Chesapeake Contractors, Inc.

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Baltimore
In Re: 	*
CHESAPEAKE CONTRACTORS, INC. 	* 	Case No. 	07-20678DK
* 	Chapter 	7
*
Debtor 	*
************************************* 	*
FIRST NIAGARA LEASING, INC.
C/O SCHILLER & KNAPP, LLP
*
*
*
Movant 	*
vs. 	*
CHESAPEAKE CONTRACTORS, INC.
AND
MONIQUE D. ALMY, TRUSTEE
*
*
*
Respondents 	*
MEMORANDUM OPINION
On July 18, 2008, First Niagara Leasing, Inc. (“Movant”) filed a Motion for Relief from the
Automatic Stay in this bankruptcy case. The Peoples Bank (“Peoples Bank”), one of the Debtor’s
creditors, filed an opposition and a Motion to Dismiss Or Strike The Motion For Relief From Stay.
The Movant responded to People’s Bank opposition and motion, and the court conducted a hearing
upon the aforementioned filings on August 13, 2008. At the conclusion of the hearing, the court
announced its findings and conclusions but informed the parties that the court intended to reduce
those findings and conclusions to a written opinion.
Date signed December 10, 2008
Entered: December 11, 2008 Case 07-20678 Doc 174 Filed 12/11/08 Page 1 of 11

1 Hereinafter, referred to as the “First Motion.”
2 Order Denying Motion For Relief From Stay, entered June 20, 2008.
3 Objection on behalf of The Peoples Bank, filed April 29, 2008.
2
In the Motion for Relief from Stay now before this court, the Movant requests that the court
enter an Order terminating the automatic stay so that the Movant may exercise alleged lien rights as
to a hydraulic excavator, including but not limited to, repossession of the collateral. Peoples Bank
opposes because the motion is duplicative of a prior motion for relief from stay filed by the Movant
on April 10, 2008 (Dkt. no. 128), 1 which was denied by this court.2 Peoples Bank asserts that the
Movant is precluded from relitigating issues decided by the court in denying the First Motion.
Movant asserted in the First Motion that the Debtor had executed an Equipment Finance
Agreement for a 1999 Kobelco Hydraulic Excavator, Model No. ED180, Serial No. YLU0024 (the
“Excavator”). The First Motion sought from the court an order terminating the automatic stay so
that the Movant could exercise legal rights as to the Excavator, including but not limited to,
“foreclosure” against the property under the agreement. The First Motion was accompanied by the
required Notice of Hearing pursuant to Local Bankruptcy Rule 4001-1 and a six page document
bearing the title, “Equipment Finance Agreement.”
On April 29, 2008, a response to the First Motion was filed by Peoples Bank.3 The response
asserted that Peoples Bank is also a creditor holding an interest in the Excavator. Peoples Bank
further contended that the court should deny the First Motion because it failed to contain the
necessary elements to support the requested relief including: (1) failure to demonstrate an
enforceable security interest under Section 9-203 of the Commercial Law Article of the Maryland
Code; and (2) failure to include any allegation of ownership or any allegation of a security interest
in the Excavator.
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4 Response To Peoples Bank of Kent County’s Objection To First Niagara Leasing, Inc.’s
Motion For Relief From Automatic Stay, filed June 12, 2008.
5Hearing Transcript, filed August 4, 2008 (hereinafter referred to as “First Hrg. Tr.”).
3
On June 12, 2008, Movant filed a Response to the objection4
, which averred, inter alia, that
the Debtor had executed and delivered to Liberty Financial Group, Inc., an Equipment Finance
Agreement secured by the Excavator. Liberty Financial Group, Inc. assigned that Equipment
Finance Agreement to Movant, and Movant further argued that it perfected its security interest in
the Excavator by filing a UCC Financing Statement. These allegations referred to Exhibit “A” and
Exhibit “B” attached to the Response. Exhibit A attached to the Response is identical to the
document attached to the First Motion as Exhibit A. Exhibit B attached to the Response is a two
page document entitled UCC Approval Sheet bearing a Recordation Stamp in the Financing
Records of the Maryland State Department of Assessments and Taxation.
A hearing upon the First Motion was held on June 16, 2008, and the transcript of that
hearing has been docketed. 5 There the following colloquy ensued between the court, the Movant’s
counsel, and Peoples Bank’s counsel:
THE COURT: What is the position of Peoples Bank concerning the relative
priorities of the positions as secured creditors by and between as to Peoples Bank
versus First Niagara?
MR. SWANSON: First Niagara doesn't have a security interest with the Debtor,
Your Honor.
. . . .
MR. SWANSON: And that's based on the documents that they have provided to this
court not once, but twice. And I'm referring, I believe, to their main exhibit, which is
the equity financing agreement under which there is no indication that any security
agreement was either granted, given, or even referenced in that -- in that context.
. . . .
THE COURT: Well, one of the requirements for a motion for relief from stay where
the Movant is seeking to grant relief from stay to take action against collateral is
some prima facie showing of a security interest in the collateral that would support
any such action.
So, what I'm going to do is permit, at this point, First Niagara, through
counsel, to seek to introduce any documents. Just because they're attached to a
Case 07-20678 Doc 174 Filed 12/11/08 Page 3 of 11

4
motion or a response doesn't make them evidence at this point.
. . . .
So, Ms. Dyson?
MS. DYSON: The exhibit I have right now is the certified copy of the UCC
financing statement. The original note is still being located. And I believe -- what
I've been told by my client is that it is being located and they are hopefully receiving
it soon. So, if the Court is requesting a copy of the original note as well, I would ask
that this hearing be continued for that to be obtained.
MS. DYSON: The original executed agreement I do not have today.
THE COURT: Well, there -- there was attached, in PDF form, a scanned image, as
Attachment 1 to the response of First Niagara Leasing, a document which is entitled
"Equipment Finance Agreement."
MS. DYSON: Right.
THE COURT: Is that the document you're speaking about?
MS. DYSON: Yes, Your Honor.
. . . .
THE COURT: Is there some reason why I should grant a continuance if the
document is available?
. . . .
MS. DYSON: Well, Your Honor, I don't know -- I'm not sure if Peoples Bank is
challenging the -- that the loan was made. . . .
THE COURT: All of the documents that you would aver support the allegation that
your client holds a security interest, are these the documents attached as Exhibit 1,
Exhibit 2, Exhibit 3, Exhibit 4 to the response?
MS. DYSON: Yes, Your Honor, except that Exhibit 4 was what went to the
valuation of the property of the equipment, since we did not know.
THE COURT: All right. Now, are there any other documents that your client is
asserting provides some security interest in this equipment?
MS. DYSON: That I know of now? No.
THE COURT: Well, this is the hearing.
MS. DYSON: No. There's no other document that –
THE COURT: All right. Mr. Swanson, do you object to any one of those documents
that were attached to the response being allowed into evidence?
MR. SWANSON: No, Your Honor.
THE COURT: Okay. But it's your assertion, as I understand it, that taken together,
none of these contain all the requisites of a security agreement under the Uniform
Commercial Code as enacted in Maryland?
MR. SWANSON: That is correct, Your Honor.
THE COURT: Okay. So, at this point, the Court is going to allow into evidence the
documents attached as Exhibits 1, 2, 3, and 4 to the response filed on behalf of First
Niagara Leasing, Inc., which response was filed on June 12th, 2008. And they will
simply repose, in their electronic form, where they are presently on the CMECF.
. . . .
THE COURT: I don't see where these create a security interest. . . .
First Hrg. Tr. at pp. 4-12 (with omissions).
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6 See Fed. R. Civ. P. 59, incorporated into bankruptcy by Fed. R. Bankr. P. 9023, and
Fed. R. Bankr. P. 8002, respectively.
7 The only variance in language is that in the Second Motion the words “certified true”
are inserted before the words “copy of the Equipment Finance Agreement . . . .”
5
After hearing arguments by counsel for both Movant and Peoples Bank, the court made the
following finding:
. . . [T]he court denies the motion for relief from stay, finding as a fact, that First
Niagara Leasing, Inc. does not hold a security interest in the subject Kobelco
Hydraulic Excavator, and therefore, has no interest in property upon which it could
execute if the automatic stay were terminated.
Consequently, the automatic stay will not be terminated, for those reasons.
First Hrg. Tr. at p.14. This ruling was based upon the court’s expressed finding that the documents
introduced into evidence by Movant did not contain language which granted a security interest.
An Order denying the First Motion for the reasons set forth on the record was entered on
June 20, 2008. No motion to alter, amend, or rehear that Order has subsequently been filed and no
notice of appeal of that Order was filed. The period of time within which such motion or notice of
appeal could permissibly be filed has expired.6
Instead, on July 18, 2008, Movant filed the Motion for Relief from Stay now before the
court (the "Second Motion"). The factual averments set forth in the Second Motion are almost
identical to those contained in the First Motion. The prayer for relief in the Second Motion asks
this court to terminate the automatic stay so that Movant may exercise its legal rights under
applicable law as to the Excavator, including but not limited to repossession. Using almost
identical language in the same enumerated paragraph as the First Motion, Movant asserts that a
copy of the Equipment Financing Agreement is attached as Exhibit A thereto and incorporated
therein. 7 However, the document attached to the Second Motion is different than that which had
been attached to the First Motion. An additional page of the document entitled Equipment Finance
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8 Movant’s Exh. 1, hearing held June 16, 2008. Other additional pages including an
auctioneer transaction addendum are also attached for the first time as part of Exhibit A to the
Second Motion.
6
Agreement is contained in the attachment to the Second Motion which page was not part of the
attachment to the First Motion or Exhibit A8.
At the hearing upon the Second Motion held on July 18, 2008, Peoples Bank argued that the
motion should be dismissed, or denied as precluded by the Court’s Order entered denying the First
Motion. In response, Movant asserted:
Here we are showing that there is a security interest. We don’t feel that it’s
duplicative of filing another motion for relief, nor do we feel like we should have
filed a motion to reconsider because at the point at that time, there was nothing to
reconsider. We did not provide the evidence necessary to meet the burden of proof.
Second Hearing Transcript, filed August 19, 2008, at p.4.
The court determines that the Second Motion must be denied under the doctrines of res
judicata, law of the case, and finality of judgment.
As to res judicata, the doctrine bars relitigation of a final judgment where issues “were or
could have been raised.” Federated Dept. Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981). Res
judicata is a fundamental principle of law that has remained unchanged since the Supreme Court
discussed the concept in Southern Pacific R. Co. v. United States, 168 U.S. 1, 48-49 (1897). 	The
Court has consistently held that a “right, question or fact distinctly put in issue and directly
determined by a court of competent jurisdiction . . . cannot be disputed in a subsequent suit between
the same parties or their privies. . .” Id. “A judgment merely voidable because based upon an
erroneous view of the law is not open to collateral attack, but can be corrected only by a direct
review and not by bringing another action upon the same cause [of action].” Baltimore S.S. Co. v.
Phillips, 274 U.S. 316, 325 (1927).
Res judicata encompasses the doctrines of claim preclusion and issue preclusion. Taylor v.
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7
Stongell, 128 S. Ct. 2161, 2171 (2008). Claim preclusion forecloses the relitigation of the same
claim that was decided by an earlier final judgment. Id. at 2171. Issue preclusion bars successive
litigation of an issue of fact or law that the court decided and was essential to the judgment. Id. In
this case, both claim and issue preclusion bar this court from reviewing whether the Movant had a
security interest in the Excavator.
A motion for relief from stay by the same creditor and as to the same collateral may be, but
is not always, precluded by the entry of a prior order deciding a previous motion seeking the
identical relief. An order that fully and finally decides the matter set forth in a motion for relief
from stay, such as an order after a final hearing which order denies all relief from the automatic
stay, is a final order for purposes of the application of the doctrine of res judicata as to a subsequent
motion brought upon the same transactional facts and legal issues. However, such a final order
denying a motion for relief from stay is not res judicata to a subsequent motion by the same creditor
seeking further relief from the automatic stay based upon subsequently occurring transactional
facts. 	For example, assume a creditor moves for relief from stay asserting a security interest in a
motor vehicle and alleging that because post-petition installment payments due under the finance
agreement are not being made, there is a lack of adequate protection. In this hypothetical also
assume the court denies that motion, finding that the payments had in fact been made and
consequently the creditor had adequate protection. Suppose months later the debtor in fact becomes
delinquent on payments and the value of the collateral is diminishing.
The order denying the original motion for relief from stay remains a final order. However, it
would not be res judicata to the bringing of a subsequent motion for relief from stay asserting that
the debtor has more recently failed to make payments and that a consequent failure of adequate
protection had occurred. While both motions pertain to the same alleged financing arrangement and
collateralization, and both motions sought the same relief, i.e. termination of the automatic stay as
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8
to the interests of the lender in collateral, the basis of two respective motions are significantly
different. The facts asserted in the subsequent motion could not have been asserted in the prior
motion. Under such circumstances, this court would hold that the subsequent motion for relief from
stay is not barred by the doctrine of res judicata, law of the case, or finality of judgment. See In re
Sun Valley Ranches, Inc., 43 B.R. 641, 642 (Bankr. D. Idaho 1984).
In the case now before this court, the Second Motion is brought upon the identical
averments of fact asserted in the First Motion. "[A] question, or fact distinctly put in issue and
directly determined by a court . . . cannot be disputed in a subsequent suit between the same
parties." 47 Am. Jur. 2d Judgments, § 464, p.21. The doctrine of claim preclusion bars a party from
relitigating an issue that the party could have raised in a prior proceeding. Clark v. Cowlitz Joint
Operating Agency v. F.E.R.C., 826 F.2d 1074, 1079 (D.C. Cir. 1987). Here, Movant had the
opportunity to prove the existence of a security interest but failed to capitalize on the opportunity.
In addition, the findings of the court as to the fact that Movant holds no security interest in
the collateral cannot be changed and is binding. Under the doctrine of “law of the case,” after a
finding that the Movant lacked a security interest, the court is precluded from reconsidering the
exact same issue again. “Issues decided at an early stage of the litigation, either explicitly or by
necessary inference from the disposition, constitute the law of the case.” Coal Resources, 865 F.2d
761, 766 (6th Cir. 1989). The earlier decision of the court “should continue to govern the same
issues in subsequent stages in the same case.” Baron Financial Corp. v. Natanzon, 509 F. Supp. 2d
501, 520 (D. Md. 2007). “This rule of practice promotes the finality and efficiency of the judicial
process by “protecting against the agitation of settled issues.” Christianson v. Colt Industries
Operating Corp., 486 U.S. 800, 816 (1988).
Finally, and in the alternative, the doctrine of finality of judgment must preclude the re-
litigation of this virtually identical motion where a final order has fully determined it. In the
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9 Fed. R. Civ. P. 60(b)(2).
9
argument before the court at the hearing on the Second Motion, Movant’s counsel stated that the
client had not provided to counsel the missing page of the Exhibit A now attached to the Second
Motion, at the time of the hearing on the First Motion. Whether this assertion was advanced to
support an unspoken motion under Fed. R. of Civ. P. 60(b)(2), incorporated by Fed. R. Bankr. P.
9024, seeking relief from a final judgment or, as an assertion of a basis as to why the matter could
be retried, the attempt by Movant to retry the issue adding additional evidence not provided at the
prior trial must be denied.
Under the doctrine of finality of judgment, a party is not entitled to try and then retry the
same dispute simply because at the first trial insufficient evidence was introduced, or issues were
ignored which now seem more attractive and persuasive to the point to be proven. The party
prevailing is entitled to rely upon the finality of a final order. “The needs for stability and
procedural efficiency, however, counsel that a persuasive justification should be required to support
consideration of the new evidence. Reconciliation of these competing forces calls for discretion.”
18B Charles Alan Wright, et al., Fed. Prac. & Proc. Juris. 2d § 4478.6 (2008).
Nor is relief available to Movant under Fed. R. Civ. P. 60(b). The court may amend or
vacate a final order if there is (1) excusable neglect; (2) newly discovered evidence; (3) fraud; (4)
the judgment is void; (5) the judgment has been satisfied, released or discharged; or (6) any other
reason justifying relief. Fed. R. Civ. P. 60(b). The evidence now sought to be introduced with the
Second Motion is not “newly discovered evidence that, with reasonable diligence, could not have
been discovered in time to move for a new trial under Rule 59(b).” 9 No demonstration has been
made by Movant that the missing page is either newly discovered, or not discoverable by Movant as
the rule requires. The only statement as to this being newly discovered evidence is contained in
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10
Movant’s Response to First People’s Opposition to the Second Motion, which states:
That Page two of the Equipment Financing Statement, which demonstrates the
Security interest granted to the Movants, was not provided to counsel at the time the
original Motion for Relief was filed April 10, 2008, nor in time for the June 16, 2008
hearing, thus counsel was unable to meet their burden of proof of showing that there
was a security interest in the Excavator, and the Motion for Relief was denied.
Movant’s Response, filed August 8, 2008, at 2. It simply appears that evidence that should and
could have been introduced by Movant was not introduced. This is not newly discovered evidence
that with reasonable diligence could not have been discovered.
In conclusion, the Movant had a full and complete opportunity to litigate the disputed issue.
The dispute of the alleged security interest in the subject Excavator was raised by the initial
opposition to the First Motion. It was the focus and point of evidence introduced by the Movant at
the hearing upon the First Motion. But that evidence did not contain any evidence that would
support the averment of the security interest. It was a necessary determination for the court to make
in order to decide the First Motion that was before it. The First Motion sought relief from stay to
permit the Movant to “foreclose” upon the Excavator, that is to repossess and sell that property as
collateral over which it held a security interest. If there was no security interest held by Movant,
relief from stay should and could not have been granted for that purpose.
When a dispute of the asserted material fact of a security interest was raised by an objecting
party, it was incumbent upon the Movant to prove that there was a basis for the motion and remedy
that was being sought. Movant failed in that proof as found by the court. It was that finding that
constituted the necessary basis for the order that denied the First Motion. Movant simply cannot
come now before the court and file a second motion asserting the same factual averments and basis,
seeking the same remedy, in effect attempting to have a second trial to introduce additional
evidence.
For these reasons, the motion for relief from stay will be denied as precluded for the reasons
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11
set forth in this Memorandum Opinion, by a separate Order to be entered contemporaneous with
this Opinion.
cc: 	Debtor
Debtor’s Counsel
Movant’s Counsel
Counsel for Peoples Bank
Trustee
U.S. Trustee
All Other Parties-In-Interest
End Of Opinion
Case 07-20678 Doc 174 Filed 12/11/08 Page 11 of 11