In re: Miguel Benitez v. n ( 2020 )

United States Bankruptcy Appellate Panel
For the Eighth Circuit
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No. 19-6030
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In re: Miguel Ignacio Benitez
Debtor - Appellant
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Appeal from United States Bankruptcy Court
for the Western District of Missouri - St. Joseph
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Submitted: January 14, 2020
Filed: February 4, 2020
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Before SCHERMER, NAIL and SHODEEN, Bankruptcy Judges.
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SCHERMER, Bankruptcy Judge
Miguel Ignacio Benitez (Debtor) appeals the bankruptcy court’s 1 dismissal of
his Chapter 13 bankruptcy case. We have jurisdiction over this appeal from the final
order of the bankruptcy court. See 28 U.S.C. § 158(b). For the reasons that follow,
we affirm.
ISSUE
The issue on appeal is whether the bankruptcy court properly dismissed the
Debtor’s Chapter 13 case as void because it was a violation of the automatic stay in
his pending Chapter 7 bankruptcy case. We hold that it did.
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The Honorable Brian T. Fenimore, Chief Judge, United States Bankruptcy Court
for the Western District of Missouri.
BACKGROUND
In 2017, the Debtor filed a Chapter 7 bankruptcy petition. The bankruptcy
court granted the motion for relief from the automatic stay filed by a secured creditor,
PBS Credit Services, Inc. (Creditor), with respect to real property (Property) in
which the Debtor held an interest. The court also denied the Debtor’s motion “for
reconsideration of” the order granting stay relief.
Less than two weeks after the bankruptcy court denied the Debtor’s request to
reconsider its stay relief order, and while his Chapter 7 case was pending, the Debtor
filed his Chapter 13 petition. He had not obtained a Chapter 7 discharge and the
Chapter 7 trustee had not abandoned the Property. The bankruptcy court promptly
issued an order requiring the Debtor to appear and show cause why his Chapter 13
case should not be dismissed as a violation of the automatic stay in his already-
pending Chapter 7 case. After a hearing at which the Debtor appeared and argued,
the bankruptcy court dismissed the Debtor’s Chapter 13 case as a violation of the
automatic stay in his pending Chapter 7 case. It also offered alternative grounds for
dismissal.
STANDARD OF REVIEW
“We review the bankruptcy court’s legal conclusions de novo and its factual
findings for clear error.” Ad Hoc Comm. of Non-Consenting Creditors v. Peabody
Energy Corp. (In re Peabody Energy Corp.), 933 F.3d 918, 924 (8th Cir. 2019). The
bankruptcy court’s decision to dismiss a Chapter 13 case is reviewed for an abuse of
discretion. Marshall v. McCarty (In re Marshall), 596 B.R. 366, 368 (B.A.P. 8th
Cir. 2019), aff’d, No. 19-1634, 2019 WL 4657414 (8th Cir. 2019). “[T]he
applicability of the automatic stay to a pending matter is an issue of law.” LaBarge
v. Vierkant (In re Vierkant), 240 B.R. 317, 320 (B.A.P. 8th Cir. 1999).
DISCUSSION
When a debtor files a bankruptcy petition, Bankruptcy Code § 362(a)(3)
imposes an automatic stay of “any act . . . to exercise control over property of the
estate.” 11 U.S.C. § 362(a)(3). The stay is “applicable to all entities,” including the
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Debtor. 11 U.SC. §362(a). The Eighth Circuit Court of Appeals has included within
the scope of the stay attempts to exercise control over property of the estate. Knaus
v. Concordia Lumber Co., Inc. (In re Knaus), 889 F.2d 773, 774 (8th Cir. 1989)
(quoting 11 U.S.C. §362(a)(3)) (“Upon the filing of a bankruptcy petition, section
362 imposes automatically a stay upon most actions by creditors to satisfy their
claims against the debtor, including attempts ‘to exercise control over property in
the estate.’ ”).
As the bankruptcy court stated, other than the relief obtained by the Creditor,
the automatic stay in the Debtor’s Chapter 7 case was still in place when the Debtor
filed his Chapter 13 petition. 11 U.S.C. §362(c)(1) and (2) (In the case of an
individual Chapter 7 debtor, generally the automatic stay “of an act against property
of the estate . . . continues until such property is no longer property of the estate,”
and the automatic “stay of any other act . . . continues until the earliest of . . . the
time the case is closed;. . . the time the case is dismissed; or . . . the time a discharge
is granted or denied.”).
Based on the facts of this case, we agree with the bankruptcy court that the
filing of the Debtor’s Chapter 13 case violated the automatic stay in his Chapter 7
case and was void. Vierkant, 240 B.R. at 325 (“[A]n an action taken in violation of
the automatic stay is void ab initio.”). By filing his Chapter 13 petition, the Debtor
attempted to exercise control over his interest in the Property, which is undisputed
to be property of his Chapter 7 bankruptcy estate. 2 The record shows that the Debtor
treated the Chapter 7 and Chapter 13 estates as co-equal. As he admits in his brief
on appeal, the Debtor listed his interest in the Property as an asset on his Chapter 13
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We take no position on the question of whether the filing of Debtor’s chapter 13
petition had any effect on the property of the bankruptcy estate in his pending chapter
7 case. See In re Shankman, 382 B.R. 591, 595 (Bankr. E.D.N.Y. 2008) (“[I]f an
asset is property of the estate in a Chapter 7 case, it is not property of the debtor at
the time of the filing of the subsequent Chapter 13 case, and therefore does not
become property of the estate in the Chapter 13 case. In other words, an asset cannot
be property of the estate in two bankruptcy cases at the same time.”).
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schedules. And, the record supports the bankruptcy court’s observation that the
Debtor filed his Chapter 13 case as an effort to stop the foreclosure of the Property
noticed by the Creditor after it obtained stay relief in the Debtor’s Chapter 7 case.
See In re Munroe, 568 B.R. 631 (Bankr. E.D. Mich. 2017) (Debtors’ filing of
Chapter 13 case violated the automatic stay in their still-pending Chapter 7 case
where it was obvious debtors filed the Chapter 13 case in an effort to obtain a stay
against and prevent a foreclosure sale by creditor who already obtained stay relief in
the Chapter 7 case). As the bankruptcy court found, the Debtor filed his Chapter 13
case less than two weeks after the court denied the Debtor’s motion to reconsider the
order granting relief from the stay to the Creditor.
In its oral ruling, the bankruptcy court offered alternative grounds for
dismissing the Debtor's Chapter 13 case. However, in its order to show cause, the
bankruptcy court only directed the Debtor to appear and show cause why his Chapter
13 case should not be dismissed as a violation of the automatic stay in his pending
Chapter 7 case. Any consideration of these alternative grounds is therefore
inappropriate. Young v. Young (In re Young), 507 B.R. 286, 296-97 (B.A.P. 8th Cir.
2014) (reversing imposition of sanctions under 11 U.S.C. § 105, where bankruptcy
court's order to show cause did not mention possibility of being sanctioned for
alleged misrepresentations during hearing on order to show cause); Morgan v.
Goldman (In re Morgan), 375 B.R. 838, 849-851 (B.A.P. 8th Cir. 2007) (limiting
review of bankruptcy court's order to show cause to grounds set forth therein);
Crofford v. Conseco Fin. Serv'g Corp. (In re Crofford), 301 B.R. 880, 885 (B.A.P.
8th Cir. 2003) (limiting review of bankruptcy court's order to show cause to analysis
of FED. R. BANKR.P. 9011(c)(1)(B), where order to show cause did not mention
either bankruptcy court's inherent powers or 11 U.S.C. § 105).
CONCLUSION
For the reasons stated, the decision of the bankruptcy court is AFFIRMED.
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