Opinion
Case No. 10-14097 Case No. 10-14244 Case No. 10-14390
04-29-2013
In Re HAROLD LEE BLANKENSHIP, JR. JEREMY R. BLANKENSHIP, SR. HAROLD LEE BLANKENSHIP, III Debtor(s)
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
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Beth A. Buchanan
United States Bankruptcy Judge
Chapter 12
Judge Buchanan
ORDER GRANTING MOTION TO FIND CITIZENS NATIONAL BANK IN
CONTEMPT FOR VIOLATION OF THE AUTOMATIC STAY
This matter is before this Court on the Debtors' Motion To Find Citizens National Bank In Contempt For Violation Of The Automatic Stay [Case Number 10-14097, Docket Number 124; Case Number 10-14244, Docket Number 101; Case Number 10-14390, Docket Number 108](the "Motion") and Citizens National Bank's (the "Bank") Response and Objection [Case Number 10-14097, Docket Number 125; Case Number 10-14244, Docket Number 102; Case Number 10-14390, Docket Number 109](the "Response"). A status conference was held on March 20, 2013 (the "Status Conference").
By the Motion, the Debtors seek a finding by this Court that the Bank violated the automatic stay provision of Section 362 of the Bankruptcy Code and request the imposition of sanctions, including attorneys' fees and other relief deemed just and appropriate. The Debtors contend that that the Bank violated the automatic stay by filing a complaint (the "Foreclosure Complaint") to foreclose on a parcel of real property located at 433 Curtis Smith Road, Otway, Ohio (the "Curtis Road Property"), which is Debtor Harold Lee Blankenship Jr.'s residence.
Unless otherwise indicated, the terms "Bankruptcy Code," "Section" and "§" refer to Title 11 of the United States Code, 11 U.S.C. § 101 et seq.
On July 18, 2011, this Court entered an order granting the Debtors' motion to modify their confirmed chapter 12 plans to provide for the surrender of this very property to the Bank. [Case Number 10-14097, Docket Number 117; Case Number 10-14244, Docket Number 94; Case Number 10-14390, Docket Number 101]. The order further provided that, as a result of the surrender, the Debtors' confirmed plans were modified to reduce the plan payments by $319.76 per month and to allow the Bank to file an unsecured non-priority claim for any deficiency resulting from the sale of the Curtis Road Property.
The Bank argues that because title to the Curtis Road Property vested in the Debtors upon confirmation of the Debtors' chapter 12 plans as provided in Section 1227(b) of the Bankruptcy Code and by the express terms of the confirmed chapter 12 plans, no stay was in effect as is expressly provided in Section 362(c)(1) of the Bankruptcy Code. As such, the Bank maintains that it was well within its rights to attempt to foreclose on the Curtis Road Property and no order of this Court was required.
Section 1227(b) of the Bankruptcy Code provides that "[e]xcept as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor."
Section 362(c)(1) of the Bankruptcy Code provides that "[t]he stay of an act against property of the estate under subsection (a) of this section continues until such property is no longer property of the estate."
The automatic stay prevents "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)(emphasis added). The Bank correctly states that the stay of an act against property of the estate terminates when such property is no longer property of the estate. 11 U.S.C. § 362(c)(1). The Bank likewise correctly states that the Curtis Road Property vested in the Debtors upon confirmation of the Debtors' chapter 12 plans and, therefore, the Curtis Road Property was no longer property of the estate.
However, the automatic stay also prevents "any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case." 11 U.S.C. § 362(a)(5)(emphasis added). The Bank cites In re Globokar, 375 B.R. 383, 386 (Bankr. N.D. Ohio 2007) and In re Crawford, 95 B.R. 491, 492 (Bankr. W.D. Mich. 1988) in its Response presumably for the proposition that the automatic stay ceases to operate upon confirmation of a plan. The cases relied upon by the Bank, however, are distinguishable from this case in that Globokar and Crawford involved plans that were confirmed under chapter 11 of the Bankruptcy Code. In a chapter 11 case, "Section 1141(d) provides, with certain exceptions, that confirmation of a plan discharges the debtor from any debt that arose before the date of such confirmation except as provided in the confirmed plan or the confirmation order." In re Globokar, 375 B.R. at 385-86. Because Section 362(c)(2) of the Bankruptcy Code provides in relevant part that the stay of any act (other than an act against property of the estate) terminates at the time a discharge is granted or denied, in a chapter 11 case the automatic stay terminates upon confirmation of a chapter 11 plan. In re Crawford, 95 B.R. at 492.
While the automatic stay terminates upon discharge, an injunction against the commencement or continuation of acts to collect a discharged debt arises in its place. See 11 U.S.C. § 524(a). Moreover, bankruptcy courts have authority to enforce the terms of a confirmed plan. See Gordon Sel-Way, Inc. v. United States (In re Gordon Sel-Way, Inc.), 270 F.3d 280, 289 (6th Cir. 2001).
This is not so in a chapter 12 case. In contrast to chapter 11, a debtor in chapter 12 does not receive a discharge until the debtor completes all payments under the confirmed plan. 11 U.S.C. § 1228(a). The Debtors in these cases have not received a discharge because they have not completed all payments under their confirmed chapter 12 plans. As such, the automatic stay remains in effect as to property of the Debtors—including the Curtis Road Property. Therefore, the Bank's filing of the Foreclosure Complaint in state court is a violation of the automatic stay. 11 U.S.C. § 362(a)(5).
The Bank may of course file a motion for relief from stay to proceed with the Foreclosure Complaint.
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As to the issue of sanctions, this Court finds that no sanctions against the Bank are warranted in this instance. First, doing so would be inequitable given that the Debtors requested and were given permission to modify their confirmed chapter 12 plans to provide for the surrender of the Curtis Road Property and in exchange received a reduction in their plan payments. Second, the Debtors waited more than seven months after the filing of the Foreclosure Complaint to bring this Motion. The Debtors have not offered any reason for this delay nor have the Debtors explained their basis for opposing the foreclosure given their voluntary surrender of this property. Finally, counsel for the Debtors affirmatively stated at the Status Conference that the Debtors have not incurred any damages as a result of the violation of the automatic stay. While this Court does not take lightly actions in violation of the automatic stay and as a general principle strongly encourages creditors to request relief from the automatic stay if there is any question as to its applicability, the violation in this case does not rise to the level that justifies sanctions to protect the integrity of the bankruptcy process.
For the foregoing reasons, the Motion is hereby GRANTED to the extent that this Court finds the Bank in contempt for violation of the automatic stay. The Motion is DENIED with respect to sanctions or other relief.
IT IS SO ORDERED. Distribution list:
Default List
James K. Cutright, Esq.