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Keybank, Na v. Hartmann

United States District Court, E.D. Kentucky, Southern Division, London

December 30, 2014

KEYBANK, N.A., Plaintiff,
v.
RANDALL T. HARTMANN, and EVONNE D. HARTMANN, Defendants.

MEMORANDUM OPINION & ORDER

EDWARD B. ATKINS, Magistrate Judge.

This matter is before the Court on Plaintiff Keybank, N.A.'s ("Keybank") Amended Motion for Attorney's Fees. [R. 59]. Defendants, Randall T. and Evonne D. Hartmann, did not file a response to Keybank's motion. This matter is fully briefed and ripe for review.

I. BACKGROUND

The instant matter centers around Randall Hartmann's personal guarantee of all obligations of Lake Cumberland Marine, LLC ("LCM") to Keybank. LCM was a luxury boat retailer. [R. 51-1 at ¶ 6]. Mr. Hartmann was LCM's managing member, and Evonne Hartmann, Mr. Hartmann's wife, was the owner of LCM's stock. [R. 1-2 at 48]. Keybank and LCM entered into a demand floor plan agreement whereby Keybank provided LCM with a $10, 000, 000 line of credit in exchange for a security interest in certain business assets of LCM. [R. 51-3 at 3-4]. Additionally, Mr. and Mrs. Hartmann each personally guaranteed LCM's obligations to Keybank. [R. 51-1 at ¶¶ 7-8].

In July 2009, LCM filed a voluntary bankruptcy petition. [R. 51-3 at 6]. Following liquidation of collateral and negotiations between LCM and Keybank, the parties agreed that LCM owed Keybank $1, 104, 989.86 in outstanding debt. [R. 51-1 at ¶ 19]. However, despite this agreement, the Hartmanns failed to make any payments to Keybank pursuant to their personal guaranties. [R. 51-1 at ¶¶ 36, 46-47].

Consequently, Keybank filed the instant action asserting claims against the Hartmanns sounding in breach of personal guaranty. [R. 1]. On February 18, 2014, this Court granted summary judgment in favor of Keybank. [R. 52 at 19]. The Court awarded Keybank judgment jointly and severally against the Hartmanns in the amount of $1, 383, 372.73 as of October 22, 2013, plus per diem interest of $189.40 from that date until entry of judgment. [R. 52 at 19]. Further, the Court determined that Keybank was entitled to reasonable attorneys' fees and costs in an amount to be determined by Keybank's submission of a separate fee application. [R. 52 at 19].

Subsequently, on March 17, 2014, Keybank filed a Motion for Counsel Fees and Costs. [R. 54]. Keybank's motion sought attorneys' fees and costs from both defendants, Mr. and Mrs. Hartmann. [R. 54]. However, unbeknownst to Keybank, on March 14, 2014, Mrs. Hartmann had filed a Chapter 7 Petition for Bankruptcy in the United States Bankruptcy Court for the Eastern District of Kentucky. [R. 55]. After it was informed of Mrs. Hartmann's bankruptcy filing, this Court denied Keybank's Motion for Counsel Fees and Costs without prejudice. [R. 58].

Now, Keybank has filed an Amended Motion for Attorney Fees. [R. 59]. This time, Keybank seeks attorneys' fees from Mr. Hartmann individually, rather than from Mr. and Mrs. Hartmann. [R. 59]. In its motion, Keybank contends that the automatic stay imposed pursuant to Mrs. Hartmann's bankruptcy does not preclude this Court from considering a grant of attorneys' fees against Mr. Hartmann alone. The Hartmanns did not file a response to Keybank's motion. Because the Court has already determined that Keybank is entitled to a recovery of attorneys' fees, the only issues before the Court are: (1) whether the automatic stay imposed pursuant to Mrs. Hartmann's bankruptcy precludes Keybank from seeking fees and costs from Mr. Hartmann; and (2) if Keybank is entitled to attorneys' fees and costs from Mr. Hartmann, the amount of fees and costs Keybank may recover.

II. ANALYSIS

A. Keybank May Seek Attorneys' Fees and Costs from Mr. Hartmann

As a general rule, "neither the protections of the automatic stay during the pendency of the bankruptcy case nor the discharge injunction granted upon the completion of the Debtors' confirmed plan, extend to non-debtor co-defendants." Saleh v. Bank of Am., N.A., 427 B.R. 415, 421 (Bankr.N.D.Ohio 2010) (citing 11 U.S.C. § 362(a) and § 524(e)). In limited circumstances, § 1301 of the Bankruptcy Code extends a co-debtor stay to certain non-debtor individuals who share liability with a Chapter 13 debtor on a consumer debt. Id . (citing 11 U.S.C. § 1301(a); In re McCormick, 381 B.R. 594, 598 (Bankr. S.D.N.Y. 2008)). However, there is no automatic stay in Chapter 7 cases for the non-debtor spouse of a bankruptcy debtor. In re Brown, 507 B.R. 31, at *5 (B.A.P. 6th Cir. 2014).

In the present case, the Hartmanns' guaranties relate to the floor plan agreement of LCM, thus they are not consumer debt. Furthermore, since Mrs. Hartmann filed a Chapter 7 bankruptcy petition, Mr. Hartmann, as a non-debtor spouse, is not entitled to a stay of the instant litigation. Accordingly, this Court may proceed with a determination of the amount of attorneys' fees and costs that Mr. Hartmann is jointly and severally liable for pursuant to his personal guaranty of LCM's obligations.

B. Attorney's Fees and Costs

As noted above, this Court has already determined that Keybank is entitled to recover attorney's fees and costs incurred as a result of this litigation. Given this Court's finding that Mr. Hartmann is not protected by an automatic stay, the only issue remaining before ...


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