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SUPREME COURT OF THE UNITED STATES
_________________
No. 19–357
_________________
CITY OF CHICAGO, ILLINOIS, PETITIONER
v. ROBBIN L. FULTON, et al.
on writ of certiorari to the united states
court of appeals for the seventh circuit
[January 14, 2021]
Justice Alito delivered the opinion of the
Court.
When a debtor files a petition for bankruptcy,
the Bankruptcy Code protects the debtor’s interests by imposing an
automatic stay on efforts to collect prepetition debts outside the
bankruptcy forum.
Ritzen Group, Inc. v.
Jackson Masonry,
LLC, 589 U. S. ___, ___–___ (2020) (slip op., at 6–7).
Those prohibited efforts include “any act . . . to
exercise control over property” of the bankruptcy estate. 11
U. S. C. §362(a)(3). The question in this case is whether
an entity violates that prohibition by retaining possession of a
debtor’s property after a bankruptcy petition is filed. We hold
that mere retention of property does not violate §362(a)(3).
I
Under the Bankruptcy Code, the filing of a
bankruptcy petition has certain immediate consequences. For one
thing, a petition “creates an estate” that, with some exceptions,
comprises “all legal or equitable interests of the debtor in
property as of the commencement of the case.” §541(a)(1). Section
541 “is intended to include in the estate any property made
available to the estate by other provisions of the Bankruptcy
Code.”
United States v.
Whiting Pools,
Inc.,
462 U.S.
198, 205 (1983). One such provision, §542, is important for
present purposes. Titled “Turnover of property to the estate,” §542
provides, with just a few exceptions, that an entity (other than a
custodian) in possession of property of the bankruptcy estate
“shall deliver to the trustee, and account for” that property.
A second automatic consequence of the filing of
a bankruptcy petition is that, with certain exceptions, the
petition “operates as a stay, applicable to all entities,” of
efforts to collect from the debtor outside of the bankruptcy forum.
§362(a). The automatic stay serves the debtor’s interests by
protecting the estate from dismemberment, and it also benefits
creditors as a group by preventing individual creditors from
pursuing their own interests to the detriment of the others. Under
the Code, an individual injured by any willful violation of the
stay “shall recover actual damages, including costs and attorneys’
fees, and in appropriate circumstances, may recover punitive
damages.” §362(k)(1).
Among the many collection efforts prohibited by
the stay is “any act to obtain possession of property of the estate
or of property from the estate or
to exercise control over
property of the estate.” §362(a)(3) (emphasis added). The
prohibition against exercising control over estate property is the
subject of the present dispute.
In the case before us, the city of Chicago
(City) impounded each respondent’s vehicle for failure to pay fines
for motor vehicle infractions. Each respondent filed a Chapter 13
bankruptcy petition and requested that the City return his or her
vehicle. The City refused, and in each case a bankruptcy court held
that the City’s refusal violated the automatic stay. The Court of
Appeals affirmed all of the judgments in a consolidated opinion.
In re Fulton, 926 F.3d 916 (CA7 2019). The court
concluded that “by retaining possession of the debtors’ vehicles
after they declared bankruptcy,” the City had acted “to exercise
control over” respondents’ property in violation of §362(a)(3).
Id., at 924–925. We granted certiorari to resolve a split in
the Courts of Appeals over whether an entity that retains
possession of the property of a bankruptcy estate violates
§362(a)(3).[
1] 589 U. S.
___ (2019). We now vacate the judgment below.
II
The language used in §362(a)(3) suggests that
merely retaining possession of estate property does not violate the
automatic stay. Under that provision, the filing of a bankruptcy
petition operates as a “stay” of “any act” to “exercise control”
over the property of the estate. Taken together, the most natural
reading of these terms—“stay,” “act,” and “exercise control”—is
that §362(a)(3) prohibits affirmative acts that would disturb the
status quo of estate property as of the time when the bankruptcy
petition was filed.
Taking the provision’s operative words in turn,
the term “stay” is commonly used to describe an order that
“suspend[s] judicial alteration of the status quo.”
Nken v.
Holder,
556 U.S.
418, 429 (2009) (brackets in original; internal quotation marks
omitted). An “act” is “[s]omething done or performed
. . . ; a deed.” Black’s Law Dictionary 30 (11th ed.
2019); see also Webster’s New International Dictionary 25 (2d ed.
1934) (“that which is done,” “the exercise of power,” “a deed”). To
“exercise” in the sense relevant here means “to bring into play” or
“make effective in action.” Webster’s Third New International
Dictionary 795 (1993). And to “exercise” something like control is
“to put in practice or carry out in action.” Webster’s New
International Dictionary, at 892. The suggestion conveyed by the
combination of these terms is that §362(a)(3) halts any affirmative
act that would alter the status quo as of the time of the filing of
a bankruptcy petition.
We do not maintain that these terms definitively
rule out the alternative interpretation adopted by the court below
and advocated by respondents. As respondents point out, omissions
can qualify as “acts” in certain contexts, and the term
“ ‘control’ ” can mean “ ‘to have power
over.’ ”
Thompson v.
General Motors Acceptance
Corp., 566 F.3d 699, 702 (CA7 2009) (quoting Merriam-Webster’s
Collegiate Dictionary 272 (11th ed. 2003)). But saying that a
person engages in an “act” to “exercise” his or her power over a
thing communicates more than merely “having” that power. Thus the
language of §362(a)(3) implies that something more than merely
retaining power is required to violate the disputed provision.
Any ambiguity in the text of §362(a)(3) is
resolved decidedly in the City’s favor by the existence of a
separate provision, §542, that expressly governs the turnover of
estate property. Section 542(a), with two exceptions, provides as
follows:
“[A]n entity, other than a custodian, in
possession, custody, or control, during the case, of property that
the trustee may use, sell, or lease under section 363 of this
title, or that the debtor may exempt under section 522 of this
title, shall deliver to the trustee, and account for, such property
or the value of such property, unless such property is of
inconsequential value or benefit to the estate.”
The exceptions to §542(a) shield (1) transfers
of estate property made from one entity to another in good faith
without notice or knowledge of the bankruptcy petition and (2)
good-faith transfers to satisfy certain life insurance obligations.
See §§542(c), (d). Reading §362(a)(3) to cover mere retention of
property, as respondents advocate, would create at least two
serious problems.
First, it would render the central command of
§542 largely superfluous. “The canon against surplusage is
strongest when an interpretation would render superfluous another
part of the same statutory scheme.”
Yates v.
United
States,
574 U.S.
528, 543 (2015) (plurality opinion; internal quotation marks
and brackets omitted). Reading “any act . . . to exercise
control” in §362(a)(3) to include merely retaining possession of a
debtor’s property would make that section a blanket turnover
provision. But as noted, §542 expressly governs “[t]urnover of
property to the estate,” and subsection (a) describes the broad
range of property that an entity “shall deliver to the trustee.”
That mandate would be surplusage if §362(a)(3) already required an
entity affirmatively to relinquish control of the debtor’s property
at the moment a bankruptcy petition is filed.
Respondents and their
amici contend that
§542(a) would still perform some work by specifying the party to
whom the property in question must be turned over and by requiring
that an entity “account for . . . the value of ” the
debtor’s property if the property is damaged or lost. But that is a
small amount of work for a large amount of text in a section that
appears to be the Code provision that is designed to govern the
turnover of estate property. Under this alternative interpretation,
§362(a)(3), not §542, would be the chief provision governing
turnover—even though §362(a)(3) says nothing expressly on that
question. And §542 would be reduced to a footnote—even though it
appears on its face to be the governing provision. The better
account of the two provisions is that §362(a)(3) prohibits
collection efforts outside the bankruptcy proceeding that would
change the status quo, while §542(a) works within the bankruptcy
process to draw far-flung estate property back into the hands of
the debtor or trustee.
Second, respondents’ reading would render the
commands of §362(a)(3) and §542 contradictory. Section 542 carves
out exceptions to the turnover command, and §542(a) by its terms
does not mandate turnover of property that is “of inconsequential
value or benefit to the estate.” Under respondents’ reading, in
cases where those exceptions to turnover under §542 would apply,
§362(a)(3) would command turnover all the same. But it would be “an
odd construction” of §362(a)(3) to require a creditor to do
immediately what §542 specifically excuses.
Citizens Bank of
Md. v.
Strumpf,
516 U.S.
16, 20 (1995). Respondents would have us resolve the
conflicting commands by engrafting §542’s exceptions onto
§362(a)(3), but there is no textual basis for doing so.
The history of the Bankruptcy Code confirms what
its text and structure convey. Both §362(a)(3) and §542(a) were
included in the original Bankruptcy Code in 1978. See Bankruptcy
Reform Act of 1978, 92Stat. 2570, 2595. At the time, §362(a)(3)
applied the stay only to “any act to obtain possession of property
of the estate or of property from the estate.”
Id., at 2570.
The phrase “or to exercise control over property of the estate” was
not added until 1984. Bankruptcy Amendments and Federal Judgeship
Act of 1984, 98Stat. 371.
Respondents do not seriously dispute that
§362(a)(3) imposed no turnover obligation prior to the 1984
amendment. But transforming the stay in §362 into an affirmative
turnover obligation would have constituted an important change. And
it would have been odd for Congress to accomplish that change by
simply adding the phrase “exercise control,” a phrase that does not
naturally comprehend the mere retention of property and that does
not admit of the exceptions set out in §542. Had Congress wanted to
make §362(a)(3) an enforcement arm of sorts for §542(a), the least
one would expect would be a cross-reference to the latter
provision, but Congress did not include such a cross- reference or
provide any other indication that it was transforming §362(a)(3).
The better account of the statutory history is that the 1984
amendment, by adding the phrase regarding the exercise of control,
simply extended the stay to acts that would change the status quo
with respect to intangible property and acts that would change the
status quo with respect to tangible property without “obtain[ing]”
such property.
* * *
Though the parties debate the issue at some
length, we need not decide how the turnover obligation in §542
operates. Nor do we settle the meaning of other subsections of
§362(a).[
2] We hold only that
mere retention of estate property after the filing of a bankruptcy
petition does not violate §362(a)(3) of the Bankruptcy Code. The
judgment of the Court of Appeals is vacated, and the case is
remanded for further proceedings consistent with this opinion.
It is so ordered.
Justice Barrett took no part in the
consideration or decision of this case.