The Bankruptcy Appellate Panel of the Ninth Circuit (“BAP”) recently issued the opinion Eden Place LLC v. Perl (In re Perl), Case No. 13-26126-NB (9th Cir. BAP June 5, 2014), which held that debtors’ filing for bankruptcy voids his eviction from the home he still occupied because the automatic stay protected his possessory interest in the home. Nine days prior to the debtors filing a voluntary petition under Chapter 13 (“Petition Date”), the state court entered an unlawful detainer judgment (“UD Judgment”) in favor of the plaintiff. Six days prior to the Petition Date, the state court entered a Writ of Possession in favor of the plaintiff. One day before the Petition Date, the debtors failed to obtain a stay of the UD Judgment. Seven days after the Petition Date, the Sheriff proceeded with the lockout of the debtors, thereby evicting the debtors.
The debtor asserted that his possessory interest in the residence constituted an equitable interest under Section 541(a) of the Bankruptcy Code, which was protected by the automatic stay. The plaintiff argued that the debtor lost whatever possessory interest he might have had in the residence upon entry of the UD Judgment. The bankruptcy court held that the post-petition eviction violated the automatic stay. The BAP affirmed the portion of the bankruptcy court’s ruling that the post-petition lockout /eviction violated the automatic stay. Specifically, the BAP found that it was bound by its holding in Williams v. Levi (In re Williams), 323 B.R. 691, 699 (9th Cir. BAP 2005)(holding that a debtor who had transferred record title in his condominium to his girlfriend prepetition had a possessory interest in the condo as a result of his occupation of it and that possessory interest was property of the estate). To see the full opinion, please click here.