S. Martin Teel, Jr., United States Bankruptcy Judge
The debtor has filed a Motion to Show Cause Why Sanctions Should Not Be Imposed on the Parties Named Below for Violating the Automatic Stay and Damages for False Imprisonment (Dkt. No. 63). The Motion will be denied for the following reasons.
The debtor owns a unit at a condo property in Ocean City, Maryland. Mann Properties manages the condo property. Coral Seas Homeowners' Association ("Coral Seas") is the property's homeowners' association. As previously ruled, part of the Motion must be dismissed as seeking damages for prepetion misconduct that, under Fed. R. Bankr.P. 7001, must be pursued via an adversary proceeding complaint. What remains is a claim that Mann Properties and Coral Seas violated the automatic stay of the Bankruptcy Code (11 U.S.C.) contained in 11 U.S.C. § 362(a). That claim must be dismissed for the reasons that follow.
The debtor filed the petition commencing this case on November 15, 2012. Prior to the commencement of the case, Mann Properties and Coral Seas withheld from the debtor the condo's access code to a storage area in which the debtor had stored various property, thereby effectively obtaining possession of that property. The debtor sent an e-mail on November 15, 2012, and then a letter on November 27, 2012, to the attorney for Mann Properties and Coral Seas demanding that they give him the access code. On November 29, 2012, in response to the November 27, 2012 letter, Coral Seas and Mann Properties provided the access code to the debtor. The debtor contends that the delay in providing the access code and the consequent continued retention of possession of his personal property constituted a violation of the automatic stay, presumably meaning, specifically, 11 U.S.C. § 362(a)(3), which bars any act to exercise control over property of the estate.
The courts are divided as to the proper interpretation of § 362(a)(3).
Controlling precedent in this jurisdiction limits the applicability of 11 U.S.C. § 362(a)(3), and requires the conclusion that Mann Properties and Coral Seas did not violate the automatic stay by failing to provide the debtor with the access code and continuing thereby to retain possession of his personal property upon the commencement of this bankruptcy case. As noted in United States v. Inslaw, Inc., 932 F.2d 1467, 1471 (D.C.Cir.1991):
11 U.S.C. § 362(a) (1988) (italics in original). In Inslaw, 932 F.2d at 1474, the court of appeals held that § 362(a)(3) was not violated by an entity's failure, upon the filing of the petition, to cure alleged prepetition misconduct. The court of appeals explained:
Inslaw, 932 F.2d at 1473 (citation and footnote omitted).
Accordingly, under the reasoning of Inslaw, it is only an affirmative act to change control of property of the estate that can give rise to a violation of § 362(a)(3). In short, § 362(a)(3) does not bar continued retention of property seized prepetition. See In re Bernstein, 252 B.R. 846 (Bankr. D.D.C.2000); In re Young, 193 B.R. 620 (Bankr.D.D.C.1996).
There are decisions constituting a majority view to the contrary, including three at the court of appeals level, Weber v.
As stated in Brubaker, Part II at 1, "[t]he majority position is highly dubious, ... and seems driven more by certain `practical considerations' (as the courts themselves have put it) than a sound, principled interpretation of the meaning of the relevant Code provisions." I elaborate at length below why the majority view is in error, and why the reasoning of Inslaw continues to be sound, and requires the conclusion that there was no violation here of § 362(a)(3).
The majority view of § 362(a)(3), espoused by Weber and its ilk, is premised on an erroneous interpretation of one of the "turnover" provisions of the Bankruptcy Code. Specifically, courts that follow the majority view contend that 11 U.S.C. § 542(a) is "self-executing" and "requires that any entity in possession of property of the estate deliver it to the trustees [sic], without condition or any further action ...." Weber, 719 F.3d at 79. Weber then reasons that, notwithstanding that the debtor is not actually in possession of the property on the petition date, the self-executing nature of § 542(a) operates to vest the debtor with a possessory interest in the property such that a creditor's continued retention of possession constitutes an act to "exercise control" over property of the estate. Id.
Section 542(a) was part of the Bankruptcy Code as enacted in 1978, and has remained the same since then. In United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983), aff'g 674 F.2d 144 (2d Cir.1982), a case relied upon heavily by courts following the majority view, the Court explored the effect of § 542(a) and whether a court could subject
With exceptions of no relevance here, § 542(a) provides that:
Sometimes a debtor is vested with a trustee's rights under § 542(a).
In contrast to the automatic stay of § 362(a), § 542(a) does not provide that it is to operate as an order (which would carry with it the consequence that it could be enforced by contempt sanctions), and the provision is subject on its face to defenses (with an additional defense against entry of a turnover order, of lack of adequate protection, being contained in 11 U.S.C. § 363(e)). For those reasons, and other reasons explored below, the statute was not viewed as self-executing prior to the 1984 amendment of § 362(a)(3) and continues to be not self-executing.
As explained in Inslaw, 932 F.2d at 1471:
The purpose of § 542(a), therefore, "is to empower the trustee in bankruptcy to get hold of the property of the debtor, some of which will be in the possession, custody, or control of third parties." Boyer v. Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A. (In re USA Diversified Prods., Inc.), 100 F.3d 53, 56 (7th Cir. 1996). The statute thus permits an entity in possession of estate property voluntarily to relinquish possession of such property to the trustee in lieu of turning over the property to a debtor who lacks the rights of a trustee.
When possession is not relinquished voluntarily, § 542(a) empowers the trustee to obtain an order directing turnover unless one of the defenses to entry of a turnover order applies. But unlike § 362(a), which operates as a statutory injunction, § 542(a) does not operate as a statutory injunction and thus does not enjoy the status of an order as to which contempt sanctions may lie if disobeyed. Instead, § 542(a) codified the pre-Code practice, exemplified by Reconstruction Fin. Corp. v. Kaplan, 185 F.2d 791 (1st Cir.1950), under which the court could order turnover by a secured creditor in possession of collateral seized prepetition, but with turnover conditioned on provision of adequate protection. After tracing that pre-Code practice, and the Court's embrace of that practice in Whiting Pools, Brubaker, Part I at 4-5,
Indeed, more generally, Code § 542(a) "gives an explicit statutory basis for the traditional turnover order against persons other than the debtor."
The most noteworthy implication of this historical perspective on the intended function of § 542(a)—the perspective that the Supreme Court itself promulgated in Whiting Pools—is that "§ 542(a) is not self-executing."
After the enactment of § 542(a) in 1978, and prior to the amended version of § 362(a)(3) at issue here taking effect in 1984, no court viewed § 542(a) as a mandatory injunction for which contempt might lie. Instead, courts uniformly viewed § 542(a) as providing bankruptcy courts with the authority to order the turnover of collateral or other property of the estate, but with the courts authorized to require adequate protection of a secured creditor's interest before directing turnover. See, e.g., In re Riding, 44 B.R. 846, 848-49 (Bankr.D.Utah 1984) (decided after the Court, decided Whiting Pools);
Despite this judicial consensus regarding § 542(a), the court in Thompson, 566 F.3d at 706, erroneously states that "at a minimum, it appears that bankruptcy courts approved of differing practices concerning adequate protection when Whiting Pools was decided," quoting In re Sharon, 200 B.R. 181, 190-91 (Bankr.S.D.Ohio 1996). As explained in Bernstein, 252
This view of § 542(a) as not self-executing is required as well by another long-standing principle of statutory construction. When sister provisions of a statute contain the same word, that word ought to be given the same meaning.
"Section 542(b) is simply an acknowledgment that the trustee, not the debtor, is entitled to receive payment of monetary obligations owed to the debtor, not a self-executing provision giving rise to contempt when the obligor fails to pay the obligation to the trustee." Bernstein, 252 B.R. at 852 (citation omitted). See also In re Randolph Towers Coop., Inc., 458 B.R. 1, 6-7 (Bankr.D.D.C.2011);
Even if in isolation the word "shall" in § 542(a) could be read as imposing a mandatory obligation of turnover, a court must "follow the cardinal rule that a statute is to be read as a whole since the meaning of statutory language, plain or not, depends on context." King v. St. Vincent's Hosp., 502 U.S. 215, 221, 112 S.Ct. 570, 116 L.Ed.2d 578 (1991) (citations omitted). It is thus necessary to interpret § 542(a) in light of other provisions of the Bankruptcy Code, and to strive for an interpretation of § 542(a) whose effects are compatible with the Bankruptcy Code as a whole.
Interpreting § 542(a) as an order compelling turnover would be inconsistent with the Bankruptcy Code as a whole. In particular, 11 U.S.C. § 363(e) provides in relevant part:
[Emphasis added.]
If a creditor is required to turn over the asset before it can seek adequate protection, it might be irreparably harmed and lose the protection that § 363(e) is intended to provide. See Bernstein, 252 B.R. at 850-51. Yet § 542(a), if treated as a mandatory injunction, would compel immediate turnover, and would result in the creditor being in contempt if it delayed making turnover while it pursued a request for adequate protection. The Court in Whiting Pools, 462 U.S. at 211-12, 103 S.Ct. 2309, expressly held that despite the applicability of § 542(a) to a secured creditor, that creditor "under section 363(e), remains entitled to adequate protection for its interests...." The Court reasoned that "the right to adequate protection ... replace[s] the protection afforded by possession," Whiting Pools, 462 U.S. at 207, 103 S.Ct. 2309, and ruled that "[a]t the creditor's insistence, the bankruptcy court must place such limits or conditions on the trustee's power to sell, use, or lease property as are necessary to protect the creditor." Id. at 204, 103 S.Ct. 2309. The right to adequate protection cannot be destroyed by treating § 542(a) as self-executing and as compelling turnover before the creditor can obtain an order providing such adequate protection:
As observed in Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 20, 116 S.Ct. 286, 133 L.Ed.2d 258 (1995) (citation omitted): "[i]t is an elementary rule of construction that `the act cannot be held to destroy itself.'" The right of adequate protection cannot be rendered meaningless by an interpretation of §§ 362(a)(3) and 542(a) that would compel turnover even before an opportunity for the court's granting adequate protection. Those provisions no more operate to destroy the right to insist on adequate protection as a condition to turnover than did § 362(a)(3) destroy the right of setoff in Strumpf, 516 U.S. at 21, 116 S.Ct. 286.
Bernstein, 252 B.R. at 851.
Here are some examples of a right to adequate protection that could be destroyed if immediate turnover were required:
Even in the Eighth Circuit, despite the court of appeals decision in Knaus, the Bankruptcy Appellate Panel has held that a secured creditor whose "relinquishment of possession will in and of itself destroy the creditor's rights" is entitled to refuse to deliver possession, despite § 542(a), until it is given adequate protection. N. Am. Banking Co. v. Leonard (In re WEB2B Payment Solutions, Inc.), 488 B.R. 387, 393 (B.A.P. 8th Cir.2013). As Professor Brubaker observes:
Brubaker, Part II at 7.
Accordingly, § 542(a) is not self-executing in light of a creditor's right to raise its right to adequate protection as a defense. Any frivolous or bad faith assertion of the defense of lack of adequate protection can be addressed via Rule 9011 of the Federal Rules of Bankruptcy Procedure.
The Weber court asserted that § 542(a) is "self-executing" and "requires that any entity in possession of property of the estate deliver it to the trustees, without condition ...." 719 F.3d at 79 (emphasis added). As authority for this view, Weber cites and quotes Collier on Bankruptcy § 542.02 (16th ed. 2012). That reliance on Collier on Bankruptcy is unpersuasive.
Before Whiting Pools was decided in 1983 and § 362(a)(3) was amended in 1984, 4 Collier on Bankruptcy § 542.02, at 542-6 (15th ed. 1980), stated (as quoted in Alpa Corp. v. IRS (In re Alpa Corp.), 11 B.R. 281, 290 n. 6 (Bankr.D.Utah 1981)) that "[t]he better view is ... that adequate protection is a condition precedent to turnover if demanded by the creditor," consistent with the view that § 542(a) is not self-executing. After Whiting Pools was decided and at least as late as December 2003, and possibly as late as June 2009, Collier on Bankruptcy continued to take that view:
5 Collier on Bankruptcy ¶ 542.02[2], at 542-11 to 542-12 (Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev. 2009).
Id. at 542-12 n.31. It is only sometime after 2003 that Collier on Bankruptcy took the view that § 542(a) is self-executing, 5 Collier on Bankruptcy, ¶ 542.02 at 542-7 to 542-8 (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2013), and then only acknowledging in two footnotes that a contrary view exists. Id. at 542-7 n. 9 & 542-8 n. 11. Collier on Bankruptcy does not explain how § 542(a) could now be viewed as self-executing despite its prior observations regarding the right to insist on adequate protection under § 363(e) as a condition to turnover, and regarding the pre-Code practice.
How Weber could view § 542(a) as requiring turnover "without condition" is inexplicable. On the face of § 542(a) alone, the statute does not require delivery to the trustee without condition. Section 542(a) itself provides defenses to turnover:
If a party raises any of these defenses and the court rejects the defense, the party ought not be held in contempt for having done so. As already noted, frivolous or bad faith assertion of a defense to entry of a turnover order can be addressed under Federal Rule of Bankruptcy Procedure 9011.
Illustratively, with respect to the defense that the property is not property of the estate, Inslaw, 932 F.2d at 1473 (citation and footnote omitted) stated:
Only upon entry of a turnover order adjudicating the estate's ownership of the property could there be a contempt for failing to turn over the property.
The danger, under a view that § 542(a) is self-executing, is that an entity with a valid defense of being the owner of the property might capitulate to the trustee's demand for turnover instead of incurring the expense of a contempt proceeding and the risk that the court might mistakenly reject its defense of ownership, and hold it to have been in contempt.
If, upon rejecting a defense of ownership, or any other defense to turnover, the court were to hold the entity that asserted that defense to have been in contempt, the risk would be that entities that have a valid or non-frivolous defense to turnover under § 542(a) would be deterred by the threat of contempt from raising the defense. This would be the equivalent of throwing out the baby (defenses that pass muster under Rule 9011) with the dirty bath water (defenses that do not pass muster under Rule 9011).
Because § 542(a) is on its face subject to explicit defenses, § 542(a) is not a self-executing statutory provision that, without condition, compels turnover of estate property possessed by a creditor.
In conclusion, as observed in Brubaker, Part II at 4:
I turn next to § 362(a)(3) itself.
The majority view holds that mere retention of pre-existing possession is an act to "exercise control" over property of the estate in violation of § 362(a)(3). This view cannot withstand close scrutiny.
Prior to the ambiguous "exercise control" language being added to § 362(a)(3) in 1984, § 542(a) was plainly not self-executing, and the well-established practice was that turnover could be refused and the creditor could raise defenses to turnover before being required to relinquish possession. The Court "will not read the Bankruptcy Code to erode past bankruptcy practice absent a clear indication that Congress intended such a departure." Cohen v. de la Cruz, 523 U.S. 213, 221, 118 S.Ct. 1212, 140 L.Ed.2d 341 (1998) (citation omitted). Nothing in § 362(a)(3) purports to amend § 542(a). Moreover, there is no evidence of a congressional intent to undo the well-established practice that a secured creditor could raise defenses before being required to make turnover. The majority view, treating mere retention of possession as being prohibited, runs counter to the presumption against such a major departure from established practice. See Dewsnup v. Timm, 502 U.S. 410, 419, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992); Brubaker, Part II at 2-3.
Section 362(a)(3) stays "any act to obtain possession of property of the estate... or to exercise control over property of the estate." This language does not require relinquishment of possession obtained prepetition. First, "[t]he automatic stay, as its name suggests, serves as a restraint only on acts to gain possession or control over property of the estate." Inslaw, 932 F.2d at 1474.
Unlike 11 U.S.C. § 521(a)(6), requiring that a debtor in certain circumstances "shall ... not retain possession of [certain] personal property" unless the debtor takes certain actions, § 362(a)(3) does not provide that a creditor shall not retain possession of collateral seized prepetition. See Young, 193 B.R. at 624-25.
Third, § 362(a)(3) addresses the issue of possession by barring acts "to obtain possession," thus suggesting that the "exercise control" language in § 362(a)(3) "prohibits only affirmative conduct directed at `control' rather than `possession' of estate property." Brubaker, Part II at 3-4. As noted in Brubaker, Part II at 3:
Examples of why the "exercise control" language was necessary for reasons other than forcing turnover in derogation of a secured creditor's rights under §§ 542(a) and 363(e) abound. See Brubaker, Part II at 3-4 & 10 nn.15-16. See also 1 David G. Epstein, et al., Bankruptcy § 3-14, at 163 (1992):
Accordingly, the language of § 362(a)(3) itself demonstrates that it ought not be interpreted as requiring relinquishment of possession obtained prepetition.
Even if § 362(a)(3) is sufficiently ambiguous that, standing alone, it could be interpreted as requiring relinquishment of
First, as explained in part III(D), above, "[i]t is an elementary rule of construction that `the act cannot be held to destroy itself,'" Strumpf, 516 U.S. at 20, 116 S.Ct. 286 (citation omitted), and the amendment of § 362(a)(3) ought not be viewed as destroying the secured creditor's rights under §§ 542(a) and 363(e), as upheld in Whiting Pools, 462 U.S. at 211-12, 103 S.Ct. 2309, to raise defenses to turnover, including the right to seek adequate protection that would be lost if relinquishment of possession were compelled by § 362(a)(3) without the necessity of a turnover order.
Moreover, "interpretations of a statute which would produce absurd results are to be avoided if alternative interpretations consistent with the legislative purpose are available." Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982). This would be the case even if § 362(a)(3) had a seemingly plain meaning (which it does not) supporting the majority view. See id. at 571, 102 S.Ct. 3245 (plain meaning will be rejected in "rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters...."). If the majority view of § 362(a)(3) were to prevail, it would lead to the absurd result that when turnover is not required under § 542(a) (for example, when the creditor is able to establish the defense under § 542(a) that the property is of inconsequential value or benefit to the estate or that its lien is not adequately protected), nevertheless the failure to have delivered the property to the trustee would constitute a stay violation. See Brubaker, Part II at 4.
This is well illustrated by Expeditors Int'l of Wash., Inc. v. Colortran, Inc. (In re Colortran, Inc.), 210 B.R. 823 (B.A.P. 9th Cir.1997), aff'd in part and vacated in part on other grounds, 165 F.3d 35 (9th Cir.1998). There, the creditor, Expeditors, was held to have violated § 362(a)(3) by refusing to turn over property unless its debt was paid even though the possessory lien it held would have been destroyed had it released the property. Colortran, 210 B.R. at 827.
When a creditor holds property it seized prepetition, the debtor does not possess the property. Accordingly, the creditor's continued retention of possession is not an exercise of control over any existing possession by the debtor of the property.
Stated another way, interests in property that the debtor holds on the petition date do not include possession of property held, instead, by a creditor. Accordingly, possession is not an interest in property that becomes property of the estate under 11 U.S.C. § 541(a)(1) upon the commencement of the case. If a trustee succeeds in obtaining turnover under § 542(a), then possession becomes an interest that is property of the estate by reason of 11 U.S.C. § 541(a)(7) (property of the estate includes "[a]ny interest in property that the estate acquires after the commencement of the case."). Before then, possession is not an interest of the debtor in property constituting property of the estate. Accordingly, a creditor's continued retention of possession is not an exercise of control over a right of possession that is property of the estate.
Section 542(a) is not itself a property interest, but instead a codification of pre-Code practice authorizing voluntary turnover to the trustee and empowering a trustee to pursue a turnover proceeding in which the creditor may raise any available defenses if unwilling voluntarily to surrender possession. A refusal to acquiesce in the trustee's view that she is entitled to turnover under § 542(a) is thus not an act to exercise control over property of the estate. See Inslaw, 932 F.2d at 1473 (mistaken refusal to capitulate to a turnover demand is not a violation of § 362(a)(3)).
It is in that context that one must read the Court's observation in Whiting Pools that:
462 U.S. at 207, 103 S.Ct. 2309 (footnote omitted). In the accompanying footnote (462 U.S. at 207 n. 15, 103 S.Ct. 2309), the Court viewed § 542(a) as "consistent with other provisions of the Bankruptcy Code that address the scope of the estate," citing §§ 544, 545, and 549. When a trustee avoids a transfer of property pursuant to one of those provisions, that results in the property becoming property of the estate, by reason of 11 U.S.C. § 541(a)(3)
Weber reasons that "Whiting Pools teaches that the filing of a petition will generally transform a debtor's equitable [ownership] interest into a bankruptcy estate's possessory right...." Weber, 719 F.3d at 79. That possessory right, however, is the procedural right under § 542(a) to obtain a turnover order abrogating the creditor's possession held on the petition date. Until such a turnover order is entered, the estate lacks actual possession, and possession only becomes property of the estate under § 541(a)(7) upon the trustee actually obtaining possession.
Section 542(a) is such a provision.
462 U.S. at 205, 103 S.Ct. 2309. In the accompanying footnote, n.10, the Court mentioned §§ 543, 547, and 548 as examples of such provisions. As observed in Brubaker, Part II at 5-6, the dictum quoted above, and the implication that § 542(a) vests the estate with possession as of the commencement of the case, are false: § 541(a)(1) is limited to "all legal or equitable interests of the debtor [not of the trustee] in property as of the commencement of the case." (Emphasis added.) Instead, §§ 541(a)(3) and 541(a)(7) are the provisions that include in the estate a possessory interest in property recovered pursuant to §§ 542, 543, 547, and 548, and they do not purport to make possession of the recovered property an interest of the estate in property until there is an actual recovery. The Court itself noted that § 541(a)(1) would render § 542(a) "largely superfluous" unless the latter statute conferred on the estate rights which the debtor did not hold as of the commencement of the case. Whiting Pools, 462 U.S. at 207 n. 15, 103 S.Ct. 2309.
The Court's erroneous dictum as to what § 541(a)(1) is intended to include in the estate can be explained by the legislative history it cites, which stated that the scope of paragraph (1) of subsection (a) of § 541:
Whiting Pools, 462 U.S. at 205 nn.9 & 11, 103 S.Ct. 2309 (quoting H.R.Rep. No. 95-595, p. 367 (1977), reprinted in 1978 U.S.C.C.A.N. 5868, 6323). That legislative history, however, related to a version of the proposed Bankruptcy Code prior to the addition of § 541(a)(7). As observed in the floor statements relating to the revised proposed § 541(a):
See 124 Cong. Rec. H11096 (daily ed. Sept. 28, 1978) (statements of Rep. Edwards); 124 Cong. Rec. S17413 (daily ed. Oct. 6, 1978) (statements of Sen. DeConcini). It is § 541(a)(7), not § 541(a)(1), that hauls into the estate property recovered under § 542(a).
Accordingly, even if a passive act of continuing to retain possession could be viewed as an act to exercise control, it is not an exercise of control over a present possessory interest that is property of the estate, and thus does not violate the automatic stay. See Barringer, 244 B.R. at 406-07. See also Fitch, 217 B.R. at 290 ("as of the date the petition was filed, the Debtor retained title to the car, but the right to possess the car remained with Autoflow and did not become property of the estate").
As stated in Brubaker, Part II at 6:
Moreover, treating continued retention of possession as a forbidden exercise of control over property of the estate is completely at odds with the proper view of § 542(a) as not being a self-executing provision requiring turnover without awaiting adjudication of whether any of the limits on turnover are applicable.
Some decisions reason that a creditor who faces the prospect of irreparable injury to its lien if it makes turnover without conditions need not worry if § 542(a) is treated as self-executing, with a failure to deliver the property to the trustee punishable as an exercise of control over property of the estate prohibited by § 362(a)(3), because the creditor can seek an emergency hearing for relief from the automatic stay under 11 U.S.C. § 362(f).
Resp't Br. at 19. The respondent, id. at 19-20, then quoted this observation from B.F. Goodrich Emps. Fed. Credit Union v. Patterson (In re Patterson), 967 F.2d 505, 511 (11th Cir.1992):
The absurdity of that approach was demonstrated by the Patterson court's acknowledgment that the bank had only a 24-hour window within which to seek ex parte § 362(f) relief, otherwise it would violate the automatic stay if it refused to honor a check drawn on the account:
Patterson, 967 F.2d at 511. The Court in Strumpf obviously did not view requiring banks to turn on a dime and seek § 362(f) relief in a 24-hour window as an adequate basis for upholding a view of the automatic stay that would otherwise destroy the right of setoff. The Court in Strumpf rejected the court of appeals' view of §§ 362(a)(3) and 362(a)(7), stating "by forcing the creditor to pay its debt immediately, it would divest the creditor of the very thing that supports the right of setoff." 516 U.S. at 20, 116 S.Ct. 286.
Section 362(f) was already part of the Bankruptcy Code as it was enacted in 1978, with immaterial differences from today's version.
Section 362(b) lists most of the exceptions to § 362(a), and neither it nor any other Bankruptcy Code provision lists the pendency of a § 362(f) motion as an exception to § 362(a)(3). Moreover, § 362(f) itself does not purport to provide an exception to § 362(a)(3). Pending disposition of a § 362(f) motion, there necessarily will be a period of time during which (under the majority view) the creditor is in contempt for failing to turn over property seized prepetition. Accordingly, when courts that follow the majority rule say that reasonably prompt resort to § 362(f) will result in no violation of § 362(a)(3) having occurred, that amounts to judicial legislation making § 362(f) an exception to the automatic stay when it is not. Such impermissible judicial legislation is an attempt to justify treating the creditor's right to adequate protection of its interest under § 363(e) as not a reason to view § 542(a) as not self-executing.
For all of the foregoing reasons, I conclude that there was no violation of § 362(a)(3). The record, however, additionally raises an issue of whether Mann Properties and Coral Seas violated 11 U.S.C. § 362(a)(6), which prohibits any "act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title." It remains unclear whether the act of Mann Properties and Coral Seas in failing immediately to release the access code to the debtor after he made a postpetition request for release to him of the access code arose from a belief that Mann Properties and Coral Seas had lien rights against the debtor's stored property. When a creditor has a lien on the debtor's property in its possession, its refusal to release the property (and thereby to injure or destroy its lien rights) unless the debt is satisfied is not a violation of § 362(a)(6) but instead a recognition that under nonbankruptcy law the lien remains intact unless the debt it secures is fully paid. Even when the creditor only believes but does not actually have a lien on the property (or an ownership interest in the property), turnover is not required absent a turnover order for reasons discussed earlier in this decision with respect to § 362(a)(3).
Even if Mann Properties and Coral Seas had no belief that they held a valid lien against the debtor's stored property, the record is unclear whether a 14-day delay in releasing the access code to the debtor was a typical delay encountered by even a member of the condo association who is current on her dues. Accordingly, the record is unclear whether the failure immediately to release the access code was a conscious step taken by Mann Properties and Coral Seas, without believing that they had a lien right in the debtor's stored property, to coerce collection of unpaid prepetition condo dues that they have asserted are owed in this case. If that were the case, that may have constituted a violation of § 362(a)(6). See In re Kuehn, 563 F.3d 289, 294 (7th Cir.2009).
However, I need not wrestle with the issue of whether there was a violation of § 362(a)(6) for two reasons. First, the debtor's motion makes no mention of unpaid condo dues, and did not allege that the withholding of the access code was an act to collect unpaid condo dues. His motion, therefore, did not state a violation of § 362(a)(6).
I view the debtor as having conceded at a hearing of December 17, 2013, that this amounted to an implicit offer not to file a motion for sanctions if the access code was submitted within five business days. He conceded at the hearing that Mann Properties and Coral Seas provided the access code to the debtor on November 29, 2012 (two days after the letter of November 27, 2012). Finally, I view him as having conceded at the hearing that he had therefore waived suing for a violation of the automatic stay.
For all of these reasons, the debtor's Motion to Show Cause Why Sanctions Should Not Be Imposed on the Parties Named Below for Violating the Automatic Stay and Damages for False Imprisonment (Dkt. No. 63) will be denied. An order follows.
Randolph Towers, 458 B.R. 1, 6-7 (Bankr. D.D.C.2011).
This quotation omits the critical words regarding property "proposed to be used, sold, or leased" by the trustee. [Emphasis added.] When property has been seized prepetition and not voluntarily delivered to the trustee, the trustee can only be in the posture of proposing to use, sell, or lease the property.
Collier on Bankruptcy now takes a different view, see 3 Collier on Bankruptcy ¶ 362.03[5], at 362-29 (Alan N. Resnick & Henry J. Sommer eds. 16th ed. 2013), relying on Thompson, Del Mission, and Knaus, but it is noteworthy that, as discussed earlier in this decision, at one point Collier seems to have held a view similar to that expressed in Inslaw.
Brubaker, Part II at 10 n. 12.
See also Stephens v. Guaranteed Auto, Inc. (In re Stephens), 495 B.R. 608, 613 (Bankr.N.D.Ga.2013) (creditor could require the debtor to provide proof of insurance as a condition to returning the car only if the creditor "moves immediately in the bankruptcy court for an order requiring adequate protection"); Yates, 332 B.R. at 7-8; In re Jackson, 251 B.R. 597, 600 (Bankr.D.Utah 2000); Sharon, 234 B.R. at 685-86.
