Central Fidelity Bank, Appellee, v. John Edward Coogan, A/k/a Jack Coogan, Appellant.in Re John Edward Coogan, A/k/a Jack Coogan, Debtor, 803 F.2d 1180 (4th Cir. 1986)

John Edward Coogan appeals from a judgment of the district court affirming a decision of the bankruptcy court which modified the automatic stay pursuant to 11 U.S.C. § 362.¹ 

On February 2, 1978, Coogan and his wife signed a note payable to the Central Fidelity Bank (the "Bank"): in the amount of $28,050.12, which was secured in part by a $20,000 deed of trust on their home. The note contained a provision known as a "dragnet clause," which permitted the Bank to retain an interest in the collateral if the debtor otherwise remained liable to the Bank at the time the note was paid in full. Thereafter, Coogan signed two uncollateralized notes payable to the Bank in the amounts of $7,000 and $11,000 respectively, upon which he later defaulted.

On April 4, 1985, Coogan filed for bankruptcy. The Bank subsequently moved to lift the stay imposed against creditors, so that it could proceed in state court to determine the extent of its lien on Coogan's property. The bankruptcy court decided to modify the automatic stay for the limited purpose of permitting the Bank to determine the nature and extent of its lien. The district court affirmed. This appeal followed.

On appeal to this Court, Coogan claims the bankruptcy court abused its discretion in four separate instances. First, he claims that the bankruptcy court erred by not deciding whether the Bank's lien was valid against him before modifying the stay. Second, Coogan claims that the Bank's lien is clearly invalid, and therefore, the court was prohibited from modifying the stay. Third, Coogan argues that the Bank waived its interest in his real estate with regard to the second and third notes both when he paid off the first note, and when the later notes were issued unsecured. Finally, Coogan alleges that 11 U.S.C. § 362(d) permits modifying stays only where the creditor is deprived of adequate protection or the debtor is without equity in the real estate. We disagree with each of these contentions.

The language of 11 U.S.C. § 362(d), which permits the modification of automatic stays in bankruptcy proceedings is broad. The statute mandates that stays shall be lifted for cause upon request of an interested party after a hearing and notice. The determination of what events constitute "cause" is left to the broad discretion of the bankruptcy judge. In this case, the stay was not lifted to permit execution against Coogan's property, but was modified for the limited purpose of permitting the Bank to seek a determination of the nature and extent of its lien against Coogan's property. Under these circumstances, we hold that the bankruptcy court did not abuse its discretion, and, accordingly, affirm for the reasons expressed by the district court. Central Fidelity Bank v. John Edward Coogan (C/A No. 85-150-NN, (E.D. Va. Dec. 5, 1985).

AFFIRMED.