In re Baldassaro, 06-10059 JMD.

• Decision Date: 24 February 2006
• Docket Number: No. 06-10059 JMD.,06-10059 JMD.
• Citation: 338 B.R. 178
• Parties: In re Scott Edward BALDASSARO, Debtor.
• Court: U.S. Bankruptcy Court — District of New Hampshire

338 B.R. 178

In re Scott Edward BALDASSARO, Debtor.

No. 06-10059 JMD.

United States Bankruptcy Court, D. New Hampshire.

February 24, 2006.

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Grenville Clark III, Esq., Gray Wendell & Clark P.C., Manchester, NH, for Debtor.

Deirdre M. Keady, Esq., Harmon Law Offices, P.C., Newton Highlands, MA, for Mortgage Electronic Registration Systems, Inc.

MEMORANDUM OPINION

J. MICHAEL DEASY, Bankruptcy Judge.

I. INTRODUCTION

Scott Edward Baldassaro (the "Debtor") filed a Motion for Continuation of the Automatic Stay (Doc. No. 8) (the "Motion") pursuant to § 362(c)(3) of the Bankruptcy Code.¹ This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a) and the "Standing Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of New Hampshire," dated January 18, 1994 (Di-Clerico, C.J.). This is a core proceeding in accordance with 28 U.S.C. § 157(b).

II. BACKGROUND

The Debtor filed a petition under chapter 13 of the Bankruptcy Code on January 25, 2006 (the "Petition Date"). Pursuant to the provisions of the Bankruptcy Code, the filing of the petition operated as a stay, applicable to all entities, of certain acts specified in § 362(a) of the Bankruptcy Code. The filing of the petition caused the clerk of the Court to open this case (the "2006 Case"). The Debtor had previously filed a chapter 13 petition with this Court on April 20, 2005 (Bk. No. 05-11582-MWV) (the "2005 Case"). In the 2005 Case, the Court had entered orders conditioning the automatic stay against Mortgage Electronic Registration Systems, Inc. ("MERS") and granting relief from the automatic stay in favor of Ashley Place Condominium Unit Owners Association, Capital One Auto Finance, and MERS. No chapter 13 plan was confirmed and the 2005 Case was dismissed effective December 9, 2005.

Section 302 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8 ("BAPCPA"), amended § 362 of the Bankruptcy Code to discourage bad faith repeat filings of bankruptcy petitions. BAPCPA added § 362(c)(3) to the Bankruptcy Code and made its provisions applicable to all cases filed on or after October 17, 2005. The provisions of BAPCPA apply to the 2006 Case. Section 362(c)(3)(A) provides for a limitation on the extent and duration of the automatic stay if the Debtor had a case pending within the preceding year that was dismissed. The Debtor concedes that the provisions of this subsection apply to him.² Section 362(c)(3)(A) terminates the automatic stay imposed by § 362(a) to the extent stated in the statute on the thirtieth day after the filing of the 2006 Case, unless a party in interest files a motion for a continuation of the stay against one or more creditors and demonstrates that the filing of the 2006 Case was made in good faith with respect to the creditors to be stayed. 11 U.S.C. § 362(c)(3)(B). Accordingly, as provided in § 362(c)(3)(A), absent an extension of the automatic stay by the Court, the stay will terminate on February 24, 2006.

The Debtor claims that the 2006 Case was filed in good faith in order to prevent the loss of his family's residence. The Motion was filed two days after the Petition Date and was served on all creditors. MERS filed an objection on February 7, 2006. No other party in interest filed a response or objection. MERS contends that the payment history of the Debtor with respect to its mortgage debt demonstrates a long term inability to meet his financial obligations and that the 2006 Case was not filed in good faith. The Court held an evidentiary hearing on the Motion on February 15, 2006.

III. DISCUSSION

A. Is § 362(c)(3) Applicable to the 2006 Case?

This is the first contested motion of its kind considered by this Court under BAPCPA. As a threshold issue, the Court notes that the language in new § 362(c)(3) is very poorly written.³ It has been noted that the provisions of this new subsection "are, at best, particularly difficult to parse and, at worst, virtually incoherent." In re Charles, 332 B.R. 538, 541 (Bankr.S.D.Tex. 2005). Judge Thomas Small, former chair of the Advisory Committee on Bankruptcy Rules, has stated that "Din an Act in which head-scratching opportunities abound for both attorneys and judges alike, § 362(c)(3)(A) stands out." In re Paschal, 337 B.R. 274, 276-78 (Bankr.E.D.N.C. 2006). This Court likewise finds the provisions of § 362(c)(3) to be neither consistent nor coherent. Section 362(c)(3)(A) provides:

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 was pending within the preceding 1-year period but was dismissed ... 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 filing of the later case.

The quality of the drafting is reflected in the analysis of § 362(c)(3)(A) by Judge Small:

Parsing this language, the court first notes that a "case" is not filed: A petition is filed, after which a case is opened. Next, the statute directs that the case must be filed by "[a] debtor who is an individual in a case ...." For a debtor to be an individual in a case in the present tense, a case must still be pending. Thus, this section literally applies only to a debtor who has a chapter 7, 11 or 13 case open when a new petition is filed by or against that individual. Finally, a single or joint case of the debtor had to be "pending within the preceding 1-year period but was dismissed." Taken all together, the section only applies to individuals who have had three cases pending in one calendar year: one case that has been dismissed, one case that is still pending when the petition at issue is filed, and the new case that is before the court for determination.

Id. As noted by Judge Small, such circumstances are not likely to occur. Id. at 278-79.

The automatic stay in the 2006 Case arose under § 362(a) as a result of the filing of a "petition" by the Debtor. The Debtor did not file a "case." Accordingly, under a strict construction of the plain language of § 362(c)(3)(A), the limitation on the extent or duration of the automatic stay would not apply in this case. However, strictly construing the plain language of the statute to distinguish between the filing a "petition" operating as a stay under § 362(a) and the filing of a "case" triggering the limitation of such a stay would render § 362(c)(3)(A) completely meaningless. Such a result would be absurd and possibly contrary to what Congress intended.

The starting point in discerning congressional intent is the language of the statute itself. Lamie v. United States Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004); Duncan v. Walker, 533 U.S. 167, 172, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001). If the "statutory scheme is coherent and consistent, there generally is no need for a court to inquire beyond the plain language of the statute." United States v. Ron Pair Enters., Inc. 489 U.S. 235, 240-41, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). "The plain meaning of legislation should be conclusive, except in the `rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.' In such cases, the intention of the drafters, rather than the strict language, controls." Id. at 242, 109 S.Ct. 1026 (internal citation omitted). Since the statutory language of § 362(c)(3) is not consistent and coherent, and a strict reading of the plain language would lead to an absurd result, the Court must look to the legislative history. Congress stated its intent to amend "section 362(c) of the Bankruptcy Code to terminate the automatic stay within 30 days in a chapter 7, 11, or 13 case filed by or against an individual if such individual was a debtor in a previously dismissed case pending within the preceding year." E-2 Collier on Bankruptcy App. Pt. 10(b) at App. Pt. 10-333 (15th rev. ed.2005). Because the legislative history clearly reflects congressional intent to limit the duration of the automatic stay in cases similar to the 2006 Case, the Court shall apply the subsection to this case, notwithstanding the plain language of the statute.

B. Application of § 362(c)(3) to the 2006 Case

Since this is a case of first impression in this district, the Court has examined the statutory language carefully and has reviewed many reported and unreported decisions by other bankruptcy courts. Even looking beyond the inconsistent and incoherent language in § 362(c)(3) regarding the applicability of the subsection to a particular case, the effect of this subsection on the extent and duration of the automatic stay imposed by § 362(a) is not clear and the standards for extending whatever limitations may be imposed by § 362(c)(3) are not articulated.

1. Nature of the Limitation on the Automatic Stay

Section 362(c)(3)(A) acts to terminate the stay on the thirtieth day after the filing of a later case "with respect to any action taken with respect to a debt or property securing such debt." 11 U.S.C. § 362(c)(3)(A) (emphasis added).. In a thoughtful opinion, Judge Small examined the language of § 362(c)(3)(A) in the context of § 362 as a whole. Paschal, 337 B.R. 274. Based upon the language in § 362(c)(1) and (c)(2) he found that the term "act" is used quite differently from the term "action taken" in § 362(c)(3)(A). Id. at 279. He found that the word "act" as used in various subsections of § 362(a) is used in the broadest possible sense. Id. at 279-80. However, the term "action" as used in § 362(a)(1), various subsections of § 362(b), and in § 362(d) contemplates a more limited prohibition against only formal judicial, administrative, or similar activities. Id. "Furthermore, the action with...