Opinion
No. B79-1540S
April 8, 1980
Former Bankruptcy Act — Arrangements-Real Property — Automatic Stay — Applicability to Governmental Agency — Small Business Administration
The automatic stay under Chapter XII, Bankruptcy Rule 12-43 of the Bankruptcy Act is applicable to governmental agencies. Therefore, the Small Business Administration violated the automatic stay when it proceeded with a deed of trust sale of the debtor's property after notice of his having filed a Chapter XII petition and the sale was voided. See Rule 12-43 at ¶ 20,843.
[Digest of Opinion]
Subsequent to the filing of the debtor's Chapter XII petition, the creditor, the Small Business Administration, proceeded with a scheduled deed of trust sale of property of the debtor. The debtor argued that the equity in the property would have provided a basis for his rehabilitation because it was the major asset available for the arrangement. Further, the debtor contended that the creditor was stayed from proceeding with its sale under Bankruptcy Rule 12-43.The creditor relied on In re Collins Enterprises, Inc., an unreported Alaska District Court decision by Judge James M. Fitzgerald, Case No. A-77-45 (1977), and United States v. Mel's Lockers, 346 F.2d 168, 438 (10th Cir. 1965), which cases held that the automatic stay of Chapter XI could not be read as a waiver of the Small Business Administration's sovereign immunity from suit or restraint, in arguing that the stay could not restrain a governmental agency where sovereign immunity has not been waived.
However, this court, in determining that the Small Business Administration was subject to the automatic stay in Chapter XII proceeding, relied on Delta Food Processing Corporation, 446 F.2d 437, 438 (5th Cir. 1971), which held that the agency was subject to the automatic stay in Chapter X proceeding. The Fifth Circuit had reasoned that in a Chapter X proceeding "there must be a period of time during which all creditors' rights are stayed . . . and a plan of reorganization presented. . . . [U]nless this stay is applicable to every creditor, including governmental agencies, it will be of no effect."
The court in the instant case found that the statutory formulation of Chapter XII closely resembled that of Chapter X in terms of language and intent. Further, in Delta Food Processing, supra, the court had noted that Sec. 263 of the Bankruptcy Act states that Chapter X does not apply to creditors of a corporation under a mortgage insured pursuant to the National Housing Act. Therefore, the Fifth Circuit applied the doctrine of expressio unius est exclusio alterius, since the Act did not make a similar exclusion for the Small Business Administration. Chapter XII contains a similar provision in Section 517 of the Bankruptcy Act, thus the court's reasoning is also applicable in this instance.
Finding that the petition was properly filed, the court voided the sale of the debtor's property and ordered the property returned to the debtor.