Shah v. Glendale Federal Bank

• Citation: 44 Cal.App.4th 1371,52 Cal.Rptr.2d 417
• Decision Date: 29 April 1996
• Docket Number: No. B093075,B093075
• Parties: , 96 Cal. Daily Op. Serv. 3011, 96 Daily Journal D.A.R. 4927 Jayendra A. SHAH et al., Plaintiffs and Appellants, v. GLENDALE FEDERAL BANK et al., Defendants and Respondents.
• Court: California Court of Appeals

Page 417

52 Cal.Rptr.2d 417

44 Cal.App.4th 1371, 96 Cal. Daily Op. Serv. 3011,

96 Daily Journal D.A.R. 4927

Jayendra A. SHAH et al., Plaintiffs and Appellants, v. GLENDALE FEDERAL BANK et al., Defendants and Respondents.

No. B093075.

Court of Appeal, Second District, Division 5, California.

April 29, 1996.

Review Denied Sept. 18, 1996.

Jayendra Shah and Usha J. Shah, in pro. per., for Plaintiffs and Appellants.

Howard Everakes & Associates and Stephen T. Hicklin, Glendale, for Defendants and Respondents.

TURNER, Presiding Justice.

This case presents the question whether the automatic stay resulting from plaintiffs' and appellants' bankruptcy petition precludes our disposition of this appeal. There is no California decisional authority directly on point. However, the federal circuit courts of appeals have held the automatic stay provision (11 U.S.C. § 362, subd. (a)(1)) is inapplicable to an appeal in a lawsuit initiated by the debtor (rather than against the debtor) in the lower court, regardless of the appellate posture of the case. We conclude the automatic stay provision is inapplicable because the debtors commenced this action in the superior court and have filed the notice of appeal.

Jayendra A. Shah and Usha J. Shah, plaintiffs, filed this action alleging breach of contract and tort causes of action against Glendale Federal Bank and Verdugo Service Corporation. While the action was pending in the superior court, plaintiffs filed a petition under chapter 11 of the Bankruptcy Code. (11 U.S.C.) Thereafter, the superior court entered an order dismissing plaintiffs' complaint and denied their reconsideration motion. Plaintiffs appealed from those orders. Presently before us is plaintiffs' motion to "delay or extend" the briefing on appeal due to the automatic stay resulting from the commencement by them of bankruptcy proceedings.

Because we are applying a federal statute, we follow rules of statutory construction enunciated by the United States Supreme Court. In Kaiser Aluminum & Chemical Corp. v. Bonjorno (1990) 494 U.S. 827, 835, 110 S.Ct. 1570, 1575-1576, 108 L.Ed.2d 842, quoting from Consumer Product Safety Comm'n v. GTE Sylvania (1980) 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766, the United States Supreme Court held: "The starting point for interpretation of a statute 'is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.' " The United States Supreme Court has noted that "the statutory language controls its construction" (Ford Motor Credit Co. v. Cenance (1981) 452 U.S. 155, 158, fn. 3, 101 S.Ct. 2239, 2241, fn. 3, 68 L.Ed.2d 744) and that " '[t]here is, of course, no more persuasive evidence of the purpose of a statute than the words by which the [L]egislature undertook to give expression to its wishes.' " (Griffin v. Oceanic Contractors, Inc. (1982) 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973.) In interpreting a statute, the United States Supreme Court has noted: " 'In expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy.' [Citations.] Our objective in a case such as this is to ascertain the congressional intent and give effect to the legislative will." (Philbrook v. Glodgett (1975) 421 U.S. 707, 713, 95 S.Ct. 1893, 1898, 44 L.Ed.2d 525.) On another occasion, the court stated, "We do not, however, construe statutory phrases in isolation; we read statutes as a whole." (United States v. Morton (1984) 467 U.S. 822, 828, 104 S.Ct. 2769, 2773, 81 L.Ed.2d 680, fn. omitted.) Further, in interpreting a statute, the Supreme Court has emphasized the importance of avoiding: "absurd results" (United States v. Turkette (1981) 452 U.S. 576, 580, 101 S.Ct. 2524, 2527, 69 L.Ed.2d 246); " 'an odd result' " (Public Citizen v. Department of Justice (1989) 491 U.S. 440, 454, 109 S.Ct. 2558, 2567, 105 L.Ed.2d 377); or "unreasonable results whenever possible." (American Tobacco Co. v. Patterson (1982) 456 U.S. 63, 71, 102 S.Ct. 1534, 1538, 71 L.Ed.2d 748.) Moreover, the Supreme Court has noted, "Judicial perception that a particular result would be unreasonable may enter into the construction of ambiguous provisions, but cannot justify disregard of what Congress has plainly and intentionally provided." (Commissioner v. Asphalt Products Co., Inc. (1987) 482 U.S. 117, 121, 107 S.Ct. 2275, 2278, 96 L.Ed.2d 97.) In Griffin v. Oceanic Contractors, Inc., supra, 458 U.S. at page 571, 102 S.Ct. at page 3250, the court stated: "Nevertheless, in rare cases the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters, and those intentions must be controlling.... [Citations.]" When a statute is unambiguous, its language cannot "be expanded or contracted by the statements of individual legislators or committees during the course of the enactment process. [Citation.]" (West Virginia Univ. Hospitals, Inc. v. Casey (1991) 499 U.S. 83, 98-99, 111 S.Ct. 1138, 1147, 113 L.Ed.2d 68.) ¹

We conclude the automatic stay is inapplicable to this appeal. First, we look to the language of title 11 of the United States Code, section 362, subdivision (a)(1) ("section 362(a)(1)"). (United States v. Ron Pair Enterprises, Inc. (1989) 489 U.S. 235, 240-241, 109 S.Ct. 1026, 1029-1030, 103 L.Ed.2d 290.) With respect to the scope of the automatic stay provision, the language of the statute is clear and there is no uncertainty as to the legislative intent. The statute states: "(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of--[p] (1) the commencement or continuation, including the issuance of employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title...." (Italics added.) California decisional authority holds, based on the plain language of section 362(a)(1), the automatic stay is inapplicable to superior court actions initiated by the debtor. (Shorr v. Kind (1991) 1 Cal.App.4th 249, 254-255, 2 Cal.Rptr.2d 192 [the automatic stay provision is inapplicable to an action brought by the debtor]; A. Groppe & Sons Glass Co., Inc. v. Fireman's Fund Ins. Co. (1991) 232 Cal.App.3d 220, 226-227, 283 Cal.Rptr. 352 ["a cause of action brought by the debtor is not tolled by the Bankruptcy Act"]; Lauriton v. Carnation Co. (1989) 215 Cal.App.3d 161, 164, 263 Cal.Rptr. 476 ["a debtor's cause of action is not tolled by the filing of a bankruptcy petition"]; Danielson v. ITT Industrial Credit Co. (1988) 199 Cal.App.3d 645, 652, 245 Cal.Rptr. 126 ["nothing in the Bankruptcy Act tolls a debtor's cause of action"].) However, those cases did not address the present issue--the effect of the automatic bankruptcy stay on an appeal by plaintiff-debtors. Nonetheless, the logic of those opinions is equally applicable here--plaintiffs commenced the present lawsuit. Defendants have not commenced or continued, to paraphrase the explicit language of section 362(a)(1), any judicial proceedings against plaintiffs.

Second, the conclusion the automatic stay provision is inapplicable to suits brought by the debtor is consistent with the policy behind section 362(a)(1)--protection of the debtor and of the creditors. As the Court of Appeals for the Seventh Circuit explained in Martin-Trigona v. Champion Fed. Sav. (7th Cir.1989) 892 F.2d 575, 577: "[T]he policy behind the statute ... is to protect the bankrupt's estate from being eaten away by creditors' lawsuits and seizures of property before the trustee has had a chance to marshal the estate's assets and distribute them equitably among the creditors. H.R.Rep. No. 595, 95th Cong., 1st Sess. 340 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787." ² The automatic stay provision was not intended to prevent debtors from prosecuting actions against others. (Ibid.; Shorr v. Kind, supra, 1 Cal.App.4th at p. 258, 2 Cal.Rptr.2d 192 ["Appellant contends, and we agree, that the legislative history of 11 United States Code section 362, the automatic stay provision of the Bankruptcy Code, shows a congressional intent to stay proceedings against the debtor only."] ).

The federal circuit courts have consistently held, relying on the language of the automatic stay provision and the policy underlying it, that section 362(a)(1) is applicable only to actions against the debtor; not to actions brought by the debtor. (Koolik v. Markowitz (2d Cir.1994) 40 F.3d 567, 568; In re Berry Estates (2d Cir.1987) 812 F.2d 67, 71; Commerzanstalt v. Telewide Systems, Inc. (2d Cir.1986) 790 F.2d 206, 207; Maritime Elec. Co., Inc. v. United Jersey Bank (3d Cir.1992) 959 F.2d 1194, 1203-1205, 1208, fn. 14; Assoc. of St. Croix Condo. Owners v. St. Croix Hotel Corp. (3d Cir.1982) 682 F.2d 446, 448-449; Matter of U.S. Abatement Corp. (5th Cir.1994) 39 F.3d 563, 568; Freeman v. C.I.R. (5th Cir.1986) 799 F.2d 1091, 1093; Cathey v. Johns-Manville Sales Corp. (6th Cir.1983) 711 F.2d 60, 61; Martin-Trigona v. Champion Fed. Sav., supra, 892 F.2d at pp. 577-578; Victor Foods, Inc. v. Crossroads Economic Development (8th Cir.1992) 977 F.2d 1224, 1226-1227; Brown v. Armstrong (8th Cir.1991) 949 F.2d 1007, 1009-1010; Parker v. Bain (9th Cir.1995) 68 F.3d 1131, 1135; Nielsen v. Price (10th Cir.1994) 17 F.3d 1276, 1277, fn. 2; Carley Capital Group v. Fireman's Fund Insurance Company (D.C.Cir.1989) 889 F.2d 1126, 1127.) ³

The automatic stay is applicable at both trial and appellate levels. (Cathey v. Johns-Manville Sales Corp., supra, 711 F.2d at p. 61.) Moreover, whether an action is "against the debtor" within the meaning of section...