FIRST NIAGARA BANK, N.A. et al v. BASKERVILLE

Filing 9

OPINION. Signed by Judge Kevin McNulty on 12/13/2016. (JB, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

FIRST NIAGARA BANK, N.A.,

Civ. No. 16-0812 (KM)
(Bankr. Docket No. 14-14886)

Appellant,
V.

ROSE BASKERVILLE,

MEMORANDUM OPINION

Appellee.

MCNULTY, U.S.D.J.:
This is an appeal by a creditor, First Niagara Bank, N.A., from an order of
the bankruptcy court, dated February 1, 2016. That order expunged First
Niagara’s claim, which was based on a car loan to the debtor, Rose Baskerville.
Pursuant to 28 U.S.C.

§ 158(a), I review “the bankruptcy court’s legal

determinations de novo, its factual findings for clear error and its exercise of
discretion for abuse thereof.” In re American Pad & Paper Co., 478 F.3d 546,
551 (3d Cir. 2007) (quoting In re United Healthcare Sys., Inc., 396 F.3d 247,
249 (3d Cir. 2005)). This was a discretionary ruling by the bankruptcy judge.
Review of that ruling for abuse of discretion encompasses plenary review of
legal determinations, and clear-error review of factual findings, contained
therein. See Koon v. United States, 518 U.S. 81, 100 (1996) (a court “by
definition abuses its discretion when it makes an error of law”); Doeblers’
Pennsylvania Hybrids, Inc. v. Doebler, 442 F.3d 812, 819 (3d Cir. 2006) (abuse
of discretion may encompass “a clearly erroneous finding of fact, an errant
conclusion of law, or an improper application of law to fact”). Finding no abuse
of discretion, clear error of fact, or error of law, I will affirm.
The facts, which are not substantially in dispute, are as follows:
In 2013, Ms. Baskerville entered into an instalment sale contract with a
New Jersey car dealer for the purchase of a 2010 Chevy Malibu. (Appellant’s
Appendix, ECF no. 3-1, at A9) It obligated her to make payments of $346.70

per month. On March 16, 2014, Baskerville filed for bankruptcy under Chapter
13. Post-petition, she fell behind on the payments.
First Niagara, the financing bank on the instalment sale contract, then
obtained relief from the automatic stay. (A 15) Through a repossession agent
known as “Stealth Recovery,” First Niagara seized the car and sent Baskerville
a letter informing her that it would be sold sometime after 4/7/20 15. The letter
also informed Baskerville that she could get the car back under certain
circumstances:
You can get the property back at any time before we sell it by
paying us the full amount you owe (not just the past due
payments), including our expenses.
The underlying instalment sale agreement is with the car dealer, although it
identifies First Niagara. It provides that, if the debtor does not recover the
collateral, “we” will sell it in satisfaction of the debt, and will deduct allowed
expenses “we pay as a direct result of taking the vehicle, holding it, preparing it
for sale, and selling

it.”l

The repossession occurred on March 25, 2014, and the followup letter
was dated March 26, 2014. Just ten days later, within the deadline imposed by
the letter, the debtor paid the arrearage to First Niagara and presented proof of
insurance. (A 18) Stealth Recovery, after first stating that the car had been
sold, corrected itself and stated that the car had been sent to a location in
upstate New York, approximately

31/2

hours away. In addition, the car was

incurring storage charges of $100 per day (i.e., approximately $1100 or $1200
as of that date, and running). Unable to afford the travel or to pay the
mounting storage charges, the debtor did not recover the car. The car was
therefore sold.
Baskerville filed an objection to claim. In response, First Niagara argued
that its removal of the car to upstate New York did not relieve the debtor of
1
I take the quotation from First Niagara’s brief, at p. 15. The attached copy of the
agreement is barely legible. The sense seems to be “we” are entitled to recover any
amount that “we” actually pay for storage, etc. That is not necessarily the same thing
as a charge that the repossession agent extracts from the car owner.

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liability. Bankruptcy Judge Stacey L. Meisel heard the matter, found that the
bank’s conduct had been unreasonable, and expunged the claim.
The parties do not dispute that, under the UCC, a secured party’s
disposition of collateral must be “commercially reasonable.” N.J. Stat. Ann.

§

12A:9-610. Reasonableness encompasses such factors as the method, manner,
time, place, and terms of disposition. Id.
Niagara cites its proof of claim, states that this was sufficient to shift the
burden to the debtor, and objects that the bankruptcy court did not construe
the facts favorably to itself or order an evidentiary hearing. See Appellant’s
Brief at 12, ECF no. 3 (citing, e.g., In re G-IHoldings, Inc., 477 B.R. 542, 558
(Bankr. N.J. 2012)). Baskerville points out, and First Niagara does not dispute,
that both sides presented facts, and that neither side requested an evidentiary
hearing. At any rate, the facts as presented to the court were not substantially
in dispute. First Niagara simply contended, then as now, that it had a right to
act as it did.
Both sides cite general equitable doctrines, such as “unclean hands.”
First Niagara argues, inter alia, that the debtor is primarily at fault for failing to
keep up on the payments. That, of course, is a classic argument that proves too
much. The debtor’s default is a given in every case where collateral is being
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disposed of; the issue is the reasonableness of the procedures. Particularly in
its reply brief (ECF no. 8), First Niagara argues that Baskerville slept on her
rights when she failed to take steps to recover the car. The bankruptcy court
was entitled to conclude, however, that Baskerville’s failure to recover the car
was a result of, not a justification for, First Niagara’s spiriting it away to
upstate New York and imposing storage charges of $100 per day.
First Niagara adds that removing the car to a neighboring state where the
bank itself is headquartered (as opposed to, say, California) was commercially
reasonable. Baskerville, however, did not especially set out to deal with a bank
in upstate New York; she entered into an instalment contract in connection
The UCC section requiring reasonable procedures is entitled “Disposition of
Collateral after Default.” N.J. Stat. Ann. § 12A:9-610.

2

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with buying a car from her local dealer. It is true, as First Niagara argues in its
reply brief, that the issue is not one of personal jurisdiction. But Baskerville’s
reasonable expectations and the hardship imposed by the bank’s procedures
are relevant to reasonableness, and they were legitimately considered by the
bankruptcy court.
The bankruptcy court was entitled to weigh the equities as between a
debtor who immediately brought the account current and a creditor who placed
formidable practical obstacles in the way of recovery of the car. That court was
entitled to consider whether the bank’s conduct and the allowance of its claim,
in the context of the UCC and the goals of Chapter 13, were reasonable. The
bankruptcy court’s ruling represented an application of its discretion to the
particular facts of the case. Whether this Court would have exercised its
discretion the same way is irrelevant; I am unable to find an abuse of
discretion here.
CONCLUSION

For the foregoing reasons, the February 1, 2016 order of the bankruptcy
court expunging the claim of First Niagara Bank, N.A., is AFFIRMED. An
appropriate order will be entered.
Dated: February 13, 2016

L)

/

KEVIN M6NULTY
United States District Judge

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