Source: https://casetext.com/case/in-re-schwartz-5
Timestamp: 2020-02-22 11:09:44
Document Index: 404630564

Matched Legal Cases: ['§ 362', '§ 362', '§ 362', '§ 549', '§ 549', '§ 101', '§ 541', '§ 6672', '§ 362', '§ 549', '§ 362', '§ 549', '§ 362', '§ 362', '§ 549', '§ 362']

In re Schwartz, 954 F.2d 569 | Casetext
Stallings v. Spring Meadows Apt. Complex
This distinction is important because if the filing of the complaint in violation of the automatic stay was…
40235 Washington St. Corp. v. Lusardi
Washington Street appealed the Court's rulings. While the appeal was pending, the Ninth Circuit overruled the…
481 Citing Cases
Full title:IN RE: RUSSELL SCHWARTZ; LINDA SCHWARTZ, DEBTORS. RUSSELL SCHWARTZ; LINDA…
954 F.2d 569 (9th Cir. 1992)
holding that an IRS tax assessment that violated the automatic stay was void
The sole issue before us is whether creditor violations of the Bankruptcy Code's automatic stay provision are void or simply voidable. If violations of the automatic stay are void, the IRS tax assessment made against the Schwartzes in the Chapter 11 bankruptcy is without effect. If, however, such violations are merely voidable, the assessment is valid because the Schwartzes made no attempt to have the assessment voided in the Chapter 11 bankruptcy. The issue in this appeal is one of law; we review the BAP's conclusions of law de novo. In re Taylor, 884 F.2d 478, 480 (9th Cir. 1989); In re 268 Ltd., 877 F.2d 804, 805 (9th Cir. 1989).
It is undisputed that the IRS tax assessment violated the Bankruptcy Code's automatic stay provision. 11 U.S.C. § 362(a)(4)-(6) (1988). The Ninth Circuit has stated generally that violations of the automatic stay are "void". See, e.g., In re Shamblin, 890 F.2d 123, 125 (9th Cir. 1989) ("Judicial proceedings in violation of [the] automatic stay are void."); In re Stringer, 847 F.2d 549, 551 (9th Cir. 1988) ("Any proceedings in violation of the automatic stay in bankruptcy are void."). Although Shamblin and Stringer suggest that violations of the automatic stay are void and not merely voidable, the void/voidable distinction was not dispositive in those cases, and the Ninth Circuit has not directly addressed the precise issue presented in this appeal. See Shamblin, 890 F.2d at 124-26 (debtor affirmatively challenged and litigated potential automatic stay violation); Stringer, 847 F.2d at 550 (same).
(a) . . . a petition filed under . . . this title . . . operates as a stay, applicable to all entities, of —
Our decision today clarifies this area of the law by making clear that violations of the automatic stay are void, not voidable. See In re Williams, 124 B.R. 311, 316-18 (Bankr.C.D.Cal. 1991) (recognizing that the Ninth Circuit adheres to the rule that violations of the automatic stay are void and criticizing the BAP decision in this case).
H.R.Rep. No. 595, 95th Cong., 1st Sess. 340 (1978), reprinted in 1978 U.S.Code Cong. Admin.News 5787, 5963, 6296-97 (emphasis added).
The district court in In re Garcia, 109 B.R. 335 (N.D.Ill. 1989), explained that if violations of the automatic stay were merely voidable, creditors would be encouraged to violate the stay:
Our conclusion is supported by the great weight of authority. The majority of courts have long stated that violations of the automatic stay are void and of no effect. See, e.g., Kalb v. Feuerstein, 308 U.S. 433, 438, 60 S.Ct. 343, 345-46, 84 L.Ed. 370 (1940); Ellis v. Consolidated Diesel Elec. Corp., 894 F.2d 371, 372-73 (10th Cir. 1990); In re 48th St. Steakhouse, 835 F.2d 427, 431 (2d Cir. 1987), cert. denied, 485 U.S. 1035, 108 S.Ct. 1596, 99 L.Ed.2d 910 (1988); Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir. 1982). Indeed, many courts have specifically held that violations of the automatic stay are void and not merely voidable. In re Advent Corp., 24 B.R. 612, 614 (Bankr. 1st Cir. 1982); Richard v. Chicago, 80 B.R. 451, 453 (N.D.Ill. 1987); In re Coleman Am. Cos., 26 B.R. 825, 831 (D.Kan. 1983); In re Pettibone Corp., 110 B.R. 848, 853 (Bankr.N.D.Ill. 1990), aff'd sub nom. Pettibone Corp. v. Baker, 119 B.R. 603 (N.D.Ill.), vacated on other grounds sub nom. Pettibone Corp. v. Easley, 935 F.2d 120 (7th Cir. 1991); In re Miller, 10 B.R. 778, 780 (Bankr.D.Md. 1981), aff'd, 22 B.R. 479 (D.Md. 1982).
The courts which have found the automatic stay voidable rather than void have relied primarily on sections 362(d) and 549 of the Bankruptcy Code to support their conclusion. See, e.g., Sikes v. Global Marine, Inc., 881 F.2d 176, 178-79 (5th Cir. 1989) (concluding that violations of the automatic stay are voidable); In re Oliver, 38 B.R. 245, 248 (Bankr.D.Minn. 1984). These courts have reasoned that (1) the court's power under section 362(d) to annul an automatic stay and (2) the trustee's duty under section 549 to bring an action to void an unauthorized transfer are inconsistent with violations of the stay being void and thus demonstrate that violations of the automatic stay are merely voidable. We find this reasoning erroneous.
On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay . . .
Statements from leading authorities on bankruptcy generally support this conclusion: "The use of the word `annulling' [in § 362(d)] permits the [court's] order to operate retroactively, thus validating actions taken by a party at a time when he was unaware of the stay. Such actions would otherwise be void." 2 Collier on Bankruptcy § 362.07 (emphasis added). With that understanding, section 362(d) gives the court the power to ratify retroactively any violation of the automatic stay which would otherwise be void. Simply put, there is nothing remarkable or inconsistent about the normal operation of the automatic stay being subject to a specific statutory exception such as that found in section 362(d). See Sikes, 881 F.2d at 180 (Johnson, J., dissenting) (noting that although violations of the automatic stay are void, "a bankruptcy court may validate an otherwise void filing in violation of the automatic stay").
The more important potential conflict with interpreting the automatic stay as voiding violations is provided by section 549 of the Code. See, e.g., Sikes, 881 F.2d at 179 (court determining that § 549 is inconsistent with automatic stay voiding violations). Section 549 allows the bankruptcy trustee to avoid certain authorized transfers and all unauthorized transfers of estate property. Section 549 includes a statute of limitation which requires the trustee to commence an action to void a transfer either within two years of the transfer or before the close of the case, whichever is earlier. 11 U.S.C. § 549(d). The Code's definitions dictate that section 549 can apply to a wide variety of transactions. "Transfer" is defined as "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property. . . ." 11 U.S.C. § 101(50) (1988). Further, "property of the estate" includes all legal interests in property. 11 U.S.C. § 541 (1988).
On the surface, this conflict appears troublesome. However, a straightforward analysis of section 549 reveals that it is not intended to cover the same type of actions prohibited by the automatic stay nor rendered moot by section 362's voiding of all automatic stay violations. Section 549 applies to unauthorized transfers of estate property which are not otherwise prohibited by the Code. Garcia, 109 B.R. at 338-40; In re R L Cartage Sons, 118 B.R. 646, 650-51 (Bankr.N.D.Ind. 1990) (adopting Garcia analysis). In most circumstances, section 549 applies to transfers in which the debtor is a willing participant. See Garcia, 109 B.R. at 339. For example, in a transfer unrelated to any antecedent debt, the debtor may sell a portion of the estate's property to a third person. The trustee has the power to avoid such a transfer under section 549.
Finally, the government argues in the alternative that its violation of the automatic stay falls within the narrow exception for technical violations of the automatic stay carved out by In re Brooks, 79 B.R. 479 (Bankr. 9th Cir. 1987), aff'd, 871 F.2d 89 (9th Cir. 1989). See also In re Wingo, 89 B.R. 54, 57 (Bankr. 9th Cir. 1988). In Brooks, the BAP held that a minor technical violation of the stay — the rerecording of a deed to correct a property description mistake — was voidable rather than void. However, on appeal we did not address the void/voidable issue and instead decided the case on the issue of standing, 871 F.2d at 90, and we expressed no opinion on the validity of the exception recognized by the BAP in Brooks. Because the BAP's Brooks. reasoning is not dispositive in this case, we again refrain from addressing the validity of the Brooks exception.
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