stay is effective upon date of filing regardless

The "automatic stay" refers to 11 USC §362, a Bankruptcy Code provision which is effective upon the filing of a bankruptcy petition, and "is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions." HRRep No. 595, 95th Cong., 1st Sess. 340 (1978), reprinted in 1978 USCCAN 5787, 6296-97. The implications of the automatic stay are discussed in detail infra at ¶¶15-17.
fn2 . When DO filed for bankruptcy, one of its duties was to compile a list of its creditors, who then received formal notice of the filing of DO’s bankruptcy petition. See 11 USC §521(1). SMI was not a creditor and did not appear on this list or receive notice from the bankruptcy court; however, the automatic stay was applicable to SMI even in the absence of formal notice. See 11 USC §362(a) (providing that stay applies to all entities); In re O’Connor, 42 BR 390, 392 (BankrEDArk 1984) (stating that the stay is effective upon date of filing regardless of whether there has been formal service or notice of the filing); In re Boston Business Machs., 87 BR 867, 871 (BankrEDPa 1988) ("[K]nowledge of the bankruptcy filing is the legal equivalent of knowledge of the stay[.]"); see also O’Connor, 42 BR at 393 (noting that 11 USC §362(h) authorizes recovery of compensatory damages, costs, and attorney’s fees for violation of the automatic stay). When the entity violating the automatic stay has knowledge of the stay, the violation is willful. Id. at 392. A willful violation may support an award of punitive damages. 11 USC §362(h); In re Stucka, 77 BR 777, 784 (BankrCDCal 1987).
fn3 . Bank and DO reached a settlement during the bankruptcy proceedings; part of that agreement included the assignment of certain accounts receivable, including the amount owed by SMI.
fn4 . Furthermore, Bank set the stage for a punitive damages award by requesting official notice of the stay be given to SMI. See supra note 2.
fn5 . SMI could have requested relief from the automatic stay as early as April 28, 1992, the date it gave notice of intent to terminate the lease. The bankruptcy court gave notice of the automatic stay on June 8, 1992, the same day Bank filed its motion. SMI’s first response was a motion for determination of inapplicability of the stay, filed on June 12. It was not until June 17 that SMI sought relief from the stay. Therefore, the delay experienced by SMI in removing its property was avoidable.
fn6 . At oral argument, SMI stated that the transcript from the first hearing was 144 pages long; this may or may not be true — SMI failed to file a transcript with this court. On its own motion, the bankruptcy court raised the issue of whether termination of the lease was itself a violation of the automatic stay. It is possible that time expended resolving that question contributed to the length of the hearing or that ownership became a key issue because of SMI’s position that the stay did not apply to the removal of its property. The appellant’s burden cannot be met without the transcript. See Baltodano v. North Cent. Health Serv., Inc., 508 NW2d 892, 894-95 (SD 1993):
[T]he ultimate responsibility for presenting an adequate record on appeal falls upon the appellant. Failure to timely order a transcript constitutes a waiver of the right to a transcript. Where an appellant waives the right to a transcript by failing to order it, the only review which can take place is a review of that portion of the record which was before the circuit court. Where the record contains no transcript, the record on appeal is confined to those pleadings and papers transmitted from the circuit court. … . When confronted with incomplete records, our presumption is that the circuit court acted properly.(Citations and internal quotations omitted).
fn7 . The record does not disclose the amount of time spent on either issue because, as noted supra at note 6, SMI failed to file a transcript of the hearing.
fn8 . This court has previously explained the tort of abuse of process in detail:
The definition of abuse of process can be found in the Restatement (Second) of Torts §682 (1977):One who uses a legal process whether criminal or civil, against another primarily to accomplish a purpose for which it is not designed, is subject to liability to the other for harm caused by the abuse of process.We have previously adopted 682 of the first edition of the Restatement of Torts. Layton v. Chase, 82 SD 270, 144 NW2d 561 (1966). Now, we adopt section 682, and comments a and b of the Restatement (Second) of Torts. The Restatement (Second) of Torts section 682 is identical to the Restatement of Torts section 682 in all respects except for the addition of the word "primarily" in the second edition. This revision narrows the claim of abuse of process as explained in new comment b:
b. "Primarily." The significance of this word is that there is no action for abuse of process when the process is used for the purpose for which it is intended, but there is an incidental motive of spite or an ulterior purpose of benefit to the defendant … For abuse of process to occur there must be use of the process for an immediate purpose other than that for which it was designed and intended. The usual case of abuse of process is one of some form of extortion, using the process to put pressure upon the other to compel him to pay a different debt or to take some action or refrain from it.
An additional commentary in the Restatement (Second) of Torts, section 682 app., attempted to clarify the essence of abuse of process:
Some act or threat directed to an immediate objective not legitimate in the use of the process is required, and the defendant is not liable if he has done no more than carry the process to its authorized conclusion, even with bad intentions.

Published by loclock7

61 year old father of three and 6 grandchildren Former SC4 Student

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