Capital One Auto Finance v. Cowley, EP-06-CA-239-PRM.

• Decision Date: 28 December 2006
• Docket Number: No. EP-06-CA-239-PRM.,EP-06-CA-239-PRM.
• Citation: 374 B.R. 601
• Parties: CAPITAL ONE AUTO FINANCE, Appellant, v. Eddy R. COWLEY and Gloria Cowley, Appellees.
• Court: U.S. District Court — Western District of Texas

374 B.R. 601

CAPITAL ONE AUTO FINANCE, Appellant, v. Eddy R. COWLEY and Gloria Cowley, Appellees.

No. EP-06-CA-239-PRM.

United States District Court, W.D. Texas, El Paso Division.

December 28, 2006.

Robert R. Feuille, Scott, Hulse, Marshall, Feuille, Finger & Thurmond, P.C., El Paso, TX, for Appellant.

Cheryl Sellers Lay, Leslie & Smith, El Paso, TX, for Appellees.

ORDER VACATING THE MAY 1, 2006 INTERIM ORDER AND THE MAY 17, 2006 FINAL ORDER OF THE UNITED STATES BANKRUPTCY COURT AND REMANDING CAUSE TO THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TEXAS

MARTINEZ, District Judge.

On this day, the Court considered Capital One Auto Finance's ("Capital One") appeal from the May 1, 2006 Interim Order and the May 17, 2006 Order of the United States Bankruptcy Court for the Western District of Texas ("Bankruptcy Court"), granting Eddy R. Cowley and Gloria Cowley's ("the Cowleys") Motion for an Extension of the Automatic Stay. After considering Capital One's brief, the Cowleys' brief, Capital One's reply brief, and the record on appeal, the Court is of the opinion that the orders of the Bankruptcy Court should be vacated and the cause remanded for the reasons set forth below.

I. Procedural & Factual History

The Cowleys borrowed money from Capital One to purchase a 2002 Chevrolet Silverado "Dually" pickup truck, securing the loan with the truck. Capital One's Br. 9; Cowleys' Br. 2. Gloria Cowley filed a Chapter 13 bankruptcy case in the El Paso Division of the Western District of Texas on September 21, 2005. Capital One's Br. 9; Cowleys' Br. 2. The case was dismissed on February 15, 2006 because Gloria Cowley failed to make the payments under her plan. Capital One's Br. 9; Cowleys' Br. 2. On April 7, 2006, the Cowleys filed a Chapter 13 bankruptcy case in the same court. Capital One's Br. 9; Cowleys' Br. 2. The instant appeal emanates from the second case, filed April 7, 2006. Capital One's Br. 9; Cowleys' Br. 2-3. The parties agree that the provisions of 11 U.S.C. § 362(c)(3), which govern the automatic stay in cases filed by individuals who have had one bankruptcy case dismissed during the year preceding the filing of the later case [hereinafter "single-repeat filers"], apply to Gloria Cowley. Capital One's Br. 14; Cowleys' Br. 5. Section 362(c)(3)(B) states that for single-repeat filers, in order for the automatic stay not to terminate pursuant to § 362(c)(3)(A), notice must be provided of a motion to continue the stay, and the hearing on the motion must be "completed before the expiration of the thirty-day period." 11 U.S.C. § 362(c)(3)(B). The thirty-day period begins with the filing of the later case. Id. § 362(c)(3)(A).

On April 28, 2006, the Cowleys filed a motion for an extension of the automatic stay, twenty-one days after the filing of the later case, and nine days before the stay would terminate pursuant to § 362(c)(3)(A). Capital One's Br. 9; Cowleys' Br. 2-3. Counsel for the Cowleys blames the delayed filing on her own surgery and ensuing complications. Cowleys' Br. 3. The Cowleys moved the Bankruptcy Court to sign an interim order, extending the stay until the hearing, and requested an expedited hearing. Capital One's Br. 10; Cowleys' Br. 3. On May 1, 2006, the Bankruptcy Court issued an "Interim Order Extending Automatic Stay and Setting Final Hearing," in which it granted an extension of the automatic stay as to all creditors until the final hearing, set for May 16, 2006. Capital One's Br. 10; Cowleys' Br. 3. The Bankruptcy Court did not hold a hearing prior to the issuance of its interim order. Capital One's Br. 10; see R. Tab 1, Bkrtcy. Ct. Dock. Entries 14-16; R. Tab 8, Int. Ord. Ext. Auto. Stay.

On May 16, 2006, the Bankruptcy Court conducted a hearing on the Cowleys' motion for an extension of the automatic stay, eight days after the expiration of the thirty-day period. Capital One's Br. 11; Cowleys' Br. 3. At the hearing, the Bankruptcy Court granted the Cowleys' motion for an extension of the automatic stay. Capital One's Br. 11; Cowleys' Br. 4.

II. Issues Appealed

Capital One appeals the following nine issues:

1. Did the Bankruptcy Court err in granting the Debtors' Motion for Extension of the Automatic Stay Pursuant to Section 362(c)(3)(B)?

2. Did the Bankruptcy Court err in granting the Debtors' Motion for Extension of the Automatic Stay Pursuant to Section 362(c)(3)(B) after the expiration of the thirty-day deadline specified in 11 U.S.C. § 362(c)(3)(A) and (B)?

3. Did the Bankruptcy Court err in granting the Debtors' Motion for Extension of the Automatic Stay Pursuant to Section 362(c)(3)(B) where the Debtors admitted that 11 U.S.C. § 362(c)(3) applied (i.e., that a single or joint case was filed by a debtor who is an individual in a case under chapter 13 of the Bankruptcy Code, where a single or joint case of the same debtor was pending within the preceding one-(1)-year period but was dismissed)?

4. Did the Bankruptcy Court err in granting the Debtors' Motion for Extension of the Automatic Stay Pursuant to Section 362(c)(3)(B) after the expiration of the thirty-day period specified in 11 U.S.C. § 362(c)(3)(A) and (B), where the Debtors admitted that 11 U.S.C. § 362(c)(3) applied (i.e., that a single or joint case was filed by a debtor who is an individual in a case under chapter 13 of the Bankruptcy Code, where a single or joint case of the same debtor was pending within the preceding one-(1)-year period but was dismissed)?

5. Did the Bankruptcy Court err in finding or concluding that, pursuant to 11 U.S.C. § 362(c)(2)(B), the Court may grant the motion of a party in interest for continuation or extension of the automatic stay after the expiration of the thirty-day period specified in 11 U.S.C. § 362(c)(3)(A), notwithstanding the express statutory requirement to the contrary?

6. Did the Bankruptcy Court err in finding or concluding that, pursuant to 11 § 362(c)(2)(B), the Court may complete a hearing on the motion of a party in interest for continuation of the automatic stay after the expiration of the thirty-day period specified in 11 U.S.C. § 362(c)(3)(A), notwithstanding the express statutory requirement to the contrary?

7. Did the Bankruptcy Court err in finding or concluding that the automatic stay of 11 U.S.C. § 362(a) would continue in effect with respect to property of the estate?

8. Did the Bankruptcy Court err in finding or concluding that the automatic stay of 11 U.S.C. § 362(a) would continue in effect with respect to property of the estate, despite the provisions of 11 U.S.C. § 362(c)(3)(A) which cause the stay to terminate within thirty days of the bankruptcy petition date "with respect to any action taken with respect to a debt or property securing such debt"?

9. Did the Bankruptcy Court err in finding or concluding that the creditor, Capital One, would be required to file an affirmative request for relief from the automatic stay under 11 U.S.C. § 362(d) in order to take action with respect to a debt or property securing such debt, or with respect to property of the estate, after expiration of the thirty-day period specified in 11 U.S.C. § 362(c)(3)(A) and (B), whether or not a party in interest obtained an extension of the automatic stay in accordance with the conditions imposed by 11 U.S.C. § 362(c)(3)(B)?

Capital One's Br. 2-3.

III. Legal Standard

A district court reviews a bankruptcy court's findings of fact for clear error and its conclusions of law de novo.¹ Carrieri v. Jobs com Inc., 393 F.3d 508, 517 (5th Cir.2004). A district court will only reverse for clear error if, after reviewing the entire record, the court is convinced that a mistake has been made. Id. However, a finding of fact based on an erroneous or improperly applied legal standard is reviewed de novo. Id.

IV. Discussion

Capital One's nine issues on appeal can be summed up in three questions: (1) Could the Bankruptcy Court issue the interim order extending the automatic stay? (2) Could the Bankruptcy Court issue the final order granting the Cowleys' motion to extend the automatic stay, when the hearing on the motion was not held within thirty days after the filing of the Cowleys' bankruptcy petition? (3) Did the Bankruptcy Court correctly conclude that the stay, if it had terminated, would have terminated only as to the property of the debtors?

A. Final Order Extending Stay

I. 11 U.S.C. § 105

When a party seeks to extend the automatic stay pursuant to 11 U.S.C. § 362(c)(3)(B), the law requires that the bankruptcy court hold a hearing within thirty days after the filing of the petition at issue. 11 U.S.C. § 362(c)(3)(B); In re Jumpp, 344 B.R. 21, 27 (Bankr.D.Mass. 2006); In re Berry, 340 B.R. 636, 637 (Bankr.M.D.Ala.2006); In re Wilson, 336 B.R. 338 (Bankr.E.D.Tenn.2005). The Cowleys agree that the statute requires a hearing within an initial thirty-day period, but argue that the Bankruptcy Court extended the stay pursuant to the powers granted it by 11 U.S.C. § 105 ("§ 105"). Cowleys' Br. 5. Section 105 states, in relevant part: "The court may issue any order; process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). There was no mention of § 105 in either the hearing on the Cowleys' motion for an extension of the automatic stay or in the order granting the extension. R. Tab 20, Tr.; R. Tab 16, Ord. on Debtors' Mot. for Ext. of Stay. The Bankruptcy Court, in extending the stay, stated: "When we have to rule in thirty days and people wait virtually the entire time and then file the petition, because we have been using — it's my belief that I'm allowed to do this. I guess if someone appeals, we'll find out one day." R. Tab 20, Tr. 5, lines 12-16. It is not clear from the record whether the Bankruptcy Court believed § 105 to be the source of its authority to extend the stay when the hearing was completed outside the thirty-day period.

The Court notes that there is a split among bankruptcy courts...