In re Williams, 06-10928BF.

• Decision Date: 21 June 2006
• Docket Number: No. 06-10928BF.,06-10928BF.
• Parties: In re Clifton WILLIAMS, Jr., Debtor.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

346 B.R. 361

In re Clifton WILLIAMS, Jr., Debtor.

No. 06-10928BF.

United States Bankruptcy Court, E.D. Pennsylvania.

June 21, 2006.

Clifton Williams Jr., Philadelphia, PA, pro se.

MEMORANDUM

BRUCE FOX, Bankruptcy Judge.

The chapter 13 debtor, Clifton Williams, Jr. has filed a "motion for a stay," which has triggered two objections. As will be discussed, at bottom this contested matter involves differing interpretations propounded by the parties of new bankruptcy law provisions found in 11 U.S.C. § 362(c)(3). An evidentiary hearing was held, and the remaining interested parties have submitted post-hearing memoranda. This contested matter is now ripe for adjudication.

I.

The following relevant facts were adduced at the hearing.

On March 6, 2006, the above-captioned debtor filed a voluntary petition in bankruptcy under chapter 13. The debtor had filed a prior chapter 13 case on September 26, 2005, docketed at Bankr.No. 05-33239. That earlier case had been dismissed on November 14, 2005, after notice, because of the debtor's failure to file all required documents, such as his chapter 13 plan, his bankruptcy schedules and his statement of financial affairs. The debtor blames his then-attorney for dismissal.

The second chapter 13 petition was filed pro se. On April 10, 2006, the debtor retained different counsel who entered his appearance. On April 11, 2006, the debtor (through his counsel) filed the instant motion, requesting "that a stay be imposed with respect to all [creditors] ... in order that the Debtor has an opportunity to file and proceed to confirm a plan which will pay them all in full[.]" Motion, ¶ 8.

The evidence revealed that this debtor owns five real properties. Ex. D-1 (schedule A). One — located at 8557 Fayette Street, Philadelphia, Pennsylvania — is his residence, held as tenants by the entireties with his wife. Four other Philadelphia properties — located at 5425 North 11th Street; 110 West Champlost Street; 2735 Opal Street; and 4620 Oakmont Street — were purchased by him (beginning in 2002) for investment after those properties had been foreclosed upon by their lenders.

The debtor is employed as a mail handler for the United States Postal Service and has been so employed for many years. He purchased these four distressed properties intending to make money by renting and/or reselling them at a profit. For some of the properties, he made modest renovations after his purchase. For others, their condition remains the same.

The debtor purchased these investment properties with borrowed funds from different lenders, using the properties as collateral. The debtor offered differing reasons that these properties have not generated sufficient income to cover his mortgage payments.¹ However, it is clear that he has fallen behind in his mortgage payments on at least some, if not all, of these properties.

On his bankruptcy schedules, the debtor discloses that CitiMortgage Corp. holds a mortgage lien on the Champlost Street realty; National City Mortgage Co. holds a mortgage lien on the 11th Street property; Prime Funding Co. holds the mortgage on the Opal Street realty; and Washington Mutual Home Loans holds the mortgage on his Fayette Street residence. Ex. D-1 (schedule D). Both the Champlost Street and 11th Street properties had been scheduled for sheriff sales prior to the debtor's March 2006 bankruptcy filing. The latter property was sold at foreclosure after the debtor's bankruptcy filing, and National City has filed a motion to annul the bankruptcy stay, which motion is now pending.

The debtor has proposed a plan calling for him to pay $100 per month to the chapter 13 trustee "for 36 months or until the sales of property take place as described in paragraph 3 of this plan." Ex. D-1 (debtor's proposed plan). The plan further provides that the debtor will obtain an agreement of sale for the 11th Street property by November 30, 2006 for an amount not less than $85,000. The secured claim of National City Mortgage Co. (estimated by the debtor in his schedules to be $45,000) will be repaid in full from the proceeds of sale, with the balance used to pay other creditors. Id., ¶ 3. The plan may also provide that the debtor will obtain an agreement of sale on the Champlost Street property by November 30, 2006, in an amount not less than $90,000. Id., ¶ 3.² Citi Mortgage Corp. (estimated by the debtor to hold a claim in the amount of $35,000) would be repaid in full from the proceeds of this sale. Id., ¶ 3. Prime Funding Corp., which holds an estimated $13,000 mortgage on the Opal Street realty, will be repaid from the proceeds of sale from the other two properties. Id., ¶ 4. The debtor "will also consider selling [the Opal Street property] if necessary." Id., ¶ 4.

While the debtor's plan calls for the eventual sale of one or more of his properties — there is no deadline for the sale of any property, only a deadline for signing an agreement of sale — he testified that he had not engaged a real estate agent by the date of the hearing on this motion. Moreover, he had unsuccessfully sought to sell some of these properties on his own.

The debtor has offered no expert opinion as to the value of these properties. He paid $30,000 for the 11th Street realty in 2002, with repairs totaling $5,000; he asserts that the realty is now worth $90,000. As to Champlost Street, he paid $30,000 for the realty in 2003 and, after $1,000 in repairs, opines that the realty is presently worth $110,000. Finally, he purchased the Opal Street realty in 2004 for about $12,000, and the debtor values it, without any improvements or repairs, at $50,000. Ex. D-1 (schedule A).

II.

A.

At the hearing on this contested matter, CitiMortgage, Inc., Prime Funding Corp. and National City Mortgage Co. all opposed any relief being afforded the debtor that would prevent them from immediately foreclosing upon their collateral. Thereafter, CitiMortgage entered into a settlement of its objection with the debtor, which settlement has been approved. Thus, only two objections remain.³

The position of these two objecting creditors is straightforward. They contend that 11 U.S.C. § 362(c)(3)(A) provides that whenever an individual files a bankruptcy case within one year from the dismissal of a prior case, the automatic stay in section 362(a) is imposed upon creditors only for thirty days from the date of the commencement of the second case. Within that thirty-day period, the debtor may request an extension of the stay for cause shown. When though, as here, the thirty-day period ends without any request by the debtor for extension of the bankruptcy stay, then the automatic stay expires, creditors are free to exercise their non-bankruptcy law rights to foreclose upon their collateral, and the bankruptcy court has no power to grant the debtor any relief.

The debtor's contentions are dual and overlapping.

First, he maintains that section 362(c)(3)(A) only causes a portion of the bankruptcy stay to terminate after thirty days: the stay as to the debtor and property of the debtor. He argues that section 362(c)(3) does not affect the bankruptcy stay as to "property of the bankruptcy estate." The 11th Street and Opal Street properties are properties of the bankruptcy estate under 11 U.S.C. §§ 541(a) and 1306. See, e.g., In re Colarusso, 382 F.3d 51, 58 (1st Cir.2004); In re Mongiove, 9 B.R. 34, 35 (Bankr.S.D.Fla.1980). Accordingly, the debtor contends that even though the thirty-day period expired prior to the filing of his motion, the automatic stay continues to prevent these two secured creditors from foreclosing upon their collateral.

Alternatively and additionally, to the extent that the bankruptcy stay expired after thirty days, the debtor maintains that, under these circumstances and emphasizing the debtor's original pro se status and his proposed chapter 13 plan, this court has the power under 11 U.S.C. § 105(a) to reimpose a stay as to all creditors and should do so.

As all parties agree that the provisions of section 362(c)(3) apply in this dispute, since the debtor's 2005 case was dismissed within one year of his filing the instant chapter 13 petition, I shall first address the scope of this new statute.

B.

The Supreme Court has repeatedly instructed that statutory interpretation of bankruptcy legislation begins with the language of the statute itself. "[W]hen the statute's language is plain, the sole function of the courts — at least where the disposition required by the text is not absurd — is to enforce it according to its terms." Hartford Underwriters Insurance Co. v. Union Planters Bank, N. A, 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000); see, e.g., Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004); United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989); In re Price, 370 F.3d 362, 368 (3d Cir.2004). Only if the statute is ambiguous or unclear should a court consider legislative history for interpretive guidance. Ross v. Hotel Employees and Restaurant Employees International Union, 266 F.3d 236, 245 (3d Cir.2001); see also Garcia v. United States, 469 U.S. 70, 75, 105 S.Ct. 479, 83 L.Ed.2d 472 (1984).

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, enacted on April 20, 2005 and effective on October 17, 2005, Pub.L. 109-8, added 11 U.S.C. § 362(c)(3) to the Bankruptcy Code. This statute states:

(c) 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 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...