In re Bender

• Decision Date: 06 December 2016
• Docket Number: Case No. 816–73280–reg
• Citation: 562 B.R. 578
• Parties: IN RE: Tracey E. BENDER a/k/a Tracey B. Vitagliano, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of New York

562 B.R. 578

IN RE: Tracey E. BENDER a/k/a Tracey B. Vitagliano, Debtor.

Case No. 816–73280–reg

United States Bankruptcy Court, E.D. New York.

Signed December 6, 2016

Richard F. Artura, Phillips, Artura & Cox, Lindenhurst, NY, Adam C. Gomerman, Huntington Station, NY, for Debtor.

MEMORANDUM DECISION

Robert E. Grossman, United States Bankruptcy Judge

Before the Court is the motion of secured creditor, New York Liens, LLC RAI Custodian ("NY Liens"), to confirm that the automatic stay terminated in this case 30 days post-filing by operation of 11 U.S.C. § 362(c)(3)(A).The Debtor does not dispute that § 362(c)(3)(A) applies because she had a prior bankruptcy case pending within the year preceding the filing of the instant case which case was dismissed due to her failure to make monthly payments under the prior chapter 13 confirmed plan.(SeeCaseNo. 814–71340–reg).However, the Debtor argues that the Court in applying this statute should distinguish between the Debtor and the Debtor's property, and property of the estate.Applying the Debtor's reasoning, under § 362(c)(3)(A) the automatic stay would be terminated only as to the Debtor and the Debtor's property.The stay of any action against property of the estate, the Debtor argues, remains in place until it is lifted upon motion by the secured creditor, and after notice and a hearing under § 362(d).

There have emerged so-called "majority" and "minority" positions on this issue.¹The Debtor urges the Court to adopt the reasoning of the majority.That is, where § 362(c)(3)(A) applies, the automatic stay terminates on the 30^thday after the filing of the petition, but only "with respect to the debtor" and the debtor's property.The minority view is that the stay terminates in its entirety, i.e. , with respect to the debtor, the debtor's property and estate property, upon expiration of the 30 days.

After a careful analysis of the cases on both sides of this argument, this Court believes that there exists an inherent flaw in both the majority and minority reasoning and holdings.In this Court's view both sides have based their conclusions on a faulty interpretation of the statute.The interpretation of § 362(c)(3)(A) that is most consistent with the principles of statutory analysis should not focus, as the majority and minority do, on "property of the debtor" or "property of the estate," neither of which phrases are used in the statute.Rather, the Court finds that the stay under § 362(a) terminates "with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease ."The focus of this Court's analysis is on specific actions with respect to specific property , not the broader categories of property of the estate or property of the debtor.In other words, the stay is lifted "with respect to a debt or property securing such debt " and with respect to leases—regardless of whether the property or the lease is property of the estate or property of the debtor.To limit the effect of § 362(c)(3)(A) to the debtor or property of the debtor would so limit its effectiveness as to not support, what this Court believes to be, the congressional intent to protect the secured creditor or lessor seeking to continue judicial, administrative or other proceedings commenced prepetition with respect to debts, property securing such debts or leases.²

This does not mean that a two time repeat filer can gain no protection from the § 362(a) stay.However, it is the debtor now that must come to the Court to seek protection.In the case of a two time repeat filing, rather than requiring the secured creditor to seek relief under § 362(d) the burden shifts to the debtor to affirmatively seek to impose the stay under § 362(c)(3)(B), or the stay will be lifted on the 30^thday by operation of law as to real property foreclosures, evictions and other actions against secured collateral.A debtor may gain the protections of § 362(a) by demonstrating to the Court that the filing of the second case was made "in good faith as to the creditors to be stayed."11 U.S.C. § 362(c)(3)(B).In so doing, the debtor must overcome a presumption that the second case was not filed in good faith.11 U.S.C. § 362(c)(3)(C).

FACTS AND PROCEDURAL HISTORY

Prior to the filing of the instant chapter 13 petition, the Debtor filed a chapter 13 petition on March 28, 2014.A chapter 13 plan was confirmed in that case on June 11, 2014, and was dismissed by order dated December 16, 2015, due to the Debtor's failure to make payments under the confirmed plan.The Debtor filed the instant chapter 13 petition seven months later, on July 20, 2016, with the assistance of counsel.The 30^thday post-filing was August 19, 2016 and at no time did the Debtor file a motion to extend the automatic stay pursuant to § 362(c)(3)(B).

On September 1, 2016, NY Liens filed the instant motion pursuant to § 362(j) to confirm the termination of the automatic stay by operation of § 362(c)(3)("Motion").NY Liens is the holder of a tax lien certificate which is a lien against the Debtor's real property arising from unpaid general and school taxes for the years 2009 to 2013.NY Liens' tax lien foreclosure action was stayed by the instant filing.The Debtor filed a response to the Motion and does not dispute that § 362(c)(3) came into play, but argues that § 362(c)(3)(A) lifts the stay only as to the debtor and the debtor's property.

A hearing on the Motion was held on October 17, 2016 at which time the Court indicated its ruling that the lifting of the stay under § 362(c)(3)(A) is not limited to the debtor and the debtor's property, and this written opinion would follow.On October 19, 2016, the Debtor filed a third amended plan which provides that NY Liens will be paid pre-petition arrears in the sum of $40,195.92 over the life of the plan.The Debtor's third amended plan was confirmed by Order entered October 26, 2016.³

DISCUSSION

Section 362(c)(3) states:

(3) if 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, 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;

Parsing the statute, as many have, we find nine distinct phrases all of which must be read as part of the whole:

1.If a single or joint case is filed by ... 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...

2.The stay under subsection (a)

3.With respect to any action taken

4.With respect to a debt

5.Or property securing such debt

6.Or with respect to any lease

7.Shall terminate

8.With respect to the debtor

9.On the 30^thday after filing of the later case.

The meaning of the first and last phrases is not disputed.The parties agree that the section applies and became effective on the 30^thday post-filing.

The second phrase refers to "the stay under subsection (a)."In this Court's view, this wholesale reference to § 362(a) should not be overlooked in this analysis.First, if one omits for now the intervening clauses, the statute states that "the stay under subsection (a) .... shall terminate ...."Section 362(a) has eight separate subsections, which stay actions "against the debtor,"see11 U.S.C. § 362(a)(1), (6), (7) and (8), against "property of the debtor,"see11 U.S.C. § 362(a)(5), and against "property of the estate,"see11 U.S.C. § 362(a)(2), (3) and (4).If Congress intended to limit the termination of the stay under § 362(c)(3)(A) to one or all of "property of the estate" versus "property of the debtor" versus "the debtor" it could have easily said so in words or by reference to specific subsections of § 362(a).The wholesale reference to subsection (a), as opposed to only those subsections pertaining to actions against the debtor and the debtor's property, see§§ 362(a)(1), (5), (6)(7) and (8), suggests that the stay would be terminated in its entirety only as limited by § 362(c)(3)(A) itself.SeeScott–Hood , 473 B.R. 133, 136(Bankr. W.D. Tex.2012).

In this Court's view, limitations on the termination of the § 362(a) stay are stated directly and explicitly in § 362(c)(3).

The phrase ‘with respect to’ appears four times in [section 362(c)(3)(A) ] and in its ordinary use, this phrase limits the phrase that precedes it—‘the stay under [§ 362(a) ].’In other words the stay that terminates 30 days after the petition when § 362(c)(3) is applicable is not the entire stay under § 362(a) but only so much of the stay in § 362(a) that satisfies the four ‘with respect to’ conditions in § 362(c)(3)(A).

Keith M. Lundin & William H. Brown, Chapter 13 Bankruptcy 4^thEd., § 432.2, at ¶ ––––, Sec. Rev. July 20, 2007, www.ch13online.com.And so we must give careful consideration to each and every phrase neither omitting nor adding language.

The third phrase, "with respect to any action taken," imposes the first of four limitations on the termination of the stay under § 362(c)(3)(A).This seemingly straight forward phrase has been subject to some scrutiny, primarily in the case of In re Paschal , 337 B.R. 274, 280(Bankr. E.D.N.C.2006).In Paschal , the bankruptcy court concluded that this phrase means that the § 362(a) stay is only terminated under § 362(c)(3)(A) with respect to the continuation of formal legal proceedings that were commenced against the debtor pre-petition.In re Paschal , 337 B.R. at 280;see alsoIn re Stanford , 373 B.R. 890(Bankr. E.D. Ark.2007).But seeIn re James , 358 B.R. 816, 820(Bankr. S.D. Ga.2007)(holding that "action taken" is not limited to...