Opinion
Case No. 1-98-02877, Adv. No. 1-01-00195A
March 18, 2002
MEMORANDUM
Factual and Procedural History
Jan Marie Harman (Debtor) filed a Chapter 13 Petition on June 9, 1998. The Commonwealth of Pennsylvania, Department of Labor and Industry, Bureau of Employer Tax Operations (the Deapartment) was listed as an unsecured creditor. Notice of the filing of the Petition was sent to the address to which the Debtor was to have made her pre-petition payments to the Department. The Department filed a proof of claim.
In September, 1999, Debtor's home was destroyed by fire. Unable to make her Chapter 13 Plan payments, she became subject to dismissal of her case. On November 26, 1999, an Order dismissing her case was entered upon Motion of the Trustee. The Order dismissing the case resulted in the expiration of the automatic stay. Thus, on December 29, 1999, the Department filed a lien against the Debtor's real property. On December 10, 1999, however, Debtor filed a Motion to reconsider the dismissal Order, based on Debtor's anticipated receipt of insurance funds. On January 24, 2000, the Trustee withdrew the his certificate of default. On February 1, 2000, the Court reinstated Debtor's case.
The matter before me now is Debtor's Complaint seeking damages from the Department for its alleged violation of the automatic stay. The violation alleged is the imposition of the lien. The Debtor argues that the stay was retroactively reinstated when the case was reinstated. Within her Complaint, Debtor also requests that the lien be satisfied. The Department filed an answer and the matter was submitted for decision on briefs. It is now ripe.
I have jurisdiction pursuant to 28 U.S.C. § 157 and 1334. This matter is core pursuant to 28 U.S.C. § 157(b)(2)(A) and (K).
Discussion
The first dispute in this case concerns whether the Department's lien should be avoided. Debtor argues that avoidance is appropriate because the reinstatement of the case had the effect of reinstating the stay. With the stay in place the lien is void ab initio. The Department does not dispute that, as a general principle, a lien imposed while the stay is in place is void. The Department does not agree, however, that the reinstatement of the case had the effect of retroactively reinstating the stay. That is the precise issue to be decided.
In re Nagel 245 B.R. 657 (D.Ariz., 1999) involved a similar situation. In Nagel, an Order had been entered by the Bankruptcy Court retroactively reinstating debtor's Chapter 11 case, after it had been dismissed based upon debtor's failure to file required documents. The Order was made retroactive in order to void a deed of trust foreclosure sale conducted after the case had previously been dismissed. On appeal, the District Court held that bankruptcy court could not retroactively reinstate the case, or the stay. The Court stated:
A review of the case law provided by the parties and the court's own research reveals no basis in law for the proposition that the automatic stay continues after dismissal of a case. . . . [T]he bankruptcy court's retroactive reinstatement of the "automatic stay" is squarely at odds with the plain reading of subsection 362(c)(2) and Congress' intent that the parties be returned to the status quo ante. By "undoing" the return to the status quo ante through the retroactive application of the stay, the bankruptcy court engaged in a kind of judicial time travel that cannot be reconciled with the law. This was not a simple matter of a nunc pro tunc order accomplishing that which should have been done previously. Rather, the order . . . divested otherwise vested rights from parties previously properly restored to the status quo ante pursuant to subsection 362(c)(2). Specifically, the order voided the trustee's sale of the . . . property. . . . Because the . . . order was inconsistent with the legal effect of dismissal of a bankruptcy case, the bankruptcy court erred in granting the debtor's second motion to reinstate the above-captioned bankruptcy case retroactive[ly] . . . the case having been properly dismissed for failure to file required documents.Id., at 662. See also, In re Jennings 2001 WL 1806980, *3 (Bkrtcy.D.S.C., 2001) (even when Court vacated dismissal of Chapter 13 case, it did not retroactively reinstate stay during period while case was dismissed); In re Frank, 254 B.R. 368, 374 (Bankr.S.D.Tex. 2000) (when a dismissed case is reinstated, the automatic stay is not retroactively reinstated with respect to creditor activity that occurred between dismissal and reinstatement). Rather, by reinstating a case, the Court reimposes the automatic stay from the date of reinstatement. In re Diviney, 225 B.R. 762, 771 (BAP 10th Cir. 1998); In re Nail, 195 B.R. 922, 929 (Bankr.N.D.Ala. 1996). It is only when an Order dismissing a case was itself entered in error or otherwise procedurally defective that the stay can be held to be reimposed retroactively upon reinstatement. In re Krueger, 88 B.R. 238 (9th Cir. BAP 1988).
For this reason, I conclude that the lien imposed by the Department in this case is not voidable as having been entered in violation of the automatic stay. Obviously, then, the Department cannot be held to have violated the stay by having the lien imposed.
The instant Complaint shall be dismissed. An appropriate Order follows.
ORDER
AND NOW, this 18th day of March, 2002, the Complaint in the above-captioned adversary case is hereby dismissed.