Opinion
Case no. 10-39268-WIL.
April 7, 2011
Constance M. Hare, Bar no. 22512, Mehlman, Greenblatt Hare, LLC, Baltimore, MD, Attorneys for Movants.
William R. Feldman, Bar no. 04929, Law Offices of William R. Feldman, PC, Rockville, MD, Attorneys for Melvin C. Keller, II.
Melvin C. Keller, II, Debtor, Bethesda, MD.
STIPULATION AND CONSENT ORDER GRANTING MOTION FOR RELIEF FROM STAY
Upon the Motion for Relief from Stay filed by Erie Indemnity Company, Attorney-In-Fact for Erie Insurance Exchange, Erie Insurance Company, Erie Insurance Company of New York, Erie Insurance Property Casualty Company, Erie Family Life Insurance Company and Flagship City Insurance Company (collectively "Erie"), good cause having been shown, and upon the consent of the parties hereto endorsed below, the parties hereby stipulate and agree as follows:
Recitals
1. On December 31, 2010 (the "Petition Date"), Melvin C. Keller, II and Marsha Dale Keller (collectively, the "Debtors") filed a Voluntary Petition for relief under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland.
2. Janet M. Nesse was appointed the Chapter 7 trustee of this bankruptcy estate.
3. On or about May 1, 2008, the debtor Melvin C. Keller, II ("Keller") entered into an Agency Agreement with Erie (the "Agency Agreement").
4. On or about April 8, 2008, in contemplation of the execution of the Agency Agreement, Keller entered into an Agent Loan and Security Agreement with Erie (the "Loan Agreement").
5. The Loan Agreement granted Erie a security interest in Keller's Policy Expirations. Policy Expirations is defined as "the customer list and policy expirations, i.e. all information regarding insurance policies in force and the expiration or renewal dates of such policies for [Keller's] agency, together with all documents containing information regarding the same." The security interest was perfected by the filing of a Financing Statement with the Department of Assessments and Taxation.
6. The Loan Agreement also modified certain terms of the Agency Agreement until the loan was paid in full. In pertinent part, the Loan Agreement provided:
Erie will at all times have a right of recoupment or offset as against all commission or other compensation not yet paid Agent to the extent of (a) any moneys in Agent's possession or control belonging to Erie, or (b) any indebtedness of Agent at any time owing to Erie. Upon acceleration of or default under any debt Agent owes to Erie, Agent will not be entitled to payment of any commissions, bonuses, prizes or other compensation to the extent of the debt Agent owes to Erie.
7. At the time of the filing of the Petition, Keller owed $27,440.62 to Erie on account of the monies loaned to him under the Loan Agreement. Further, the Loan Agreement provided for interest to accrue at the rate of 12% per annum, and for the reimbursement of attorneys fees incurred by Erie in enforcing the Loan Agreement (the monies loaned, interest and attorneys fees collectively referred to as the "Loan Obligation"). As of March 30, 2011, Erie has incurred attorneys' fees of $5,400.00.
8. On or about February 15, 2011, Erie filed a Motion for Relief From Stay (the "Motion") seeking to lift the stay to allow Erie to apply those Policy Expirations and any and all cash or non-cash proceeds thereof and other monies that would otherwise be paid to Keller arising from all policies which were originated by Keller prior to the filing of the Petition against the Loan Obligation.
9. As of February 28, 2011, Erie is holding, pursuant to its perfected security interest and/or right of recoupment, pre-petition commissions arising from Policy Expirations in the amount of $7,061.39 pending resolution of the Motion through entry of this Consent Order.
10. Further, Keller stated his intention to reaffirm the Loan Obligation in his Statement of Intention. A Reaffirmation Agreement has been sent to Keller for his review and execution.
11. In contemplation of execution of the Reaffirmation Agreement, Keller has requested that Erie advise it has no present intention to terminate his relationship with Erie and Erie has advised that is has no present intention to do so. Erie further represents that the filing of this bankruptcy proceeding will not be considered in any determination with respect to his status as a Principal Agent with Erie.
12. Further, Keller has requested that Erie enter into an agreement to allow him to obtain certain of the commissions resulting from Policy Expirations that would otherwise be applied to the monies owed under the Loan Obligation.
13. In order to accommodate Keller, and as consideration for this accommodation, Keller has agreed to grant Erie a lien and a right of recoupment and/or set-off on all post-petition Policy Expirations and other monies that would be otherwise owed to him by Erie.
NOW, THEREFORE, in consideration of the mutual promises and agreements of the parties hereto, it is, by the United States Bankruptcy Court for the District of Maryland,
ORDERED, that the recitals set forth above are true and accurate in every respect, and are hereby incorporated into this Order by reference, and it is further
ORDERED, that notwithstanding the provisions of § 552(a) of the Bankruptcy Code and in addition to the security interests granted by § 552 of the Bankruptcy Code, Keller hereby grants to Erie a first priority post-petition security interest in the Policy Expirations and all cash and non-cash proceeds thereof which are, will be, or have been acquired, generated or received by Keller subsequent to the filing of the Voluntary Petition, including but not limited to all of Keller's commissions, residuals or other payments owed to him under any policies originated by him on behalf of Erie, and any bonuses, prizes or other compensation that would otherwise be owed to him by Erie (the "Post-Petition Collateral"), and it is further
ORDERED, that Erie has a first priority security interest in the Policy Expirations and all cash and non-cash proceeds thereof which are or have been acquired, generated or received by Keller prior to the filing of the Voluntary Petition, including but not limited to all of Keller's commissions, residuals or other payments owed to him under any policies originated by him on behalf of Erie, and any bonuses, prizes or other compensation that would otherwise be owed to him by Erie (the "Pre-Petition Collateral"), and it is further
ORDERED, the security interests granted in the above paragraphs and any other paragraph of this Order are deemed to be validly perfected security interests without the necessity for filing or execution of any documents which might otherwise be required under applicable nonbankruptcy law for the perfection of said security interests, and such security interests shall be binding upon all creditors of Keller who have extended or may extend credit to Keller in the future, and it is further
ORDERED, that if Erie, in its sole discretion, elects to file documents to continue its status as a secured creditor with a first priority lien in the Pre-Petition Collateral and Post-Petition Collateral, it shall be able to do so without violating 11 U.S.C. §§ 362 and 524, and it is further
ORDERED, that the stay is lifted to allow Erie to enforces its contractual rights and state law remedies under the Loan Agreement against both the Pre-Petition Collateral and Post-Petition Collateral, and it is further
ORDERED, that Erie, notwithstanding its rights in the above-referenced paragraph, commencing from February, 2011 and monthly thereafter until the Loan Obligation is paid in full, shall provide a Commission Statement to Keller itemizing all monies earned by Keller from both the Pre-Petition and Post-Petition Collateral, and from the total amount owed to Keller as shown on each Commission Statement, Erie shall retain 50% of said amount or $703.60 (the previous regular monthly payment under the Loan Agreement), whichever is greater, and apply it to the Loan Obligation, and Erie shall then pay Keller the remainder of the monies owed under each Commission Statement, and it is further
ORDERED, that in the event Keller executes the Reaffirmation Agreement and such Reaffirmation Agreement is approved by the Bankruptcy Court, Keller shall be deemed to have reinstated under the terms of the Loan Agreement, and no interest shall accrue on the Loan Obligation unless either (i) Keller rescinds the Reaffirmation Agreement; or (ii) the Agency Agreement is terminated by either party, and it is further
ORDERED, that Erie may enforce this Consent Order in any court with appropriate jurisdiction, including but not limited to, any court authorized by the Agency Agreement and Loan Agreement or any court authorized by state law, and it is further
ORDERED, that in the event that Keller terminates his relationship with Erie prior to the Loan Obligation having been paid in full, Erie shall have the right to apply 100% of the Pre-Petition Collateral and Post-Petition Collateral to the repayment of the Loan Obligation, and it is further
ORDERED, that any acts by Erie authorized by this Consent Order shall not violate the provisions of 11 U.S.C. §§ 362 or 524, and it is further
ORDERD, that the 14 day stay ordinarily imposed by Bankruptcy Rule 4001(a)(3) is hereby waived.