Laurence Frank Siegel

1 The Honda representative testified that it is not unusual to
extend a lease informally for six months, but if an extension is for a
longer term, a written agreement is necessary.
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
LAURENCE FRANK SIEGEL
DEBTOR
CASE NO.
05-04389-5-ATS
ORDER ALLOWING MOTION FOR RELIEF FROM STAY
The matter before the court is the motion for relief from the
automatic stay filed by Honda Financial Services ("Honda"). A hearing
took place in Raleigh, North Carolina on March 1, 2006.
Laurence Frank Siegel filed a petition for relief under chapter
13 of the Bankruptcy Code on October 3, 2005. Mr. Siegel and Honda
entered into a 48-month lease agreement for a 2001 Honda Civic on
January 31, 2001. Honda moved for relief from the automatic stay,
contending that the lease expired and that Mr. Siegel was delinquent in
his payments. Mr. Siegel opposed the motion, contending that the lease
had been extended and that he would be current with his payments but
for Honda's refusal to accept his payments.
A representative from Honda testified that the lease agreement
expired on January 31, 2005. Honda's records indicated that on
September 28, 2005, Mr. Siegel contacted Honda about extending the
lease on the same terms as the prior contract.1 Honda agreed to a two-
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year extension, and sent Mr. Siegel the appropriate paperwork. Mr.
Siegel filed his bankruptcy petition on October 3, 2005, and Honda
received notice of the filing on October 14, 2005. On October 24,
2005, Honda received the agreement signed by Mr. Siegel. Because of
the bankruptcy filing, however, Honda did not sign the agreement and
contacted Mr. Siegel on October 26, 2005, informing him that Honda
would not go forward with the extended lease. Honda advised Mr. Siegel
that he could exercise the purchase option, find a co-signer for the
lease, or return the vehicle by November 2, 2005. Mr. Siegel did not
pursue any of these options, but he did make payments that were
accepted on November 3, 2005, and December 1, 2005. Thereafter, Honda
refused Mr. Siegel's payments and sought relief from the stay.
Honda contends that there was no meeting of the minds with respect
to the lease extension because Mr. Siegel's offer was to extend the
lease under the same terms as the original contract, and the chapter 13
filing materially changed the parties' rights and obligations. Mr.
Siegel contends that the extension was entered prepetition when Honda
orally agreed to extend the lease, as evidenced by its acceptance of
payments in November and December. Further, the extension agreement is
dated August 1, 2005, leading Mr. Siegel's attorney to question the
dates to which the Honda representative testified; however, Mr. Siegel
did not appear at the hearing to contradict Honda's evidence.
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At first blush, it appears that an agreement to extend the lease
term was reached prior to Mr. Siegel's filing his bankruptcy petition,
and the lease should be allowed to "ride through" the bankruptcy.
However, there is an applicable statute of frauds. North Carolina
General Statute § 25-2A-201 provides
§ 25-2A-201. Statute of frauds.
(1) A lease contract is not enforceable by way of action or
defense unless:
(a) the total payments to be made under the lease
contract, excluding payments for options to renew
or buy, are less than one thousand dollars
($1,000); or
(b) there is a writing, signed by the party against
whom enforcement is sought or by that party's
authorized agent, sufficient to indicate that a
lease contract has been made between the parties
and to describe the goods leased and the lease
term.
(2) Any description of leased goods or of the lease term is
sufficient and satisfies subsection (1)(b) of this section,
whether or not it is specific, if it reasonably identifies what
is described.
(3) A writing is not insufficient because it omits or
incorrectly states a term agreed upon, but the lease contract is
not enforceable under subsection (1)(b) of this section beyond the
lease term and the quantity of goods shown in the writing.
(4) A lease contract that does not satisfy the requirements
of subsection (1) of this section, but which is valid in other
respects, is enforceable:
(a) if the goods are to be specially manufactured or
obtained for the lessee and are not suitable for
lease or sale to others in the ordinary course of
the lessor's business, and the lessor, before
notice of repudiation is received and under
circumstances that reasonably indicate that the
goods are for the lessee, has made either a
substantial beginning of their manufacture or
commitments for their procurement;
(b) if the party against whom enforcement is sought
admits in that party's pleading, testimony, or
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otherwise in court that a lease contract was
made, but the lease contract is not enforceable
under this provision beyond the quantity of goods
admitted; or
(c) with respect to goods that have been received and
accepted by the lessee.
(5) The lease term under a lease contract referred to in
subsection (4) of this section is:
(a) if there is a writing signed by the party against
whom enforcement is sought or by that party's
authorized agent specifying the lease term, the
term so specified;
(b) if the party against whom enforcement is sought
admits in that party's pleading, testimony, or
otherwise in court a lease term, the term so
admitted;
(c) if there is other evidence of the parties' intent
with regard to the lease term, the term so
intended; or
(d) in the absence of evidence of the parties'
intent, a reasonable lease term.
N.C. Gen. Stat. § 25-2A-201 (1993).
Based on the statute of frauds, neither party could enforce or
defend the lease extension until the agreement was reduced to writing.
When the debtor returned the agreement to Honda, he had already filed
his bankruptcy petition, resulting in a material change in the terms to
which Honda originally orally agreed. Honda refused to sign the lease
extension, and notified Mr. Siegel promptly of its refusal.
Accordingly, the court concludes that no enforceable agreement was
in place on the petition date, and Honda is entitled to relief from the
automatic stay to pursue its remedies in accordance with its rights
under the original lease agreement and the applicable laws and statutes
of North Carolina. Rather than requiring Honda to return the payments
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made by Mr. Siegel for November and December 2005, and file an
administrative claim, Honda may keep those
payments as adequate protection for the debtor's use of the vehicle.
SO ORDERED.
DATED: March 2, 2006
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