Greg Kendal Smith

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
GREG KENDAL SMITH,
dba G 13 Land Co., Inc.,
dba G13 Angus Ranch, Inc.
dba Leonard Goff Ranches, Inc.,
Debtor. 	No. 12-10-11752 SL
FINDINGS OF FACT AND CONCLUSIONS
OF LAW RELATED TO MOTION FOR RELIEF FROM
AUTOMATIC STAY OR, ALTERNATIVELY, TO DETERMINE
THAT AUTOMATIC STAY IS NOT LONGER APPLICABLE
This matter is before the Court on Creditor Clifford Wayne
Glenn’s Motion for Relief from Automatic Stay or, alternatively,
to Determine that the Automatic Stay is No Longer Applicable (doc
205)(“Motion”) and the objection thereto filed by Debtor Greg
Kendal Smith (doc 208). 	At the preliminary hearing on the Motion
the Court and the parties all raised the issue of jurisdiction
because this case is a post-confirmation Chapter 12 case. 	The
parties filed simultaneous briefs (docs 214 and 216) and
responses (docs 217 and 218). 	The Court has reviewed the briefs
and the applicable authorities and finds that the automatic stay
is no longer applicable because the Bankruptcy Court lost
jurisdiction upon confirmation.
FACTS
1. 	Debtor filed a Chapter 12 petition with this Court on April
8, 2010 (doc 1).
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2. 	Debtor’s Schedule G listed as an executory contract/
unexpired lease an “Amended Land Lease with Option to
Purchase” with the Buna Jean Glenn Estate (doc 10, p. 19).
3. 	On July 30, 2010 Debtor filed a Motion to Assume Lease or
Executory Contract with the Buna Jean Glenn Estate (doc 33).
4. 	The Motion to Assume Lease or Executory Contract was granted
by Order entered August 27, 2010 (doc 45).
5. 	On January 12, 2011, Debtor filed his Second Amended Chapter
12 Plan (doc 108). 	Paragraph 5.1 of the Second Amended Plan
provides:
Debtor shall assume the Amended Land Lease Agreement
with Option to Purchase between the Debtor as
lessee/buyer and Buna Jean Glenn as lessor/seller
("Lease Agreement"). 	The Debtor shall pay the yearly
payment of $17,812.00 outside the Second Amended Plan.
Paragraph 7.8 provides:
Vesting of Assets. 	To the extent property of the
estate has not already vested in the Debtor, it will
vest in the Debtor when the Second Amended Plan is
confirmed.
Paragraph 7.10 provides:
Retention of Jurisdiction. 	The Court will retain
jurisdiction to hear and determine all matters and
proceedings to the fullest extent permitted under the
Bankruptcy Code or other applicable law.
6. 	On March 22, 2011, the Court entered an Order Confirming
Debtor’s Second Amended Chapter 12 Plan (doc 174). 	The
Confirmation Order was not appealed.
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7. 	The bankruptcy case remains open pending completion of the
Chapter 12 plan. 	Discharge has not been entered.
8. 	The Glenn estate alleges a breach of the contract post-
assumption and post-confirmation and seeks to enforce its
rights under state law in the state courts.
CONCLUSIONS OF LAW
1. 	The actions prohibited by the automatic stay are set forth
in Bankruptcy Code section 362(a). 	The prohibitions protect
both the debtor and property of the debtor (e.g., §
362(a)(1) (actions against the debtor that could have been
commenced before bankruptcy); § 362(a)(2) (enforcement
against the debtor of a prepetition judgment); § 362(a)(5)
(prepetition lien enforcement against property of the
debtor); § 362(a)(6) (actions to collect prepetition claims
against the debtor); § 362(a)(7) (setoff of prepetition
debts owing to the debtor)(emphasis added); § 362(a)(8)
(inapplicable, pertains only to a corporation’s tax
liability)). 	Section 362(a) also protects property of the
estate (e.g., 	§ 362(a)(2) (enforcement against estate
property of a prepetition judgment); § 362(a)(3) (actions to
obtain possession of property of the estate or from the
estate or to exercise control over that property); §
362(a)(4) (actions to create or enforce liens against
property of the estate)).
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1“[S]ubsections 362(a)(1), (2), (5), (6) and (7) pertain to
stays of actions relating only to pre-petition claims.” 	In re
Ziegler, 136 B.R. 497, 500 (Bankr. N.D. Ill. 1992).
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2. 	The automatic stay protects a debtor and a debtor’s property
(as opposed to property of the estate) only from prepetition
debts. 1
3. 	Postconfirmation breaches of assumed contracts or leases are
postpetition debts.
Once an unexpired lease is assumed
postpetition, it, and the effects of a subsequent
breach of its terms by the debtor, are no longer
treated as prepetition obligations. 	Assumption
has been aptly described as:
an act of administration that create[s] an
obligation of the postpetition bankruptcy
estate which is legally distinct from the
obligations of the parties prior to the
assumption. 	Any breach of the assumed
obligations, whether in the form of a default
or a formal rejection of the lease thereby
constitutes a breach by the postpetition
debtors of postpetition obligations.
In re Wright, 256 B.R. 858, 860 (Bankr. W.D. N.C.
2001)(Citations omitted.) 	See also 11 U.S.C. §
365(g)(2)(A):
[T]he rejection of an executory contract or
unexpired lease of the debtor constitutes a breach
of such contract or lease–-
...
(2) if such contract or lease has been assumed
under this section or under a plan confirmed under
chapter 9, 11, 12, or 13 of this title--
(A) if before such rejection the case has not been
converted under section 1112, 1208, or 1307 of
this title, at the time of such rejection[.]
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4. 	The Glenn estate alleges post-assumption and post-
confirmation breaches. 	Therefore, the automatic stay
provisions do not prevent the Glen estate from pursuing
(only) the Debtor or his property.
5. 	Bankruptcy Code section 1227(b) provides “Except as
otherwise provided in the plan or the order confirming the
plan, the confirmation of a plan vests all of the property
of the estate in the debtor.” 	Debtor’s Plan does not
provide otherwise. 	Therefore, all property revested in the
Debtor upon confirmation of Debtor’s Second Amended Plan.
Consequently, there is no longer any property of the estate.
See also 11 U.S.C. § 362(c)(1) (“[T]he stay of an act
against property of the estate under subsection (a) of this
section continues until such property is no longer property
of the estate.”) 	Therefore, the automatic stay provisions
do not prevent the Glen estate from pursuing the property
that was formerly property of the estate.
6. 	The Court will enter an Order declaring that the automatic
stay does not apply.
7. 	Debtor’s Second Amended Plan purports to “retain
jurisdiction to hear and determine all matters and
proceedings to the fullest extent permitted under the
Bankruptcy Code or other applicable law.” 	The Court finds
no statutory authority for this provision. 	Compare 11
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U.S.C. § 1123(b)(3)(B) (“[A] plan may –- ... (3) provide for
... (B) the retention and enforcement by the debtor, by the
trustee, or by a representative of the estate appointed for
such purpose, of any such claim or interest[.] 	with 11
U.S.C. § 1222 (no comparable provision). 	See also 11 U.S.C.
§ 1142(b) (“The court may direct the debtor and any other
necessary party to execute or deliver or to join in the
execution or delivery of any instrument required to effect a
transfer of property dealt with by a confirmed plan, and to
perform any other act, including the satisfaction of any
lien, that is necessary for the consummation of the plan.”)
Chapter 12 has no comparable provision. 	However, even if
this were an acceptable provision the Court finds that it
goes too far.
Under Tenth Circuit law, section 1123(b)(3)(B) requires
“specific and unequivocal language of reservation.” 	Retail
Marketing Co. v. King (In re Mako), 985 F.2d 1052, 1055 n.3
(10 th Cir. 1993):
[B]ecause the confirmation of a Chapter 11 Plan
dissolves the bankruptcy estate and the rights and
powers created under the Bankruptcy Code, the
retention provision of § 1123(b)(3)(B) requires
specific and unequivocal language of reservation.
Without this language, the avoidance powers of the
Trustee ... perish and become unenforceable.
(Quoting Retail Marketing Co. v. Norwest Nat’l Bank (In re
Mako, Inc.), 120 B.R. 203, 209 (Bankr. E.D. Okla. 1990).)
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2 In Mako, the Tenth Circuit was also concerned about
whether the actions sought to be preserved would benefit
creditors of the estate:
Although we have approved the prosecution of avoidance
actions for the benefit of administrative claimants,
see [Citicorp Acceptance Co. v. Robison ( In re
Sweetwater), 884 F.2d 1323, 1327 (10th Cir.1989)], the
uncontested finding of the bankruptcy court was that
under the plan “RMC is not obligated in any way to
distribute any proceeds realized from the successful
prosecution of this avoidance action to the unsecured
creditors of the estate.” Bankruptcy Court Order at 5.
By bringing these avoidance actions RMC is seeking to
recoup money it was obligated to pay under §
1129(a)(9)(A). A successful recovery from defendants
will work only to the benefit of RMC.
Id. at 1056.
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The language in Debtor’s purported reservation of
jurisdiction does not identify who will prosecute or defend
what actions, brought by whom or against what entity, and
for whose benefit the actions will be prosecuted or
defended. 2 	This is not specific and unequivocal language.
See Connolly v. City of Houston (In re Western Integrated
Networks, LLC), 329 B.R. 334, 340 (Bankr. D. Colo.
2005)(discussing retention of jurisdiction generally and
noting that “blanket language” such as reserving the power
to compromise or settle “Chapter 5" litigation was too vague
to confer standing on a reorganized debtor to bring section
542 actions.)
8. 	Furthermore, every federal court has a duty to examine its
own jurisdiction. 	Lopez v. Behles (In re American Ready
Mix, Inc.), 14 F.3d 1497, 1499 (10 th Cir.), cert. denied,
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3Any argument that the outcome of the litigation may impact
the Debtor’s ability to fund the plan is not persuasive. 	See
Finkelstein v. Transamerican Natural Gas Corp. (In re
Transamerican Natural Gas Corp.), 127 B.R. 800, 804 (S.D. Texas
1991)(Dismissing identical argument, and noting that under such
reasoning every future breach of contract action by a confirmed
(continued...)
Page -8-
513 U.S. 818 (1994). 	“[N]either the parties nor the
bankruptcy court can create [28 U.S.C.] § 1334 jurisdiction
by simply inserting a retention of jurisdiction provision in
a plan of reorganization if jurisdiction otherwise is
lacking[.]” 	Valley Historic Limited Partnership v. Bank of
New York (In re Valley Historic Limited Partnership), 486
F.3d 831, 837 (4 th Cir. 2007). 	See also Binder v. Price
Waterhouse & Co., LLP (In re Resorts Int’l, Inc.), 372 F.3d
154, 161 (3 rd Cir. 2004)(If a court lacks jurisdiction over
a dispute, it cannot create it by stating that it has
jurisdiction in a confirmation order. 	If there is no
jurisdiction under 28 U.S.C. § 1334 or § 157 then retention
of jurisdiction provisions are “fundamentally irrelevant.”)
9. 	The Glenn estate action is not a core proceeding because it
is not based on any provision of the bankruptcy code and
could be brought in a state court absent the bankruptcy
filing. 	It is also not related to the bankruptcy case. 	The
plan is confirmed. 	The payments the creditors will receive
are set out in the plan. 	The outcome of the litigation will
not change the terms of the confirmed plan 3 . 	The proposed
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3(...continued)
debtor, no matter how unrelated to its former bankruptcy estate,
could arguable be drawn into federal court as affecting its
liquidity.)
4This conclusion also disposes of Debtor’s judicial
efficiency argument. 	If there is no jurisdiction efficiency is
irrelevant.
Page -9-
litigation also does not seek to construe or interpret the
confirmed plan or seek to apply any provisions of the
bankruptcy code. 	It is a simple state law issue of whether
a party breached a contract. 	See id. at 168-69. 	Therefore,
the Court lacks jurisdiction under 28 U.S.C. § 1334(b)
(providing for jurisdiction in all civil proceedings arising
under title 11, or arising in or related to cases under
title 11.)
10. 	The bankruptcy court also loses jurisdiction over property
when it leaves the estate. 	Gardner v. United States (In re
Gardner), 913 F.2d 1515, 1518 (10 th Cir. 1990). 	Therefore,
the Court also lacks jurisdiction under 28 U.S.C. §
1334(e)(1) (providing for jurisdiction over all of the
property of the debtor as of the commencement of the case
and of property of the estate.)
11. 	The Court therefore lacks jurisdiction to hear the Glenn
estate claims 4.
CONCLUSION
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The Court will enter an Order declaring that the automatic
stay does not apply.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	July 13, 2012
Copies to:
Jennie D Behles
PO Box 7070
Albuquerque, NM 87194-7070
William F. Davis
6709 Academy NE, Suite A
Albuquerque, NM 87109
Philip J. Montoya
Trustee
PO Box 159
Albuquerque, NM 87103
United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
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