In re McGrath

621 B.R. 260

IN RE: Sandra Joyce MCGRATH and Dale Allen Rogers, Debtors.

Case No. 20-11513-ta13

United States Bankruptcy Court, D. New Mexico.

Signed October 2, 2020

Mark Daniel John Regazzi, Mark D. Regazzi, Albuquerque, NM, for Debtors.

OPINION

Hon. David T. Thuma, United States Bankruptcy Judge

This is Debtors' second chapter 13 case within a year; their first one was dismissed because they did not comply with a court-ordered deadline. On September 17, 2020, the Court held a hearing on Debtors' motion to extend the automatic stay, to which Debtors' mortgage lender objected. The Court denied the motion, holding that the deadline to enter an extension order had passed. At the hearing, the parties disagreed whether the stay had terminated entirely or only "with respect to the debtor." The Court agreed to rule on that issue separately. Having reviewed the briefs and the relevant law and being sufficiently advised, the Court concludes that the automatic stay has terminated with respect to the Debtors but continues to stay efforts to obtain estate property.

I. FACTS

For the limited purpose of ruling on the scope of the stay termination, the Court finds:¹

Debtors live in Capulin, New Mexico. Mr. Rogers works on a nearby ranch. Debtors have two young children.

Debtors filed their first chapter 13 case on October 28, 2019.² The case was assigned to the Honorable Robert H. Jacobvitz. The case appears to have been prompted by an action InBank filed to foreclose on Debtors' house.

Judge Jacobvitz held a preliminary hearing on confirmation of Debtors' chapter 13 plan on April 28, 2020. He entered an order setting a final confirmation hearing for June 16, 2020, and setting a deadline for Debtors to file an operating report and an amended tax return. The order stated that if Debtors failed to comply with the deadline the case would be dismissed without further notice or hearing. Debtors did not timely file their operating report or tax return, so Judge Jacobvitz dismissed the case on June 15, 2020.

Debtors filed this case on July 29, 2020, represented by the same counsel as before. On the petition date they filed a motion to extend the automatic stay. InBank objected to the motion on August 6, 2020, and Debtors replied in support on August 21, 2020. On September 1, 2020 (34 days postpetition), Debtors asked for a hearing on the motion. The Court set a hearing for September 17, 2020 (50 days postpetition). The Court denied the motion from the bench on September 17, 2020, based on the time limit imposed under § 362(c)(3)(B).³

At the hearing, Debtors and InBank debated the scope of the stay's termination. Debtors argued that the stay was only terminated for actions against them personally, but not for actions to obtain bankruptcy estate property. InBank disagreed and argued that the stay had terminated for all purposes, including its pending foreclosure action.

II. DISCUSSION

A. Section 362(c)(3).

At issue is the proper interpretation of § 362(c)(3), which provides:

[I]f 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; [and]

(B) on the motion of a party in interest for continuation of the automatic stay and upon notice and a hearing, the court may extend the stay in particular cases as to any or all creditors (subject to such conditions or limitations as the court may then impose) after notice and a hearing completed before the expiration of the 30-day period only if the party in interest demonstrates that the filing of the later case is in good faith as to the creditors to be stayed[.]

Debtors point to the phrase "with respect to the debtor" in subsection (A) and argue that unless extended, the stay is terminated for actions against the debtor but not for actions against estate property (e.g. Debtors' house). InBank takes a contrary view. It argues that the section is poorly drafted and ambiguous, but that the only logical construction is that the stay terminates entirely after 30 days. InBank also argues that Debtors' interpretation renders the subsection of little practical value. Both sides have case law to back up their arguments. Debtors rely on a 2008 decision from the Tenth Circuit Bankruptcy Appellate Panel ("BAP") that is on point and supports Debtor's interpretation. In re Holcomb , 380 B.R. 813 (10th Cir. BAP 2008). InBank counters that Holcomb is not binding precedent and not as persuasive as the more current First Circuit Court of Appeals decision of In re Smith , 910 F.3d 576 (1st Cir. 2018). Finally, the Fifth Circuit recently weighed in on Holcomb's side, creating a circuit split. Rose v. Select Portfolio Servicing, Inc. , 945 F.3d 226 (5th Cir. 2019).

B. Stare Decisis and BAP Decisions.

The Court must first decide whether it is bound to follow Holcomb . The precedential effect of BAP decisions is not as clear as one might suppose. See, e.g. , Precedential Effect of Bankruptcy Court, Bankruptcy Appellate Panel, or District Court Bankruptcy Case Decisions, 8 A.L.R. Fed. 2d 155, §§ 8–10; 8 Norton Bankr. L. & Prac. 3d § 170:17 ; March and Obregon, Are BAP Decisions Binding on Any Court? 18 Cal. Bankr. J. 189, 191-93 (1990).

In the only circuit opinion the Court found that addressed the issue, In re Silverman , 616 F.3d 1001 (9th Cir. 2010), the Ninth Circuit stated:

We have never held that all bankruptcy courts in the circuit are bound by the BAP. See, e.g. , Bank of Maui v. Estate Analysis, Inc. , 904 F.2d 470, 472 (9th Cir.1990).... Nevertheless, we treat the BAP's decisions as persuasive authority given its special expertise in bankruptcy issues and to promote uniformity of bankruptcy law throughout the Ninth Circuit. See In re Rosson , 545 F.3d 764, 772 n. 10 (9th Cir.2008) ; Bank of Maui , 904 F.2d at 472 (O'Scannlain, J., specially concurring).

Id. at 1005, n.1. Similarly, most lower courts have ruled that BAP opinions do not have stare decisis effect. See , e.g. , In re Carrozzella & Richardson , 255 B.R. 267, 271–73 (Bankr. D. Conn. 2000) ; In re Virden , 279 B.R. 401, 409 n.12 (Bankr. D. Mass. 2002) (citing Carrozzella & Richardson ); In re Williams , 257 B.R. 297, 301 n.5 (Bankr. W.D. Mo. 2001) (same); In re Livingston , 379 B.R. 711, 726–27 (Bankr. W.D. Mich. 2007), rev'd on other grounds, 422 B.R. 645 (W.D. Mich. 2009) ; In re Cormier , 382 B.R. 377, 408-09 (Bankr. W.D. Mich. 2008) ; In re Cox , 393 B.R. 681, 687 (Bankr. W.D. Mo. 2008) ; In re Rodriguez , 487 B.R. 275, 288 (Bankr. D.N.M. 2013) ; In re Junes , 76 B.R. 795, 797 (Bankr. D. Ore. 1987) ; see generally In re Wenzel , 415 B.R. 510, 516–17 (Bankr. D. Kan. 2009) (discussing but not deciding the issue).⁴

There are two problems with treating Holcomb as binding precedent. First, stare decisis is a policy, not a law, and there is no policy in the Tenth Circuit on the stare decisis effect of BAP decisions. In Livingston the bankruptcy court observed:

[T]he Supreme Court has made it equally clear that modern stare decisis is a judicial policy, not a law. Payne v. Tennessee , 501 U.S. 808, 828, 111 S.Ct. 2597, 2609–10, 115 L.Ed.2d 720 (1991), Planned Parenthood of SE Pennsylvania v. Casey , 505 U.S. 833, 854, 112 S. Ct. 2791, 2808, 120 L.Ed.2d 674 (1992), Hohn v. U.S., 524 U.S. 236, 251–52, 118 S. Ct. 1969, 1977, 141 L.Ed.2d 242 (1998).

Policies exist, though, only because institutions adopt them. They also exist only so long as the institution desires. The judicial policy of stare decisis is no exception. Modern stare decisis does not exist apart from the court. It exists only at the court's pleasure.

379 B.R. at 723-24 (footnotes omitted). The Livingston court concluded:

I acknowledge my station within the federal judicial hierarchy. Consequently, I have no choice but to accept whatever policies have been adopted by superior courts. In my case, the policies of both the Supreme Court and the Sixth Circuit require that I accept their interpretations of the Bankruptcy Code regardless of whether my own interpretation may be different. However, the Sixth Circuit has not yet adopted any policy concerning the binding effect of bankruptcy appellate decisions. Therefore, I am not obligated under the modern view of stare decisis to treat Sarff as binding precedent.

Id. at 726-27. Under current judicial policy, Supreme Court and Tenth Circuit decisions are binding precedent on lower courts in the Tenth Circuit.⁵ The Tenth Circuit has not determined that BAP decisions should be stare decisis. Without clear guidance on that point from the Circuit, neither the BAP nor bankruptcy courts should take it upon themselves to declare BAP decisions binding precedent.

Second, given the relationship between bankruptcy courts, district courts, and the BAP, treating BAP decisions as binding precedent would cause more problems than it would solve. District courts are not bound by BAP decisions. See, e.g. , Bank of Maui , 904 F.2d at 472 ("[I]t must be conceded that BAP decisions cannot bind the district courts themselves. As Article III courts, the district courts must always be free to decline to follow BAP decisions and to formulate their own rules within their jurisdiction."). Contrariwise, BAPs and bankruptcy courts are not bound by district court decisions. In Carrozella & Richardson , for example, the court stated:

It is widely accepted that the decision of one district court judge is not binding on another district judge, even within the same district. E.g. , Threadgill v. Armstrong World Industries, Inc. , 928 F.2d 1366 (3d Cir.1991). Logically then, a judge of the

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