In re McLouth, No. 00-51569-13.

• Decision Date: 14 September 2000
• Docket Number: No. 00-51569-13.
• Citation: 257 BR 316
• Parties: In re Debra K. McLOUTH, Debtor.
• Court: U.S. Bankruptcy Court — District of Montana

257 B.R. 316 (2000)

In re Debra K. McLOUTH, Debtor.

No. 00-51569-13.

United States Bankruptcy Court, D. Montana.

September 14, 2000.

COPYRIGHT MATERIAL OMITTED

Gregory E. Paskell, Kalispell, MT, for debtor.

Counsel of Record: Charles J. Peterson, Dickinson, ND, Local Counsel: Richard J. Samson, Christian, Samson & Jones, P.C., Missoula, MT, for Advanta Mortgage Corporation.

ORDER

RALPH B. KIRSCHER, Bankruptcy Judge.

After due notice a hearing was held at Missoula on August 8, 2000, on the Debtor's "Motion for Turnover and Sanctions for Violation of Automatic Stay" filed against Advanta Mortgage Corporation ("Advanta") on July 24, 2000, based upon a trustee's sale of the Debtor's home¹ which took place on the petition date but several hours prior to the time Debtor filed her Chapter 13 bankruptcy petition. Advanta's attorney Charles J. Peterson ("Peterson") filed a response in opposition on July 27, 2000, and Missoula attorney Richard D. Samson ("Samson") represented Advanta at the hearing. Attorney Gregory E. Paskell ("Paskell") appeared on behalf of the Debtor. No testimony or exhibits were admitted. The Court heard argument of counsel. At the close of the hearing the Court granted the parties time to file simultaneous briefs and took the matter under advisement. The briefs have been submitted and reviewed by the Court, together with the applicable law. This matter is ready for decision.

At issue is whether Advanta wilfully violated the "automatic stay" of 11 U.S.C. § 362(a) when a trustee's sale of Advanta's security to a third party took place on the petition date but several hours prior to the time Debtor filed her bankruptcy petition. For the reasons set forth below, under the plain language of § 362(a) the stay was not effective until the filing of the Debtor's Chapter 7 petition, and therefore the trustee's sale did not violate the stay and Debtor's motion for turnover and for sanctions is denied.

FACTS

The material facts are not in dispute. Advanta was the beneficiary under a valid trust indenture securing a note, both of which the Debtor executed, by which Debtor granted her home as Advanta's security. Peterson was the trustee under the trust indenture. After the Debtor defaulted under the terms of the note and trust indenture, Peterson properly noticed and conducted a trustee's sale of Advanta's security on or about 11:00 o'clock a.m. on June 21, 2000, on the steps of the Flathead County Courthouse. Robert J. Rinke ("Rinke") bid $87,000 for the property, and Peterson accepted his bid. Rinke tendered $87,000 in certified funds to Peterson for the purchase, and Peterson executed a trustee's deed conveying the property to Rinke.

The Debtor filed her Chapter 13 petition at 4:59 p.m. on June 21, 2000, after the trustee's sale and delivery of the trustee's deed to Rinke. The trustee's deed was recorded several days later. Notwithstanding the sale, delivery of the trustee's deed and its recordation, the Debtor remains in possession of the property. Debtor filed her motion for turnover and for sanctions on July 24, 2000.

CONTENTIONS OF THE PARTIES

At hearing Paskell argued that the Debtor's bankruptcy petition stayed the trustee's sale because it was filed on the date of the sale, even though the sale took place several hours before she filed her petition. Debtor contends that the sale was not complete under Montana law until the trustee's deed was recorded several days later, and that because the recordation occurred after the petition date the sale was void and a violation of the stay.

Advanta contends that the trustee's sale was completed before the automatic stay arose; that the "indivisible day" rule espoused by the Debtor should not be adopted for purposes of § 362(a) because the Debtor failed to address her default during the notice period preceding the trustee's sale; that the Debtor's estate has no interest in the property conveyed by the trustee's deed under Montana law and thereby under 11 U.S.C. § 541(a); and that the Debtor's motion is improper procedure because she did not initiate an adversary proceeding to recover property under F.R.B.P. 7001(1).

DISCUSSION

Section § 362(a) provides in pertinent part: "A petition filed . . . operates as a stay, applicable to all entities, of —

* * * * * *

(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;

(4) any act to create, perfect, or enforce any lien against property of the estate;

(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;

(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title. . . . "

11 U.S.C. § 362(a).

The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. In re Schwartz, 954 F.2d 569, 571 (9th Cir.1992). Section 362(a) is "self-executing, effective upon the filing of the bankruptcy petition." In re Gruntz, 202 F.3d 1074, 1081 (9th Cir.2000) (emphasis added); In re Reece, 15 Mont. B.R. 474, 477-78 (Bankr.Mont.1996).

The Ninth Circuit recently construed § 362(a) in In re Pettit, 217 F.3d 1072, 1077, 36 B.C.D. 91, 93 (9th Cir.2000):

The automatic stay under section 362 is designed to give the bankruptcy court an opportunity to harmonize the interests of both debtor and creditors while preserving the debtor\'s assets for repayment and reorganization of his or her obligations. See MacDonald v. MacDonald (In re MacDonald), 755 F.2d 715, 717 (9th Cir.1985). The stay is self-executing, effective upon the filing of the bankruptcy petition, see Minoco Group of Cos. v. First State Underwriters Agency of New Eng. Reins. Corp. (In re Minoco Group of Cos.), 799 F.2d 517, 520 (9th Cir.1986), and sweeps broadly, enjoining the commencement or continuation of any judicial, administrative, or other proceedings against the debtor, enforcement of prior judgments, perfection of liens, and "any act to collect, assess or recover a claim against the debtor that arose before the commencement of the case." 11 U.S.C. § 362(a)(6).

(Emphasis added). Based upon the above case authority the Court declines to adopt the "indivisible day" rule urged by the Debtor, i.e., that the petition stayed the trustee's sale even though the sale took place several hours before the Debtor filed her petition.

The plain language of § 362(a) states "a petition filed . . . operates as a stay". In construing § 362(a), the first step in ascertaining congressional intent is to look to the plain language of the statute, and the plain meaning controls. DeGeorge v. United States District Court for the Central District of California, 219 F.3d 930, 936-37 (9th Cir.2000). When the words of a statute are unambiguous, "judicial inquiry is complete." Connecticut National Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 1149, 117 L.Ed.2d 391 (1992) ("We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there."); United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241-242, 109 S.Ct. 1026, 1030-31, 103 L.Ed.2d 290 (1989); Rubin v. United States, 449 U.S. 424, 430, 101 S.Ct. 698, 701, 66 L.Ed.2d 633 (1981).

Section 362(a) states that a petition filed operates as a stay. It does not state that a stay arises on the date of the filing of the petition, as urged by the Debtor. Courts should disfavor interpretations of statutes that render language superfluous. Connecticut National Bank v. Germain, 503 U.S. at 253-54, 112 S.Ct. at 1149. If Congress intended for the automatic stay to arise on the "date of the filing of the petition", it would have drafted § 362(a) to make the stay effective on the date of the filing of the petition, as it drafted the statute for determining exemptions, 11 U.S.C. § 522(b)(2)(A), and other subsections of the Code².

Debtor cites In re Dilree, 12 Mont. B.R. 398 (Bankr.Mont.1993)³, in support of her indivisible day theory, stating that in Dilree "the court held that the date is to sic date." Debtor's Brief p. 2. Paskell argues that Dilree held that the filing of a homestead on the petition date, but after the filing of the petition, did not invalidate the homestead. While that may be the result in Dilree, the instant case is distinguishable from Dilree both on the facts and the law. Dilree involved the allowance of a homestead exemption, which is determined along with other exemptions according to Montana law⁴ "that is applicable on the date of the filing of the petition". 11 U.S.C. § 522(b)(2)(A). The language of § 522(b)(2)(A) referring to "the date of the filing of the petition" is simply not found in § 362(a), and thus the holding in Dilree is of no support for Debtor's indivisible day theory.

The instant case involves a Chapter 7 petition filed several hours after the trustee Peterson conducted a trustee's sale and delivered a trustee's deed pursuant to Montana law⁵. The Debtor's bankruptcy case commenced with the filing of her petition. 11 U.S.C. § 301. There is no question that the automatic stay was not in effect when the trustee Peterson conducted the trustee's sale of Advanta's security at 11:00 a.m. on June 21, 2000. Several hours later at 4:59 p.m. on June 21, 2000, the Debtor filed her Chapter 13 bankruptcy petition. Since Congress drafted § 362(a) in plain language stating that the filing of a petition operates as a stay, this Court holds that the automatic stay is effective upon the filing of the bankruptcy petition. In re Pettit, 217 F.3d at 1077, 36 B.C.D. at 93; In re Gruntz, 202 F.3d at 1081. Therefore, the trustee's sale which Peterson conducted on June 21, 2000, did not violate the automatic stay.

Next, Paskell argues that the trustee's sale was not complete until after the trustee's...