3 ABR 184 UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

In re:	)
	)
AURORA TOWING, INC.,	)	Case No. A93-00111-DMD
	)
Debtor.	)	Chapter 11
	)
_____________________________	)

ORDER DENYING MOTION FOR RELIEF FROM STAY

     Creditor Capital Investments, Inc. (Capital) has filed a motion for relief from stay seeking to enforce the terms of a pre-petition agreement it entered with the debtor in a state court collection suit. One of the terms of this agreement is that if Aurora Towing, Inc. (Aurora) were to file bankruptcy, it would not oppose a motion for relief from stay filed by Capital. For the reasons stated below, Capital's motion will be denied.

Factual Backqround

     In 1985, Aurora obtained a loan in the amount of $159,280 from First Interstate of Alaska. The loan was secured by a 1975 Kenworth tow truck and a 1981 GMC tow truck, and was guaranteed by principals of debtor. The note was assigned to the FDIC, which assigned it to Capital Investments, Inc. in October, 1991. The GMC tow truck was liquidated while the FDIC held the note.

     In 1992, after default on the note, Capital filed a collection suit in state court against Aurora. In order to avert prejudgment attachment, Aurora entered into a stipulated agreement with Capital which permitted it to retain the tow truck during the pendency of the state court action, provided it made payments of $1,000 per month to Capital. The agreement also required Aurora to immediately pay the full amount of any judgment rendered in favor of Capital, or surrender the tow truck. Finally, the agreement provided that in the event Aurora filed bankruptcy, it would not oppose any motion for relief from stay filed by Capital.

     Aurora made the monthly payments to Capital until January, 1993. Capital says Aurora "quit making the monthly payments" at this time and filed bankruptcy. It appears Aurora's

   3 ABR 185 failure to make the January, 1993 payment was due to the fact that summary judgment had been granted in Capital's favor, and Aurora was now required, under the terms of the agreement, to either pay the full amount of Capital's debt (approximately $56,000) or surrender the tow truck.

     Aurora filed its Chapter 11 petition on February 12, 1993, and Capital's motion for relief from stay was filed shortly thereafter. Capital contends the terms in the pre-petition stipulated agreement entitle it to relief from stay for cause. Capital also alleges Aurora has filed this petition in bad faith.

The Pre-petition Consent to Relief From Stay is Unenforceable.

     Capital relies on In re Citadel Properties, Inc., 86 B.R. 275 (Bankr. M.D. Fla. 1988) in support of its position. In that case, a debtor with no employees, no source of income, and only one asset - a 6.5 acre parcel of real estate - filed a Chapter 11 petition just prior to a scheduled foreclosure sale. The court granted relief from stay based on the terms of a pre-petition forbearance agreement which provided that a mortgagor would be entitled to immediate relief from stay in the event the debtor filed bankruptcy. However, the court also found that the debtor had filed the petition in bad faith, justifying relief from stay "for cause" under § 362(d) (1).

     The Citadel court cited three prior decisions from the same District in support of its conclusion that pre-petition agreements regarding relief from stay were enforceable in bankruptcy. All three of these cases involved single-asset debtors who had filed petitions to forestall foreclosure on real estate. Only one of these cases, Matter of B.O.S.S. Partners I, 37 B.R. 348 (Bankr. M.D. Fla. 1984), involved an agreement in which the debtor specifically agreed to relief from stay, and that agreement had been entered post-petition and approved by the court. The court enforced the stipulation, but noted that "under proper circumstances, the Court may use its equitable powers" under § 105 to grant further relief to a debtor, in spite of an agreement to waive the protections of § 362. Id. at 351. In the other two cases,

   3 ABR 186 Matter of International Supply Corp. of Tampa, Inc., 72 B.R. 510 (Bankr. M.D. Fla. 1987); Matter of Gulf Beach Devel. Corp., 48 B.R. 40 (Bankr. M.D. Fla. 1985), the courts granted relief only after making a § 362(d) analysis.

     Three more recent cases involving pre-petition relief from stay agreements have followed Citadel. In each case, the court made an independent § 362(d) analysis and found another, independent basis for granting relief from stay in addition to the fact that the debtor had waived the stay as to one creditor. See Matter of Growers Properties No. 56 Ltd., 117 B.R. 1015 (Bankr. M.D. Fla. 1990) [relief from stay based a more important factor, the debtor's bad faith filing]; In re Wheaton Oaks Office Partners, 1992 WL 381047 (N.D. Ill., Dec. 10, 1992) ["pre-petition contract waiving post-petition defenses" could be enforced only after a § 362(d) analysis and a finding that cause to lift the stay existed]; In re Club Tower L.P., 138 B.R. 307 (Bankr. N.D. Ga. 1991) [relief from stay based on a pre-petition agreement and on the debtor's bad faith filing].

     In none of these cases was the pre-petition agreement, by itself, the basis for granting relief from stay. I find it doubtful that such an agreement could provide the only basis for granting a creditor relief from stay. An agreement to waive the protections of the automatic stay as to one creditor amounts, in effect, to a forfeiture of the debtor's property. This type of agreement is unenforceable under 11 U.S.C. § 541(c) (1) which provides that an interest of the debtor in property becomes property of the estate notwithstanding any provision in an agreement:

(A) that restricts or conditions transfer of such interest by the debtor; or

(B) that is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title, or on the appointment of or taking possession by a trustee in a case under this title . . . , and that effects or gives an option to effect a forfeiture, modification, or termination of the debtor's interest in property.

3 ABR 187 Section 541(c) "invalidates restrictions on the transfer of property of the debtor, in order that all of the interests of the debtor in property will become the property of the estate." In re Farmers Markets, Inc., 792 F.2d 1400, 1402 (9th Cir. 1986), citing S.Rep. No.95-989, 95th Cong., 2d Sess. 83. Notwithstanding Citadel and the other cases which have held otherwise, I find that a pre-petition waiver of the automatic stay is unenforceable under § 541(c)(1)(B).

Capital contends the pre-petition agreement does not violate public policy because it does not preclude Aurora from filing bankruptcy, but merely permits one creditor to have relief from stay. I disagree. The automatic stay is one of the "fundamental debtor protections provided by the bankruptcy laws." Riggs Nat. Bank of Washinqton, D.C. v. Perry, 729 F.2d 982, 984 n.2 (4th Cir. 1984); see also In re Posner, 700 F.2d 1243, 1246 (9th Cir. 1983).

It is a well settled principal that an advance agreement to waive the benefits conferred by the bankruptcy laws is wholly void as against public policy.

In re Tru Block Concrete Products, Inc., 27 B.R. 486, 492 (Bankr. S.D. Ca. 1983). Tru Block involved a pre-petition forbearance agreement which contained a covenant to dismiss any bankruptcy petition which might be filed and a covenant that the secured creditors would not be adequately protected unless the debtor complied with the terms of the agreement. The court noted the forbearance agreement was negotiated in good faith with the intent of avoiding bankruptcy, but found the covenants void as against public policy.

Clauses in pre-petition agreements which result in waiver of fundamental rights in bankruptcy have been found to be void as against public policy. See, e.g., Riggs Nat. Bank, 729 F.2d at 984 [default-on-filing clause unenforceable]; Matter of Railway Reorganization Estate, Inc., 133 B.R. 578 (Bankr. D. Del. 1991) [provision that the debtor's property would become subject to a creditor's lien in event bankruptcy filed prohibited by § 541(c) (1) (B) and contra to fresh start policy]; In re Sky Group

   3 ABR 188 International, Inc., 108 B.R. 86 (Bankr. W.D. Pa. 1989) [prepetition agreement to waive automatic stay not self executing]; In re Winters, 69 B.R. 145 (Bankr. D. Or. 1986) [default-on-filing clause void under § 541(c) (1)(B), is a form of waiver of discharge differing only in degree from more direct forms prohibited under § 542(a) (2)]. I find the reasoning of these cases, particularly Winters and Tru Block, to be more persuasive than Citadel. Aurora's pre-petition waiver of the automatic stay does not, by itself, constitute "cause" to grant Capital relief from stay.

Capital is Not Entitled to Relief From Stay

     Capital also asserts Aurora has filed the petition in bad faith, to avoid repossession of the tow truck, and that it is entitled to relief from stay under either § 362(d)(1) or (d) (2).

     In determining whether a petition has been filed in bad faith, the court should examine "an amalgam of factors", including the debtor's financial status and motives, and the local economic environment. In re Arnold, 806 F.2d 937, 939 (9th Cir. 1986). "Good faith is lacking only when the debtor's actions are a clear abuse of the bankruptcy process." Id.

     In this case, Aurora, a towing business, is a going concern. In addition to the Kenworth tow truck, Aurora has scheduled other vehicles, a boat worth $25,000 and accounts receivable of $25,000. The total scheduled value for Aurora's assets, consisting entirely of personalty, is $85,398.39. Aurora's total scheduled secured and unsecured debt is $80,939. The tow truck has a scheduled value of $17,000, but Aurora contends the tow truck earned over $50,000 in gross income in 1992, and will earn more than that in 1993. Aurora says it maintains replacement insurance of $105,000 on the truck, and notes that because the truck is 18 years old any depreciation is minimal. Aurora indicates the tow truck is necessary to its reorganization because it enables Aurora to tow heavy equipment, which is a major profit base for its business. Aurora has agreed to make adequate protection payments of $1,000 per month to Capital to keep the stay in effect.

3 ABR 189
Based on the record, Aurora's actions are not a "clear abuse" of the bankruptcy process. I also find that the payments of $1,000 per month to Capital and maintenance of insurance on the tow truck provide adequate protection to Capital. Finally, although there is clearly no equity in the tow truck, the property is necessary to Aurora's reorganization and at this point I cannot conclude that prospects for reorganization in this case are unlikely. Relief from stay cannot be justified under § 362(d). Accordingly,

IT IS ORDERED:

1. Capital Investments, Inc.'s motion for relief from stay is denied.

2. Aurora Towing, Inc. shall continue to make adequate protection payments of $1,000 per month to Capital Investments, Inc., and comply with the other Provisions of this court's prior order entered May 3, 1993, which order shall remain in effect until confirmation of the debtor's plan of reorganization, until this case is dismissed, or until other further order of this court.

3. Capital Investments, Inc. shall, within 5 days of the date of this order, file a certificate of mailing indicating that it has complied with the terms of paragraph 4 of this court's May 3, 1993 order, regarding notice.

DATED: May 13, 1993

	BY THE COURT
	DONALD MacDONALD IV
	United States Bankruptcy Judge