Opinion ID: 769339
Heading Depth: 3
Heading Rank: 2

Heading: Property Interest Extinguished When Order Was Signed

Text: 39 In addition to its conclusions regarding the effect of the April 15, 1996 judgment, the district court held that, assuming the Pettits had some vestigial property interest remaining in the funds after judgment was entered against them, this interest was extinguished when Judge Illston signed the Release of Funds order on May 21, 1996, hours before the Pettits filed for bankruptcy. Specifically, the court noted that, although the Trust Funds did not actually receive the check from the clerk of the court until after the bankruptcy petitions were filed, it was the judicial act of signing the order to release the funds that was relevant. The clerk's subsequent involvement was only to issue the check, which was not a discretionary act and was thus purely ministerial. The district court held that this ministerial act had no effect on the ownership of the funds, which had already been legally transferred to the Trust Funds when Judge Illston signed the order. We agree. 40 In its analysis, the district court applied what other circuits have termed the ministerial act exception to the automatic stay provisions of the bankruptcy code. See, e.g., Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 97374 (1st Cir. 1997) (noting that ministerial acts, even if undertaken in a state judicial proceeding subsequent to a bankruptcy filing, do not fall within the proscription to the automatic stay); Rexnord Holdings, Inc. v. Biderman, 21 F.3d 522, 527 (2nd Cir. 1994) (holding that act of entry of judgment by court clerk was ministerial act and did not violate stay). This exception stems from the common-sense principle that a judicial proceeding within the meaning of section 362(a) ends once a decision on the merits has been rendered. Ministerial acts or automatic occurrences that entail no deliberation, discretion, or judicial involvement do not constitute continuations of such a proceeding. We now adopt the ministerial act exception for this circuit and apply it to the case before us. 41 Applying the logic of the exception, the judicial proceeding in this case ended once Judge Illston signed the order to release the funds. The clerk of the court had no discretion as to whether to issue the check to the Trust Funds and her act was, therefore, purely ministerial. As such, because the judicial act concluded when Judge Illston signed the order, which occurred hours before the bankruptcy filings, the registry funds never became property of the bankruptcy estate and the Trust Funds did not violate the automatic stay. 42 This result comports with Judge Illston's intent at the proceeding. It is clear that Judge Illston intended for the registry funds to be transferred to the Trust Funds upon signing the order, to avoid any overlap with a bankruptcy filing. Specifically, when the Pettits refused to stipulate to not filing for bankruptcy, Judge Illston explained: Okay. The consequence of that will be, I'll sign the order releasing the funds. The clerk's subsequent act of issuing the check was clearly outside the judicial function and, thus, ministerial. See Rexnord Holdings, 21 F.3d at 527. 43 To hold otherwise and conclude that the registry funds did not become the Trust Funds' property until the clerk actually issued the check and physically handed it to Mr. Davis, the Trust Funds' attorney, would result in an arbitrary outcome. If the clerk of the court had not gone home early on May 21, 1996, the Trust Fundswould have been able to obtain their check for $523,117.69 immediately, before the Pettits had an opportunity to file for bankruptcy. Instead, because the clerk was not available, counsel for the Trust Funds came back the following morning. By this time, the bankruptcy filings were already complete. The outcome of this case should not hinge on the clerk's whereabouts on a given afternoon, and the arbitrariness of such a result further supports our decision to apply the ministerial act exception. 44 The Pettits' arguments fail. The district court's analysis, including its use of the ministerial act exception, was correct. Accordingly, we affirm the district court and conclude that the Trust Funds did not violate the automatic stay provisions under section 362 2 .