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Bankruptcy Court Rules That Mere Possession Of Real Property Is An
Equitable Property Interest Protected By The Automatic Stay, That Evictions
Under Code of Civil Procedure § 715.050 Are Subject To The Automatic Stay,
And
That § 715.050 Is Unconstitutional.
By: Steven B. Haley, Esq.
Adleson, Hess & Kelly
shaley@ahk-law.com
www.ahk-law.com
In the case of In re
Butler (Bktcy., C.D. Cal. 2002) 2002 WL 77038, the debtor filed a
Chapter 7 petition in bankruptcy court in order to stay eviction from her
apartment. The unlawful detainer judgment had been entered against debtor,
and the writ of possession had been issued prior to the filing of the Ch. 7
petition. The Sheriff’s Dept. had served the Notice to Vacate on the same
day that the debtor filed the petition. The Sheriff also filed a Notice of
Enforcement of Eviction, which provided that the Sheriff could evict debtor
even if she filed a bankruptcy petition. The debtor informed the Sheriff’s
Dept. of the filing of the bankruptcy petition, but they advised her that
they intended to proceed with the eviction. Debtor filed an emergency
motion in bankruptcy court for a stay of the eviction. The bankruptcy court
issued the stay, pending further hearings. The judgment creditor filed a
motion for relief from the automatic stay, which was granted.
Clearly, since the debtor’s
interest in the property (the apartment unit) had been terminated by the
unlawful detainer judgment, she had no legal interest in the
property. However, the bankruptcy court ruled that debtor’s mere possession
of the premises, even without a legal right to possession, creates an
equitable interest protected under California law. This equitable
interest qualifies as property of the bankruptcy estate under 11 U.S.C. §
541(a)(1), and is thereby protected by the automatic stay that goes into
effect upon the filing of the bankruptcy petition. The bankruptcy court
relied upon the decision in In re Di Giorgio (C.D. Cal. 1996) 200 B.R.
664, 670.
The California
Legislature had enacted Code of Civil Procedure § 715.050, as a means of
avoiding the effect of the automatic stay. This section provided for
enforcement of a writ of possession (but not a writ of execution for money
damages) notwithstanding the filing of a bankruptcy petition. This section
is explicitly contrary to the automatic stay under 11 U.S.C. §362(a). The
Supremacy Clause of the U. S. Constitution provides that the federal
bankruptcy code preempts state statutes that are contrary to the federal
statute’s provisions. Code of Civ. Proc. § 715.050 represents an attempted
end run around the automatic stay. The bankruptcy court ruled that the
statute is unconstitutional.
The court warned that judgment creditors who attempt to
proceed with an eviction without first obtaining relief from the automatic
stay run the risk of liability for violating the automatic stay.
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