United States District Court, D. Maryland
Lipton Hollander United States District Judge.
case involves the intersection of bankruptcy and admiralty
law. The Court wades into murky waters in an effort to
determine whether the district court may allow the bankruptcy
court to administer the sale of a vessel that is at issue in
October 31, 2018, plaintiff Howard Bank filed a verified
complaint in district court, seeking foreclosure against
defendants M/V “Mothership” (the
“Vessel”), Timothy Edward Horan, and Valerie Jo
Horan, asserting admiralty jurisdiction. See ECF 1
(the “Complaint). In particular, plaintiff alleged
breach of contract as to the Horans, jointly and severally
(Count I), and sought foreclosure of a preferred ship
mortgage as to the Vessel (Count II). Plaintiff claimed
exigent circumstances, and provided a sworn statement
(id. at 5) in support of that contention.
Id. ¶ 7.
addition, plaintiff moved for appointment of substitute
custodian (ECF 2) for the Vessel and for issuance of a
warrant in rem (ECF 3), ordering the United States Marshal to
take and retain custody of the Vessel. The Court granted the
motions on November 1, 2019 (ECF 11; ECF 12), and the warrant
was executed the next day. ECF 17. On November 2, 2019, the
Court granted plaintiff's second “Motion for Order
Appointing Substitute Custodian for the Vessel
‘Mothership.'” ECF 15; ECF 16.
2017, Mr. Horan has filed for bankruptcy three times, and Ms.
Horan has filed for bankruptcy twice. See In re Timothy
& Valerie Horan, Nos. TJC-17-16732, TJC-19-10407 (D.
Md.); In re Timothy Horan, No TJC-18-25040. On
November 14, 2018, after this suit was filed, Mr. Horan filed
for bankruptcy. ECF 21-3. But, on December 21, 2018, Howard
Bank notified the Court of the termination of the automatic
stay in In re Timothy & Valerie Horan, No.
TJC-17-16732. ECF 21 at 2.
on January 30, 2019, Howard Bank notified the Court that the
Horans had filed for bankruptcy on January 11, 2019. ECF 23;
In re Timothy & Valerie Horan, No. TJC-19-10407.
However, Howard Bank asserted that no automatic stay went
into effect because of the Horans' prior bankruptcy
filings. ECF 23; see also 11 U.S.C. §
362(c)(4)(a)(i). As discussed, infra, that assertion
was not entirely correct.
February 5, 2019, Howard Bank moved for judgment and sale of
the Vessel (ECF 24), supported by several exhibits (ECF 24-1
to ECF 24-7), as corrected on February 6, 2019. ECF 25. Upon
consideration of Howard Bank's motion, and by Order of
February 6, 2019, the Court authorized the United States
Marshal to sell the Vessel within thirty days. ECF 26.
on February 21, 2019, the Horans, who are self-represented in
this Court, filed a consolidated “Response to
Plaintiff's Motion for Judgment and Sale of Vessel
‘Mothership” and a “Motion for the Return
of the Vessel to the Defendants, and Motion to Dismiss or, in
the Alternative, Motion for Summary Judgment and/or Request
for Hearing.” ECF 27 (the “Motion”).
Pursuant to Supplemental Federal Admiralty Rule E(4)(f), on
February 25, 2019, the Court stayed the Order of February 6,
2019, pending resolution of the defendants' Motion. ECF
March 6, 2019, this Court held a status conference (ECF 31)
with the parties, in open court, and on the record. During
the status conference, counsel for plaintiff stated that in
his earlier notification to the Court (ECF 23), he had
mistakenly informed the Court that there was no automatic
stay in In re Timothy & Valerie Horan, No.
at that time, an automatic stay was imposed at least as to
the property of Ms. Horan's bankruptcy estate, which
includes the Vessel. On March 1, 2019, the bankruptcy court
terminated the stay “with respect to the debtor Timothy
Edward Horan and property of his estate, and to Valerie
Horan, personally, but not to property of the estate of
Valerie Horan.” In re Timothy & Valerie
Horan, No. TJC-19-10407, ECF 44 (D. Md. Mar. 1, 2019).
Because Ms. Horan owns an interest as a tenant in the
entirety in the Vessel, a stay remained in effect as to the
parties also addressed the significant cost of the custodial
supervision of the Vessel, and Mr. Horan's belief that he
could sell the Vessel for more than the Bank would obtain,
and with while incurring far less in costs. See,
e.g., ECF 15, ¶ 8. In an Order of March 7, 2019
(ECF 32), I expressed concern about the potentially avoidable
costs and expenses inherent in the storage of the Vessel, but
noted that I was unable to take any action as to the Vessel
because of the stay. Further, I directed the parties to
notify the Court if and when the stay is lifted. Id.
April 24, 2019, Bankruptcy Judge Thomas J. Catliota issued an
order in the case of In re Timothy & Valerie
Horan, No. TJC-19-10407, ECF 88. The order addressed two
motions. In the first motion, Howard Bank sought relief from
the stay so that it could proceed with foreclosure on the
Vessel. In the second motion, the Horans sought turnover of
the Vessel, pursuant to 11 U.S.C. § 542.
bankruptcy court concluded that the motions could be easily
resolved as a matter of bankruptcy law. In re Timothy
& Valerie Horan, No. TJC-19-10407, ECF 88 at 3. It
concluded that the Horans should have the first opportunity
to sell the Vessel, by the end of the summer, provided the
Horans make monthly payments of $960 to Howard Bank, maintain
adequate insurance, ...