MEMORANDUM DECISION REMOTION OF 12TH STREET REAL ESTATE, LLC TO DISMISS
As of the start of the day of June 17, 2011, Gary Stancil and his mother, Delores Stancil, owned property located on 12th Street, NW, Washington, D.C. Gary Stan-cil, as the debtor in possession in a bankruptcy case under chapter 11 of the Bankruptcy Code (11 U.S.C.), Case No. 11-00747, has filed a Complaint to Compel Turnover of Real Property as Result of Willful Violation of the Automatic Stay, Breach of Fiduciary Duty and Sanctions alleging that a foreclosure sale of the property conducted during the pendency of an earlier bankruptcy case violated the automatic stay of section 362(a) of the Bankruptcy Code (11 U.S.C.), and seeking a turnover of the property. One of the defendants, 12th Street Real Estate, LLC, the purchaser at the foreclosure sale, has moved to dismiss on these grounds:
(1) the automatic stay was not in effect at the time of the foreclosure sale because the bankruptcy case was an unauthorized joint filing by Gary Stancil and his mother, Delores Stancil, and because the foreclosure sale occurred before Delores Stancil was dismissed from the unauthorized joint filing;
(2) the turnover provisions set forth in 11 U.S.C. § 542 do not apply to assets whose title is in dispute; and
(3) the complaint fails to contain any factual allegation that the subject property, if turned over to Gary Stancil, is not “of inconsequential value or benefit to the estate” pursuant to 11 U.S.C. § 542.
The motion will be denied for the following reasons.
I
The complaint establishes these facts. On June 17, 2011 at 9:29 a.m., Gary Stancil and Delores filed a petition under chapter 13 of the Bankruptcy Code naming themselves as debtors and signed by each of them. The joint petition was docketed as Case No. 11-00465. Later that day, the foreclosure sale occurred, and 12th Street purchased the property at the foreclosure sale. Still later that day, the court dismissed the case as to Delores Stancil because she was ineligible to file a bankruptcy case as a result of an order entered on March 7, 2011, in her earlier bankruptcy case, Case No. 11-00097, that dismissed that earlier case with prejudice for 180 days.
II
For the following reasons, I reject 12th Street Real Estate, LLC’s argument that because the bankruptcy case was an unauthorized joint filing by Gary Stancil and his mother, Delores Stancil, and because the foreclosure sale occurred before Delores Stancil was dismissed from the unauthorized joint filing, no automatic stay was in effect at the time of the foreclosure sale.
Permitting the filing by spouses of a joint petition pursuant to 11 U.S.C. § 302 is designed to reduce the cost of administration and to permit only one filing fee. Reider v. FDIC (In re Reider),
Entities that are not spouses are not entitled to obtain joint administration by filing a single petition. Nevertheless, when such entities file a single petition listing each as a debtor, with each of them signing the petition, they evidence an intention to commence a bankruptcy case as to each entity.
Earlier decisions than In re Wilkerson gave non-spouses who filed on the same petition the option of dismissing one of the debtors or face dismissal of the entire case. See Bone v. Allen (In re Allen),
Yet another approach for addressing a petition filed by non-spouse debtors, followed only by Fitzgerald v. Hudson (In re Clem),
As an alternative remedy to address a petition filed by non-spouses, the court has discretion to dismiss the cases. See In re 4-1-1 Fla. Ga., L.P.,
The In re Wilkerson approach of severing the petition would usually result in the court directing the clerk to open a second docket as to one of the debtors and to treat the first docket opened as limited to the other debtor, but with both of the cases deemed commenced as of the date of the filing of the petition. Here, however, Mrs. Stancil was barred from commencing a bankruptcy case, and the court dispensed with opening a separate docket as to her, and simply dismissed her as having been barred from filing a petition.
Although Delores Stancil was not dismissed from the case until after the foreclosure sale had been held, the case was pending as to Gary Stancil when the foreclosure sale was held, and an automatic stay had arisen in his case that barred the foreclosure sale.
Ill
In support of its argument that the turnover provisions set forth in 11 U.S.C. § 542 do not apply to assets whose title is in dispute, 12th Street Real Estate, LLC observes that “the law is settled that ‘the debtor cannot use the turnover provisions to liquidate contract disputes or otherwise demand assets whose title is in dispute.’ U.S. v. Inslaw, Inc.,
An act in violation of the automatic stay, however, is void, such that the foreclosure sale pursuant to which 12th Street Real Estate, LLC purchased the property is deemed not to have occurred. Accordingly, 12th Street Real Estate, LLC has no basis for asserting that it holds title to the property and, therefore, no legitimate dispute exists. See Porter-Hayden
IV
12th Street Real Estate, LLC further argues that the complaint fails to allege that the property is not of inconsequential value or benefit to the estate and, as a result, does not state a claim for turnover under section 542(a). Section 542(a) provides:
Except as provided in subsection (c) or (d) of this section, an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debt- or may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.
The issue is whether establishing that the property is of inconsequential value or benefit to the estate is an affirmative defense or whether, as part of its prima facie case, the trustee (or debtor in possession) must set forth that the property is not of inconsequential value or benefit, an issue as to which courts do not agree. Compare Desmond v. Baker (In re McDonnell),
The plain language of section 542(a) demonstrates that establishing inconsequential value or benefit to the estate is an affirmative defense to a turnover action. Section 542(a) first provides the elements the trustee must establish for turnover, with the other party required to deliver the property (or the value of such property) to the trustee “unless such property is of inconsequential value or benefit to the estate.” (Emphasis added). The term “unless” and its juxtaposition after
In addition, in opposing the claim for turnover of property to the estate on the basis that the property is of inconsequential value or benefit to the estate, 12th Street Real Estate, LLC is inherently seeking abandonment of that property. The party seeking abandonment of property pursuant to 11 U.S.C. § 554 carries the burden of setting forth a prima facie case that the property is of inconsequential value and benefit to the estate.
Finally, even if it is the debtor’s burden to establish as part of its prima facie case for turnover that the property is not of inconsequential value or benefit to the estate, the debtor, simply by bringing this adversary proceeding, has implicitly alleged that the property is not of inconsequential value or benefit to the estate.
V
For all of these reasons, 12th Street Real Estate, LLC’s motion to dismiss the complaint is denied. A separate order follows.
Notes
. If it is evident that the entities are not spouses, as in the case of a petition for John Doe and X Corporation, the entities are not allowed to pay but one filing fee. If the petition is unaccompanied by a filing fee for each entity, the clerk arguably could properly refuse to accept the petition for filing. See Fed. R. Bankr.P. 1006. But once a petition presented by non-spouses is accepted for filing, the petition is a filed petition, and the issue is how then to treat the petition.
. See also In re Moore,
. See also In re Jackson,
.Under Arbaugh v. Y & H Corp.,
. The court in In re Lucero opined in what was necessarily dictum (because the issue was not before it) that upon dismissing only one of the debtors, Ms. Aguirre, from the case, the case would still be pending, and thus not be a dismissed case for purposes of 11 U.S.C. § 362(c)(3) if Ms. Aguirre were to file a new case. That dictum does not square with this court’s view that a petition for two non-spouses creates two separate bankruptcy cases, with a filing fee owed for each case. Necessarily, when one of the debtors is dismissed from the case that can be viewed as a dismissal of that entity’s bankruptcy case.
. Nevertheless, the rule against non-spouses filing a joint petition has appropriately been used as an aid in addressing an ambiguity raised by a petition filed for an individual listed in the petition as trustee of trusts, and to conclude that the petition was a filing only of the individual, and only his assets are property of the estate. See In re Simon,
. To the extent that In re Jephunneh Lawrence & Assocs. Chartered viewed the petition as "irremediably defective,” it disregarded the remedy of severing the petition into two separate cases, and is unpersuasive.
. In effect, that was what the court in Norris v. Norris,
. In hindsight, the court should have opened a separate docket for Mrs. Stancil, treating the case as to her as being commenced at the time of the filing of the original petition signed by her and her son. Two filing fee obligations were incurred, one by Gary Stan-cil and one by Delores Stancil. It is unclear who was the source of the one filing fee that was paid. An order could have issued directing Gary Stancil and Delores Stancil to address that issue or suffer dismissal of the case as to both of them. However, no case is pending now as to either debtor, dismissal having been on grounds other than the lack of a filing fee, and the failure to pay a filing fee can no longer serve as a basis for dismissal as there is no pending case to dismiss. Nevertheless, the court will direct the two debtors to show cause why they ought not be each held jointly and severally liable to pay the unpaid filing fee.
. By reason of 11 U.S.C. § 362(b)(21), no stay had arisen in Delores Stancil's case commenced by the filing of her and Gary Stancil's petition.
. See Hunter v. Secretary of U.S. Army,
. Section 554 provides in relevant part:
(a) After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.
(b) On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.
. Moreover, if section 542(a) is not an appropriate remedy, an action for recovery of possession of the property under D.C.Code § 16-501 is still an available remedy under state law. See n. 11, supra.