In re Smith

• Citation: 573 B.R. 298
• Decision Date: 18 August 2017
• Docket Number: Case No. 16–10744
• Parties: IN RE: Leland S. SMITH Jr., Debtor
• Court: United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Maine

573 B.R. 298

IN RE: Leland S. SMITH Jr., Debtor

Case No. 16–10744

United States Bankruptcy Court, D. Maine.

Signed August 18, 2017

James F. Molleur, Esq., Molleur Law Office, Biddeford, ME, for Debtor.

ORDER REGARDING STAY TERMINATION UNDER 11 U.S.C. § 362(c)

Michael A. Fagone, United States Bankruptcy Judge

This contested matter requires the Court to interpret 11 U.S.C. § 362(c)(3)(A). Section 362(c)(3)(A) plainly effects a termination of the automatic stay on the thirtieth day after the petition date in a chapter 7, 11, or 13 case if the debtor had a prior case dismissed within the previous year. However, the extent of termination under section 362(c)(3)(A) is not plain, and courts have struggled to find an interpretation that adheres to the statute's text and promotes its apparent purpose. One interpretation does not fulfill the statute's purpose in any meaningful sense, and others arguably run afoul of rules of statutory construction. No interpretation is entirely satisfactory.

Based on the text of section 362(c)(3)(A), the surrounding context, and the apparent purpose of the statute, the Court concludes that one interpretation is better than the others. When the stay terminates under section 362(c)(3)(A), section 362(a) ceases to protect the repeat-filing debtor and all of that debtor's property, including property of the debtor's estate.

I. BACKGROUND

The facts that gave rise to this contested matter are not in dispute. In December 2014, Leland S. Smith, Jr. filed a petition under chapter 13. In November 2016, Mr. Smith's case was dismissed because of his failure to make the payments required by a confirmed chapter 13 plan. On December 28, 2016, Mr. Smith commenced this chapter 13 case. No party in interest moved for an order extending the stay under section 362(c)(3)(B). As a result, the stay terminated under section 362(c)(3)(A) on January 27, 2017.

The State of Maine Bureau of Revenue Services ("Maine Revenue") timely filed a proof of claim in this case. At a hearing on February 16, 2017, Maine Revenue moved for an order under 11 U.S.C. § 362(j) clarifying the extent to which the stay had terminated. Mr. Smith opposed Maine Revenue's proposed construction of section 362(c)(3)(A), and the parties submitted briefs outlining their respective positions. In March 2017, Mr. Smith's chapter 13 plan [Dkt. No. 3] was confirmed by an order providing that all estate property would remain estate property notwithstanding 11 U.S.C. § 1327(b). The confirmation order also reserved the question of the extent to which the stay had terminated pursuant to section 362(c)(3)(A). After a continued hearing on Maine Revenue's motion in April 2017, the Court took the matter under advisement.

II. DISCUSSION

A. Relief Under Section 362(j)

Section 362(j) instructs the Court, on request of a party in interest, to "issue an order under [ 11 U.S.C. § 362(c) ] confirming that the automatic stay has been terminated." 11 U.S.C. § 362(j). The statute does not define the term "party in interest" but Maine Revenue, as a creditor bound by the automatic stay, qualifies as such. Mr. Smith does not argue otherwise, and for good reason. If a creditor was not among the class of persons authorized to seek relief under section 362(j), it is hard to imagine who would be among that class. See 11 U.S.C. § 362(a) (establishing an automatic stay applicable to, among other things, acts to recover a claim); 11 U.S.C. § 101(10) (defining "creditor" as an entity holding a claim); cf. Lexmark Int'l, Inc. v. Static Control Components, Inc., –––U.S. ––––, 134 S.Ct. 1377, 1388, 188 L.Ed.2d 392 (2014) (stating "that a statutory cause of action extends only to [parties] whose interests fall within the zone of interests protected by the law invoked") (quotation marks omitted).

B. The Language of Section 362(c)(3)(A)

Section 362(c)(3)(A) states that:

Except as provided in subsections (d), (e), (f), and (h) of this section—

...

(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[.]

11 U.S.C. § 362(c)(3)(A). At the outset, a few observations about the statute are in order. First, the statute is directed to "the stay under subsection (a)" not to any of the various parts of the stay. See id. Second, section 362(c)(3)(A) terminates the stay "with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease[.]" Id. This clause refers to "property securing [a] debt," without distinguishing between property of the debtor on one hand and property of the estate on the other hand. See id. Third, the stay terminates "with respect to the debtor[.]" Id. Fourth, the stay terminates thirty days after the filing of the later case. Id. Although the statute can be dissected in this manner and although that dissection may be helpful in divining the meaning of the statute, none of these phrases should be interpreted in isolation or be given undue emphasis.

"Statutory construction ... is a holistic endeavor." United Sav. Ass'n of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 371, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988). In determining the extent of stay termination, the Court's interpretive quest begins, but does not end, with the text of the statute. See United States v. Yellin (In re Weinstein), 272 F.3d 39, 43 (1st Cir. 2001) (indicating that the text of one section of the Bankruptcy Code controls if its meaning is clear, but that a single section need not be read in isolation if other sections provide textual evidence of the meaning of the section in question). "The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." Robinson v. Shell Oil Co., 519 U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997). When a statute is ambiguous, it may be appropriate to consult legislative history as an interpretive aid. See Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 737, 105 S.Ct. 1598, 84 L.Ed.2d 643 (1985).

C. Possible Interpretations of Section 362(c)(3)(A)

The language of section 362(c)(3)(A) has resulted in multiple lines of authority. One line interprets this section, and specifically the phrase "with respect to the debtor," to effect a termination of the stay as to the debtor and the debtor's property, but not as to property of the estate. See, e.g., Holcomb v. Hardeman (In re Holcomb), 380 B.R. 813 (10th Cir. BAP 2008) ; Jumpp v. Chase Home Fin., LLC (In re Jumpp), 356 B.R. 789 (1st Cir. BAP 2006) ; In re Jones, 339 B.R. 360 (Bankr. E.D.N.C. 2006). Mr. Smith favors this line of cases, which is sometimes described as the majority view. See, e.g., In re Holcomb, 380 B.R. at 815. The second line of authority reads section 362(c)(3)(A), and specifically the phrase "with respect to the debtor," to terminate the stay as to a repeat-filing debtor, that debtor's property, and property of the debtor's estate, but not as to the debtor's spouse in a joint case if that spouse is not also a repeat filer. See, e.g. , St. Anne's Credit Union v. Ackell, 490 B.R. 141 (D. Mass. 2013) ; In re Daniel, 404 B.R. 318 (Bankr. N.D. Ill. 2009) ; In re Jupiter, 344 B.R. 754 (Bankr. D.S.C. 2006). Maine Revenue favors this line of cases, which is sometimes described as the minority view. See, e.g., St. Anne's Credit Union, 490 B.R. at 144. A handful of courts depart from the reasoning of both lines of cases, and instead focus the analysis on the phrase "with respect to any action taken" in section 362(c)(3)(A). See In re Bender, 562 B.R. 578, 580 (Bankr. E.D.N.Y. 2016) ; In re Paschal, 337 B.R. 274, 280 (Bankr. E.D.N.C. 2006).¹

There is no controlling authority as to the correct interpretation. The First Circuit Bankruptcy Appellate Panel ("BAP") has adopted the majority interpretation of section 362(c)(3)(A). See Witkowski v. Knight (In re Witkowski), 523 B.R. 291 (1st Cir. BAP 2014) ; In re Jumpp, 356 B.R. 789. The BAP's decisions must be given consideration as significant and persuasive authority, but there is no law definitively establishing that the decisions of the BAP are binding on bankruptcy courts within the First Circuit. See LBM Fin. LLC v. Shamus Holdings, Inc., 2010 WL 4181137 at *2 n.2 (D. Mass. Sept. 28, 2010) (collecting cases to this effect); see also In re Virden, 279 B.R. 401, 409 n.12 (Bankr. D. Mass. 2002) (concluding that if district court judges do not bind each other, neither do bankruptcy judges even when empaneled on a bankruptcy appellate panel).

D. The Meaning of "With Respect to the Debtor"

In Daniel, the court parsed the language of section 362(c)(3)(A) and identified difficulties with three possible interpretations of the phrase "with respect to the debtor." 404 B.R. at 321–26. After a careful examination of section 362(c)(3)(A) and its legislative history, the court concluded that the so-called minority view is the best interpretation of the statute. Id. at 326–27. Instead of reading "with respect to the debtor" to limit the termination of the stay to certain categories of property, the court read that phrase to distinguish between the repeat-filing debtor and the debtor's spouse, who is not a repeat filer, in a joint case. Id. For several reasons, this Court is persuaded by the textual analysis and the reasoning of Daniel.

First, as noted above, section 362(c)(3)(A) terminates the stay under subsection (a). In general, the stay under subsection (a) halts three kinds of...