DANIEL F. BUSHEY AND ALMA M. BUSHEY, APPELLANTS,
v.
GERALD R. WELLS, AS EXECUTOR OF THE ESTATE OF MARY ELIZABETH OCHS, DECEASED, APPELLEE
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The Busheys appealed a judgment against them on a promissory note, arguing that their bankruptcy petition filing automatically stayed the creditor's action in state court. The Florida appellate court held that the bankruptcy stay provision applies only to enforcement of liens on real or chattel property, not to in personam actions on unsecured notes, and therefore the state court judgment was properly entered.
The filing of a bankruptcy petition does not operate as a bar to or valid defense against an in personam action on an unsecured promissory note. The automatic stay provision applies only to actions to enforce liens on real property or chattel real, not to in personam actions against the debtor.
[1] The filing of a bankruptcy petition does not automatically stay an in personam action on an unsecured promissory note.
[2] A bankruptcy court's jurisdiction is not automatically exclusive over all actions against a debtor merely upon the filing of a petition.
Previewing 2 of 4 headnotes on this case. FLexlaw’s editorially structured points of law — every proposition, pinpointed — are reserved for members.
Join FLexlaw to unlock all legal intelligence“Section 428 is inapplicable to this case since there is not an action or proceeding to enforce a lien, and this is an in personam action.”
The court's ruling that the automatic bankruptcy stay does not apply to the creditor's unsecured note action.
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Join FLexlaw to unlock all legal intelligenceGerald Wells, as executor of the estate of Mary Elizabeth Ochs, brought an action against Daniel and Alma Bushey on a promissory note. The Busheys adm…
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This is an appeal from a final judgment on complaint and answer entered against Daniel F. Bushey and Alma M. Bushey and in favor of Gerald R. Wells, as executor of the Estate of Mary Elizabeth Ochs.
Wells was the owner and holder of a note given to Mary Elizabeth Ochs by the Busheys. He brought an in personam action upon the Busheys’ non-payment of the note.
In their answer the Busheys admitted the execution and delivery of the note and alleged :
(1) On June 30, 1963, the Busheys filed a petition under Chapter 12 of the Acts of *835Congress relating to bankruptcy in the United States District Court for the Southern District of Florida, No. 63-217-Bk-dd.
(2) Wells’ testatrix filed a claim in the bankruptcy proceedings, and was scheduled as an unsecured creditor.
(3) As of the date of the filing by the Busheys of their answer in the action by Wells on the note the plan proposed in the bankruptcy proceedings had not been accepted or confirmed by the Federal Court and no motion for adjudication had been made.
The Busheys did not allege any discharge in bankruptcy nor any stay of proceedings as a defense to the action on the note.
The Busheys rely on Section 428 of the Acts of Congress (Section 828, Title 11, U.S.Code (Bankruptcy)), in which it is provided: “Unless and until otherwise ordered by the Court * * * the filing of a petition under this chapter shall operate as a stay of any action or proceedings to enforce any lien on the real property or chattel real of a debtor.”
They contend that the filing of a petition is self executing to draw exclusive jurisdiction to the bankruptcy court. They argue that the mere pleading of such filing would constitute a valid defense to the action against them in the state court on the unsecured promissory note.
The Busheys cite 9 Collier on Bankruptcy (14th Edition, paragraph 4.16, page 875) in support of this position and refer to Meyer v. Rowen, 10 Cir. 1959, 181 F.2d 715.
Section 428 is inapplicable to this case since there is not an action or proceeding to enforce a lien, and this is an in personam action. It is not an attempt to foreclose a mortgage as it was in the Meyer case. A further reading of Collier (Section 4.16 on page 876) makes this clear: “Section 428, does not affect an in personam action against the debtor or act or proceedings to enforce a lien upon property other than real property or a chattel real of the debtor, but the court has power to stay those suits, acts, and proceedings under Section 414.”
The mere filing of a petition by the Busheys under Chapter 12, did not operate either as a bar to the in personam action on the unsecured promissory note or as a valid defense to the action. The final judgment was properly entered.
Judgment affirmed.
WALDEN and REED, JJ., concur.