Placida N Robinson

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
PLACIDA N. ROBINSON,
Debtor.
NOT FOR PUBLICATION
Case No. 17-10275
Chapter 7
MEMORANDUM OPINION AND ORDER DETERMINING THAT THE AUTOMATIC
STAY DOES NOT APPLY, OR, IN THE ALTERNATIVE, LIFTING THE STAY
Pending before the Court is the Motion for an Order Declaring Automatic Stay
Inapplicable or, in the Alternative, Granting Relief from the Stay, (the “Motion,” ECF Doc. #
83), filed by Aspire Federal Credit Union (“Aspire”). The Motion was served by mail on the
Debtor. (ECF Doc. # 84.) The Motion is supported by various exhibits (ECF Doc. ## 83-1–10),
such as the affidavit of Nicole Seymour, Operations Manager for Aspire’s authorized loan
servicer (the “Seymour Affidavit”). No opposition to the Motion was filed, but the Debtor
appeared at the hearing on the Motion and opposed granting it. For the reasons explained below,
the Motion is GRANTED.
I. 	BACKGROUND
A. 	Factual Background
Debtor is the sole shareholder of Nine T Thirty One Shearn Corporation (“9T31”), 5584
Chicago Corporation (“5584”) and 2331 Chicago Corporation (“2331,” collectively with 9T31
and 5584, the “Companies”). The Companies are dormant taxicab companies and medallion
managers. Each of the Companies received a loan from Aspire on a secured basis. As of
December 19, 2018, the 9T31 loan, the 5584 loan and the 2331 loan had outstanding amounts
due totaling $1,037,133.89, $236,820.95 and $255,813.94, respectively. (Seymour Aff. ¶¶ 7,
13–14.)
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The core collateral for Aspire’s loans to the Companies are three taxi medallions
(collectively, the “Collateral”), separately owned by each of the Companies. Debtor guaranteed
the loans. Aspire claims it has superior rights to the Collateral, owned by the Companies and not
part of the Estate in this Chapter 7 liquidation proceeding. The value of the Collateral has
dropped significantly and Aspire’s loans are deeply underwater. For instance, since December
2013, the value of the medallion owned by 9T31 has dropped from $1,050,000 to $293,830.
(Seymour Aff. ¶ 22.) Indeed, at the hearing on the Motion in January 8, 2019, the Debtor
acknowledged that the amount of the debt secured by the three taxi medallions substantially
exceeds the value of the Collateral. Thus, the Debtor, who wholly owns the three Companies
that own the medallions, has no equity in the value of the medallions. Counsel for the Chapter 7
Trustee appeared at the hearing and stated that the Trustee has no objection to the lifting of the
stay.
B. 	The Motion
Aspire requests a declaration that the automatic stay does not apply to the Companies or
the Collateral so that Aspire may foreclose on the Collateral to protect its interests. In the
alternative, Aspire requests relief from the automatic stay to permit the New York State court, in
a pending action, to decide a sub judice motion for replevin of the medallion held by 9T31 and
commence foreclosure proceedings in Illinois against 2331 and 5584.
II. 	DISCISSION
Aspire is a creditor of the Debtor, who is a guarantor of Aspire’s loans to the non-debtor
Companies that are, in turn, owned by the Debtor. Aspire also holds a security interest in the
Collateral, the three taxi medallions owned by the non-debtor entities. The loans are in default,
and the taxi medallions are worth substantially less than the amount of the debt.
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The automatic stay does not apply to the Collateral because the Companies are not
debtors and the Companies, rather than Debtor, own the Collateral. Boise Cascade Corp. v.
Wheeler, 419 F. Supp. 98, 101-02 (S.D.N.Y. 1976), aff’d, 556 F.2d 554 (2d Cir. 1977) (“[a]
corporation’s property rights are entirely distinct from those of its shareholders and that even
complete ownership of capital stock does not operate to transfer the title to corporate property”)
(internal citations omitted). Other courts in this district have held that stay in a shareholder’s
case does not apply to debtor’s wholly-owned non-debtor corporation. In re Sheu, 2009 WL
1794473, at *2 (Bankr. E.D.N.Y. Jun. 16, 2009); In re Pitts, 2009 WL 4807615, at *7 (Bankr.
E.D.N.Y. Dec. 8, 2009).
As the Second Circuit explained in Queenie, Ltd. v. Nygard Int’l, 321 F.3d 282, 287–88
(2d Cir. 2003), “a suit against a codefendant is not automatically stayed by the debtor’s
bankruptcy filing. The automatic stay can apply to non-debtors, but normally does so only when
a claim against the non-debtor will have an immediate adverse economic consequence for the
debtor’s estate. Examples are a claim to establish an obligation of which the debtor is a
guarantor, a claim against the debtor’s insurer, and actions where ‘there is such identity between
the debtor and the third-party defendant that the debtor may be said to be the real party defendant
. . .” (internal quotations and citations omitted). As already stated, counsel for the Chapter 7
Trustee—the only party with a potential interest in the medallions, through the Debtor’s
ownership of the Companies—stated at the hearing that the Trustee has no objection to lifting the
stay. There simply is no value available to the estate in the deeply underwater Collateral that
secures Aspire’s loans.
A prima facie case that a party lacks adequate protection under section 362(d)(1) can be
satisfied by showing (i) a quantitative decline in value of a property, or (ii) that the debtor has
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failed to make numerous post-bankruptcy payments. See Elmira Litho, 174 B.R. at 902–04.
Aspire has satisfied both prongs of this test.
Even assuming the automatic stay applied to the Collateral, cause exists to lift the stay
under 11 U.S.C. § 362(d)(1). Aspire does not have adequate protection because the medallions
have rapidly declined in value and because Debtor and the Companies have never made any
post-petition payments on the loans. (Mot. at 15.)
A prima facie case under section 362(d)(2) requires a showing that the debtor has no
equity in the property and that the property is not necessary to the reorganization of the estate.
See id. at 900 (collecting cases). Courts use simple arithmetic to calculate the equity in a
property, subtracting the total claims from the value of the property. If the value of claims
against a property exceeds the value of the property, the debtor has no equity in the property.
See 3 COLLIER ON BANKRUPTCY ¶ 362.07[4][a]. If the movant shows that the debtor lacks equity
in the property, the debtor must then show “that there [is] a reasonable possibility of a successful
reorganization within a reasonable time” and that the property is “essential” to such a
reorganization. In re Timbers of Inwood Forest, 484 U.S. 365, 375–76 (1988). Aspire has
demonstrated that the Debtor has no equity in the Collateral. And, in a Chapter 7 case,
reorganization is not an alternative.
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III. 	CONCLUSION
For the foregoing reasons, Aspire’s Motion is GRANTED. Aspire has the right to seek
the state-law remedy of replevin to recover the Collateral. The automatic stay, to the extent it
exists, is lifted. Aspire may proceed unhindered by this bankruptcy case to recover its Collateral.
IT IS SO ORDERED.
Dated: 	January 11, 2019
New York, New York
_____Martin Glenn____________
MARTIN GLENN
United States Bankruptcy Judge
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