Salzer, Matter of

• Decision Date: 14 June 1995
• Docket Number: No. 94-3155,94-3155
• Citation: 52 F.3d 708
• Parties: 33 Collier Bankr.Cas.2d 581, Bankr. L. Rep. P 76,460 In the Matter of Thomas R. SALZER, d/b/a TRS Automotive, Debtor-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 708

52 F.3d 708

33 Collier Bankr.Cas.2d 581, Bankr. L. Rep. P 76,460

In the Matter of Thomas R. SALZER, d/b/a TRS Automotive Debtor-Appellant.

No. 94-3155.

United States Court of Appeals Seventh Circuit.

Argued Feb. 6, 1995.

Decided April 18, 1995.

Rehearing and Suggestion for Rehearing En Banc Denied June 14, 1995.

David R. Steiner, Michael P. O'Hara, Thomas P. Yoder (argued), Barrett & McNagny, Fort Wayne, IN, for appellee.

Thomas R. Salzer (argued), Fort Wayne, IN, pro se.

Before MANION and ROVNER, Circuit Judges, and NORGLE, District Judge. ^*

NORGLE, District Judge.

This is an appeal from the district court's order affirming the bankruptcy court's grant of summary judgment in favor of the defendant in an action brought by the debtor for breach of the automatic stay. 11 U.S.C. Sec. 362(a). We affirm.

I.

Thomas Rodger Salzer ("Salzer") filed a petition for relief pursuant to Chapter 11 of the Bankruptcy Code on December 6, 1989. Salzer was engaged in the business of automotive salvage, repair, and sales in Fort Wayne, Indiana. On or about July 28, 1992, while operating as debtor-in-possession, Salzer entered into an oral periodic lease with Donald E. Stinson ("Stinson") for non-residential real property at 2206 Broadway, Fort Wayne, Indiana (the "leasehold premises"). The rental amount was five hundred dollars per month, payable in advance, and the lease was on a month-to-month basis. Salzer paid rent in August, September, and October. He made no rent payments after October 1992.

Salzer's case was converted into a Chapter 7 case on September 29, 1992, and a trustee was appointed. The trustee did not act to assume or reject the oral lease between Salzer and Stinson within sixty days of the order of relief entered on September 29, 1992. On January 4, 1993, Salzer filed a list of property he claimed as exempt. The list included personal property located on the leasehold premises. Salzer amended his list of exemptions on April 1, 1993. No objections were filed to either the original or amended list.

On March 1, 1993, on his own initiative, Stinson placed a utility trailer that was on the leasehold premises in a locked storage locker. Salzer had claimed the trailer as exempt property. On April 1, 1993, the trustee directed Stinson to secure the personal property located on the leasehold premises. Stinson did so by locking the leasehold premises with the personal property inside and denying Salzer access to it. Salzer had also claimed as exempt the property Stinson locked inside the leasehold premises. ¹

On April 13, 1993, proceeding pro se, Salzer filed a complaint for damages pursuant to 11 U.S.C. Sec. 362(h) in the bankruptcy court asserting that Stinson's actions violated 11 U.S.C. Sec. 362(a)(3), a provision of the automatic stay. Subsequently, Stinson moved for summary judgment on the claim, and the bankruptcy court granted the motion. The district court affirmed, and Salzer appealed.

II.

We review the bankruptcy court's findings of fact under a clearly erroneous standard. In re Yonikus, 974 F.2d 901, 903 (7th Cir.1992). We review conclusions of law made by the bankruptcy court de novo. In re Kazi, 985 F.2d 318, 320 (7th Cir.1993).

A. Personal Property Secured at Trustee's Direction

Salzer contends that Stinson violated the automatic stay when, at the direction of the trustee, he secured the personal property located at the leasehold premises and denied Salzer access to it. Salzer theorizes that because there was no objection to his claim of exemption in the property within the thirty days allotted by Bankruptcy Rule 4003(b), title to the property revested in him, and he was entitled to physical possession of the property at the end of the thirty days. Consequently, he asserts, Stinson's refusal to turn over the property upon his demand violated the automatic stay.

Upon the filing of a bankruptcy, all property of the debtor becomes property of the bankruptcy estate. 11 U.S.C. Sec. 541; In re Kazi, 985 F.2d at 320. However, the debtor can prevent certain property from being used to satisfy his creditors by claiming it as exempt. 11 U.S.C. Sec. 522(l ); Taylor v. Freeland & Kronz, 503 U.S. 638, 643, 112 S.Ct. 1644, 1647, 118 L.Ed.2d 280 (1992). Once the debtor claims property exempt, the creditors and trustee have the opportunity to object to the claimed exemptions. 11 U.S.C. Sec. 522(l ); Bankruptcy Rule 4003(b); In re Kazi, 985 F.2d at 320. Failure of a trustee or creditor to object within the thirty days provided by Bankruptcy Rule 4003(b) waives the right to contest the validity of an exemption. Taylor, 503 U.S. at 644, 112 S.Ct. at 1648.

However, the running of the thirty day period without objection does not mean that the debtor is entitled to possession of the property on the thirty-first day. The statutory scheme established by Indiana law ² allows the debtor to claim as exempt, inter alia, "[r]eal estate or tangible personal property of four thousand dollars ($4,000)." Ind.Code Sec. 34-2-28-1(a)(2). ³ Under that scheme, in conjunction with 11 U.S.C. Sec. 522(l ), the debtor is required to file a list of property claimed as exempt. The officer holding the execution, the trustee when the debtor is in bankruptcy, is then obligated to have the property appraised and set apart. He then must sell other property subject to execution (non-exempt property). Ind.Code Sec. 34-2-28-7. Thus, the statutory scheme envisions an appraisal ordered by the trustee insuring that the true value of the property claimed as exempt coincides with the debtor's valuation and that it does not exceed the four thousand dollar statutory limit. Property claimed as exempt but exceeding the statutory limit in appraised value is to be sold. See id. ⁴

Accordingly, the statutory scheme anticipates the trustee's continued administration of the exempted property until such time as its value is definitively determined. Clearly this is appropriate because while the failure to object to an exemption does waive any right to contest the validity of the exemption, such a failure does not waive the estate's right to any excess value over the allowed exemption limit. In re Bronner, 135 B.R. 645, 647 (9th Cir. BAP 1992); In re Hyman, 123 B.R. 342, 348-49 (9th Cir. BAP 1991) aff'd 967 F.2d 1316 (9th Cir.1992); In re Page, 171 B.R. 349, 352 (Bankr.W.D.Wis.1994). ⁵

The trustee has a statutory duty to collect and liquidate the property of the estate. 11 U.S.C. Sec. 704(1). He is accountable for all property received, 11 U.S.C. Sec. 704(2), and he owes a fiduciary duty to the creditors. Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343, 355, 105 S.Ct. 1986, 1994, 85 L.Ed.2d 372 (1985). Indiana law requires that the trustee cause the property claimed as exempt to be appraised so that property in excess of the allowable limit can be sold. Ind.Code Sec. 34-2-28-7. This procedure enables the trustee to fulfill his duty under the Bankruptcy Code to "maximize the value of the estate." Weintraub, 471 U.S. at 352, 105 S.Ct. at 1992. In order to achieve this end, under Indiana law, the trustee has the right to possession of the personal property that the debtor has claimed as exempt. Ind.Code Sec. 34-2-28-7. Allowing a debtor the right to immediate possession of property claimed as exempt upon the running of the thirty day period provided by Bankruptcy Rule 4003(b) would be inconsistent with, and impede, the trustee's duties under Indiana and federal law. We hold that there is no such right.

On April 1, 1993, the trustee had the right to possess the personal property located at the leasehold premises, and Salzer did not. Salzer having no right to possess the property, Stinson's refusal to turn the property over to Salzer when he demanded it, did not violate the automatic stay. Furthermore, because the trustee had the authority to possess the property, he had the authority to direct Stinson to secure it on his behalf. Consequently, Stinson was acting under the valid direction of the trustee, and Stinson did not violate the automatic stay by securing the personal property notwithstanding Salzer's claim of exemption.

B. Personal Property Secured by Stinson on His Own Initiative

On March 1, 1993, acting without direction from the trustee, Stinson placed a utility trailer that was on the leasehold premises in a locked storage locker. ⁶ Salzer had claimed the trailer as exempt, and he charges that Stinson's actions violated the automatic stay. Salzer's claim is meritless.

Under the Bankruptcy Code, an entity in possession, custody, or control of property that the trustee is entitled to possess, including property that the debtor may exempt, must turn that property over to the trustee. 11 U.S.C. Sec. 542(a). ⁷ Salzer asserts that he had a key to the leasehold premises and complete access to it through April 1, 1993. From this, Salzer deduces, without citation to any authority, that Stinson was not in possession of the trailer at the time he put it in the locker. (App.Br. at 10-11). This argument is waived. See Varhol v. National R.R. Passenger Corp., 909 F.2d 1557, 1566 (7th Cir.1990) (holding that a claim is waived on appeal when not supported by citation to relevant authority).

Notwithstanding the waiver, when Salzer's bankruptcy was converted to a Chapter 7 on September 29, 1992, the trustee took no action to accept or reject the lease within sixty days. At that point, the lease was rejected and the leasehold surrendered to Stinson. This terminated the automatic stay. 11 U.S.C. Sec. 365(d)(4); In re James Wilson Assoc., 965 F.2d 160, 164 (7th Cir.1992). Furthermore, even if that provision had not terminated the stay, the oral month-to-month lease with rent payable in advance was terminated as a matter of Indiana law when Salzer failed to pay rent in November 1992. Ind.Code Sec. 32-7-1-7; In re Depoy, 29 B.R. 466, 469 (Bankr.N.D.Ind.1983). The lease having been terminated, the leasehold premises was no longer subject to...