# Kennedy Funding, Inc. as Agent For Certain Co-Lenders v. Oracle Business Developments, LLC, a Virgin Islands Limited Liability Company

> District Court, Virgin Islands · July 29, 2020

URL: https://www.frixlaw.com/law-library/cases/10695007

## Case

- **Court:** District Court, Virgin Islands
- **Decided:** July 29, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

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## How later opinions describe it (automated extraction)

- finding debt for attorneys’ fees incurred in obtaining a divorce was primarily for personal or family reasons and therefore a consumer debt

## Opinion text

DISTRICT COURT OF THE VIRGIN ISLANDS
DIVISION OF ST. CROIX

KENNEDY FUNDING, INC., AS AGENT )
FOR CERTAIN CO-LENDERS, )
)
Plaintiff, )
v. ) Civil Action No. 2012-0009
)
ORACLE BUSINESS DEVELOPMENTS, LLC, )
A VIRGIN ISLANDS LIMITED LIABILITY )
COMPANY; JOSEPH JAGRUP; MEINRAD )
JAGRUP; MARY JAGRUP; THE INTERNAL )
REVENUE SERVICE OF THE UNITED STATES )
OF AMERICA; ERIC A. CANTON and )
ELAINE S. CANTON, )
)
Defendants, )
________________________________________________)
Attorneys:
Matthew J. Duensing, Esq.,
St. Thomas, U.S.V.I.
For Plaintiff

Nizar A. Dewood, Esq.,
Houston, TX
For Defendants Meinrad Jagrup and Mary Jagrup

Angela Tyson-Floyd, Esq.,
St. Croix, U.S.V.I.
For Defendant Internal Revenue Service

Edward H. Jacobs, Esq.,
St. Croix, U.S.V.I.
For Defendant/Cross-Claimant/Third-Party
Plaintiffs Elaine S. Canton and Eric A. Canton

MEMORANDUM OPINION
Lewis, Chief Judge
THIS MATTER comes before the Court on the “Motion to Vacate Sale & Order
Confirming Sale of 73 Estate Castle Coakley” (Dkt. No. 126) filed by Defendants Meinrad Jagrup
and Mary Jagrup (“Jagrups”). The Motion seeks to void both the Marshal’s Sale held on December
18, 2017 and this Court’s Order dated February 15, 2018 confirming the sale of real estate owned
by Oracle Business Developments, LLC. (“Oracle”) (Dkt. Nos. 124-7; 125). The property was sold
to pay a judgment obtained against Oracle by Kennedy Funding, Inc., as Agent for Certain Co-

Lenders (“Kennedy”). (Dkt. No. 101).
The Jagrups—individual members of Oracle and guarantors of Oracle’s debts—filed
bankruptcy under Chapter 13 of the Bankruptcy Code on October 3, 2017.1 In their Motion to
Vacate, the Jagrups claim that the sale of the real estate owned by Oracle violated the automatic
bankruptcy stay that protects co-debtors pursuant to 11 U.S.C. § 1301(a). (Dkt. No. 127). For the
reasons that follow, the Court will deny the Motion in its entirety.
I. BACKGROUND
In January 2012, Plaintiff Kennedy Funding, Inc., as Agent for Certain Co-Lenders, filed
a debt and foreclosure action against Oracle, a Virgin Islands Limited Liability Company. Joseph
Jagrup, Meinrad Jagrup, and Mary Jagrup also were named as Defendants because they were

alleged to be members of Oracle as well as guarantors of Oracle’s debt to Kennedy. (Dkt. No. 1 at
¶¶ 4-8). Kennedy alleged in its Complaint that in September 2008, Oracle executed a Promissory
Note (“Note”) to repay Kennedy $820,000, together with interest. Id. at ¶ 12. The Note was secured
by a Mortgage and Security Agreement over commercial real estate owned by Oracle described as:
Plot No. 73, Estate Castle Coakley, Queen Quarter, St. Croix, U.S. Virgin Islands
consisting of 1.00 U.S. acre, more or less, as more fully shown and described on
OLG Drawing No. 3260, dated March 12, 1976, and revised May 17, 1982

1 The Jagrups filed a joint Voluntary Petition for Bankruptcy under Chapter 13 of the Bankruptcy
Code, 11 U.S.C. §§ 1300 et seq., docketed in the Bankruptcy Court of the Virgin Islands as Case
No. 1:17-bk-10002.
(“Castle Coakley Property”). Id. at ¶ 14. Under the Security Agreement with Oracle, Kennedy also
obtained a security interest in all accounts and property owned or thereafter acquired by Oracle
whether or not affixed to the Castle Coakley Property. Id. at ¶ 18. Oracle’s repayment obligation
to Kennedy was further secured by a Mortgage and Security Agreement signed by the Jagrups

against real property owned by them, described as:
Plot No. 34, Estate Hope, Prince Quarter, St. Croix, U.S. Virgin Islands consisting
of 1.29 acres, more or less, as more fully shown on OLG Drawing No. 5024 dated
March 15, 1996

(“Estate Hope Property”). Id. at ¶ 15. The Mortgages against the Castle Coakley Property and the
Estate Hope Property both were recorded with the Recorder of Deeds for St. Croix on September
19, 2008. Id. at ¶¶ 14-15. In addition, Kennedy’s interest in Oracle’s accounts and personal
property covered by the Security Agreement was perfected by the filing of a UCC-1 Financing
Statement. Id. at ¶ 19.
Oracle defaulted on the loan and despite demand for payment, the default was not cured.
Id. at ¶¶ 24, 25-27. Kennedy then filed the instant action against Oracle, its members and
guarantors, as well as other Defendants who had or might have a claim against the mortgaged
properties. Id.
After Defendants were served with process, Oracle file a Chapter 7 Bankruptcy proceeding
in the Bankruptcy Court of the Virgin Islands, Case No. 1:12-bk-10012. Oracle’s Bankruptcy
Petition indicated that its debts were primarily “business debts” and that its primary asset was the
Castle Coakley Property. (Case No. 1:12-bk-10012, Dkt. No. 1). Approximately six months later,
the Bankruptcy Court entered an Order of Abandonment based on the Trustee’s Notices of
Abandonment of both the real property—i.e., the Castle Coakley property—and personal property
of Oracle’s bankruptcy estate. (Case No. 1:12-bk-10012, Dkt. Nos. 10, 13, 17). Oracle’s
bankruptcy case was closed on October 29, 2013. (Case No. 1:12-bk-10012, Dkt. No. 19).
In May 2017, this Court granted, in large part,2 Kennedy’s “Motion for Default and
Summary Judgment” (Dkt. No. 100). The Court entered Default Judgment in favor of Kennedy

against Oracle and the Jagrups, and summary judgment against other debtors and lienholders. (Dkt.
No. 101 at 1-2). The Court further found that Kennedy held a first priority lien on the Castle
Coakley and the Estate Hope properties. Id. at 2-3. Kennedy was awarded a judgment against
Oracle and the Jagrups for an amount in excess of $1.9 million. Id. at 3. The Court foreclosed all
liens against the Castle Coakley and the Estate Hope properties and ordered that both properties
be sold by the United States Marshal at a public sale. Id. at 4-5. The Court issued a Writ of
Execution and the two properties were seized by the Marshal on August 9, 2017. (Dkt. Nos. 121-
123).
On October 3, 2017, the Jagrups jointly filed a Chapter 13 Bankruptcy Petition which was
docketed in the Bankruptcy Court as Case No. 1:17-bk-10002. (Case No. 1:17-bk-10002, Dkt. No.

1). In their Bankruptcy Petition, the Jagrups identified the Estate Hope property as their residence
and identified Jagrup Electric as their only sole proprietorship business. Id. at 2, 4. The Jagrups
also stated in their Petition that their debts were not primarily “consumer debts”—defined as debts
“‘incurred by an individual primarily for a personal, family or household purpose.’” Id. at 8.
Instead, the Jagrups reported that their primary debts were as a result of being guarantors. Id. at 8,
21. The Jagrups’ property list included the Estate Hope property, undeveloped land in Kingshill
and Frederiksted, as well as a multi-unit building in Estate Whim. Id. at 11-12. They also verified

2 The Court denied, with prejudice, Kennedy’s Motion for Default Judgment against Joseph
Jagrup.
that they did not have any other property “of any kind” not listed in their Petition. Id. at 12. In
Schedule H of the Petition, the Jagrups identified Joseph Jagrup and Oracle as co-debtors “who
are also liable for any debts [the Jagrups] may have.” Id. at 26.
In November and December 2017, the U.S. Marshal advertised the sale of the Castle

Coakley property in newspapers of general circulation of the Virgin Islands. (Dkt. No. 124 at 1-2;
124-1). On December 18, 2017, the Marshal oversaw the public sale of the Castle Coakley property
and filed a verified report that Kennedy, which bid $400,000 for the property, was the highest
bidder at the sale. (Dkt. No. 124-7). In February 2018, Kennedy filed a “Motion for Order
Confirming Sale” of the Castle Coakley Property. (Dkt. No. 124). On February 15, 2018, the Court
issued an Order Confirming Sale and allowed Oracle and the Jagrups six months to redeem the
property. (Dkt. No. 125).
The record in the instant case does not reflect that the Jagrups ever filed a Notice formally
advising the Court that they had filed for bankruptcy. They did not file a motion to stay the
Marshal’s sale of the Castle Coakley property and did not object to the Marshal’s Verified Return

of Writ of Execution for Judicial Sale (Dkt. No. 124-7). Nor did the Jagrups file any opposition to
Kennedy’s Motion to Confirm Sale filed on February 9, 2018. (Dkt. No. 124).
Twelve days after the sale was confirmed, the Jagrups filed the instant “Motion to Vacate
Sale & Order Confirming Sale of 73 Estate Castle Coakley” pursuant to Fed. R. Civ. P. 60(b)3 and
11 U.S.C. § 1301(a). (Dkt. No. 126). In their Memorandum in Support, the Jagrups argue that the
sale of the Castle Coakley property and the Order Confirming Sale were void because they violated

3 The Jagrups do not identify which subsection of Rule 60(b) they claim applies in this case. In
view of their argument that the sale of the Castle Coakley property and the Order Confirming Sale
are void, the Court presumes the Jagrups are relying on Rule 60(b)(4) which permits a court to
relieve a party from a judgment or order because the judgment is void.
the automatic stay embodied in 11 U.S.C. § 1301(a) in that Oracle—as a co-debtor of the Jagrups—
was shielded from the consequences of the Court’s Judgment—namely the sale of its property and
the Order Confirming Sale. (Dkt. No. 127 at 3-5). The Jagrups also appear to take issue with the
timing and the circumstances of the sale: (1) that the sale occurred less than three months after

Hurricanes Irma and Maria damaged the property; (2) that it appeared that no other bidders were
present at the sale;4 and (3) that the price obtained for the property was unreasonably low and
permitted Kennedy a windfall. Id. at 5.
Kennedy responded to the Jagrups’ Motion to Vacate by arguing that it respected the
Jagrups’ bankruptcy by removing the Estate Hope property—the Jagrups’ personal residence listed
in their bankruptcy schedule—from the Marshal’s Sale. (Dkt. No. 128 at 2). In countering the
Jagrups’ assertions that their bankruptcy stay extended to Oracle’s commercial Castle Coakley
property, Kennedy asserted: (1) that the Jagrups did not list the Castle Coakley property as an asset
in its bankruptcy schedules; (2) that the Jagrups’ attorney—who represented them in both the
instant case and the bankruptcy case—received notice through the ECF system of the Writ of

Execution and Motion to Confirm Marshal sale, but raised no objection at any stage of the process;
and (3) that the automatic stay did not extend to Oracle or its property because the debts at issue
were commercial debts, not “consumer debts” under 11 U.S.C. § 1301 and Oracle was not an
“individual” subject to the co-debtor stay. Id. at 2-4. The Jagrups’ Reply disputed Kennedy’s
claims and argued that Kennedy’s collection of debts against Oracle had an immediate adverse
impact on their bankruptcy estate. (Dkt. No. 131, at 2-5).

4 The Jagrups fail to point to any evidence in the record that Kennedy was the only party present
at the auction and the Court’s record does not establish that as a fact.
II. APPLICABLE LEGAL PRINCIPLES
The Jagrups’ Motion to Vacate relies on Fed. R. Civ. P. 60(b) and 11 U.S.C. § 1301(a).
The former permits a party, in specific circumstances, to ask the Court to relieve that party “from
a final judgment, order or proceeding . . . .” Fed. R. Civ. P. 60(b). One of the bases for relief

provided in the Rule is if “the judgment is void.” Fed. R. Civ. P. 60(b)(4). “A judgment is void . . .
only if the court that rendered it lacked jurisdiction of the subject matter, or of the parties, or if it
acted in a manner inconsistent with due process of law.” Union Switch & Signal Div. American
Standard Inc. v. United Elec., Radio and Mach. Workers of America, Local 610, 900 F.2d 608,
612 n.1 (3d Cir. 1990) (citations omitted); see also United Student Aid Funds, Inc. v. Espinosa,
559 U.S. 260, 270 (2010) (a void judgment under Rule 60 is one “so affected by a fundamental
infirmity that the infirmity may be raised even after the judgment becomes final.”)
As a general rule, judgments or awards entered against a party after that party files for
bankruptcy—such judgment thus having been entered in violation of the automatic stay—are void
and of no effect. Fleet Consumer Discount Co. v. Graves (In re Graves), 33 F.3d 242, 247 (3d Cir.

1994) (absent relief from the stay, judicial actions against the debtor are void ab initio); see also
In re Jones, 604 B.R. 443, 455 (Bankr. W.D.Pa. 2019) (except for retroactive relief from a stay
granted by court, arbitration award entered against debtor after bankruptcy filing would have been
void ab initio).
In order to determine whether the Confirmation Order is void, the Court must examine the
applicable bankruptcy statutes. After a debtor files a Chapter 13 petition, a creditor may not “act,
or commence or continue any civil action, to collect all or any part of a consumer debt of the debtor
from any individual that is liable on such debt with the debtor, or that secured such debt, unless
. . .” certain statutory exceptions apply. See 11 U.S.C. § 1301(a) (emphasis added). For the
co-debtor stay to apply, (1) there must be an action to collect a consumer debt; (2) the consumer
debt must be of the debtor, and (3) the action to collect must be against an individual that is liable
on such debt with the debtor. Smith v. Capital One Bank, N.A., 845 F.3d 256, 259 (7th Cir. 2016).
Acts in violation of the co-debtor stay, like acts in violation of the automatic stay under

§ 362, are generally held void. Harris v. Margaretten & Co., Inc., (In re Harris), 203 B.R. 46, 50
(Bankr. E.D. Va. 1994), aff'd, 100 F.3d 950 (4th Cir. 1996). In the Third Circuit, acts taken in
violation of the co-debtor stay are void or voidable unless validated by the retroactive annulment
of the co-debtor stay. See In re Myers, 491 F.3d 120, 128 (3d Cir. 2007) (decision whether to
retroactively annul the stay—thereby ratifying the acts which violated the automatic stay—is
within the discretion of the bankruptcy court); see also In re Morris, 385 B.R. 823, 829 (E.D. Va.
2008) (recognizing bankruptcy court’s authority to retroactively annul co-debtor stay based on the
balancing of equities). Section 1301(c) authorizes a court to grant relief to a creditor from the co-
debtor stay if it determines that “such creditor's interest would be irreparably harmed by
continuation of such stay.” 11 U.S.C. § 1301(c)(3).

III. DISCUSSION
The legal basis for the Jagrups’ “Motion to Vacate Sale & Order Confirming Sale of 73
Estate Castle Coakley” (Dkt. No. 126) is their claim that the sale occurred after they filed their
joint petition for Chapter 13 bankruptcy. They assert that the automatic stay under Chapter 13
extended to its co-debtor, Oracle. Because the sale allegedly violated § 1301(a) by collecting a
joint debt from a co-debtor after the debtor filed for bankruptcy, the Jagrups contend that the Sale
and Order confirming the sale are void and may be set aside under Rule 60(b). (Dkt. No. 127 at
3-6).
In contrast, Kennedy contends that Rule 60(b) does not apply to the Order confirming the
sale because that Order was not a final appealable order. (Dkt. No. 128 at 3-4). Alternatively,
Kennedy argues that the co-debtor stay is inapplicable to Oracle’s property. Kennedy asserts two
bases for claiming the stay does not apply under the present facts: (1) because the underlying debt

is not a “consumer debt” within the meaning of 11 U.S.C. § 1301(a); and (2) because Oracle, as a
limited liability company, is not an individual and, thus, cannot by law be a co-debtor under
Chapter 13. Id. at 4-5.
A. Availability of Relief Under Rule 60(b)
In order to address the Jagrups’ claims, the Court must first determine whether Rule 60(b)
applies under the circumstances. In its response, Kennedy contends that Rule 60(b) is not
applicable because the sale and order confirming sale are not “final” orders subject to Rule 60
relief. (Dkt. No. 128 at 3-4). See State Nat'l Ins. Co. v. Cty. of Camden, 824 F.3d 399, 406 (3d Cir.
2016) (explaining that Rule 60(b) generally only applies to final judgments). Instead, Kennedy
claims that the appropriate standard is that under Fed. R. Civ. P. 72(a). Id. at 3.

Kennedy is mistaken in its reliance on Rule 72. While Rule 72 applies to “nondispositive
matters,” by its plain terms, it only applies to the review of a Magistrate Judge’s decision in such
nondispositive matters. Fed. R. Civ. P. 72(a) (“When a [nondispositive] pretrial matter . . . is
referred to a magistrate judge to hear and decide, . . . the district judge in the case must consider
timely objections and modify or set aside any part of the order that is clearly erroneous or is
contrary to law.”) Because the Orders authorizing the Marshal Sale (Dkt. No. 101) and Confirming
the Sale of the Castle Coakley Property (Dkt. No. 125) were issued by the District Court, Rule 72
does not apply.
Kennedy’s argument also fails because the confirmation of a sale in a mortgage foreclosure
proceeding is generally considered an order subject to a timely appeal or challenge under Rule 60.
See generally, 55 AM. JUR. 2D Mortgages, § 675 (2019). Due to the unique nature of mortgage
foreclosure proceedings, a court’s various orders in a foreclosure case—orders determining

priorities, foreclosing real property interests and directing sales, confirming sales, and entering
deficiency judgments—are appealable although they occur at different stages of the case. See
Citibank, N. A. v. Data Lease Financial Corp., 645 F.2d 333, 337 (5th Cir. 1981) (foreclosure
order directing the immediate sale of specified property is a final order for purposes of appeal);
see also United States v. Zimmerman, 491 F. App’x 341, 347 n.8 (3d Cir. 2012) (foreclosure order
may be challenged on appeal to determine the rights of all parties with interests in the property;
appeal of confirmation order is permitted to determine whether the court had jurisdiction to order
the sale); see also Keb Hana Bank USA v. Red Mansion, LLC, 763 F. App’x 256, 257 n.1 (3d Cir.
2019) (finding appellate court had jurisdiction to review district court’s confirmation of a mortgage
foreclosure sale); Milligan v. Knodra, 2004 WL 3383654, at *6 (D.V.I. Sept. 30, 2004) (litigant

who fails to appeal from foreclosure order may find his right to appeal limited or barred).
Likewise, courts in various circuits have found that Rule 60(b) can be an appropriate
vehicle to set aside orders alleged to have violated an automatic bankruptcy stay, either because
such judgment was void or voidable. See James v. Frame, 2013 WL 1314746, at *1 (D.N.J. March
28, 2013) (judgment against Defendant entered after bankruptcy stay went into effect rendered the
order void ab initio entitling Defendant to relief under Rule 60(b)); Mink v. Baltimore Behavioral
Health, Inc., 2013 WL 3507314, at *3 (D.Md. July 10, 2013) (vacating the judgment under Rule
60(b)(4) entered in violation of bankruptcy stay); cf. In re Sullivan, 2013 WL 587323, at *1 (Bankr.
D.N.J. Feb. 14, 2013) (Order directing release of government levy on debtor’s funds could be set
aside under Rule 60(b)(4) when the Bankruptcy Court lacked jurisdiction over the United States
due to lack of service on the government).
Thus, for the reasons set forth above, the Court rejects Kennedy’s argument that the Jagrups
cannot seek relief from the Order confirming sale of the Castle Coakley Property under Rule 60(b).

B. Applicability of the Automatic Stay
As discussed above, the Jagrups contend that the Court should vacate the Order Confirming
Sale of the Castle Coakley Property because it allegedly violated the automatic stay extended to
co-debtors under Chapter 13 of the Bankruptcy Code. (Dkt. No. 126).
The Bankruptcy Code grants a debtor filing for bankruptcy the protection of an automatic
stay from the collection of its debts in order to “‘give[] the debtor a breathing spell from its
creditors.’” In re Grossman’s Inc., 607 F.3d 114, 122 (3d Cir. 2010) (quoting Grady v. A.H. Robins
Co., Inc., 839 F.2d 198, 200 (4th Cir. 1988)). Under Chapters 7 (liquidation) and 11
(reorganization) of the Code, the automatic stay does not apply to nonbankrupt co-debtors and
does not prevent actions against loan guarantors. 11 U.S.C. § 362(a). Thus, under Chapters 7 and

11 proceedings, the automatic stay cannot be invoked by sureties, co-obligors, or others with a
similar nexus to the debtor. In re Roggio, 612 B.R. 655, 666 (Bankr. M.D.Pa. 2020); Maritime
Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1205 (3d Cir. 1991) (“the automatic stay is
not available to non-bankrupt co-defendants of a debtor even if they are in a similar legal or factual
nexus with the debtor”).
Congress created an exception protecting some co-debtors in Chapter 13 cases—by
providing a co-debtor stay to protect non-debtors who are jointly liable with a debtor on a consumer
debt, or who guaranteed a debtor's consumer debt. Maritime Electric Co., Inc., 959 F.2d at 1205
n. 9. The relevant statutory provision states: “A creditor may not act, commence, or continue any
civil action, to collect all or any part of a consumer debt of the debtor from any individual that is
liable on such debt with the debtor, or that secured such debt.” 11 U.S.C. § 1301(a) (emphasis
added). The co-debtor stay applies by operation of law, and takes effect once a party, jointly liable
on the debt, files for bankruptcy protection under Chapter 13. Patti v. Fred Ehrlich, PC, 304 B.R.

182, 187 (E.D.Pa. 2003). Section 1301(a) “[was] designed to protect a debtor operating under a
Chapter 13 individual debtor repayment plan case by insulating him from indirect pressures from
his creditors exerted through friends or relatives that may have cosigned an obligation of the
debtor.” H. R. Rep. No. 95-595, 95th Cong., 2nd Sess. 426, reprinted in 1978 U.S.C.C.A.N. 5787,
5963, 6381. The co-debtors stay under Section 1301(a) does not expire until the debtor's Chapter
13 “case is closed, dismissed, or converted.” In re Tarby, 2012 WL 1390201, at *5 (Bankr. D.N.J.
April 20, 2012) (quoting 11 U.S.C. § 1301(a)(2)).5
1. Consumer Debts
As Kennedy asserts—and the Jagrups’ bankruptcy filings reflect—the debt Kennedy is
collecting in this action does not constitute a “consumer debt” under the Bankruptcy Code. The

Code defines “consumer debt” as “debt incurred by an individual primarily for a personal, family,
or household purpose.” 11 U.S.C. § 101(8) (emphasis added). Many courts have found that a
mortgage on a residence is considered a “consumer debt” if the debt is for purposes of purchasing
the home. See In re Liegey, 2009 WL 3817902, at *4 (Bankr. M.D.Pa. Nov. 13, 2009) (majority
of courts have determined that purchase money mortgages on residential property and second
mortgages “used for non-business purposes, such as consolidating other consumer debt or for
home improvement, are consumer debts.”) (citation omitted); see also In re Kelly, 841 F.2d 908,

5 Approximately three months after the Motion to Vacate was filed, the Jagrups’ bankruptcy
petition was dismissed on the Trustee’s motion because the value of the Jagrups’ assets and debts
exceeded the limits applicable to Chapter 13 debtors. (Case No. 17-bk-10002, Dkt. Nos. 41, 45).
913 (9th Cir. 1988) (mortgages against home for its purchase or equity line of credit for home
improvements and repayment of credit card debts are “consumer debts”)’ In re Johnson, 115 B.R.
159, 162 (Bankr. S.D. Ill. 1990) (same); In re Haugland, 199 B.R. 125, 127 (condominium
association fees for primary residence are “consumer debts” for purposed of Section 1301 stay).

However, if the loan secured by the property is for some purpose other than to pay off a
purchase money mortgage, it may not be a “consumer debt.” See In re Cherrett, 873 F.3d 1060,
1067-68 (9th Cir. 2017) (mortgage loan obtained through employer for employee’s temporary
residence for purposes of furthering career was not a “consumer debt”); In re Matter of Booth, 858
F.2d 1051, 1054 (5th Cir. 1988) (if mortgage is based upon “credit transaction involv[ing] a profit
motive, it is outside the definition of consumer credit.”); In re Straughter, 219 B.R. 672, 681-82
(Bankr. E.D. Pa. 1998) (when the proceeds from a mortgage loan are used for debtor’s business,
the loan is not a “consumer debt”).
In determining whether a debt was primarily used for personal, family, or household
purposes, an inquiry should be made as to why the debt was incurred. Straughter, 219 B.R. at 681-

82 (“If the debt was incurred with a profit motive, it cannot be for family or household purposes
and, therefore, does not qualify as a consumer debt.”); Patti, 304 B.R. at 188 (finding debt for
attorneys’ fees incurred in obtaining a divorce was primarily for personal or family reasons and
therefore a consumer debt). In this case, Kennedy’s loan to Oracle, for which the Jagrups were
guarantors, was for the company’s business operations, not for “personal, family or household
purposes.” The Jagrups’ own bankruptcy filings confirm their debts were not primarily “consumer
debts.” Because the debt for which Oracle was a co-debtor was not a consumer debt, the automatic
stay protections of 11 U.S.C. § 1301(a) did not extend to Oracle or its property, i.e., the Castle
Coakley Property.
2. Individual Co-Debtors
Kennedy also argues that the co-debtor automatic stay does not apply because Oracle is
not an “individual” under 11 U.S.C. § 1301(a). As noted above, the co-debtor stay provides that
“[a] creditor may not act, commence, or continue any civil action, to collect all or any part of a

consumer debt of the debtor from any individual that is liable on such debt with the debtor, or that
secured such debt.” 11 U.S.C. § 1301(a) (emphasis added). Noting that the Code defines “person”
as “individuals, partnership[s], and corporation[s]”, 11 U.S.C. §§ 101(41), and that only an
“individual with regular income” can apply for bankruptcy under chapter 13, 11 U.S.C. § 109(e),
several courts have held that corporations and other separate legal entities are not “individuals”
protected by the co-debtor stay of Section 1301. See In re McCormick, 381 B.R. 594, 598-99
(Bankr. S.D.N.Y. 2008) (LLC is not eligible for the co-debtor automatic stay in a Chapter 13
proceeding); see also In re Brines, 2015 WL 3476695, at *3 (Bankr. D. Kan. May 28, 2015)
(corporation owned solely by individual debtors is not entitled to the benefit of the co-debtor stay
because corporation is not “individual”); In re Saleh, 427 B.R. 415, 420 (Bankr. S.D. Ohio 2010)

(Chapter 13’s co-debtor stay does not extend to corporations or other non-individuals). Although
no cases could be found from courts in the Third Circuit, the reasoning in these cases is consistent
with the narrow reading that courts in the Third Circuit have applied to Section 1301(a). See, e.g.,
Straughter, 219 B.R. at 681-82 (loan used for debtor’s business not a “consumer debt”); In re Izzi,
196 B.R. 727, 730-31 (Bankr. E.D. Pa 1996) (debt resulting from tort liability not a “consumer
debt”). The Jagrups have provided no authority to the contrary.
Thus, the Jagrups’ claim that the sale of the Castle Coakley property belonging to Oracle
violated the automatic stay for co-debtors under 11 U.S.C. § 1301 fails in two respects. First, the
debt is not a “consumer debt,” and second, the alleged co-debtor—Oracle—is not an individual.
Because the sale of the Castle Coakley Property did not violate the automatic bankruptcy stay
resulting from the Jagrups’ bankruptcy filing, the Marshal’s Sale and Order Confirming Sale are
not void, and thus are not subject to being set aside under Rule 60(b)(4).
3. Other Rule 60(b) Grounds for Relief

The Jagrups have failed to clearly articulate any alternative bases to set aside the
Confirmation Order under any other provision of Rule 60(b). Although they challenge, in passing,
the timing of the sale and the number of bidders that may or may not have been present (Dkt. No.
127 at 5), these conclusory allegations do not support any basis to claim mistake, inadvertence or
surprise (Rule 60(b)(1)), newly discovered evidence (Rule 60(b)(2)), or any other reason that
justifies relief (Rule 60(b)(6)). Although the Jagrups claim Kennedy received a windfall due to its
bid of $400,000 allegedly being too low for the true value of the property, this conclusory and
unsupported assertion is likewise insufficient to warrant relief under Rule 60(b).6
The Court’s conclusion that the Jagrups are not entitled to relief under Rule 60(b) is further
supported by their failure to: (1) notify the Court of their individual bankruptcy proceeding; (2)

assert any type of claim prior to the Marshal’s Sale or the Confirmation Order which reflected their
belief that the bankruptcy stay extended to the Castle Coakley property; and (3) timely respond to
the Motion to Confirm the Sale. Deliberate or strategic choices are insufficient to warrant relief
under the “any other reason that justifies relief” language of Rule 60(b)(6). See Budget Blinds, Inc.
v. White, 536 F.3d 244, 255 (3d Cir. 2008) (relief under Rule 60(b)(6) requires a showing of

6 It is difficult to see how Kennedy could predict that, after the properties were seized and before
the sale, Hurricanes Irma and Maria would occur and cause devastating damage throughout the
Virgin Islands, both to property and to the economy. The Jagrups further fail to cite to any legal
authority that obligates a creditor such as Kennedy to further delay collecting on its debt, in which
Oracle and the Jagrups had been in default since at least 2012, in order to wait for a possibly better
real estate market.
“extraordinary circumstances” and not circumstances arising from a party’s “deliberate choices”);
Smart v. Kraft, 2016 WL 5219581, at *2 (D.N.J. Sept. 21, 2016) (strategic choices in claims
included in amended complaint insufficient to warrant relief under 60(b)(6)). Thus, the Jagrups
have failed to provide any support for their claim for relief.

IV. CONCLUSION
For the foregoing reasons, the Court will deny the Jagrups’ “Motion to Vacate Sale & Order
Confirming Sale of 73 Estate Castle Coakley.” (Dkt. No. 126).
An appropriate Order accompanies this Memorandum Opinion.
Date: July 29, 2020 ________/s/_______
WILMA A. LEWIS
Chief Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10695007. Public record. Not legal advice.