In Re: Christopher E. Padilla And Lori R. Padilla, 7-09-15203 JR
| Decision Date | 16 November 2010 |
| Docket Number | No. 7-09-15203 JR,Adversary No. 10-1098 J,7-09-15203 JR |
| Parties | In re: CHRISTOPHER E. PADILLA and LORI R. PADILLA, Debtors. LORI R. PADILLA, Plaintiff, v. PRESTIGE FINANCIAL and STATEWIDE RECOVERY, LLC, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Mexico |
THIS MATTER is before the Court on the Motion to Dismiss Adversary Proceeding ("Motion to Dismiss") filed by Defendant Prestige Financial Services ("Prestige"), by and through its attorneys of record, Poli & Ball, P.L.C. (James E. Shively). Defendant Statewide Recovery, LLC ("Statewide") joined in the Motion to Dismiss. See Joinder in Prestige Financial Services['] Motion to Dismiss Adversary Proceeding [Docket No. 5] ("Joinder")-Docket No. 7. Plaintiff filed this adversary proceeding against Prestige and Statewide asserting that Defendants' actions in repossessing Plaintiffs vehicle were in contempt of the order granting Prestige's motion for relief from stay entered in Plaintiffs bankruptcy case on June 7, 2010 and further constituted a willful violation of the automatic stay entitling Plaintiff to damages, including actual damages, punitive damages, and attorney's fees, costs, and expenses. See Complaint for Contempt of Court and Willful Violation of Automatic Stay ("Complaint").
In its Motion to Dismiss, Prestige asserts that the automatic stay terminated by operation of law before the entry of the order granting relief from the automatic stay so that Defendants'actions which occurred fewer than fourteen days after the entry of the order granting relief from the automatic stay cannot constitute a willful stay violation. Consequently, Prestige requests the Court to dismiss the Complaint in accordance with Rule 7012(b), Fed.R.Bankr.P., for failure to state a claim upon which relief can be granted. Plaintiff opposes the Motion to Dismiss, arguing 1) that 11 U.S.C. § 521(a)(2) is inapplicable to converted chapter 7 cases; 2) that because 11 U.S.C. § 362(h) terminates the automatic stay based on non-compliance with which 11 U.S.C. §521, automatic termination cannot occur under 11 U.S.C. § 362(h) in a converted case; and 3) that by submitting an order granting relief from the automatic stay Prestige waived its right to argue that the automatic stay terminated by operation of law.1
After consideration of the Motion to Dismiss, the Plaintiffs response thereto, and Prestige's reply, and being otherwise sufficiently informed, the Court finds that the automatic stay terminated by operation of law pursuant to 11 U.S.C. § 362(h) upon Plaintiffs failure to timely file a Statement of Intention within thirty days of the date of the meeting of creditors in her converted chapter 7 case. Further, In re Duran, 483 F.3d 653 (10th Cir. 2007) is persuasive Tenth Circuit authority for the proposition that the time period under Rule 4001(a)(3), Fed.R.Bankr.P., which stays an order granting a motion for relief from the automatic stay for fourteen days after the entry of the order, does not prevent the automatic termination of the stay by operation of law under an applicable section of the Bankruptcy Code. The Court will, therefore, grant the Motion to Dismiss.
A motion to dismiss for failure to state a claim is governed by Rule 12(b)(6), Fed.R.Civ.P., made applicable to adversary proceedings by Rule 7012, Fed.R.Bankr.P. Inconsidering a motion to dismiss under Rule 12(b)(6), the Court accepts as true all well pleaded facts and evaluates those facts in the light most favorable to the plaintiff. Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir. 2006). To survive a motion to dismiss, the plaintiff's complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). The function of a motion to dismiss for failure to state a claim upon which relief can be granted is to test the law of the claim, not the facts which support it. In re Manelos, 337 B.R. 409, 412 (Bankr.D.N.M. 2006)(citing In re Bunker Exploration Co., 42 B.R. 297, 299 (Bankr.W.D. Okla. 1984)(citation omitted)).
In evaluating a motion to dismiss for failure to state a claim, the Court may consider matters that are subject to judicial notice, such as the docket of the debtor's bankruptcy case, without having to convert the motion to dismiss into a motion for summary judgment.2 The Court takes judicial notice of the documents filed in Plaintiff's bankruptcy case.
Plaintiff filed a voluntary petition under Chapter 13 of the Bankruptcy Code on November 13, 2009, as Case No. 13-09-15203 JR ("Bankruptcy Case"). Plaintiff converted her Bankruptcy Case to Chapter 7 on April 12, 2010. See Bankruptcy Case, Docket No. 33. Her bankruptcy schedules list a debt to Prestige secured by a lien against a 2005 Hyundai Sonata ("Vehicle."). See Bankruptcy Case, Docket No. 10, Schedule D. On the date of conversion, the vehicle was property of the estate. See 11 U.S.C. § 348(f)(1)(A).3 On May 3, 2010, Prestige filed a Motion for Relief from Automatic Stay with respect to the Plaintiff's vehicle. See Bankruptcy Case, Docket No. 46. The first date set for the meeting of creditors in the converted chapter 7 case was May 25, 2010, and the meeting was held and concluded on that date. See Bankruptcy Case, Docket No. 34.
The Order for Relief from the Automatic Stay ("Order") granting Prestige's Motion for Relief from Automatic Stay was entered on June 7, 2010. See Bankruptcy Case, Docket No. 52. Rule 4001(a)(3), Fed.R.Bankr.P. provides that orders granting relief from the automatic stay are "stayed until the expiration of 14 days after the entry of the order, unless the court orders otherwise." The Order did not contain any language indicating that the court ordered otherwise. See Complaint, Facts and Allegations, ¶ 13; Answer to Complaint for Contempt of Court and Willful Violation of Automatic Stay ("Answer"), ¶ 5.
Prestige repossessed the Plaintiff's Vehicle on June 9, 2010. See Motion, p. 2. Plaintiff filed a Statement of Intention in her Bankruptcy Case on June 14, 2010. See Bankruptcy Case, Docket No. 54. Plaintiff did not file a motion requesting an extension of the time within which to file a Statement of Intention.
1. Bankruptcy Code § 521(a)(2)(A) applies in converted chapter 7 cases.
Plaintiff first points out that 11 U.S.C. § 521(a)(2)(A) does not apply in chapter 13 cases, and asserts that 11 U.S.C. § 521(a)(2)(A) likewise does not apply in cases commenced under chapter 13 that convert to chapter 7. While the Court agrees that 11 U.S.C. § 521(a)(2)(A) does not apply to a case pending under chapter 13, the Court disagrees with Plaintiff's assertion that that the statute does not apply in converted chapter 7 cases.
Pursuant to 11 U.S.C. § 521(a)(2), an individual debtor in a case pending under chapter 7 liable on a debt scheduled as secured by property of the estate must file a Statement of Intention indicating whether the debtor intends to retain, redeem, or surrender property of the estate subject to a creditor's lien. That section provides, in relevant part:
Because the Plaintiff is an individual proceeding under Chapter 7 of the Bankruptcy Code with a scheduled debt to Prestige secured by a Vehicle that was property of the estate upon conversion of the case to chapter 7, she was required to file a Statement of Intention in the converted chapter 7 case. 11 U.S.C. § 521(a)(2).4 Plaintiff in fact filed a Statement of Intention in her convertedchapter 7 case, but did not file it within thirty days of the conversion date or before the first date set for the meeting of creditors in the converted chapter 7 case.
2. The automatic stay termination provisions of 11 U.S.C. § 362(h) apply when a debtor fails to file a Statement of Intention on or before the date of the Section 341(a) meeting in the converted chapter 7 case.
Plaintiff further argues that the automatic stay termination provisions of 11 U.S.C. § 362(h) do not apply, reasoning that even though she failed to file her Statement of Intention within the time periods provided under Rule 1019(1)(B), Fed.R.Bankr.P., her Statement of Intention was not untimely in relation to a time period set forth in 11 U.S.C. § 521(a)(2). In other words, because 11 U.S.C. § 362(h) expressly limits automatic termination of the stay to the failure to comply with the applicable time period set forth under 11 U.S.C. § 521(a)(2), which the Plaintiff asserts is, by its own terms, tied to a date that will never occur in her case (i.e., the date of filing of a petition under chapter 7), Plaintiff concludes that 11 U.S.C. § 362(h)(1) is inapplicable. The applicability of 11 U.S.C. § 362(h)(1) to a case converted to chapter 7 appears to be an issue of first impression in a reported decision.
Pursuant to 11 U.S.C. § 362(h), the automatic stay terminates upon the failure of a debtor to timely file the Statement of Intention and thereafter timely taking such action indicated in the Statement of Intention. That section provides, in relevant part:
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