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Click here for the full text of this decision FACTS:This case arises out of the foreclosure of a 2.52-acre parcel of land. Jacqueline Chesnut, who is named in the deed as the sole purchaser of the property, married the debtor, Vance Chesnut, approximately three years before she purchased the property. The parties dispute whether the property was Jacqueline’s separate property or belonged to both Jacqueline and Vance as their community property. Although the warranty deed recites that the property was acquired by “Jacqueline Chesnut, as her sole and separate property and estate,” Vance contended that the property was paid for with community funds. After Jacqueline failed to make the necessary payments, Mark Templeton Brown, the holder of the mortgage on the property, set a foreclosure sale for Feb. 4, 2003. However, on Jan. 31, 2003, Vance filed an individual Chapter 13 petition for bankruptcy relief and claimed that the property was community property under the protection of the automatic stay. Brown proceeded with the foreclosure sale and the property was sold. Vance brought this action against Brown, asserting that Brown willfully violated the automatic stay provisions of 11 U.S.C. 362(h). The bankruptcy court, without deciding whether the property was community property, agreed and assessed Brown a fine and attorney’s fees. The district court reversed the bankruptcy court, and held that the property was Jacqueline’s separate property and that, regardless of when that determination was made, there was no violation of the automatic stay because Vance had no interest in the property. Vance appealed the district court’s judgment. HOLDING:The judgment of the district court is reversed and the judgment of the bankruptcy court is affirmed; and the case is remanded to the bankruptcy court for further proceedings not inconsistent with this opinion, including, if necessary, the determination of whether the property is Jacqueline’s separate property or community property. The court notes that there are three elements to a claim under 362(h): 1. the defendant must have known of the existence of the stay; 2. the defendant’s acts must have been intentional; and 3. these acts must have violated the stay. The court finds that the first two elements are undeniably present in the case before it. At issue on appeal was whether Brown violated the automatic stay when he foreclosed on the property without first seeking relief from the bankruptcy court. The court states that 362(a)(3) bars any act to obtain possession of property of the estate and, by negative implication, allows “any act to obtain possession” of property that is not “property of the estate.” However, 362(a)(3) says nothing about the automatic stay’s effect on any act to obtain possession of what is later determined to be property of the estate. Therefore, the court finds that the section does not make clear whether its protection extends to property with uncertain status at the time of the act of possession. The court points out that the property at issue was not clearly part of Vance’s bankruptcy estate at the time of the foreclosure, but neither was it clearly not part of his estate. The court states that the status of the property hinged on the application of Texas’ legal presumptions regarding separate and community property, as well as an examination of the factual bases underlying the transaction, including the text of the title documents, the source of purchasing funds and even the possible existence of fraud. The court finds that the policy and structure of the Bankruptcy Code suggest that the stay covers at least some arguable property. The court notes that 362(d) gives bankruptcy courts flexibility to address specific exigencies on a case-by-case basis. The court determines that such legal provisions suggest a preference for adjudication rather than seizure. The court holds that if a creditor wishes to seize property for lack of adequate protection, 362(d)(1), or for lack of equity, 362(d)(2), he cannot do so first and thereby force the debtor to vindicate his rights after the seizure. Instead, he must first seek relief from the bankruptcy court. Where seized property is arguable property, the court states that it is no answer for the creditor to defend the foreclosure by claiming that the property was not properly covered by the stay. The court also points out that suspending planned foreclosure actions in the face of a bankruptcy petition was a matter of course for Brown and not obviously acutely harmful to his business. Furthermore, the procedural burden on Brown to petition for relief from the stay was not onerous. Federal Bankruptcy Rule 4001(a) requires only a motion for relief, and under 362(e) the stay is automatically lifted as to the challenged property if the motion is not acted on within 30 days. Finally, if Brown’s inability to foreclose on the Eastland property was particularly harmful to his business, he could have sought immediate, ex parte relief under 362(f). OPINION:Clement, J.; Higginbotham, Wiener and Clement, JJ.

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