Crouser v. BAC Home Loans Servicing, L.P. (In re Crouser)

476 B.R. 340, 2012 WL 3637145, 2012 Bankr. LEXIS 3821
CourtUnited States Bankruptcy Court, S.D. Georgia
DecidedAugust 20, 2012
DocketBankruptcy No. 10-10739; Adversary No. 11-01047
StatusPublished
Cited by4 cases

This text of 476 B.R. 340 (Crouser v. BAC Home Loans Servicing, L.P. (In re Crouser)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Crouser v. BAC Home Loans Servicing, L.P. (In re Crouser), 476 B.R. 340, 2012 WL 3637145, 2012 Bankr. LEXIS 3821 (Ga. 2012).

Opinion

OPINION AND ORDER

SUSAN D. BARRETT, Chief Judge.

Before the Court is an Amended Objection to Plaintiffs Motion to Approve Settlement and Dismiss with Prejudice filed by the Chapter 13 Trustee (“Trustee”) arguing that proceeds received in the settlement of this adversary proceeding under 11 U.S.C. § 362(k) are property of the bankruptcy estate. This is a core proceeding pursuant to 28 U.S.C. § 157(b) and the Court has jurisdiction pursuant to 28 U.S.C. § 1334.

FINDINGS OF FACT

George Crouser (“Debtor”) filed a voluntary bankruptcy petition under chapter 13 of the Bankruptcy Code on March 27, 2010. The case was confirmed on August 24, 2010, providing a 0% dividend to unsecured creditors under the plan. On August 30, 2011, Debtor commenced this adversary proceeding against Bank of America (“Bank of America”), a secured creditor, for post-confirmation violations of the automatic stay. A settlement agreement was reached in the adversary proceeding by which the Debtor would receive $25,000.00, a portion of which would [341]*341be designated for payment of attorney fees and the remainder being turned over to either the debtor or the trustee for distribution depending on the outcome of this order. Debtor filed a motion to approve the settlement and dismiss the adversary proceeding. The Trustee objects to approval of the Debtor receiving any of the settlement proceeds arguing such funds are property of the bankruptcy estate since Debtor does not have any remaining exemptions. For the reasons set forth below, I agree with the Trustee.

CONCLUSIONS OF LAW

The issue is whether the settlement proceeds from this post-confirmation § 362(k) stay violation action are property of the bankruptcy estate, subject to distribution to Debtor’s unsecured creditors. Section 362(k) of the Bankruptcy Code provides in relevant part:

(k)(l) Except as provided in paragraph (2), an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.

11 U.S.C. § 362(k).1 Debtor argues § 362(k) claims, by their nature, cannot possibly exist at the commencement of a bankruptcy proceeding, therefore, such claims cannot be property of the bankruptcy estate. For the reasons discussed below and under the facts of this case, I disagree.

Under § 541(a)(1) of the Bankruptcy Code, property of the bankruptcy estate includes “all legal and equitable interests of the debtor in property as of commencement of the case.” 11 U.S.C. § 541(a)(1). Undeniably, the cause of action for violation of the automatic stay cannot exist at the commencement of the case because the stay in a chapter 13 case begins at commencement — that is, filing of the bankruptcy petition. However, 11 U.S.C. § 1306 states:

(a) Property of the [chapter 13 bankruptcy] estate includes, in addition to the property specified in section 541 of this title—
(1) All property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted ...

11 U.S.C. § 1306(a)(1). In statutory construction, “[o]ur highest responsibility ... is to read the laws in a consistent way.” Chisom v. Roemer, 501 U.S. 380, 417, 111 S.Ct. 2354, 115 L.Ed.2d 348 (1991) (Scalia, dissenting). Reading § 1306(a)(1) and § 541(a)(1) as consistent with each other, § 1306(a)(1) expands the scope of § 541(a)(1) in chapter 13 bankruptcy cases to include “all legal and equitable interests of the debtor” both at commencement of the case and those “that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted.” 11 U.S.C. § 541(a)(1); 11 U.S.C. § 1306(a)(1). Section 1306 alters the time limitation set forth in Section 541(a)(1) to include all such property that a chapter 13 debtor acquires after the commencement of the bankruptcy case.

While section 541 applies to all bankruptcy cases filed under any chapter of the Bankruptcy Code, section 1306 provides for an expansion of that provision applicable only to chapter 13 cases. Debtor argues § 541 and § 1306 include all legal or equitable interests available to the Debtor [342]*342at commencement of the bankruptcy case. Since a stay violation, by its very nature, is not available at the commencement of the bankruptcy case, Debtor argues it cannot be property of the bankruptcy estate. I disagree and find such interpretation ignores the purpose of § 1306(a)(1) with respect to chapter 13 cases.

Debtor cites the Labuzan case for the proposition that “Congress could have easily included § 362(k) claims under the ‘property of the estate’ umbrella of § 541” but it did not. See St. Paul Fire & Marine Ins. Co. v. Labuzan, 579 F.3d 533, 545 (5th Cir.2009). Unlike the case now before the Court, the Labuzan case involved a determination of what constituted property of a chapter 7 case as opposed to a chapter 13 case and so the court did not address 11 U.S.C. § 1306. See Id. Unlike the case sub judice, chapter 7 cases have no corresponding provision to 11 U.S.C. § 1306(a)(1).

This interpretation of § 541(a)(1) and § 1306 is further supported by the principles set forth by the Eleventh Circuit in the Waldron case. See In re Waldron, 536 F.3d 1239 (11th Cir.2008). The Eleventh Circuit found that while property of the bankruptcy estate vests in the debtor at confirmation of the chapter 13 plan, property acquired by the debtor after confirmation comes into the estate under 11 U.S.C. § 1306(a) until the case is dismissed, closed, or converted. Id. at 1243. Under the Waldron analysis, these settlement proceeds become part of the bankruptcy estate. Id.; see also In re Key, 465 B.R. 709, 712 (Bankr.S.D.Ga.2012) citing In re Walsh, 2011 WL 2621018 at *2 (Bankr.S.D.Ga. June 15, 2011) (“[Sjection 1306(a)(1) clearly alters § 541(a)(1) ...

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Bluebook (online)
476 B.R. 340, 2012 WL 3637145, 2012 Bankr. LEXIS 3821, Counsel Stack Legal Research, https://law.counselstack.com/opinion/crouser-v-bac-home-loans-servicing-lp-in-re-crouser-gasb-2012.