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Tucker v. Sears, Roebuck & Co.
Citations: 36 B.R. 706; 39 U.C.C. Rep. Serv. (West) 651; 1984 Bankr. LEXIS 6413Docket: Bankruptcy No. BK 83-40163
Court: United States Bankruptcy Court, S.D. Illinois; January 19, 1984; Us Bankruptcy; United States Bankruptcy Court
A motion to terminate the automatic stay was filed by Sears, Roebuck Company, while the debtors sought to avoid a nonpossessory, nonpurchase money security interest. The debtors filed for Chapter 7 bankruptcy on June 13, 1983, listing Sears as an unsecured creditor with a claim of $661.75 for a revolving charge account related to a washer purchase. Sears submitted a proof of claim for the same amount as a secured claim, supported by a security agreement signed by debtor George R. Tucker, Jr. The Trustee abandoned the washer from the bankruptcy estate, prompting the debtors to file a motion to avoid Sears’ lien on it under Section 522(f) of the Bankruptcy Code. The court evaluated whether Sears held a nonpossessory, nonpurchase-money security interest in the washer. Debtors contended that there was no security interest since Tucker did not intend to create one upon the washer's purchase. They also argued that any interest had terminated due to substantial payments made before filing for bankruptcy. The debtors further claimed that Sears could not assert a secured status because it was listed as an unsecured creditor without objection, and on equitable grounds, they argued the washer's value was minimal. The court found that a security interest was granted to Sears under the terms of the security agreement, which provided that Sears had a security interest in all merchandise charged to the account. It ruled that Sears had a purchase money security interest since it provided value for the debtor to acquire rights in the washer. Consequently, the court determined that Sears holds a perfected security interest in the washer under Illinois state law. Sears is not prevented from asserting its secured status despite the debtors not objecting to its listing in Schedule A-3. Sears filed a secured proof of claim, which is considered allowed under 11 U.S.C. § 502(a) unless contested. The responsibility lies with the debtors to address any inconsistencies between their schedules and claims when declaring property as exempt. Since no objection has been made, Sears' claim is valid. The debtors misinterpret their security agreement with Sears, believing that partial payments or the low current value of the washer negate the lien. The agreement explicitly states that Sears retains a lien until full payment is made, which has not occurred. The debtors' unilateral misunderstanding of the law does not justify altering or nullifying the contract. The court will not consider the debtor George Ray Tucker, Jr.'s assertion of lack of intent to create a security interest. Consequently, the court denies the debtors' motion to avoid Sears' lien, affirming Sears' valid security interest in the washer. Additionally, the court finds sufficient grounds to lift the automatic stay regarding the property. The debtors' motion to avoid the security interest is denied, and the automatic stay is lifted.