Thaddeus Rudolph Jones

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
THADDEUS RUDOLPH JONES, JR.
DEBTOR
CASE NO.
06-00050-5-ATS
ORDER INTERPRETING 11 U.S.C. § 362(c)(3)(A)
AND EXTENDING AUTOMATIC STAY PURSUANT TO § 362(c)(3)(B)
The matter before the court is the Motion for Declaratory Judgment
and, in the Alternative, for the Continuance of the Automatic Stay
filed by the chapter 13 debtor, Thaddeus Rudolph Jones, Jr. The
debtor, in his motion filed on January 17, 2006, requests the court to
interpret the meaning of the phrase "with respect to the debtor" in 11
U.S.C. § 362(c)(3)(A), and determine whether the automatic stay will
terminate under that section. If the court determines that the stay
will terminate under that section, the debtor requests an extension of
the automatic stay pursuant to 11 U.S.C. § 362(c)(3)(B).
National City Home Loan Services, Inc. ("National"), a secured
creditor with a lien on the debtor's residence, filed a response in
opposition to the motion, and a hearing was set for February 7, 2006.
The parties requested additional time to file briefs, and the hearing
was continued to March 7, 2006. With the consent of National, the
court preliminarily re-imposed the automatic stay until the debtor's
motion is decided.
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Thaddeus Rudolph Jones, Jr. filed his second petition for relief
under chapter 13 of the Bankruptcy Code on January 17, 2006. The
debtor’s first chapter 13 case (Case No. 04-01250-5-ATS) was dismissed
on October 28, 2005. In the prior case, National filed a motion for
relief from stay based on the debtor's failure to make payments, and
the motion was resolved by a consent order entered on November 17,
2004. The trustee later moved to dismiss the case, the debtor did not
oppose dismissal, and the case was dismissed. After the first case was
dismissed, National commenced a foreclosure proceeding. The prepetition
arrearage due from the debtor to National is more than $26,000.
Because Mr. Jones’ previous chapter 13 case was pending and was
dismissed within the one-year period before he commenced his present
case, § 362(c)(3) applies. The debtor acknowledges in his motion that
the foreclosure proceeding brought by National constitutes an "action
taken" against him within the meaning of § 362(c)(3)(A), as that
language was construed by this court in In re Paschal, --- B.R. ---,
2006 WL 258298 (Bankr. E.D.N.C. 2006). Today's question is one that
was identified but not decided in Paschal: When the automatic stay is
terminated under § 362(c)(3)(A) as to "an action taken," to what extent
is the stay terminated? Is the stay terminated only as to "actions
taken" against the debtor? Or, is the termination broader and
applicable to "actions taken" against the property of the debtor and
against property of the estate?
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The debtor contends that the stay only terminates under
§ 362(a)(3)(A) as to "actions taken" against the debtor and not as to
property of the debtor or as to property of the estate. National
maintains that the stay terminates as to the debtor, the debtor's
property and property of the estate.
Section 362(c)(3) was added to the Bankruptcy Code by the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L.
No. 109-8, § 302 ("BAPCPA"). In its entirety, § 362(c)(3) provides:
(c) Except as provided in subsections (d), (e), (f), and
(h) of this section--
* * *
(3) if a single or joint case is filed by or against
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;
(B) on the motion of a party in interest for
continuation of the automatic stay and upon
notice and a hearing, the court may extend the
stay in particular cases as to any or all
creditors (subject to such conditions or
limitations as the court may then impose) after
notice and a hearing completed before the
expiration of the 30-day period only if the party
in interest demonstrates that the filing of the
later case is in good faith as to the creditors
to be stayed; and
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(C) for purposes of subparagraph (B), a case is
presumptively filed not in good faith (but such
presumption may be rebutted by clear and
convincing evidence to the contrary)--
(i) as to all creditors, if--
(I) more than 1 previous case under
any of chapters 7, 11, and 13 in which
the individual was a debtor was
pending within the preceding 1-year period;
(II) a previous case under any of
chapters 7, 11, and 13 in which the
individual was a debtor was dismissed
within such 1-year period, after the
debtor failed to--
(aa) file or amend the petition
or other documents as required by
this title or the court without
substantial excuse (but mere
inadvertence or negligence shall
not be a substantial excuse
unless the dismissal was caused
by the negligence of the debtor's
attorney);
(bb) provide adequate protection
as ordered by the court; or
(cc) perform the terms of a plan
confirmed by the court; or
(III) there has not been a substantial
change in the financial or personal
affairs of the debtor since the
dismissal of the next most previous
case under chapter 7, 11, or 13 or any
other reason to conclude that the
later case will be concluded--
(aa) if a case under chapter 7,
with a discharge; or
(bb) if a case under chapter 11
or 13, with a confirmed plan that
will be fully performed; and
(ii) as to any creditor that commenced an
action under subsection (d) in a previous
case in which the individual was a debtor
if, as of the date of dismissal of such
case, that action was still pending or had
been resolved by terminating, conditioning,
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or limiting the stay as to actions of such
creditor[.]
11 U.S.C. § 362(c)(3).
Once again, warily, and with pruning shears in hand, the court re-
enters the briar patch that is § 362(c)(3)(A). Having been here before
is of some help, in that at least the thorns and thickets have a
certain familiarity. Indeed, the court will closely track the path it
labored to clear the first time around, and will conclude for the
reasons that follow that the words "with respect to the debtor"
encompass "actions taken" against the debtor, against property of the
debtor, but do not include "actions taken" against property of the
estate.
In Paschal, this court held that the words "action taken," as used
in § 362(c)(3)(A), "means a formal action such as a judicial,
administrative, governmental, quasi-judicial, or other essentially
formal activity or proceeding." Paschal, 2006 WL 258298 at *5. The
court identified, but did not decide the "interesting question" of
whether a stay terminated as to an action taken terminates with respect
to the debtor, but not as to property of the estate. Paschal at *6.
As in Paschal, the court’s analysis begins with the language of
the statute. "It is an axiom of statutory interpretation that the
plain meaning of an unambiguous statute governs, barring exceptional
circumstances." Wachovia Bank, N.A. v. Schmidt, 388 F.3d 414, 416 (4th
Cir. 2004). The court must be "guided 'by reference to the language
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itself, the specific context in which that language is used, and the
broader context of the statute as a whole.'" In re Coleman, 426 F.3d
719, 725 (4th Cir. 2005), quoting Robinson v. Shell Oil Co., 519 U.S.
337, 341, 117 S. Ct. 843 (1997).
Section 362(c)(3)(A) as a whole is not free from ambiguity, but
the words, "with respect to the debtor" in that section are entirely
plain; a plain reading of those words makes sense and is entirely
consistent with other provisions of § 362 and other sections of the
Bankruptcy Code. Section 362(c)(3)(A) provides that the stay
terminates "with respect to the debtor." How could that be any
clearer?
Section 362(a) differentiates between acts against the debtor,
against property of the debtor and against property of the estate.
Section 362(a)(1) stays actions or proceedings "against the debtor;"
§ 362(a)(2) stays enforcement of a judgment "against the debtor or
against property of the estate;" § 362(a)(3) stays "any act to obtain
possession of property of the estate or of property from the estate;"
§ 362(a)(4) stays "any act to create, perfect, or enforce any lien
against property of the estate;" § 362(a)(5) stays "any act to create,
perfect, or enforce against property of the debtor any lien" to the
extent it secures a prepetition claim; and § 362(a)(6) stays "any act
to collect, assess, or recover a claim against the debtor . . . ."
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Section 362(b)(2)(B) permits collection of domestic support
obligations from "property that is not property of the estate." In re
Baldassaro, --- B.R. ---, 2006 WL 459201 at *4 (Bankr. D. N.H. 2006).
Section 362(c) also distinguishes between the stay of acts against
property of the estate and the stay of any other acts. Section
362(c)(1) provides that "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," and § 362(c)(2) provides
for the termination of the stay of "any other act" prohibited by §
362(a).
Section 521 of the Bankruptcy Code also distinguishes between
property of the estate and property of the debtor. Section 521(a)(6)
provides that the automatic stay is terminated "with respect to the
personal property of the estate or of the debtor" if the debtor does
not reaffirm or redeem property within 45 days after the first meeting
of creditors. If Congress had intended that the automatic stay would
terminate under § 362(c)(3)(A) as to property of the estate, it would
have specifically said so, as it did in § 521(a)(6).
In Paschal, the court observed that the language of § 362(c)(3)(A)
is very different than that of § 362(c)(4)(A)(i) and was persuaded that
the difference meant that the scope of the stay termination under §
362(c)(3)(A) is different and more limited than the stay termination in
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§ 362(c)(4)(A)(i). Paschal at *3-4. That analysis also applies to the
issue now before the court.
As the court observed in Paschal, Congress' "use of a particular
phrase in one statute but not in another 'merely highlights the fact
that Congress knew how to include such a limitation when it wanted
to.'" Paschal at *4, quoting Coleman, 426 F.3d at 725. The Supreme
Court's clear directive on this topic is that "[w]here Congress
includes particular language in one section of a statute but omits it
in another, it is generally presumed that Congress acts intentionally
and purposely in the disparate inclusion or exclusion." Keene Corp. v.
United States, 508 U.S. 200, 208, 113 S. Ct. 2035, 2040 (1993)
(internal quotation marks and alterations omitted).
There are arguments that favor an interpretation that
§ 362(c)(3)(A) terminates all of the protections of the stay under
§ 362(a), but they are not convincing. The legislative history, as
noted in Paschal, suggests such an interpretation, but because the
language here is clear, legislative history is not a factor in the
court's analysis. Paschal at *3.
It may be argued that if § 362(c)(3)(A) only terminates the stay
with respect to the debtor, § 362(c)(3)(A) is inconsistent with §
362(c)(3)(B), which permits "any party in interest" to move that the
stay be extended. If § 362(c)(3)(A) only applies with respect to the
debtor, the argument is that only the debtor would be interested in
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extending the stay. It is true that if § 362(c)(3)(A) only applies
with respect to the debtor, it is unlikely that anyone other than the
debtor would seek an extension, but the fact that it is unlikely does
not make § 362(c)(3)(A) inconsistent with § 362(c)(3)(B). Furthermore,
as previously mentioned, inconsistencies are not entirely unknown to
those provisions added to the Bankruptcy Code by the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005. Paschal at *6.
It is abundantly clear from the plain language of § 362(c)(3)(A)
that the stay that terminates under that section is not the stay that
protects property of the estate.
The debtor also maintains that § 362(c)(3)(A) does not include a
termination of the stay with respect to property of the debtor. The
court disagrees. Section 362(c)(3)(A) specifically refers to
termination of the stay with respect to any action taken, with respect
to a debt or with respect to "property securing such debts." At a
minimum, the stay would therefore terminate "with respect to the
debtor" as it relates to a debt of the debtor and to property "securing
such debt."
Although the language in this part of the § 362(a)(3)(A) briar
patch is less clear, the court interprets § 362(c)(3)(A) to terminate
the stay with respect to actions taken against the debtor and with
respect to the debtor's property. Although not directly applicable,
§ 102 provides some guidance. Under the rules of construction provided
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1Property of the estate revests pursuant to § 1327(b) in the
debtor upon confirmation of the plan unless otherwise provided in the
plan or confirmation order. Some courts routinely provide that the
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in § 102(2), claims against the debtor include a claim against property
of the debtor. Section 101(12) defines debt as "liability on a claim."
Section 362(c)(3)(A) terminates the stay with respect to a debtor's
debts and, by definition, with respect to liability on claims including
claims against property of the debtor. See 11 U.S.C. §§ 101(12);
101(2).
To summarize, the court holds that § 362(c)(3)(A) terminates the
stay with respect to actions taken against the debtor and against
property of the debtor, but does not terminate the stay with respect to
property of the estate. See In re Johnson, 335 B.R. 805, 806 (Bankr.
W.D. Tenn. 2006)("[w]hen read in conjunction with subsection (1), . .
. the plain language of § 362(c)(3)(A) dictates that the 30-day time
limit only applies to 'debts' or 'property of the debtor' and not to
'property of the estate.' (335 B.R. at 806). See also Baldassaro,
2006 WL 459201 at *4 (issue discussed but not decided).
Although supported by the plain meaning of § 362(c)(3)(A),
§ 101(12) and § 102(2), this interpretation also makes sense from a
policy perspective. It is important in chapter 13 cases to protect
property of the estate from automatic termination under § 362(c)(3)(A),
because estate property may be needed to consummate the debtor's
chapter 13 plan.1 It is even more important to protect property of the
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debtor's property remains property of the estate until the plan is
completed. Johnson, 335 B.R. at 807.
2The debtor requested an extension of the stay as an alternative
to the declaratory relief, but since the court allowed the declaratory
relief, the alternative relief is not required.
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estate in chapter 7 cases, to which § 362(c)(3)(A) also applies. 11
U.S.C. § 103(c). In a chapter 7 case, the chapter 7 trustee has the
duty to administer the assets of the bankruptcy estate. 11 U.S.C. §
704(a)(1). Keeping the stay in place with respect to property of the
estate, even in cases where there has been a dismissal in the prior
year, is an important protection for creditors.
In this case, the only action taken by a creditor against the
debtor is the foreclosure proceeding brought by National. The debtor's
plan has not been confirmed and the real property securing National's
secured claim is still property of the estate and thus protected by the
automatic stay of § 362(a)(4). Therefore, no extension of the
automatic stay is needed.
In Paschal, the court extended the stay as a precautionary
measure, see Paschal at *6, but that relief has not been requested
here.2 In the event that a higher court shall have a different
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view of § 362(c)(3)(A), the court may reconsider whether an extension
of the stay is required.
SO ORDERED.
DATED: March 21, 2006
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