Citizens Bank of Md. v. Strumpf
516 U.S. 16 (1995)

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OCTOBER TERM, 1995

Syllabus

CITIZENS BANK OF MARYLAND v. STRUMPF

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 94-1340. Argued October 3, 1995-Decided October 31, 1995

When respondent filed for relief under the Bankruptcy Code, he had a checking account with, and was in default on the remaining balance of a loan from, petitioner bank. Under the Code, a bankruptcy filing gives rise to an automatic stay of a creditor's "setoff of any debt owing to the debtor that arose before the commencement of the [bankruptcy case] against any claim against the debtor." 11 U. S. C. § 362(a)(7). Mter respondent had filed in bankruptcy, petitioner placed an "administrative hold" on so much of respondent's account as it claimed was subject to setoff-that is, it refused to pay withdrawals that would reduce the account balance below the sum it claimed to be due on the unpaid loanand filed a "Motion for Relief from Automatic Stay and for Setoff" under § 362(d). In granting respondent's motion to hold petitioner in contempt, the Bankruptcy Court concluded that petitioner's "administrative hold" constituted a "setoff" in violation of § 362(a)(7). The District Court disagreed and reversed, but was in turn reversed by the Court of Appeals.

Held:

1. Petitioner's refusal to pay its debt to respondent upon the latter's demand was not a setoff within the meaning of § 362(a)(7), and hence did not violate the automatic stay. Petitioner refused to pay, not permanently and absolutely, but merely temporarily while it sought relief under § 362(d) from the automatic stay. The requirement of an intent permanently to settle accounts is implicit in the prevailing state-law rule that a setoff has not occurred until (i) a decision to effectuate it has been made, (ii) some action accomplishing it has been taken, and (iii) a recording of it has been entered. Even if state law were different, the question whether a setoff under § 362(a)(7) has occurred is a matter of federal law, and other provisions of the Bankruptcy Code such as §§ 542(b) and 553(a) would lead this Court to embrace the same intent requirement. pp. 18-20.

2. Petitioner's refusal to pay its debt to respondent also did not violate § 362(a)(3) or § 362(a)(6) of the Bankruptcy Code. P. 21.

37 F.3d 155, reversed.

SCALIA, J., delivered the opinion for a unanimous Court.


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Irving E. Walker argued the cause for petitioner. With him on the briefs were James R. Eyler and Jefferson v: Wright.

Miguel A. Estrada argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Days, Assistant Attorney General Argrett, Deputy Solicitor General Wallace, Kent L. Jones, and Gary D. Gray.

Roger Schlossberg argued the cause for respondent.

With him on the brief were John R. Owen, Jr., Brian R. Seeber, and Gregory P. Johnson. *

JUSTICE SCALIA delivered the opinion of the Court.

We must decide whether the creditor of a debtor in bankruptcy may, in order to protect its setoff rights, temporarily withhold payment of a debt that it owes to the debtor in bankruptcy without violating the automatic stay imposed by 11 U. S. C. § 362(a).

I

On January 25, 1991, when respondent filed for relief under Chapter 13 of the Bankruptcy Code, he had a checking account with petitioner, a bank conducting business in the State of Maryland. He also was in default on the remaining balance of a loan of $5,068.75 from the bank. Under 11 U. S. C. § 362(a), respondent's bankruptcy filing gave rise to an automatic stay of various types of activity by his creditors, including "the setoff of any debt owing to the debtor that arose before the commencement of the [bankruptcy case] against any claim against the debtor." § 362(a)(7).

On October 2, 1991, petitioner placed what it termed an "administrative hold" on so much of respondent's account as

*Briefs of amici curiae urging reversal were filed for BankAmerica Corp. by Harold R. Lichterman and Michael J. Halloran; and for the New York Clearing House Association et al. by Bruce E. Clark, Norman R. Nelson, John J. Gill III, Michael F. Crotty, Leonard J. Rubin, John H. Culver III, and Charles P. Seibold.


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Full Text of Opinion

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