United States Bankruptcy Appellate Panel

For the Eighth Circuit

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No. 14-6045

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In re: Daniel Neale Gess; Amy Lea Garza

lllllllllllllllllllllDebtors

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Daniel Neale Gess; Amy Lea Garza

lllllllllllllllllllllDebtors - Appellants

v.

Randolph Brooks Federal Credit Union

lllllllllllllllllllllCreditor - Appellee

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Appeal from United States Bankruptcy Court 

for the District of Minnesota - Minneapolis
2

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Submitted: February 17, 2015

Filed: March 18, 2015

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Before FEDERMAN, Chief Judge, SALADINO and NAIL, Bankruptcy Judges. 

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FEDERMAN, Chief Judge

Daniel Neale Gess and Amy Lea Garza (the “Debtors”) appeal from the 

Order of the Bankruptcy Court1granting the Randolph Brooks Federal Credit 

Union relief from the automatic stay with regard to a vehicle. For the reasons that 

follow, the Order is AFFIRMED.

FACTUAL BACKGROUND

The Debtors filed a joint Chapter 7 bankruptcy petition, pro se, on July 30, 

2014.2 Randolph Brooks Federal Credit Union filed a Motion for Relief from Stay 

regarding a 2008 Chrysler Town & Country van, which had been owned by Debtor 

Daniel Gess’ father, but was in the Debtors’ possession. The Debtors opposed the 

Motion. The Bankruptcy Court granted the Motion, and the Debtors appeal.

 

1 The Honorable Robert J. Kressel, United States Bankruptcy Judge for the 

District of Minnesota.

2 Debtor Amy Lea Garza has since been dismissed from the bankruptcy case. 
3

STANDARD OF REVIEW

A decision to grant or deny a motion for relief from the automatic stay 

is within the discretion of the bankruptcy court and is reviewed for an 

abuse of discretion. An abuse of discretion will be found if the court’s 

judgment was based on clearly erroneous factual findings or on 

erroneous legal conclusions. In its application, the abuse of discretion 

standard is nearly indistinguishable from the clearly erroneous 

standard.3

 

DISCUSSION

Section 362(a) of the Bankruptcy Code generally provides for an automatic 

stay against taking any action against property of the estate once a bankruptcy 

petition is filed. Section 362(d) provides for relief from the automatic stay, as 

relevant here:

(d) On request of a party in interest and after notice and a hearing, the 

court shall grant relief from the stay provided under subsection (a) of 

this section, such as by terminating, annulling, modifying, or 

conditioning such stay—

(1) for cause, including the lack of adequate protection of an 

interest in property of such party in interest; [or]

(2) with respect to a stay of an act against property under 

subsection (a) of this section, if—

(A) the debtor does not have an equity in such property; 

and

 

3

In re Crossroads Ford, Inc., 449 B.R. 366, 367 (B.A.P. 8th Cir. 2011) 

(citations omitted).
4

(B) such property is not necessary to an effective 

reorganization.4

The Credit Union, as the moving party, bore the burden of proof on the issue of 

whether there was equity in the vehicle, but the Debtors bore the burden of proof 

on all other issues under § 362(d).5

The Bankruptcy Court granted relief under both subparagraphs (1) and (2), 

for reasons stated on the record at the conclusion of the hearing on the Motion. 

The Debtors appear to make three primary arguments as to why the stay should not 

have been lifted: that they do not have an ownership interest in the vehicle; that 

the Credit Union’s lien is no good or is not enforceable against them; and that the 

Credit Union’s interest is adequately protected because the van is insured.

The first issue is whether the van is property of the bankruptcy estate subject 

to the automatic stay. The Debtors asserted, and appear to continue to assert, that

because the Credit Union failed to establish “color of title,” they had no ownership 

interest in the van. Indeed, the Bankruptcy Court found, and the Debtors do not 

dispute, that the Certificate of Title on the van lists Debtor Daniel Gess’ father, 

Neale Walter Gess, as the sole owner. As the Bankruptcy Court noted, if that had 

been the end of the inquiry, the Credit Union would not have needed relief from 

the stay in order to repossess the van in the first place. 

 

4

 11 U.S.C. § 362(d).

5

11 U.S.C. § 362(g).
5

However, § 541 of the Bankruptcy Code broadly defines property of the 

estate to include “all legal or equitable interests of the debtor in property as of the 

commencement of the case.”6 By the time the Debtors filed their bankruptcy case, 

Neale Gess had passed away and Debtor Daniel Gess was the sole designee under 

his will, which the Debtors had submitted to the Court. As a result, the Bankruptcy 

Court found that Debtor Daniel Gess had at least an equitable interest in the van, 

which interest was property of the estate. Therefore, the Credit Union was correct 

in seeking relief from the stay before exercising its rights as to the van. We see no 

clear error in that holding.

Next, the Debtors assert that the Credit Union does not have a perfected 

security interest in the van, or that the loan cannot be enforced against them. They 

submitted to the Court voluminous documentation detailing a pre-bankruptcy 

dispute with the Credit Union in making the loan to Neale Gess. However, as the 

Bankruptcy Court held, the Credit Union’s interest was evidenced by a Security 

Agreement signed by Neale Gess, and the lien was noted on the Certificate of 

Title. The Certificate of Title was issued in Texas. Texas law provides that, 

except for motor vehicles being held as inventory, “a person may perfect a security 

interest in a motor vehicle that is the subject of a first or subsequent sale only by 

recording the security interest on the certificate of title as provided by this 

chapter.”7 The fact that Neale Gess is now deceased, and that the Debtors may not 

be personally liable on the loan, does not affect the Credit Union’s security interest

in the van. The Bankruptcy Court did not clearly err in finding that the Credit 

Union had a perfected security interest in the van.

 

6

11 U.S.C. § 541(a)(1). 

7 Tex. Transp. Code § 501.111 (2012).
6

The Debtors next assert that the Credit Union’s interest is adequately 

protected because they produced evidence that it is insured. Insurance on a vehicle 

is, indeed, necessary to adequately protect a secured creditor’s interest in it. 

However, “[t]he concept of adequate protection is derived from the property 

interest protections found in the Fifth Amendment.”8 “The purpose of adequate 

protection is to guard the secured creditor’s interest from a decline in the value of 

the collateralized property.”9 Because vehicles depreciate in value relatively 

quickly through use, cash payments, in addition to insurance, are typically required 

to adequately protect the creditor. The Credit Union established that the loan was 

in default at the time it filed its Motion for Relief from the Stay and, as discussed 

below, that there was no equity cushion to protect against decline in value. 

Because the Credit Union established that its interest was not adequately protected, 

the Bankruptcy Court did not clearly err in holding that cause existed to lift the 

stay under § 362(d)(1).10

Finally, the Debtors assert that relief from the stay was not warranted under 

§ 362(d)(2). However, the Credit Union demonstrated that the amount owed on 

the loan was $12,095.03, and the Debtors conceded that the value was $4,137. 

 

8

In re Panther Mountain Land Dev., LLC, 438 B.R. 169, 189 (Bankr. E.D. 

Ark. 2010 (citing U.S. Const. Amend. V; additional citations omitted). See also 

LNC Investments, Inc. v. First Fidelity Bank, 247 B.R. 38, 44 (S.D. N.Y. 2000) 

(citations omitted). 

9

Id. (citing 11 U.S.C. § 361; United Sav. Ass’n v. Timbers of Inwood Forest 

Assocs., Ltd., 484 U.S. 365, 370, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988); additional 

citations omitted).

10 In re Martens, 331 B.R. 395, 398 (B.A.P. 8th Cir. 2005) (“A creditor is 

entitled to relief from the stay if the debtor is not making mortgage payments, and 

if there is insufficient equity in the property to adequately protect the creditor.”)

(citations omitted).
7

Since the lien was valid, as discussed above, and the value of the van was less than 

the amount owed on the loan, there clearly was no equity. Further, the Debtors 

concede that the van is not needed for an effective reorganization because this is a 

Chapter 7 case.11 As a result, the Court did not clearly err in granting relief from 

the stay under § 362(d)(2). 

ACCORDINGLY, the Order of the Bankruptcy Court granting Randolph 

Brooks Federal Credit Union’s Motion for Relief from Stay is AFFIRMED.

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11 Id. (“This is a Chapter 7 liquidating bankruptcy case, therefore, by 

definition, the property is not necessary for an effective reorganization, which 

satisfies § 362(d)(2)(B).”).