American Builders & Contractors Supply Co., Inc. v. Precision Roofing and Consulting, LLC et al
MEMORANDUM OPINION AND ORDER: For the reasons discussed, following the analysis of the Turner case affirmed by the Eleventh Circuit and subsequently followed by other courts, this court concludes that the post-bankruptcy petition claims in this case are not subject to the stay pursuant to 11 U.S.C. 362(a) at this time. Signed by Honorable Judge W. Harold Albritton, III on 5/22/2017. (kh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC. etc.,
PRECISION ROOFING AND
CONSULTING, LLC etc., and MICHAEL
CIVIL ACTION NO. 2:17cv97-WHA
MEMORANDUM OPINON AND ORDER
FACTS AND PROCEDURAL HISTORY
This cause is before the court on a Notice of Bankruptcy Automatic Stay (Doc. #14),
filed by the Defendants, based on the bankruptcy of Defendant Michael S. Dunn.
The Plaintiff, American Builders & Contractors Supply Co., Inc. (“ABS Supply”) filed
this case bringing numerous claims against Precision Roofing and Consulting, LLC and Michael
S. Dunn, including claims for declaratory judgment and claims damages for damages under
several causes of action, based on conduct arising from a 2016 roofing project. The Defendants
filed the Notice of Bankruptcy and have taken the position that the present case is subject to stay
pursuant to 11 U.S.C. §362.
Section 362(a)(1)-(4) of Title 11 of the United States Code provides as follows:
(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-(1) the commencement or continuation, including the issuance or 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, or to recover a claim against the
debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a
judgment obtained before the commencement of the case under this title;
(3) 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;
(4) any act to create, perfect, or enforce any lien against property of the estate.
Michael S. Dunn filed a petition for bankruptcy under Chapter 13 in 2013. An Order
Confirming the Plan of the Debtor was entered on May 1, 2014.
The parties have briefed the issues of the appropriateness of the stay. For reasons to be
discussed, the court concludes that this case is not due to be stayed at this time.
ABC Supply argues that this case ought not be stayed pursuant to 11 U.S.C. §362
because under the plain language of §362(a)(1), the automatic stay does not apply to acts and
litigation which occur after the filing of the bankruptcy petition, citing cases such as United
States of America v. Gumbaytay, No. 2:08cv573, 2009 WL 605275 (M.D. Ala. March 9, 2009).
ABC Supply argues that in post-petition conduct cases, the automatic stay does not apply to the
litigation itself, but may apply to the enforcement of the judgment if the plaintiff succeeds.
In response, the Defendants agree that the stay in §362(a)(1) does not apply in this case,
but argue that §362(a)(3) requires a stay because that provision “prohibits a party from taking
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.” The Defendants argue that if the court were to proceed,
ABC would be seeking an advisory opinion that it does not intend to enforce. The Defendants
cite cases, including In re Jefferson County, Alabama, 484 B.R. 427 (N.D. Ala. 2012), in support
of their argument.
In Turner Broadcasting Sys., Inc. v. Sanyo Elec., Inc., 33 B.R. 996 (N.D.Ga.1983), aff'd
sub nom. Turner Broadcasting v. Rubin, 742 F.2d 1465 (11th Cir.1984) (unpublished), the court
explained that the automatic stay in 362(a)(1) is not designed to be an offensive weapon to allow
a debtor to breach a post-bankruptcy petition contract. The court analyzed the purposes behind
the bankruptcy laws and explained that one purpose would be severely undermined by allowing a
debtor to hide behind section 362(a) in a suit arising after the bankruptcy petition was filed
because repayment or reorganization plans would be hampered if post-petition creditors were
discouraged from conducting business with the debtor. Id. The court found that the automatic
stay does not apply to a case commenced after a bankruptcy petition is filed. Id.
The court went on to note in a lengthy footnote, however, that there are other aspects of
§362(a) which could apply. Id. at 100 n.2. The court explained that its “conclusion that a breach
of contract case for which the cause of action arose after the petition in bankruptcy was filed is
not stayed by 11 U.S.C. §362(a) does not mean that the plaintiff can defeat other aspects of
section 362(a) and satisfy its default judgment.” Id. The court noted that other aspects of 362(a)
“severely limit the ability of a plaintiff to satisfy a judgment it may receive even if the original
action was not prohibited by §362(a)(1),” such as §363(a)(3). Id. In the analysis within the
footnote, the Turner court relied on another case for the proposition that “although section
362(a)(1) is inapplicable to proceedings commenced after the bankruptcy petition is filed, that
creditor would still have to obtain relief from the stay before attaching, or executing on, the
property of the estate.” Id. (citing In re Anderson, 23 B.R. 174, 175 (Bankr. N.D. Ill. 1982)).
Other decisions within this circuit have also applied that rule, finding that it is the enforcement of
claims that arise post-petition which may be prohibited by the automatic stay. See Matter of
Growth Dev. Corp., 168 B.R. 1009, 1014 (Bankr. N.D. Ga. 1994).
Other courts outside of this circuit apply similar analysis, finding that as long as the
chapter 13 case is pending, “relief from the automatic stay may be required before the movant is
permitted to enforce any judgment she may obtain.” In re Shuman, 122 B.R. 317, 318 (Bankr.
S.D. Ohio 1990). Rrelying in part on Turner, the Fourth Circuit concluded that 11 U.S.C.
§362(a)(1) did not bar an action as a result of a post-petition breach of contract, but reasoned that
“[b]ecause attachment or execution of a judgment obtained as a result of a post-petition claim
would fall within the stay provision of subsections 362(a)(3) and (4), a creditor must obtain relief
from the stay to satisfy a judgment against property of the bankruptcy estate.” Bellini Imports,
Ltd. v. Mason and Dixon Lines, Inc., 944 F.2d 199, 201-02 (4th Cir. 1991); see also In re Al’s
Transmission Service, Inc., No. 95-1-1579-PM, 1995 WL 781697, at *1 (Bankr. D. Md. Dec. 28,
1995)(stating “the automatic stay does prevent a post-petition creditor from satisfying such a
claim with property of the estate.”)(citing 11 U.S.C. §362(a)(3); In re Grown Development
Corp., 168 B.R. 1009, 1016 (Bankr. N.D. Ga. 1994)).
While non-binding cases cited by the Defendant may support a stay of claims at this point
pursuant to §362(a)(3), the Turner decision, affirmed by the Eleventh Circuit, and relied on by
other courts, adopts a position, urged by the Plaintiff here, that the Plaintiff’s post-petition claims
ought to be allowed to proceed, and that the stay in §362(a)(3) applies only if a judgment is
sought to be enforced against property of Dunn’s bankruptcy estate. This court will follow that
For the reasons discussed, following the analysis of the Turner case affirmed by the
Eleventh Circuit and subsequently followed by other courts, this court concludes that the post-
bankruptcy petition claims in this case are not subject to the stay pursuant to 11 U.S.C. §362(a)
at this time.
DONE this 22nd day of May, 2017.
/s/ W. Harold Albritton
W. HAROLD ALBRITTON
SENIOR UNITED STATES DISTRICT JUDGE
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