside of bankruptcy? Probably so.

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Bluebook (online)
268 B.R. 268, 2001 Bankr. LEXIS 1335, 2001 WL 1203046, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-beeman-ksb-2001.