Menu    6 ABR 302  

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

In re:

 
FREDERICK J. WOELKERS,Case No. A99-00389-DMD
Chapter 7
Debtor. 

ORDER GRANTING MOTION FOR RELIEF FROM STAY
[Dyanne Bestry]

      A preliminary hearing on creditor Dyanne Bestry's motion for relief from stay was held before the undersigned on December 10, 1999. Linda Webb appeared on behalf of Ms. Bestry, William Artus appeared for the chapter 7 trustee, Kenneth Battley, and debtor Frederick Woelkers appeared on his own behalf. Having considered the comments of counsel and the debtor from the hearing, and reviewed the motion, opposition, and reply, as well as the other papers and pleadings on file in this case,

      IT IS ORDERED that Dyanne Bestry's motion for relief from stay is granted and the automatic stay provided by 11 U.S.C. § 362(a) is lifted to permit her to enforce her interest in the vessel S/V WINDFALL, a sailboat (CHUNG HWA 36 Hull No. CHB 360391176-CK), with her gear and attachments..

Discussion

      On January 24, 1997, Woelkers entered into a purchase agreement with Bestry and her husband regarding the vessel CHUNG HWA 36 Hull No. CHB 360391176-CK, with her gear and attachments. Woelkers agreed to purchase the vessel for $25,000.00, with a 10% downpayment and the balance to be paid in 84 equal monthly installments plus 6% interest. The debtor was to maintain hull insurance on the vessel, in favor of the Bestrys, to "cover [their]   TOP    6 ABR 303   interest in vessel." Contemporaneously with the purchase agreement, Woelkers executed another "agreement" which pertained to the insurance, taxes, utilities and moorage for the vessel. The agreement required the Bestrys to maintain moorage for the vessel until Woelkers had "51% or more ownership in the vessel." Woelkers was required to reimburse the Bestrys for the moorage charges upon presentation of a bill. The Bestrys were also to maintain the registration on the vessel until Woelkers had acquired a 51% interest in the vessel, at which time the vessel would be registered either in his name or jointly with the Bestrys. The Bestrys were also to pay taxes and utilities on the vessel until Woelkers had acquired a 51% ownership interest. Woelkers was to reimburse the Bestrys for these expenses, as well.

      After Woelkers defaulted on his obligations under the purchase agreement, the Bestrys filed suit in state court for breach of contract.(1) On April 12, 1999, the state court granted summary judgment in favor of the Bestrys, finding that a valid contract existed between them and Woelkers for the purchase of the vessel, and that the debtor was in breach "of the Purchase Agreement and conditions of the Agreement, both dated January 24, 1997."

      Woelkers filed his chapter 7 petition on April 19, 1999. He did not list the vessel as personal property on his Schedule B, but on his Statement of Intent indicated that he would both reaffirm his debt with Bestry and avoid her lien under 11 U.S.C. § 522(f). No reaffirmation agreement has been filed. Bestry is scheduled as a general unsecured creditor with a disputed claim, amount unstated. Finally, on the debtor's original Schedule G, he has listed the purchase agreement with Bestry as an executory contract.

      Bestry seeks relief from stay so that she can recover the vessel from Woelkers.   TOP    6 ABR 304   According to her motion, the outstanding principal balance due on the purchase agreement is $18,000.00. Bestry has provided evidence establishing that the vessel has been titled and registered to her since the time the purchase agreement was signed.(2)

      Both Woelkers and the trustee have objected to Bestry's motion. The trustee contends her interest in the vessel is avoidable because she does not hold a perfected lien or security interest. Under the circumstances of this case, I find that she has an enforceable interest in the vessel and is entitled to relief from stay.

      Pursuant to 46 U.S.C. § 31321(a)(1), a conveyance of a documented vessel is not valid unless it is filed with the Secretary of Transportation.(3) The vessel at issue here is a documented vessel, subject to the provisions of § 31321.(4) Here, since the purchase agreement   TOP    6 ABR 305   between Bestry and Woelkers was not filed as specified under the federal statute, the conveyance is invalid as to third parties. Further, title and registration to the vessel has remained with Bestry since the time the agreement was signed. Under state law, an attaching creditor of Bestry's would prevail over any interest Woelkers may have in the vessel by virtue of the unrecorded purchase agreement.(5) Under these circumstances, the trustee's avoidance powers under 11 U.S.C. § 544 cannot defeat Bestry's interest in the vessel.(6) Her motion for relief from stay will, therefore, be granted.



DATED: December 20, 1999. 
 BY THE COURT
 DONALD MacDONALD IV
 United States Bankruptcy Judge



N O T E S:

TOP    6 ABR 303  1. Bestry v. Woelkers, Case No. 3AN-98-6355-Civ, in District Court for the State of Alaska, Third Judicial District at Anchorage.

TOP    6 ABR 304  2. The vessel is actually registered to Ms. Bestry's husband, who died in 1998. This distinction is not important to the determination of the issues present in this proceeding.

TOP    6 ABR 304  3. 46 U.S.C. § 31321(a)(1) provides:

(a)(1) A bill of sale, conveyance, mortgage, assignment, or related instrument, whenever made, that includes any part of a documented vessel or a vessel for which an application for documentation is filed, must be filed with the Secretary of Transportation to be valid, to the extent the vessel is involved, against any person except --

(A) the grantor, mortgagor, or assignor;

(B) the heir or devisee of the grantor, mortgagor, or assignor; and

(C) a person having actual notice of the sale, conveyance, mortgage, assignment, or related instrument.

TOP    6 ABR 304  4. 46 U.S.C. § 30101(1) defines a "documented vessel" as one documented under chapter 121 of Title 46, United States Code. A vessel bearing a United States Coast Guard number is a documented vessel. Fehir v. State of Alaska, 755 P.2d 1107, 1108 n.3 (Alaska 1988). Bestry has provided evidence reflecting that the vessel at issue here has been registered with the U.S. Coast Guard, and is therefore a "documented vessel."

TOP    6 ABR 305  5. Graeber v. Hickel Investment Co., 803 P.2d 871 (Alaska 1990). This decision was based on 46 U.S.C. § 921, the predecessor statute to 46 U.S.C. § 31321. There is no significant difference between the two statutes which would compel a different result here.

TOP    6 ABR 305  6. The only basis for seeking to set aside Bestry's claim under the facts of this case would be under § 544. There is nothing in the record here to support a preference claim under 11 U.S.C. § 547 or a fraudulent conveyance claim under 11 U.S.C. § 548.