Matter of Schewe
| Decision Date | 12 January 1989 |
| Docket Number | Adv. No. 88-0303.,Bankruptcy No. GK 86-01228 |
| Parties | In the Matter of Jeffrey A. SCHEWE and Cathy A. Schewe, Debtors. Jeffrey A. SCHEWE and Cathy A. Schewe, Plaintiffs, v. FAIRVIEW ESTATES, Don Daglow, Jr., Manager, Branch County Sheriff's Department, Clerk and Court Officers of the District Court for Branch County, Jointly and Severally, Defendants. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Western District of Michigan |
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Edward R. Barton, Allegan, Mich., for plaintiffs/debtors.
John D. Bradshaw, Walsh, Langeland, Walsh & Bradshaw, Kalamazoo, Mich., for defendants Fairview Estates and Don Daglow, Jr.
Several legal issues are considered in this opinion. The issues addressed are:
1. Does 11 U.S.C. § 362 prohibit the Defendants from seeking to dispossess the Plaintiffs of their tenancy, after confirmation of the Plaintiffs' Chapter 13 Plan, unless and until relief from the automatic stay is granted?
2. If the automatic stay applies, what is the effect of the stay?
3. If the automatic stay was violated, should the Defendants be held in contempt or the Plaintiffs be awarded damages?
4. Are Plaintiffs entitled to a preliminary injunction which prohibits the Defendants from seeking a writ of restitution to enforce the Defendants' previous judgment of possession in the state court?
5. If the automatic stay applies, are the Defendants entitled to relief from the automatic stay for cause? If so, should such relief be granted retroactively?
Cathy A. Schewe and Jeffrey A. Schewe, "Plaintiffs" or "Debtors", rent a mobile home lot from Defendant Fairview Estates; the manager of Fairview Estates is Defendant Don Daglow, Jr. Originally the Debtors and Fairview Estates entered into a written lease with a term of one year. The lease expired in accordance with its terms either shortly before or shortly after the Debtors filed their Chapter 13 petition. The Debtors decided not to enter into another written lease because they desired to terminate their tenancy on thirty days' notice in the event they were able to purchase a house. After expiration of the written lease, the Debtors rented the lot pursuant to an oral month-to-month lease as tenants at will.
On April 30, 1986, the Debtors filed for relief under Chapter 13 of the Bankruptcy Code.1 The Debtors did not list Fairview Estates as a creditor in their Chapter 13 Statement because the Debtors were current on their rent obligations at the time the case was filed. Therefore, Fairview Estates did not receive any official notice of the bankruptcy case. The Debtors' Chapter 13 plan was confirmed on June 27, 1986 and the confirmation order was entered on July 1, 1986.
On or about May 20, 1988, Fairview Estates served a notice to quit upon the Debtors to terminate their tenancy. Although the Debtors were current in their rent obligations, Defendant Daglow served the notice because of the Debtors' failure to comply with certain mobile home park rules and regulations. The violations included noncompliance with storage regulations, numerous parking violations by the Debtors and their guests, excessive noise from the Debtors' use of the recreation room for a Boy Scout group, speeding on the streets of the mobile home park, and the Debtors' children playing in the streets. Since the service of the notice to quit, the Debtors have complied with all rules except for the storage regulation.
On June 24, 1988, Fairview Estates, by Mr. Daglow, filed a complaint for possession of the mobile home lot in the Third District Court for the State of Michigan. At the time the complaint was filed in the state court, Fairview Estates and Mr. Daglow had no official or actual knowledge of the Debtors' bankruptcy case. After filing of the complaint, Mr. Daglow was advised of the pendency of the case. Because the Defendants believed the automatic stay was inapplicable, and the state court judge apparently agreed, a judgment for possession regarding the mobile home lot was entered on July 1, 1988. That judgment provided a writ of restitution would issue on July 10, 1988 to evict the Debtors, and their mobile home, from the lot.
On July 7, 1988, the Debtors initiated this adversary proceeding by filing a verified complaint for injunctive relief. The Debtors requested a temporary restraining order to prohibit the Defendants from evicting them. After telephonic notice to Mr. Daglow, this court issued a temporary restraining order and scheduled a hearing on the preliminary injunction for July 15, 1988.
At the preliminary injunction hearing, the Defendants filed their answer, argued that the automatic stay was inapplicable, and informed the court they would also file a motion for relief from stay. After the court preliminarily opined the automatic stay might be applicable, the parties agreed the status quo should be maintained until such time the court's schedule permitted a full evidentiary hearing to address the facts and the legal issues. On July 20, 1988, an Order Restraining Defendants from Dispossessing Plaintiffs-Debtors from Possession of Real Property Pending Future Court Hearing was entered.
On August 4, 1988, the Defendants filed their Motion for Relief from Stay and a supporting legal memorandum. Subsequently the Debtors and the Defendants have filed additional legal memoranda. In accordance with the Pretrial Order dated August 30, 1988, this adversary proceeding and the motion for relief from stay were consolidated for trial, the above issues were framed and trial took place on October 7, 1988 in Kalamazoo, Michigan.
Applicability of the Automatic Stay.
The automatic stay is set forth in 11 U.S.C. § 362(a) as follows:
Because all facts relate to postpetition activity, including entry of the state court judgment of possession, the court concludes that none of the automatic stay subsections are applicable with the possible exception of "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." 11 U.S.C. § 362(a)(3). The court has also considered the thirteen enumerated exceptions to the automatic stay set forth in 11 U.S.C. § 362(b). The only exception that might conceivably apply is "any act by a lessor to the debtor under a lease of nonresidential real property that has terminated by the expiration of the stated term of the lease before the commencement of or during a case under this title to obtain possession of such property." 11 U.S.C. § 362(b)(10). The court concludes this exception is inapplicable because the lease between the Debtors and Fairview Estates pertains to residential real property.
The Defendants argue that the stay imposed by Section 362(a)(3) is inapplicable because after confirmation of the Debtors' Chapter 13 plan all property revests in the Debtors and is no longer property of the estate. The Debtors argue that the estate survives confirmation of their plan.
Property of the estate is defined in 11 U.S.C. § 541(a) and, in Chapter 13 cases, 11 U.S.C. § 1306(a). After reviewing these statutory subsections, it appears that the only subsections which may apply are 11 U.S.C. § 541(a)(1), 11 U.S.C. § 541(a)(7) and 11 U.S.C. § 1306(a)(1).
Property of the estate is generally defined as "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). Also, "any interest in property that the estate acquires after the commencement of the case" is property of the estate.2 11 U.S.C. § 541(a)(7). Finally the possessory interest in the lot pursuant to the month-to-month lease might also be property of the estate if acquired "after the commencement of the case but before the case is closed, dismissed, or converted". 11 U.S.C. § 1306(a)(1). Regardless of when the one-year term lease expired and the month-to-month tenancy began, the debtors' possessory right to the mobile home lot was property of the estate prior to confirmation of their Chapter 13 plan.
Does the mobile home lot remain property of the estate after confirmation of the plan? Cases reported to date reach differing conclusions regarding this legal issue.
11 U.S.C. § 1327(b) states: "Except as otherwise provided in the plan or the order confirming the...
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In re Wilson
...home constituted property of the estate, protected from termination and repossession by the automatic stay. See In re Schewe, 94 B.R. 938, 942 (Bankr. W.D. Mich. 1990). Section 362's automatic stay provision is "effective upon the filing of the bankruptcy petition" and is applicable to all ......