Palmer v. Bank of the West

Filing 11

ORDER RE BANKRUPTCY APPEAL signed by Judge Rudolph T Randa on 10/15/2010 AFFIRMING the ruling of the Bankruptcy Court. (cc: all counsel)(Zik, Linda)

P a l m e r v. Bank of the West

D o c . 11

UNITED STATES DISTRICT COURT E A S T E R N DISTRICT OF WISCONSIN

J U L I E MARIE PALMER, A p p e llan t, C a s e No. 10-C-574 -vsB A N K OF THE WEST, Appellee.

D E C IS IO N AND ORDER

T h e debtor-appellant, Julie Marie Palmer ("Palmer"), owns and operates a boat marina b u s in e ss called Action Marine, Inc. Palmer appeals the bankruptcy court's denial of her m o tio n to extend the automatic stay in her second small business chapter 11 case. For the re a so n s that follow, the bankruptcy court's decision is affirmed. O n April 9, 2009, Palmer filed her first chapter 11 small business debtor case, No. 092 4 6 2 2 -je s (Bankr. E.D. Wis.) On February 3, 2010, Palmer filed her reorganization plan and d isc lo su re statement. Various creditors objected, including the appellee, Bank of the West. O n April 1, the bankruptcy court dismissed Palmer's first bankruptcy case because Palmer fa iled to confirm her plan within 45 days of the plan having been filed. 11 U.S.C. § 1129(e). O n April 9, 2010, Palmer filed her second small business chapter 11 case, No. 10-25464m d m (Bankr. E.D. Wis.) On April 21, Palmer moved to extend the automatic stay. Bank of th e West objected to the extension. On May 6, the bankruptcy court held a hearing and issue d an oral ruling that the automatic stay in 11 U.S.C. § 362(a) did not apply to Palmer's

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s e c o n d bankruptcy case. The bankruptcy court entered an order on May 19, a final order for p u rp o s e s of the Court's appellate jurisdiction under 28 U.S.C. § 158(a). Matter of B o o m g a r d e n , 780 F.2d 657, 659 (7th Cir. 1985) (lifting of automatic stay is a final order for p u rp o se s of appeal); Matter of James Wilson Assoc., 965 F.2d 160, 166 (7th Cir. 1992) (order ref u sing to lift or modify automatic stay is a final order). T h e filing of a bankruptcy petition operates as an automatic stay of collection p ro c e e d in g s against the debtor. § 362(a). Except as provided in § 362(n)(2), the automatic stay in § 362(a) does not apply in a case in which the debtor ­ (A ) is a debtor in a small business case pending at the time the p e titio n is filed; (B ) was a debtor in a small business case that was dismissed for a n y reason by an order that became final in the 2-year period e n d in g on the date of the order for relief entered with respect to th e petition; (C ) was a debtor in a small business case in which a plan was c o n f irm e d in the 2-year period ending on the date of the order f o r relief entered with respect to the petition; or (D ) is an entity that has acquired substantially all of the assets or b u s in e s s of a small business debtor described in subparagraph (A ), (B), or (C), unless such entity establishes by a p re p o n d e ra n c e of the evidence that such entity acquired s u b s ta n t ia lly all of the assets or business of such small business d e b to r in good faith and not for the purpose of evading this p a ra g ra p h .

§ 362(n)(1). Palmer's first small business case was dismissed on April 1, 2010, which is e a sily within the 2-year period ending on April 9, 2010, the date of the order for relief in P a lm e r' s second case. In re Hoffman, 248 B.R. 79, 83 n.4 (Bankr. W.D. Tex. 2000) (order -2-

f o r relief is issued the date a voluntary petition is filed). Therefore, § 362(n)(1)(B) applies to Palmer's second bankruptcy petition, rendering the automatic stay inapplicable. § 362(n)(1) refers to and must be read in conjunction with § 362(n)(2). § 362(n)(2) p ro v id e s that § 362(n)(1) does not apply: (A ) to an involuntary case involving no collusion by the debtor w ith creditors; or (B ) to the filing of a petition if ­ (i) the debtor proves by a preponderance of the e v id e n c e that the filing of the petition resulted f ro m circumstances beyond the control of the d e b to r not foreseeable at the time the case then p e n d in g was filed; and (ii) it is more likely than not that the court will c o n f irm a feasible plan, but not a liquidating plan, w ith in a reasonable period of time. § 362(n)(2). On appeal, Palmer argues that she can meet the requirements of §

3 6 2 ( n ) (2 ) (B ) (i) if she demonstrates that the filing of the petition in her second small business c a se resulted from circumstances that were not foreseeable at the time the first case was filed. C o n f u sio n arises from the phrase "circumstances beyond the control of the debtor not f o re s e e a b le at the time the case then pending was filed." § 362(n)(2)(B)(i) (emphasis added). P alm er insists that "the case then pending" refers to her first small business case. However, th e plain language of this provision does not support Palmer's proposed interpretation. In s te a d , "the case then pending" refers to a separate case that is pending at the time the s e c o n d petition is filed. Obviously, this does not apply to Palmer's situation because her first c a se was already dismissed by the time she filed her second case. -3-

R e a d in g the entirety of § 362(n)(1) and § 362(n)(2) together further demonstrates that th is is the correct result. § 362(n)(2) provides that despite the four exceptions listed at § 3 6 2 (n )(1 )(A -D ), the automatic stay applies [1] to an involuntary case involving no collusion b y the debtor with creditors, § 362(n)(2)(A), or [2] to the filing of a petition if the debtor p ro v e s that it resulted from circumstances beyond the control of the debtor not foreseeable a t the time the case then pending was filed, § 362(n)(2)(B)(i), and it is more likely than not th a t the court will confirm the plan. § 362(n)(2)(B)(ii). As discussed above, the exception w h i c h applies to Palmer's case is found at § 362(n)(1)(B) (debtor in a small business case d is m is s e d within the last two years), but a separate exception in § 362(n)(1) refers to the s itua tio n where the debtor "is a debtor in a small business case pending at the time the p e titio n is filed." § 362(n)(1)(A) (emphases added). § 362(n)(2)(B)(i)'s reference to a p e titio n that is filed because of circumstances "not foreseeable at the time the case then p e n d in g was filed" appears to refer to a petition that is currently pending under § 3 6 2 ( n ) (1 ) (A ) . Therefore, the language in § 362(n)(2)(B)(i) is not rendered meaningless s im p l y because it does not apply to § 362(n)(1)(B). Congress could have been more precise in its drafting, but the foregoing construction conforms with the plain language of the statute. T h e ruling of the bankruptcy court is AFFIRMED. D a te d at Milwaukee, Wisconsin, this 15th day of October, 2010. S O ORDERED,

s / Rudolph T. Randa HON. RUDOLPH T. RANDA U.S. District Judge -4-