In re Bradley

• Decision Date: 07 March 1984
• Docket Number: Reference No. M3-1982-JA.,Bankruptcy No. LA 83-19403-JA
• Citation: 38 BR 425
• Parties: In re Evelyn BRADLEY, Debtor. CASHMAN INVESTMENT CORP., Plaintiff, v. Gilbert ROBINSON, Trustee in Bankruptcy, and Evelyn Bradley, Defendants.
• Court: U.S. Bankruptcy Court — Central District of California

38 B.R. 425 (1984)

In re Evelyn BRADLEY, DebtorCASHMAN INVESTMENT CORP., Plaintiff, v.Gilbert ROBINSON, Trustee in Bankruptcy, and Evelyn Bradley, Defendants.

Bankruptcy No. LA 83-19403-JA, Reference No. M3-1982-JA.

United States Bankruptcy Court, C.D. California.

March 7, 1984.

Leon L. Vickman, Encino, Cal., for plaintiff.

Masuda, Jenzaki, Osajima & Nishimora, Los Angeles, Cal., for debtor/defendant.

Gilbert Robinson, Robinson, Wolas & Diamant, Los Angeles, Cal., trustee.

MEMORANDUM OF DECISION

JOHN D. AYER, Bankruptcy Judge.

Evelyn Bradley is a secretary who lives in southwest Los Angeles.In May, 1982, she gave a third trust deed on her home to HRL Construction, Inc., together with an installment contract to pay $8,901 plus interest over 10 years.Apparently, these were assigned to Cashman Investment Corporation.She never made a payment on the loan.She did, however, on August 30, 1982, file a petition for relief under Chapter 13 of the Bankruptcy Code.The petition was dismissed on March 4, 1983.On April 21, 1983, she filed a second Chapter 13 petition, which was dismissed on June 9, 1983.In August, 1983, she filed a third petition which was dismissed on November 29, 1983.Meanwhile, on November 17, 1983, she filed a petition for relief under Chapter 7 of the Bankruptcy Code.This fourth case is pending before me now.

Ms. Bradley's multiple filings have contributed to a bankruptcy boom.As of March 30, 1983, (the latest date for which figures are available) the number of bankruptcy cases pending in the Central District of California was 55,032.That was a 48.7 percent increase from the previous year.It was an increase of 354.25 percent from 1978.It is nearly double the number of all business cases(30,528) or the number of Chapter XIIIcases(30,185) filed in the entire nation during 1977-78.It is almost as great as the number of cases filed in the entire nation in 1954-55 (59,404).

In not one of her four cases did Ms. Bradley receive a discharge.The first three were dismissed too soon, and this fourth is still pending.In each case, however, she received the protection of the automatic stay forestalling, inter alia, Cashman from exercising its power of sale pursuant to the deed of trust.See11 U.S.C. § 362(1982).Cashman sought and got relief from the automatic stay in the first and also in the second Chapter 13 action.Not having gone to trust deed sale at the time of the fourth filing, Cashman began this third stay action before me.

It used to be said that a dominant purpose of bankruptcy law was to provide for and protect the debtor's discharge.Local Loan Co. v. Hunt,292 U.S. 234, 54 S.Ct. 695, 78 L.Ed. 1230(1934), Shelby v. Texas Improvement Loan Company,280 F.2d 349(5th Cir.1960), Hardie v. Swafford Bros. Dry Goods Co.,165 F. 588(5th Cir.1908), see generallyREPORT OF THE COMMISSION ON THE BANKRUPTCY LAWS OF THE UNITED STATES, H.R. Doc. No. 137, 93d Cong., 1st Sess. 33-59(1973)(causes of bankruptcy).No doubt that is still true.But cases like this one make it clear that the world is changing.Seemingly more and more debtors are resorting to the bankruptcy courts with no particular thought of a discharge, but rather seeking the protection of the automatic stay.

There is, of course, no mystery as to why debtors only now have begun to utilize the automatic stay.The reason is that the stay is, for present purposes, largely new.In its current form, it came in with the Bankruptcy Code of 1978, codified as11 U.S.C.(1982).By any measure, the new stay greatly expanded the protection available to the debtor under bankruptcy law.As with any new mechanism, the stay presents, to the public, the bar and the courts, a new range of problems and possibilities.Together we are creating a new set of conventions as to what is permissible under this new device.In this case, Cashman argues that Ms. Bradley has exceeded the bounds of the permissible.Cashman asks that I grant relief from the stay.But Cashman asks more.Cashman asks for a range of related remedies calculated either to sanction the debtor for past multiple filings, or to assure that she does not further forestall foreclosure by filing again.

I think Cashman has presented me with an important and largely unexamined problem.On the record as presented, I hold, first, that Cashman's relief from the stay in prior proceedings is res judicata for this case.I therefore grant relief from the stay.Further, I enjoin Ms. Bradley from filing any new proceeding of any sort for a period of six months, except with the prior permission of a bankruptcy judge.Because of the importance of this issue in the Central District, it may be useful to try to set forth my thoughts at length.

The Stay

Novel as it may be, the stay has deep roots.The Bankruptcy Act of 1898 stayed lawsuits on dischargeable claims.SeeBankruptcy Act of July1, 1898 § 11, 30 Stat. 544.Case law very early protected property in custodia legis.Ex parte Christy,44 U.S. (3 How.) 292, 11 L.Ed. 603(1845)(per Story J.).From these beginnings, the stay over the past half century has gone through a process of incremental extension.There are a number of episodes of which three are worth noting.The first was the extension of the stay, in reorganization proceedings, to property not in custodia legis.Continental Bank v. Rock Island Ry.,294 U.S. 648, 55 S.Ct. 595, 79 L.Ed. 1110(1935).The second was the move from a discretionary stay, dependent on judicial action, to a stay that was wholly self-executing.See§ 75(o) of the Bankruptcy Act of 1898, as amended byAct of Mar. 3, 1933, 47 Stat. 1467(actions against farmers automatically stayed)(ended by its own terms 1949), reprinted in10 COLLIER ON BANKRUPTCY 1833(14th ed.);§ 148 of the Bankruptcy Act of 1898, as amended byAct of June 22, 1938(Chandler Act), 52 Stat. 840(automatic stay of actions in corporate reorganizations upon court approval of petition)(superseded 1978), reprinted in6 COLLIER ON BANKRUPTCY 1086(14th ed.); Bankr. Rule 10-601(implemented § 148, id.)(superseded 1983), reprinted in13 COLLIER ON BANKRUPTCY ¶ 10-601.03(14th ed.).The third was the extension and generalization of the stay, under the Bankruptcy Rules, from corporate reorganizations (Chapter X under the 1898 Act) to other methods of nonliquidation relief.See Bankr.Rule 11-44(arrangements for payment of unsecured debt)(superseded 1983), reprinted in14 COLLIER ON BANKRUPTCY at Ch. 11-44(14th ed.); Bankr. Rule 12-43(real property arrangements by persons other than corporations)(superseded 1983), reprinted in14A COLLIER ON BANKRUPTCY at Ch. 12-43(14th ed.); Bankr.Rule 13-401(wage earners' plan)(superseded 1983), reprinted in15 COLLIER ON BANKRUPTCY at Ch. 13-401(14th ed.).But none of these rules was as extensive as the rule reserved for corporate reorganizations under former Bankruptcy Rule 10-601, supra.And in straight bankruptcy, the protection was narrower still.See Bankr.Rule 401(superseded 1983), reprinted in12 COLLIER ON BANKRUPTCY at Ch. 401(14th ed.); Bankr.Rule 601(superseded 1983), reprinted in13 COLLIER ON BANKRUPTCY at Ch. 601(14th ed.).In any event, all this was swept away by the single, comprehensive stay of Section 362,11 U.S.C. § 362(1982).

From this history, it is possible to discern a number of purposes for the automatic stay.Much of the early case law asserted the power, sometimes said to be inherent, to protect the dignity and authority of the equity court.Ex parte Christy,44 U.S. (3 How.) 292, 11 L.Ed. 603(1845);In re Tyler,149 U.S. 164, 13 S.Ct. 785, 37 L.Ed. 689(1893);Julian v. Central Trust Co.,193 U.S. 93, 24 S.Ct. 399, 48 L.Ed. 629(1904);cf.Diners Club v. Bumb,421 F.2d 396(9th Cir.1970).Other purposes may be more peculiar to bankruptcy law.For example, the stay is said to prevent "a chaotic and uncontrolled scramble for the debtor's assets in a variety of uncoordinated proceedings in different courts."Fidelity Mortgage Investors v. Camelia Builders, Inc.,550 F.2d 47, 55(2d Cir.1955);seeIn re Holtkamp,669 F.2d 505(7th Cir.1982).And this proposition, itself frequently echoed, may itself conceal a number of other purposes.For example, it may represent a policy of imposing a "bankruptcy priority" scheme, rather than letting the assets go to the swift, the lucky, or the aggressive.Sampsell v. Imperial Paper & Color Corp.,313 U.S. 215, 61 S.Ct. 904, 85 L.Ed. 1293(1941);Canright v. General Finance Corp.,35 F.Supp. 841(E.D.Ill.1940).Or it may represent a policy of retaining going-concern values to maximize the total return available to creditors generally.In re C.F. Simonin's Sons, Inc.,28 B.R. 707(Bkrtcy. E.D.N.C.1983);In re Inforex,10 B.R. 497(Bkrtcy.D.Mass.1979).

But there is another discernable purpose, not specifically recognized in any of the above.That is the goal of permitting the debtor to hold on hoping for better times.However primitive as this may appear on the surface, it is quite clearly an established policy of bankruptcy law.Thus a seminal source, discussing the roots of modern bankruptcy law, recalls: "the nadir of the depression found debtors either temporarily handicapped by frozen assets or at least temporarily insolvent, due to artificial low-price levels resulting from an oversupply of goods caused by an almost total lack of demand."Receivership and Bankruptcy Proceedings in United States Courts(The Jackson Report), Sen.Doc. No. 268, 74th Cong., 2d Sess. 2(1936).

In this perspective, it may be helpful to recall that the first truly broad-gauge, self-executing automatic stay occurs not in the Bankruptcy Act of 1978, and not in Chapter X of the Chandler Act, but in Section 75 of the Bankruptcy Act of 1898, as amended byAct of Mar. 3, 1933, 47 Stat. 1467, reprinted in10 COLLIER ON BANKRUPTCY 1833(14th ed.), designed to protect debt-ridden farmers against mortgage foreclosure.Section 75 by its language...