First Fin. Bank v. Clark

• Decision Date: 19 March 2021
• Docket Number: Cause No. 2:18-cv-390 DRL
• Citation: 627 B.R. 663
• Parties: FIRST FINANCIAL BANK, Plaintiff, v. Lawrence Allen CLARK, Defendant.
• Court: U.S. District Court — Northern District of Indiana

627 B.R. 663

FIRST FINANCIAL BANK, Plaintiff,

v.Lawrence Allen CLARK, Defendant.

Cause No. 2:18-cv-390 DRL

United States District Court, N.D. Indiana, Hammond Division.

Signed March 19, 2021

Bradley S. Salyer, Charles J. Otten, Morgan Pottinger McGarvey, Louisville, KY, for Plaintiff.

Miguel F. Martinez, Law Offices of Moseley & Martinez LLC, Merrillville, IN, for Defendant.

OPINION AND ORDER

Damon R. Leichty, Judge

Lawrence Clark filed a Chapter 13 bankruptcy petition.An automatic stay went into effect but then lapsed in part.First Financial Bank, a secured creditor and mortgage holder, requested a comfort order to confirm that the automatic stay had expired so that the bank could foreclose on his real property.The bankruptcy court confirmed that no stay existed for Mr. Clark individually or his property but said the stay remained for the bankruptcy estate's property, including certain real property.First Financial Bank appealed.This presiding judge recently received this bankruptcy appeal by reassignment, and the court now affirms.

BACKGROUND

The facts are brief and undisputed.Lawrence Clark filed a voluntary bankruptcy petition under Chapter 13 on June 28, 2018 in the Northern District of Indiana.He was a previous debtor in a voluntary bankruptcy case that was dismissed on May 3, 2018 because he didn't comply with the terms of a confirmed plan.¹He filed this bankruptcy case within one year of the time his previous case remained pending.An automatic stay went into effect.When Mr. Clark didn't move to continue it, it terminated in part thirty days after he filed the petition under 11 U.S.C. § 362(c)(3)(A).

Mr. Clark is indebted to First Financial Bank (FFB) in the amount of $71,416.92, plus accruing interest and attorney fees and expenses.FFB secured its claim with a mortgage located on his real property in Merrillville, Indiana.FFB obtained a state court judgment and decree of foreclosure on the house for his failure to pay his debts, but the sale date for September 7, 2018 was canceled because of the bankruptcy case.

On August 2, 2018, FFB moved for a comfort order under 11 U.S.C. § 362(j) to confirm the absence of the automatic stay.The bankruptcy court granted the motion in part, confirming that the stay terminated as to Mr. Clark individually and as to his property, but denying the request as to any real property of the bankruptcy estate.FFB appealed on October 11, 2018.The appeal was reassigned to this presiding judge on January 25, 2021.

STANDARD

Under 28 U.S.C. § 158(a), federal district courts have jurisdiction to hear appeals from final and certain other orders of the bankruptcy courts.The comfort order here constitutes an appealable order.SeeIn re Bulk Petroleum Corp. , 796 F.3d 667, 671(7th Cir.2015);In re Smith , 910 F.3d 576, 579-80(1st Cir.2018).District courts apply a dual standard of review in bankruptcy appeals.The bankruptcy judge's findings of fact are reviewed for clear error, and its conclusions of law are reviewed de novo.In re Veluchamy , 879 F.3d 808, 814(7th Cir.2018).A factual finding is clearly erroneous if it leaves a definite and firm conviction that a mistake has been made.Id.

DISCUSSION

The issue here is whether the 30-day automatic stay for repeat bankruptcy filers lapses entirely when that time runs or terminates solely as to the debtor and his property but not as to the bankruptcy estate's property.See11 U.S.C. § 362(c)(3)(A).Courts have split on this issue, and this circuit hasn't taken a side.

The majority view, adopted by the bankruptcy court and advanced by Mr. Clark, is that the statute unambiguously terminates the stay solely as to the debtor and his property, without applying the termination to the property of the bankruptcy estate.²See, e.g. , Rose v. Select Portfolio Servicing, Inc. , 945 F.3d 226, 231(5th Cir.2019);In re Holcomb , 380 B.R. 813, 816(10th Cir. B.A.P.2008);In re McGrath , 621 B.R. 260, 266-67(Bankr. D.N.M.2020);In re Markoch , 583 B.R. 911, 914(Bankr. W.D. Mich.2018);In re Pope , 351 B.R. 14, 16-17(Bankr. D.R.I.2006);In re Brandon , 349 B.R. 130, 132(Bankr. M.D.N.C.2006);In re Gillcrese , 346 B.R. 373, 377(Bankr. W.D. Pa.2006).

The minority view, espoused by FFB, is that the statute is ambiguous and that its purpose and legislative history counsel terminating the stay in its entirety.See, e.g. , In re Smith , 910 F.3d 576, 591(1st Cir.2018);In re Reswick , 446 B.R. 362, 373(9th Cir. B.A.P.2011);In re Goodrich , 587 B.R. 829, 849(Bankr. D. Vt.2018);In re Furlong , 426 B.R. 303, 307(Bankr. C.D. Ill.2010);In re Daniel , 404 B.R. 318, 329(Bankr. N.D. Ill.2009);In re Curry , 362 B.R. 394, 402(Bankr. N.D. Ill.2007);In re Jupiter , 344 B.R. 754, 762(Bankr. D.S.C.2006).

The court adopts the majority position based, as a starting point, on the statute's text.Duncan v. Walker , 533 U.S. 167, 172, 121 S.Ct. 2120, 150 L.Ed.2d 251(2001).If the text is unambiguous, the court applies its plain and ordinary meaning, seeBostock v. Clayton Cnty. , ––– U.S. ––––, 140 S. Ct. 1731, 1738, 207 L.Ed.2d 218(2020), with an eye toward avoiding absurd results, seeO'Kane v. Apfel , 224 F.3d 686, 691(7th Cir.2000).The court strives to give meaning to every word in the statute and avoids treating any language as surplusage.Duncan , 533 U.S. at 174, 121 S.Ct. 2120.

A circuit split on whether a statute is ambiguous doesn't alone create an ambiguity.SeeReno v. Koray , 515 U.S. 50, 65, 115 S.Ct. 2021, 132 L.Ed.2d 46(1995).The court won't use legislative history to create an ambiguity either.SeeBostock , 140 S. Ct. at 1749;Milner v. Dept. of Navy , 562 U.S. 562, 574, 131 S.Ct. 1259, 179 L.Ed.2d 268(2011).That a statute is poorly drafted, as courts at times lament when reading this section of the Bankruptcy Code, see, e.g. , In re Reswick , 446 B.R. at 370;In re Baldassaro , 338 B.R. 178, 182 & n.3(Bankr. D.N.H.2006), doesn't give the court leeway to restructure its meaning."It is beyond [the court's] province to rescue Congress from its drafting errors, and to provide for what [the court] might think ... is the preferred result."Lamie v. U.S. Tr. , 540 U.S. 526, 542, 124 S.Ct. 1023, 157 L.Ed.2d 1024(2004)(citingUnited States v. Granderson , 511 U.S. 39, 68, 114 S.Ct. 1259, 127 L.Ed.2d 611(1994)(Kennedy, J., concurring));see alsoIn re Trejos , 352 B.R. 249, 261(Bankr. D. Nev.2006)("the fact that an expert, trained in both drafting and bankruptcy, would have written the statute differently is not sufficient reason to exclude an interpretation that would have resulted from that better drafting").

With these principles in mind, the relevant statute reads as follows:

[I]f 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, ... 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.

11 U.S.C. § 362(c)(3)(A)(emphasis added).The key phrase is "with respect to the debtor"—whether this prescribes the scope of the stay's termination.The parties don't contest that Mr. Clark is subject to the automatic stay's termination; instead, the parties dispute the termination's scope.

The text references the "stay under subsection (a)," which is the automatic stay of other actions against the debtor when he files bankruptcy.See11 U.S.C. § 362(a).It serves as a protection for the debtor.Midlantic Nat. Bank v. N.J. Dept. of Envtl. Prot. , 474 U.S. 494, 503, 106 S.Ct. 755, 88 L.Ed.2d 859(1986).It stays actions in three categories: those against (1) the debtor; (2) the debtor's property; and (3) the property of the bankruptcy estate.In re Smith , 910 F.3d at 580;seeRose , 945 F.3d at 230.Congress enacted the stay to apply to these categories under 11 U.S.C. § 362(a) expressly, using the specific category's name.SeeRose , 945 F.3d at 230.For instance, subsection (a)(1) stays actions "against the debtor ,"subsection (a)(2) stays actions "against the debtor or against property of the estate ," and subsection (a)(5) stays actions "against property of the debtor. " This isn't exhaustive; there are numerous other references to the categories throughout subsection (a).

For repeat filers (debtors with one prior bankruptcy case dismissed within one year of their current bankruptcy filing), the automatic stay ceases after 30 days, unless extended by the bankruptcy court.11 U.S.C. § 362(c)(3);seeIn re Wade , 592 B.R. 672, 676(Bankr. N.D. Ill.2018).Mr. Clark is a repeat filer.That said, the statute says the automatic stay "shall terminate with respect to the debtor. "11 U.S.C. § 362(c)(3)(A)(emphasis added).On its face, "the debtor" means exactly what is says: the debtor individually.Congress knows full well the difference between the debtor and the estate and could have added "and the property of the estate" as it did multiple times in § 362(a), see11 U.S.C. §§ 362(a)(2), (a)(3), & (a)(4), but it didn't.The court won't add that language now or presume, in the guise of "interpreting"the statute, that this gloss should be added to it.SeeKeene Corp. v. United States , 508 U.S. 200, 113 S.Ct. 2035, 124 L.Ed.2d 118(1993)("Where 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.")(citation omitted);Evans v. Portfolio Recovery Assocs., LLC , 889 F.3d 337, 346(7th Cir.2018)("our task is to interpret the words of Congress, not add to them")(citation omitted).

Similarly, Congress could have eliminated "with respect to the debtor" and thus written a statute that terminated...