United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 05-1176

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In re: Coyita Voncile Thomas,

Debtor.

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Coyita Voncile Thomas,

Appellant,

v.

Money Mart Financial Services, Inc.,

Appellee.

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Appeal from the United States

Bankruptcy Appellate Panel for

the United States Court of

Appeals for the Eighth Circuit.

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Submitted: October 10, 2005

 Filed: November 4, 2005 

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Before LOKEN, Chief Judge, GRUENDER, and BENTON, Circuit Judges. 

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GRUENDER, Circuit Judge.

Coyita Voncile Thomas (“Thomas”), the debtor, filed an adversary proceeding

against Money Mart Financial Services, Inc. (“Money Mart”), alleging that Money

Mart violated the automatic stay by presenting postpetition four checks that Thomas
1

The Honorable Dennis R. Dow, United States Bankruptcy Judge for the

Western District of Missouri.

2

The Honorable Robert J. Kressel, Chief Judge, and the Honorable Timothy J.

Mahoney and the Honorable Barry S. Schermer, Bankruptcy Judges. 

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had written prepetition. After a trial, the United States Bankruptcy Court1 found that:

(a) Money Mart had not violated the stay; and (b) the payment on the checks

constituted an avoidable postpetition transfer of property of the estate. The

bankruptcy court ordered that the transferred amount of $308 be returned to the estate.

The United States Bankruptcy Appellate Panel for the United States Court of Appeals

for the Eighth Circuit (“BAP”)2

 affirmed. For the reasons set forth below, we also

affirm.

I. Background

On November 15, 2003, Thomas obtained four payday loans from Money Mart.

Each loan was in the amount of $50. For each loan, Thomas wrote a separate check

for $77, postdated to December 15, 2003. On November 18, 2003, Thomas filed for

Chapter 7 bankruptcy relief. On December 17, 2003, Money Mart presented the four

checks for payment to Thomas’s bank. The bank honored the checks. On January 14,

2004,Thomas commenced an adversary proceeding against Money Mart for violation

of the automatic stay. The bankruptcy court held that Money Mart was entitled to

enforce the checks under state law and that the act of presentment was excepted from

the stay pursuant to § 362(b)(11) of Title 11 of the United States Code (the

“Bankruptcy Code”). On appeal, Thomas argues that the bankruptcy court erred in

concluding that Money Mart had the right to enforce the checks under Missouri law

and thus erred in concluding that the checks were effectively “presented” for purposes

of the exception to the stay under § 362(b)(11).
3

Thomas also argues that Money Mart cannot avail itself of § 362(b)(11)

because the exception requires that the holder of the negotiable instrument take all

three actions listed in the subsection: (1) present the instrument; (2) give notice of its

dishonor; and (3) protest the dishonor. According to Thomas, the conjunction “and”

makes all three actions mandatory. There is no merit to this construction of the

statute. The three actions are merely listed in the order in which they would occur.

The statute reflects that an instrument holder is not limited to presenting the check, but

also may advise the debtor of its dishonor and of the holder’s position regarding that

dishonor, without violating the stay.

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II. Discussion

We review the bankruptcy court’s conclusions of law de novo and findings of

fact for clear error. Jefferson Co. v. Halverson (In re Paulson), 276 F.3d 389, 391

(8th Cir. 2002).

The Bankruptcy Code provides that a petition for bankruptcy relief operates

as an automatic stay of most types of actions to collect or otherwise enforce a

prepetition debt. 11 U.S.C. § 362(a). If a prepetition creditor acts in violation of the

stay in the case of an individual debtor, the debtor is entitled to recover actual

damages and, in appropriate circumstances, punitive damages. 11 U.S.C. § 362(h)

(2004). However, the Bankruptcy Code also provides certain exceptions to the stay,

including for “the presentment of a negotiable instrument and the giving of notice of

and protesting dishonor of such an instrument.” 11 U.S.C. § 362(b)(11). 

Money Mart asserts that its presentment of the checks is excepted from the stay

pursuant to § 362(b)(11). Thomas, however, contends that Money Mart’s actions do

not constitute effective “presentment.” She maintains that Money Mart had no right

to present the checks because she had a defense to enforcement of the checks under

state law. Thus, she argues, as the right to enforce by presentment is a matter of state

law, § 362(b)(11) cannot be used to shelter Money Mart’s actions.3

 Accordingly, the
4

Thomas concedes that the four checks are negotiable instruments under

Missouri law.

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The California statute provides that “the right to enforce the obligation of a

party to pay an instrument is subject to . . . [a] defense of the obligor based on . . .

discharge of the obligor in insolvency proceedings.” Cal. Com. Code § 3305(a).

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issue here does not involve interpreting § 362(b)(11). Rather, we are called upon to

interpret the state statute creating the right to enforce a negotiable instrument by

presentment and the defense to enforcement due to the bankruptcy discharge of the

obligor.

Thomas claims that she has a complete defense to enforcement because

Missouri law provides that a negotiable instrument is unenforceable against an obligor

with the defense of discharge in insolvency proceedings. Mo. Rev. Stat. § 400.3-

305(a)(1)(iv).4

 Thomas asserts that as a Chapter 7 debtor, she may assert the defense

of discharge even though at the time of presentment she had not received her

discharge. To support her interpretation of the statute, Thomas relies on Hines v.

Gordon (In re Hines), 198 B.R. 769 (9th Cir. BAP 1996), rev’d on other grounds, 147

F.3d 1185 (9th Cir. 1998). In Hines, the Ninth Circuit BAP applied an almost

identical California statute and summarily concluded that a creditor was not entitled

under state law to enforce an instrument against an obligor in bankruptcy, even though

the bankruptcy court had not yet ordered the discharge of the obligor. Id. at 772.5

We disagree with Hines. A plain reading of the Missouri statute shows that it,

like the California statute, requires the obligor to have received the discharge–not

merely to have the possibility of receiving a discharge in the future. Discharge is a

specific occurrence in a bankruptcy case, effected by court order, and is not

guaranteed merely by the filing of a petition for relief. For instance, discharge is not

granted when the debtor fails to meet the statutory requirements for discharge under

Bankruptcy Code § 727(a), or when the case is dismissed under Bankruptcy Code §
6

Ind. Code Ann. § 26-1-3-305 (repealed 1994) (currently enacted as Ind. Code

Ann. § 26-1-3.1-305) and Tenn. Code Ann. § 47-3-305.

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707. Hines, however, ignores this important distinction and effectively expands

“discharge” to include “potential discharge,” allowing the obligor to benefit from a

discharge it has not yet earned. Moreover, it interprets the state statute not to

complement federal bankruptcy law, see, e.g., 11 U.S.C. § 524(a) (providing that

discharge permanently enjoins the collection or enforcement of a prepetition debt), but

to undermine it. The practical effect of Hines is to render meaningless § 362(b)(11)

in any state with this common statutory language.

Hines stands in contrast to the decisions in Roete v. Smith (In re Roete), 936

F.2d 963, 966 (7th Cir. 1991) (applying Indiana law and holding that “[t]hese wellsettled principles point to the undeniable conclusion that [the check] is a ‘negotiable

instrument’ which the [creditors] ‘presented’ when they attempted to cash it. Even

[the debtor] does not dispute this common sense conclusion”) and Franklin v. Kwik

Cash of Martin (In re Franklin), 254 B.R. 718, 720 (Bankr. W.D. Tenn. 2000)

(applying Tennessee law and holding that “[i]t is also clear that Kwik Cash did not

violate the § 362 automatic stay when it presented [the debtor’s] check to First

Citizens”). Although both Indiana and Tennessee had statutes providing the defense

to enforcement of a negotiable instrument when the obligor was discharged in

insolvency proceedings,6

 neither court even addressed the possibility that the term

“discharge” could be so broadly read to include “future, potential discharge.”

Presumably, this is because a straight-forward reading of the statutes and the fact that

the debtor has not been discharged until the bankruptcy court orders discharge make

such a discussion unnecessary.
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Accordingly, because Missouri Revised Statute § 400.3-305(a)(1)(iv) provides

a defense to enforcement of a negotiable instrument only after the obligor has received

its discharge and Thomas had not received her discharge at the time Money Mart

presented her checks, Money Mart was not prohibited by Missouri law from enforcing

the debt. Further, because the Bankruptcy Code provides an exception to the stay for

presentment of negotiable instruments, Money Mart did not violate the stay.

III. Conclusion

The bankruptcy court did not err in determining that Money Mart did not

violate the stay by presenting Thomas’s checks postpetition. Accordingly, the

bankruptcy court’s order is affirmed.

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