562 B.R. 578 | Bankr. E.D.N.Y. | 2016
MEMORANDUM DECISION
Before the Court is the motion of secured creditor, New York Liens, LLC RAI Custodian (“NY Liens”), to confirm that the automatic stay terminated in this case 30 days post-filing by operation of 11 U.S.C. § 362(c)(3)(A). The Debtor does not dispute that § 362(c)(3)(A) applies because she had a prior bankruptcy case pending within the year preceding the filing of the instant case which case was dismissed due to her failure to make monthly payments under the prior chapter 13 confirmed plan. (See Case No. 814-71340-reg). However, the Debtor argues that the Court in applying this statute should distinguish between the Debtor and the Debtor’s property, and property of the estate. Applying the Debt- or’s reasoning, under § 362(c)(3)(A) the automatic stay would be terminated only as to the Debtor and the Debtor’s property. The stay of any action against property of the estate, the Debtor argues, remains in place until it is lifted upon motion by the secured creditor, and after notice and a hearing under § 362(d).
There have emerged so-called “majority” and “minority” positions on this issue.
After a careful analysis of the cases on both sides of this argument, this Court believes that there exists an inherent flaw in both the majority and minority reasoning and holdings. In this Court’s view both sides have based their conclusions on a faulty interpretation of the statute. The interpretation of § 362(c)(3)(A) that is most consistent with the principles of statutory analysis should not focus, as the majority and minority do, on “property of the debtor” or “property of the estate,” neither of which phrases are used in the statute. Rather, the Court finds that the stay under § 362(a) terminates “with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease.” The focus of this Court’s analysis is on specific actions with respect to specific property, not the broader categories of property of the estate or property of the debtor. In other words, the stay is lifted “with respect to a debt or property securing such debt” and with respect to leases—regardless of whether the property or the lease is property of the estate or property of the debt- or. To limit the effect of § 362(c)(3)(A) to the debtor or property of the debtor would so limit its effectiveness as to not support, what this Court believes to be, the congressional intent to protect the secured creditor or lessor seeking to continue judicial, administrative or other proceedings commenced prepetition with respect to debts, property securing such debts or leases.
This does not mean that a two time repeat filer can gain no protection from the § 362(a) stay. However, it is the debtor now that must come to the Court to seek protection. In the case of a two time repeat filing, rather than requiring the secured creditor to seek relief under § 362(d) the burden shifts to the debtor to affirmatively seek to impose the stay under § 362(c)(3)(B), or the stay will be lifted on the 30th day by operation of law as to real property foreclosures, evictions and other actions against secured collateral. A debtor may gain the protections of § 362(a) by demonstrating to the Court that the filing of the second case was made “in good faith as to the creditors to be stayed.” 11 U.S.C. § 362(c)(3)(B). In so doing, the debtor must overcome a presumption that the second case was not filed in good faith. 11 U.S.C. § 362(c)(3)(C).
FACTS AND PROCEDURAL HISTORY
Prior to the filing of the instant chapter 13 petition, the Debtor filed a chapter 13 petition on March 28, 2014. A chapter 13 plan was confirmed in that case on June 11,2014, and was dismissed by order dated December 16, 2015, due to the Debtor’s
On September 1, 2016, NY Liens filed the instant motion pursuant to § 362(j) to confirm the termination of the automatic stay by operation of § 362(c)(3) (“Motion”). NY Liens is the holder of a tax lien certificate which is a lien against the Debtor’s real property arising from unpaid general and school taxes for the years 2009 to 2013. NY Liens’ tax lien foreclosure action was stayed by the instant filing. The Debt- or filed a response to the Motion and does not dispute that § 362(c)(3) came into play, but argues that § 362(c)(3)(A) lifts the stay only as to the debtor and the debtor’s property.
A hearing on the Motion was held on October 17, 2016 at which time the Court indicated its ruling that the lifting of the stay under § 362(c)(3)(A) is not limited to the debtor and the debtor’s property, and this written opinion would follow. On October 19, 2016, the Debtor filed a third amended plan which provides that NY Liens will be paid pre-petition arrears in the sum of $40,195.92 over the life of the plan. The Debtor’s third amended plan was confirmed by Order entered October 26, 2016.
DISCUSSION
Section 362(c)(3) states:
(3) if a single or joint case is filed by or against a debtor who is an individual in a case under chapter 7, 11, or 13, and if a single or joint case of the debtor was pending within the preceding 1-year period but was dismissed, other than a case refiled under a chapter other than chapter 7 after dismissal under section 707(b)—
(A) the stay under subsection (a) with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case;
Parsing the statute, as many have, we find nine distinct phrases all of which must be read as part of the whole:
1. If a single or joint case is filed by ... a debtor who is an individual in a case under chapter 7, 11, or 13, and if a single or joint case of the debtor was pending within the preceding 1-year period but was dismissed...
2. The stay under subsection (a)
3. With respect to any action taken
4. With respect to a debt
5. Or property securing such debt
6. Or with respect to any lease
7. Shall terminate
8. With respect to the debtor
9. On the 30th day after filing of the later case.
The meaning of the first and last phrases is not disputed. The parties agree that the section applies and became effective on the 30th day post-filing.
The second phrase refers to “the stay under subsection (a).” In this Court’s view,
In this Court’s view, limitations on the termination of the § 362(a) stay are stated directly and explicitly in- § 362(c)(3).
The phrase “with respect to’ appears four times in [section 362(c)(3)(A) ] and in its ordinary use, this phrase limits the phrase that precedes it—‘the stay under [§ 362(a) ].’ In other words the stay that terminates 30 days after the petition when § 362(c)(3) is applicable is not the entire stay under § 362(a) but only so much of the stay in § 362(a) that satisfies the four ‘with respect to’ conditions in § 362(c)(3)(A).
Keith M. Lundin & William H. Brown, Chapter 13 Bankruptcy 4th Ed., § 432.2, at ¶-, Sec. Rev. July 20, 2007, www.ch!3 online.com. And so we must give careful consideration to each and every phrase neither omitting nor adding language.
The third phrase, “with respect to any action taken,” imposes the first of four limitations on the termination of .the stay under § 362(c)(3)(A). This seemingly straight forward phrase has been subject to some scrutiny, primarily in the case of In re Paschal, 337 B.R. 274, 280 (Bankr. E.D.N.C. 2006). In Paschal, the bankruptcy court concluded that this phrase means that the § 362(a) stay is only terminated under § 362(c)(3)(A) with respect to the continuation of formal legal proceedings that were commenced against the debtor pre-petition. In re Paschal, 337 B.R. at 280; see also In re Stanford, 373 B.R. 890 (Bankr. E.D. Ark. 2007). But see In re James, 358 B.R. 816, 820 (Bankr. S.D. Ga. 2007) (holding that “action taken” is not limited to creditors who took action prior to the bankruptcy filing). The Paschal court analyzed the use of the word “act” in § 362(c)(1) and (c)(2)
In this limited context, the Court agrees with Paschal and finds that under § 362(c)(3), the § 362(a) stay is only terminated as to the continuation of judicial, administrative or other proceedings commenced prior to the bankruptcy filing. Congress’s use of the phrase “action taken” in contrast to “act” used elsewhere in the statute should not be ignored. In addition, this interpretation of the statute is consistent with this Court’s view that § 362(c)(3)(A) was intended to apply and shift the burden from the creditor to the debtor in cases where, as here and in many cases, a debtor uses bankruptcy in order to stymie judicial, administrative or other proceedings with respect to debts, property securing such debts and leases.
The fourth, fifth and sixth phrases— “with respect to a debt” “or property securing such debt” “or with respect to any lease”—are often overlooked in the § 362(c)(3)(A) analysis. In this Court’s view, these phrases are pivotal to interpreting the statute. It is significant that these phrases do not distinguish between “property of the estate” or “property of the debtor” or “leases of the estate” or “leases of the debtor.” Rather, the focus is solely on the “lease” and on the “property” and the fact that it serves as collateral for a debt, regardless of whether it is property of the estate or property of the debtor. These phrases further support the conclusion that § 362(c)(3)(A) was intended to apply where the debtor is a repeat filer and where a secured creditor’s or lessor’s judicial administrative or other proceeding against specific property have been- stayed by the most recent filing. If there was a judicial or administrative or other proceeding as to specific property commenced pre-petition, these phrases tell us that the stay is lifted on the 30th day under § 362(c)(3)(A) to allow that proceeding to go forward as to a debt, property securing such debt and leases.
The seventh phrase uses the word “terminate” and in this Court’s view that refers directly back to § 362(a), and is limited only by the intervening third through sixth phrases outlined above. Cf. In re Scott-Hood, 473 B.R. at 136.
The majority view places much emphasis on the eighth phrase, “with respect to the debtor,” and reads it to mean that, despite the fourth through sixth phrases discussed above, the stay is only lifted as to the debtor and the debtor’s property. See, e.g., In re Witkowski, 523 B.R. 291, 296-97 (1st Cir. BAP 2014); In re Holcomb, 380 B.R. 813, 815-16 (10th Cir. BAP 2008). First, the majority interpretation requires one to read into the statute words which are not there. The majority view expands the phrase “with respect to the debtor” to say “with respect to the debtor and the debt- or’s property.” See, e.g., Reswick v. Reswick (In re Reswick), 446 B.R. 362, 366 (“[Majority] arguably [reads] beyond the phrase because they find that the stay terminates with respect to the debtor and to any property of the debtor that is not property of the estate.”) (emphasis added). The words “property of the debtor” simply are not mentioned in § 362(c)(3)(A). The
Third, a finding that under § 362(c)(3)(A) the stay terminates only as to actions “with respect to the debtor” or the debtor’s property would be a hollow victory for any secured creditor. Upon the filing of a bankruptcy petition, “property of the estate” includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a). This broad definition applies in all chapters of the Bankruptcy Code, but in a chapter 13 case property of the estate has an even broader reach and includes property acquired after the bankruptcy filing and post-petition earnings.
There is another interpretation of the phrase “with respect to the debtor” which reads those same words as a reference to the debtor’s bankruptcy case, not the property that is affected by the stay. See In re Daniel, 404 B.R. at 324-25. The criticism of this approach is that it would render the phrase “with respect to the debtor” surplus. In other words, “[tjhere is no need to emphasize that termination of the stay under § 362(c)(3)(A) applies in the debtor’s case, since, after all, that is the
The instant case does not involve- a joint filer and so the distinction between these two approaches does not matter here. Regardless of which interpretation is applied, this Court finds that “with respect to the debtor” | does not place a limitation on the termination of the stay under § 362(c)(3)(A) with respect to the debt, property and lease mentioned in the fourth through sixth phrases discussed above.
CONCLUSION
For all of the foregoing reasons, the Court grants NY Liens’ motion to confirm that the automatic stay terminated in this case 30 days post-filing by operation of § 362(c)(3)(A), and further finds that the § 362(a) stay terminated with respect to any judicial, administrative or other formal proceeding commenced prepetition which relates to a debt or property securing such debt or a lease, regardless of whether the property or lease was property of the estate or property of the Debtor.
. Majority: Witkowski v. Knight (In re Witkowski), 523 B.R. 291, 296-97 (1st Cir. BAP 2014); Holcomb v. Hardeman (In re Holcomb), 380 B.R. 813, 815-16 (10th Cir. BAP 2008); Jumpp v, Chase Home Fin., LLC (In re Jumpp ), 356 B.R. 789, 793-797 (1st Cir. BAP 2006); Abernathy, LLC v. Smith, No. 1:13— CV-03801-RWS, 2014 WL 4925654, at *4-5 (N.D. Ga, Sept. 30, 2014); Chekroun v. Weil (In re Weil), No. 3:12cv462 (SRU), 2013 WL 1798898, at *3 (D. Conn. Apr. 29, 2013); U.S. Bank N.A. v. Mortimore (In re Mortimore), No. 11-955 (RMB), 2011 WL 6717680, at *5 (D.N.J. Dec. 21, 2011); In re Roach, 555 B.R. 840, 842-48 (Bankr. M.D. Ala. 2016); In re Hale, 535 B.R. 520, 527-28 (Bankr. E.D.N.Y. 2015); In re Rodriguez, 487 B.R. 275, 286-88 (Bankr. D.N.M. 2013); In re Williford, No. 13-31738, 2013 WL 3772840, at *2-3 (Bankr. N.D. Tex, July 17, 2013); In re Scott-Hood, 473 B.R. 133, 135-40 (Bankr. W.D. Tex. 2012) (analysis departs from majority and minority approaches and yet holds that section 362(c)(3)(A) terminates with respect to (1) debtor individually, (2) debtor’s exempt property ’that stands as collateral for a debt of debtor, and (3) certain leases); In re Rinard, 451 B.R. 12, 17-20 (Bankr. C.D. Cal. 2011); In re Alvarez, 432 B.R. 839, 840-43 (Bankr. S.D. Cal. 2010); In re Dowden, 429 B.R. 894, 902-03 (Bankr. S.D. Ohio 2010); In re Robinson, 427 B.R. 412, 414 (Bankr. W.D. Mich. 2010); In re Burnette, No. 09-00699-8-JRL, 2009 WL 961807, at *1-2 (Bankr. E.D.N.C. Apr, 2, 2009); In re Graham, No, 07-62339-fra11, 2008 WL 4628444, at *2-3 (Bankr. D. Or. Oct. 17, 2008); In re Milledge, No. 08-62839, 2008 WL 7866897, at *1-2 (Bankr. N.D. Ga. Apr. 10, 2008); In re Ajaka, 370 B.R. 426, 429 (Bankr. N.D. Ga. 2007); In re McFeeley, 362 B.R. 121, 124-26 (Bankr. D. Vt. 2007); In re Stanford, 373 B.R. 890, 893-95 (Bankr. E.D. Ark. 2007); In re Simonson, No. 06-22833 (MBK), 2007 WL 703542, at *1-2 (Bankr. D.N.J. Mar. 2, 2007); In re Taylor, No. 07-3105 5-KRH, 2007 WL 1234932, at *4-5 (Bankr. E.D. Va. Apr. 26, 2007); In re Tubman, 364 B.R. 574, 582-84 (Bankr. D. Md. 2007); Bankers Trust Co. of Cal. v. Gillcrese (In re Gillcrese), 346 B.R. 373, 373-77 (Bankr. W.D. Pa. 2006); In re Brandon, 349 B.R. 130, 131-32 (Bankr. M.D.N.C. 2006); In re Harris, 342 B.R, 274, 276-280 (Bankr. N.D. Ohio 2006); In re Hollingsworth, 359 B.R, 813, 814 (Bankr. D. Utah 2006); In re Johnson, 335 B.R. 805, 806-07 (Bankr. W.D. Tenn. 2006); In re Jones, 339 B.R. 360, 363-65 (Bankr. E.D.N.C. 2006); In re Moon, 339 B.R. 668, 670-73 (Bankr. N.D. Ohio 2006); In re Pope, 351 B.R. 14, 15-16 (Bankr. D.R.I. 2006); In re Rice, 392 B.R. 35, 38 (Bankr. W.D.N.Y. 2006); In re Williams, 346 B.R. 361, 368-70 (Bankr. E.D. Pa. 2006). Minority: Reswick v. Reswick (In re Reswick), 446 B.R. 362, 365-73 (9th Cir. B.A.P. 2011); St. Anne’s Credit Union v. Ackell, 490 B.R. 141, 143-45 (D. Mass. 2013); In re Akwa, No. 15-26914-PM, 2016 WL 67219, at *1 (Bankr.
. See discussion of legislative history in In re Daniel, 404 B.R. at 327-29 (citing to the National Bankruptcy Review Commission Report and House Judiciary committee report suggesting that § 362(c)(3)(A) was intended to address multiple filings to stay foreclosure and/or eviction).
. See In re Lemma, 394 B.R. 315, 323 (Bankr. E.D.N.Y. 2008) ("Even where the stay is terminated prior to confirmation, the confirmed plan binds such creditor so long as the creditor’s claim is treated under the plan, the plan was served on the creditor and the plan does not contain any language specifically preserving the rights of the parties under the prior order vacating the automatic stay.”).
. Sections 362(c)(1) and (2) read:
(c) Except as provided in subsections (d), (e),
(f), and (h) of this section—
(1) the stay of an act against property of the estate under subsection (a) of this section continues until such property is no longer property of the estate;
(2) the stay of any other act under subsection (a) of this section continues until the earliest of—(A) the time the case is closed; (B) the time the case is dismissed; or (C) if the case is a case under chapter 7 of this title concerning an individual or a case under chapter 9, 11, 12, or 13 of this title, the time a discharge is granted or denied; ...
11 U.S.C. § 362(c)(1) and (2) (emphasis added).
. Under § 1306(a), property of the estate includes,
(1) all property of the kind specified in [section 541] that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first; and (2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first.
11 U.S.C. § 1306(a).