In re Barringer

• Decision Date: 04 October 1999
• Docket Number: Bankruptcy No. 99-30513. Adversary No. 99-3030.
• Citation: 244 BR 402
• Parties: In re George John BARRINGER, Debtor. George John Barringer, Plaintiff, v. Eab Leasing, the Paragron Capital Group, Inc. and MPH Vehicle Management Corp., jointly and severally, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Michigan

244 B.R. 402 (1999)

In re George John BARRINGER, Debtor George John Barringer, Plaintiff, v. Eab Leasing, the Paragron Capital Group, Inc. and MPH Vehicle Management Corp., jointly and severally, Defendants.

Bankruptcy No. 99-30513. Adversary No. 99-3030.

United States Bankruptcy Court, E.D. Michigan, Southern Division-Flint.

October 4, 1999.

Thomas J. Budzynski, Mt. Clemens, MI, for Plaintiff.

Steven W. Moulton, Flint, MI, for Defendants.

OPINION REGARDING SCOPE OF AUTOMATIC STAY

ARTHUR J. SPECTOR, Bankruptcy Judge.

In January of 1997, George Barringer leased a truck from MPH Vehicle Management Corporation. He defaulted on his lease payments, and the truck was repossessed on March 6, 1999. Two days later, Barringer filed for chapter 13 bankruptcy relief. He then initiated this adversary proceeding by filing a complaint against MPH, which has refused to return the truck to him. (Other entities apparently related to MPH are also named as defendants.) A principal allegation made by the Debtor, who does not claim that repossession of the truck was illegal, is that "failure to turn over pursuant to 11 U.S.C. § 542(a) constitutes a violation of the automatic stay as codified under 11 USC 362." Complaint at ¶ 15.¹ For reasons to be explained, the Court rejects this assertion.

In arguing that a stay violation occurred, the Debtor relies solely upon a recent opinion of the Sixth Circuit Bankruptcy Appellate Panel, In re Sharon, 234 B.R. 676 (6th Cir. BAP 1999). See Plaintiff's Trial Brief at p. 4. The creditor in that case repossessed a woman's car shortly before she filed for bankruptcy under chapter 13. Sharon, 234 B.R. at 680. The creditor refused to return the vehicle, so she "filed a Motion for Contempt and Sanctions for Violation of the Automatic Stay." Id. In a 2-to-1 decision, the court ruled that the creditor did in fact violate 11 U.S.C. § 362(a)(3) by failing to comply with the turnover request. Id. at 682.

While Sharon directly supports the Debtor's position, the case is neither binding nor persuasive. In the sections which follow, we explain the basis for this conclusion.

I. This Court Is Not Bound by In re Sharon

Neither the Plaintiff nor the Defendants addressed the question of whether Sharon is binding, and we are disinclined to render a definitive opinion on the subject without benefit of the parties' input. See generally Ladner v. United States, 358 U.S. 169, 173, 79 S.Ct. 209, 3 L.Ed.2d 199 (1958) (choosing to defer consideration of "an important and complex question until it is . . . adequately briefed and argued"). We instead note only that appeals to the B.A.P. have not been authorized by the Eastern District of Michigan. See generally 28 U.S.C. § 158(b)(6). Since our district is "outside the loop," so to speak, we presume for present purposes that this Court is not bound by decisions of the Sixth Circuit BAP.²See generally R. Obregon, In re Globe Illumination Co.: A Provocative But Flawed Theory on the Precedential Value of BAP Authority, 21 Cal. Bankr.J. 45, 49-50 (1993) ("It makes more sense to view a bankruptcy appellate panel as a `unit of the district court' than as an `adjunct of the Court of Appeals.' . . . An appeal to the BAP in the first instance is an appeal to the district court, which in turn may relegate appellate review, with the litigants' consent, to a bankruptcy appellate panel." (citation omitted)); United States v. Glaser, 14 F.3d 1213, 1216 (7th Cir.1994) ("Opinions `bind' only within a vertical hierarchy."); Gould v. Bowyer, 11 F.3d 82, 84 (7th Cir.1993) ("A district court decision binds no judge in any case, save to the extent that doctrines of preclusion (not stare decisis) apply."); 28 U.S.C. § 151 ("In each judicial district, the bankruptcy judges . . . shall constitute a unit of the district court to be known as the bankruptcy court for that district."). But see In re Globe Illumination Co., 149 B.R. 614, 620 (Bankr.C.D.Cal.1993) ("A bankruptcy appellate panel is a unit of the circuit court. . . . ").

II. The Right of Possession Under Section 542(a) is Non-Derivative

(A) The Derivative/Non-Derivative Distinction

Section 541(a) states:

(a) The commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:

(1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.

(2) All interests of the debtor and the debtor\'s spouse in community property as of the commencement of the case that is —

(A) the sole, equal, or joint management and control of the debtor; or

(B) liable for an allowable claim against the debtor, or for both an allowable claim against the debtor and an allowable claim against the debtor\'s spouse, to the extent that such interest is so liable.

(3) Any interest in property that the trustee recovers under section 329(b), 363(n), 543, 550, 553, or 723 of this title.

(4) Any interest in property preserved for the benefit of or ordered transferred to the estate under section 510(c) or 551 of this title.

(5) Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date —

(A) by bequest, devise, or inheritance;

(B) as a result of a property settlement agreement with the debtor\'s spouse, or of an interlocutory or final divorce decree; or

(C) as a beneficiary of a life insurance policy or of a death benefit plan.

(6) Proceeds, product, offspring, rents, or profits of or from property of the estate, except such as are earnings from services performed by an individual debtor after the commencement of the case.

(7) Any interest in property that the estate acquires after the commencement of the case.

11 U.S.C. § 541(a).

Pursuant to this statute, then, there are three sources of estate property: (A) interests owned by the debtor when the case commenced, see 11 U.S.C. §§ 541(a)(1), (2); (B) certain narrowly defined interests which the debtor acquires post-petition, see 11 U.S.C. § 541(a)(5); and (C) interests acquired by the estate in its own right, see 11 U.S.C. §§ 541(a)(3), (4), (6) and (7). The first two classes of interests are "derivative": The estate automatically acquires the interest by virtue of the fact that it previously belonged to the debtor. The third class, for lack of a better term, comprises those interests which are "non-derivative": The estate acquires such an interest for reasons other than the mere fact that the debtor used to own it.

(B) The Creditor's Right of Possession

Security agreements frequently provide creditors with a right to seize or repossess the collateralized property in the event of the debtor's default. Similarly, creditors holding non-consensual liens on the debtor's property are permitted by statute to levy on the property, thereby acquiring possession of that property. Under either scenario, if the seizure is "lawful," (by which we mean permissible under the terms of the parties' contract and/or applicable law), then the creditor holds not only the physical property itself, but also the abstract right of possession. It may well be true that the debtor retains certain rights in or relating to the seized property, such as legal or equitable ownership, a right of redemption, or a right to any surplus from sale of the property. But by definition (since we're talking here only about legally valid seizures), the debtor does not have a present right to possess the property.

(C) Section 542(a)

This statute states that "an entity . . . in possession . . . of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee . . . such property." 11 U.S.C. § 542(a). Sections 363 and 522, in turn, relate to estate property. Thus where applicable, § 542(a) obligates an entity to relinquish possession of estate property to the trustee of the bankruptcy estate. And this obligation can be imposed even on an entity that is otherwise rightfully in possession of the subject property. See United States v. Whiting Pools, Inc., 462 U.S. 198, 205-09, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983).

(D) The Trustee's Right to Possess Is Non-Derivative

As indicated in part (C) above, a creditor in lawful possession of seized property must nevertheless turn that property over to the trustee if § 542(a) is applicable. In such instances, the estate's right to possess is not obtained from the debtor (who had no such right), but rather from the creditor (who did have such a right). Thus the estate's right of possession under § 542(a) is an example of a non-derivative interest. See In re Coleman, 229 B.R. 428, 432 (Bankr.N.D.Ill.1999) (Schmetterer, J.); In re Spears, 223 B.R. 159, 166-67 (Bankr. N.D.Ill.1998) (Lefkow, J.); In re Fitch, 217 B.R. 286, 288-90 (Bankr.S.D.Cal.1998); In re Quality Health Care, 215 B.R. 543, 579 (Bankr.N.D.Ind.1997); In re Massey, 210 B.R. 693, 696 (Bankr.D.Md.1997); In re Brown, 210 B.R. 878, 884 (Bankr.S.D.Ga. 1997); In re Young, 193 B.R. 620, 625-26 (Bankr.D.D.C.1996).

(E) Whiting Pools Supports This Conclusion

In Whiting Pools, the Supreme Court stated as follows: "Section 541(a)(1) is intended to include in the estate any property made available to the estate by other Code provisions. . . . Section 542(a) is such a provision." Whiting Pools, 462 U.S. at 205, 103 S.Ct. 2309. If this assertion is accepted at face value, then one must infer that in the Court's view, all property interests belonging to the estate were owned by the debtor on the bankruptcy petition date. Cf. In re Sheridan, 215 B.R. 144, 147 n. 6 (Bankr.N.D.Ill.1996) ("In Whiting Pools the Supreme Court suggested . . . that...