FILED NOV 10 2021 ORDERED PUBLISHED SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. AZ-21-1063-FLS MARK E. STUART, Debtor. Bk. No. 2:19-bk-05481-BKM

MARK E. STUART, Appellant, v. OPINION CITY OF SCOTTSDALE; RUSSELL BROWN, Chapter 13 Trustee; CITY OF SCOTTSDALE ATTORNEY’S OFFICE, Appellees.

Appeal from the United States Bankruptcy Court for the District of Arizona Brenda K. Martin, Bankruptcy Judge, Presiding

APPEARANCES: Chris D. Barski of Barski Law PLC argued for appellant Mark E. Stuart; Vail C. Cloar of Dickinson Wright PLLC argued for appellee City of Scottsdale.

Before: FARIS, LAFFERTY, and SPRAKER, Bankruptcy Judges.

FARIS, Bankruptcy Judge:

INTRODUCTION

After the City of Scottsdale garnished three of his bank accounts, debtor Mark E. Stuart filed a chapter 13 1 petition. Mr. Stuart argued that

the automatic stay required the City to lift the garnishment immediately.

Relying on City of Chicago v. Fulton,

(2021), the bankruptcy

court ruled against Mr. Stuart. Mr. Stuart appeals, arguing that Fulton is

inapplicable to this case and that the City engaged in “acts” that violated

multiple subsections of § 362(a).

The bankruptcy court correctly held that the City did not violate the

automatic stay. We AFFIRM. We publish to explain the effect of Fulton on a

prepetition bank account garnishment.

FACTS

A. Prepetition events

Mr. Stuart has long pursued the City in various “public interest”

cases. He lost one such case (the “State Court Action”), and in 2015 the

state court awarded the City a final judgment exceeding $30,000 in

sanctions and costs, plus interest (the “State Court Judgment”). The

Arizona Court of Appeals affirmed the State Court Judgment.

In April 2019, the City served a writ of garnishment on Bank of

America (“BOA”), where Mr. Stuart had three accounts. BOA froze the

accounts, which held a total of $8,879.95.

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code,

, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure.

2 Mr. Stuart sought to quash the writ, arguing that the bank accounts

were community property not subject to the City’s claims. The state court

agreed that the State Court Judgment was unenforceable against any

community property. However, it noted that Mr. Stuart had previously

obstructed discovery, making it impossible for the City to determine the

existence and nature of his property, and allowed the City an opportunity

to conduct discovery. Before the City could take any further action,

Mr. Stuart filed his bankruptcy petition.

B. Mr. Stuart’s bankruptcy case and the City’s response

On Saturday, May 4, 2019, Mr. Stuart filed a chapter 13 petition.2 His

attorney contacted BOA by fax dated May 6 (the next business day) and

requested that it release the frozen funds. BOA responded the following

day that it would retain the funds unless it was directed otherwise by the

City or the bankruptcy court.

On May 7, Mr. Stuart’s counsel contacted the City and demanded

that the City direct BOA to release the frozen funds. The attorney handling

the matter was out of town and did not respond immediately.

Nevertheless, the City filed a motion to stay litigation in the State Court

Action that same day. It requested that “all pending matters in this case,

including any scheduled hearings, be stayed pending resolution from [sic]

the bankruptcy proceedings.” The state court granted the motion.

2 Mr. Stuart apparently faxed a copy of the petition to the City on May 4, a Saturday, but the offices were closed, and the City did not receive it until Monday. 3 Also on May 7, Mr. Stuart, proceeding pro se, filed a document

informing the state court of the stay and requesting that the state court

quash the writ of garnishment.

On May 13, the responsible attorney for the City sent an e-mail to

Mr. Stuart’s counsel, BOA’s counsel, and others. He said that he had been

out of the office the previous week and stated that he believed that “the

funds being held by the bank pursuant to the garnishment became

property of the bankruptcy estate. Accordingly, the City of Scottsdale does

not have a current possessory interest in them . . . .” He concluded that “the

City will abide whatever disposition of those funds is made in accordance

with the Bankruptcy Statutes/Rules.”

Counsel for BOA responded that he would direct BOA to release the

funds once the City quashed the writ of garnishment. Counsel for the City

wrote back that “[t]he City has requested a stay of the proceedings in state

court. The City does not oppose release of the funds by the Bank.”

The City also filed a response to Mr. Stuart’s request to quash the

writ. It took the position that the court should “deny Stuart’s request as the

court has already provided Stuart to [sic] the relief which he is entitled, i.e.,

a stay of the proceedings. However, the City does not oppose release of the

funds by [BOA] and does not object to a court order instructing [BOA] to

release the funds.” It argued that, under § 362(a), it was not required to

dismiss the garnishment proceedings, only to stay them, which the court

had already done. Because funds had not left Mr. Stuart’s accounts, there

4 was nothing to “return.” Nevertheless, it repeated that it “does not object

to an order from this Court authorizing [BOA] to release any hold on funds

that may have arisen as a result of the garnishment.”

On May 14, the state court issued a minute order that: (1) granted

Mr. Stuart’s request to quash the writ; (2) denied the City’s request for a

stay, because all matters were previously stayed; and (3) denied

Mr. Stuart’s request for a return of the funds, because the monies remained

in his accounts. BOA unfroze the three bank accounts shortly thereafter.

C. The motions for sanctions for the City’s stay violation

Mr. Stuart filed a motion for sanctions (“Stay Violation Motion”)

against the City3 based on the alleged violation of the automatic stay.4 He

asserted that there was no dispute that the City knew of the automatic stay

yet refused to dismiss the state court garnishment action. He argued that

the City had an affirmative duty to remedy the violation by releasing the

frozen account funds. He alleged that the garnishment and the stay

violation caused him and his wife severe psychological distress, including

anxiety, depression, and sleeplessness.

The City objected to the Stay Violation Motion. It argued that it never

3 Mr. Stuart also sought sanctions against the City’s attorneys. In the remainder of this opinion, the term “City” generally includes its attorneys. 4 The Stay Violation Motion was the third such motion filed by Mr. Stuart against the City. The BAP affirmed the bankruptcy court’s denial of his previous motions. Stuart v. City of Scottsdale (In re Stuart), BAP No. AZ-19-1332-LBT,

(9th Cir. BAP July 28, 2020).

5 held the garnished funds and never took any action after the bankruptcy

filing, including continuing the garnishment action or exercising control

over estate property. It contended that BOA held the funds and that the

City had done all that was required of it, i.e., move to stay the State Court

Action. It was not required to dismiss any judicial action, only “maintain

the status quo ante.” It pointed out that Mr. Stuart did not identify any act

that violated the automatic stay. The City took the position that it had

“nothing to do with” the return of the frozen funds and stated (falsely) that

it had “filed a request to quash the writ.”

Mr. Stuart filed a reply brief and asserted that sanctions were

warranted under § 362(a)(1), (2), (3), and (6).

At the hearing on the Stay Violation Motion, the bankruptcy court

recognized that the City immediately sought to stay the State Court Action

but nevertheless faulted the City for not seeking to quash the writ of

garnishment. The bankruptcy court cited an unpublished Ninth Circuit

decision, Best Service Co. v. Bayley (In re Bayley),

(9th Cir.

2017), for the proposition that the City violated the automatic stay “by

failing to promptly direct Bank of America to return the funds and/or

promptly requesting the writ be quashed . . . .” It said that its decision was

a “preliminary ruling” subject to an evidentiary hearing to determine

damages.

The court entered a minute order determining that the City violated

the automatic stay (“Stay Violation Ruling”). It allowed Mr. Stuart to

6 proceed with an evidentiary hearing for a determination of damages

against the City and its attorneys in the State Court Action. 5

Mr. Stuart filed a motion for sanctions (“Sanctions Motion”) under

§ 362(k) against the City and two of its attorneys. He sought damages for

physical and psychological distress for himself and his non-debtor wife,

Virginia Stuart, as well as costs associated with the Stay Violation Motion,

totaling $20,783. Additionally, he requested $30,000 in punitive damages

and attorneys’ fees and costs. The City opposed the motion.

D. The City’s motion for reconsideration

Prior to the hearing, the City filed a motion for reconsideration

(“Reconsideration Motion”) of the Stay Violation Ruling under Civil Rule

60(b), made applicable in bankruptcy via Rule 9024. It argued that the U.S.

Supreme Court’s recent Fulton decision “clarified that the mere retention of

property post-petition does not comprise a violation of the automatic stay

as a matter of law.” It contended that Fulton dictated that the City needed

only to refrain from disturbing the status quo and was not required to

release the garnished funds or direct BOA to release the funds.

Mr. Stuart opposed the Reconsideration Motion, arguing that Fulton’s

narrow holding under § 362(a)(3) was inapplicable to this case because the

City denied ever possessing Mr. Stuart’s property. Rather, Mr. Stuart

5 The bankruptcy court held that the City’s bankruptcy counsel did not violate the automatic stay and entered a separate order denying the Stay Violation Motion as to them. That order is not part of this appeal. 7 focused on the continuation of the writ of garnishment, which he

contended was an act to collect and enforce the State Court Judgment

under § 362(a)(1), (2), (3), and (6).

The bankruptcy court held a hearing on the Reconsideration Motion.

It took the matter under advisement and issued a supplemental minute

entry/order granting the Reconsideration Motion. It noted that “the crux of

its [Stay Violation Ruling] was that the City of Scottsdale had an

affirmative duty to ensure the release of funds frozen by Bank of America

based on the City of Scottsdale’s pre-petition garnishment action.” It

clarified that its “focus was on the retention of estate property as being in

violation of the stay” and that “the Court ruled that the City of Scottsdale’s

failure to direct or otherwise secure release of the frozen funds violated the

stay under § (a)(3).” It held that, “[u]nder Fulton that conclusion is now

wrong. . . . [M]ere retention of an estate asset is not an act in violation of

§ 326(a)(3) [sic] and there is no requirement that an entity take affirmative

action ‘to relinquish control of the debtor’s property at the moment a

bankruptcy petition is filed.’” (Quoting Fulton, 141 S. Ct. at 591.)

The bankruptcy court then examined subsections (a)(1), (2), (3), and

(6) and declined to find any stay violation.

As to subsection (a)(1), the bankruptcy court held that Eskanos &

Adler, P.C. v. Leetien,

(9th Cir. 2002), did not help Mr. Stuart’s

position because the duty under subsection (a)(1) is to discontinue an

action. It noted that the City promptly sought a stay of the State Court

8 Action upon learning of the petition and only opposed the motion to quash

the writ, requesting instead that the matter remain stayed. It further

rejected his argument that garnishment actions are different from other

collection actions.

Regarding subsection (a)(2), the court held that the City’s failure to

quash the writ was not an act to enforce a judgment. It distinguished

Bayley, which it earlier relied on, because the City did not direct any third

party to retain estate property and did not take any other “act” to compel

or enforce the State Court Judgment. It stated that the City “ceased ongoing

collection activities.”

Regarding subsection (a)(3), the court held that the City did not

“obtain possession” of estate property. It stated that Mr. Stuart failed to

explain what the City did to “obtain possession” of the frozen funds and

that he could have sought turnover of the funds under § 542.

Finally, the court held that subsection (a)(6) was equally inapplicable

because the refusal to dismiss a lawsuit was not an “act to collect a claim.”

The City did not take any action other than to request a stay of the

proceedings, and the mere retention of property is not an “act.”

The bankruptcy court thus entered an order (“Reconsideration

Order”) that granted the Reconsideration Motion, vacated its earlier

minute order, and denied the Stay Violation Motion.6

6 While the Sanctions Motion was pending, Mr. Stuart filed a motion for leave to amend to add Mrs. Stuart as a party. The court’s Reconsideration Order denied that 9 Mr. Stuart timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(A). We have jurisdiction under

.

ISSUE

Whether the bankruptcy court erred by holding that the City did not

violate the automatic stay.

STANDARDS OF REVIEW

The City styled its motion as a motion for reconsideration under Rule

9024, and the bankruptcy court applied the incorporated standards of Civil

Rule 60(b). But, as the bankruptcy court acknowledged, the Stay Violation

Ruling was not a final order because it did not decide the question of

damages. Rule 9024 therefore did not apply. The bankruptcy court was free

to review and change its own interlocutory order whether or not Rule 9024

permitted it to do so. See City of L.A., Harbor Div. v. Santa Monica Baykeeper,

(9th Cir. 2001) (“Although [Civil] Rule 60(b) has since

changed, the lessons learned from our interpretation of it have not – a

district court’s authority to rescind an interlocutory order over which it has

jurisdiction is an inherent power rooted firmly in the common law and is

not abridged by the Federal Rules of Civil Procedure.”).

Therefore, we review the Reconsideration Order de novo. Yellow

motion. Mr. Stuart does not challenge that part of the order on appeal. 10 Express, LLC v. Dingley (In re Dingley),

(9th Cir. BAP 2014)

(“A bankruptcy court’s determination that the automatic stay was violated

is a question of law subject to de novo review.”), aff’d on other grounds,

(9th Cir. 2017). “De novo review requires that we consider a

matter anew, as if no decision had been made previously.” Francis v.

Wallace (In re Francis),

(9th Cir. BAP 2014).

We review the court’s underlying factual findings for clear error.

Knupfer v. Lindblade (In re Dyer),

(9th Cir. 2003). Factual

findings are clearly erroneous if they are illogical, implausible, or without

support in the record. Retz v. Samson (In re Retz),

(9th

Cir. 2010). If two views of the evidence are possible, the court’s choice

between them cannot be clearly erroneous. Anderson v. City of Bessemer City,

(1985).

DISCUSSION

A. The filing of a bankruptcy petition stays certain postpetition actions.

The automatic stay “is designed to effect an immediate freeze of the

status quo by precluding and nullifying post-petition actions, judicial or

nonjudicial, in nonbankruptcy fora against the debtor or affecting the

property of the estate.” Mwangi v. Wells Fargo Bank, N.A. (In re Mwangi),

(9th Cir. 2014) (quoting Hillis Motors, Inc. v. Haw. Auto.

Dealers’ Ass’n,

(9th Cir. 1993)).

The subsections of § 362(a) describe the actions that are subject to the

11 automatic stay. In this case, Mr. Stuart alleges that the City violated

subsections (1), (2), (3), and (6). As is relevant to this case, those sections

provide that the filing of a bankruptcy petition creates a stay of:

(1) the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;

(3) 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;

...

(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title[.]

§ 362(a).

Section 362(k)(1) provides that “an individual injured by any willful

violation of a stay provided by this section shall recover actual damages,

including costs and attorneys’ fees, and, in appropriate circumstances, may

recover punitive damages.” “A willful violation is satisfied if a party knew

of the automatic stay, and its actions in violation of the stay were

intentional.” Eskanos & Adler, P.C.,

.

12 B. The bankruptcy court correctly held that, under Fulton, the City did not violate § 362(a)(3).

The bankruptcy court held that, under Fulton, the City did not violate

§ 362(a)(3) when it failed to move to quash the writ of garnishment or cause

BOA to unfreeze the bank accounts. We discern no error.

Prior to Fulton, this circuit interpreted § 362(a)(3) to require the

creditor to take affirmative steps to turn over property of the estate, even if

it is held by a third party. In an unpublished decision, the Ninth Circuit

held:

Upon the filing of Bayley’s bankruptcy petition, Best Service had an affirmative duty to turn over all property to the bankruptcy estate, even if it was in the Sheriff’s possession. See Cal. Emp’t Dev. Dep’t v. Taxel (In re Del Mission Ltd.),

, 1151 (9th Cir. 1996); Knaus v. Concordia Lumber Co. (In re Knaus),

(8th Cir. 1989). However, by directing the Sheriff to hold the levied funds, Best Service both “enforce[d]” its pre-petition judgment, see

(a)(2), and “exercise[d] control over property of the estate,” see

§ 362(a)(3). Best Service should have “cease[d] its collection procedures and notif[ied] the Sheriff to return [Bayley’s] property.” In re Hernandez,

(Bankr. S.D. Cal. 2012). But because it did not, the district court properly concluded that Best Service was in violation of the automatic stay.

In re Bayley,

. The Bayley decision cited Del Mission, in

which the Ninth Circuit held that “the knowing retention of estate property

violates the automatic stay of § 362(a)(3)[,]” 98 F.3d at 1151, and that the

state’s knowing retention of disputed taxes violated the automatic stay, id. 13 at 1152.

In the consolidated cases addressed in Fulton, the City of Chicago

impounded the debtors’ vehicles for nonpayment of fines. The debtors filed

chapter 13 petitions and requested that the city return their vehicles, but

the city refused. The bankruptcy court held that the city’s refusals violated

§ 362(a)(3) because it had acted to “exercise control over” the debtors’

vehicles, and the Court of Appeals for the Seventh Circuit affirmed. 141 S.

Ct. at 589.

The Supreme Court began its analysis by looking at the plain

language of the statute. It stated:

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.

Id. at 590. It then said that the individual words suggested “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.” Id. 7

The Court pointed to § 542, which concerns turnover of estate

7 The Court acknowledged that an omission can be an “act” in some contexts but maintained that “the language of § 362(a)(3) implies that something more than merely retaining power is required to violate the disputed provision.” 141 S. Ct. at 590.

14 property, in support of its decision. It stated that § 542 “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.” Id. at 591. Rather, it clarified 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.” Id.

The Court rejected the notion that § 362(a)(3) contained “an

affirmative turnover obligation,” instead holding that the reference to

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.” Id. at 592. The Court concluded “that mere retention of estate

property after the filing of a bankruptcy petition does not violate

§ 362(a)(3) of the Bankruptcy Code.” Id.8

Fulton cited the Ninth Circuit’s decision in Del Mission as a case on

one side of the circuit split that the Court resolved. Id. at 590 n.1. Because

the Court adopted the view of the courts on the other side of the split,

Fulton overruled Del Mission and other decisions taking the same position,

such as Bayley.

8 The Court explicitly limited its holding to § 362(a)(3), 141 S. Ct. at 592, and Justice Sotomayor stated in her concurrence that the Court did not decide whether the city’s actions violated any other subsection of § 362(a), id. (Sotomayor, J., concurring). 15 The bankruptcy court here held that its Stay Violation Ruling was at

odds with Fulton. It clarified that the Stay Violation Ruling was based on a

violation of § 362(a)(3) for the City’s failure to affirmatively seek to quash

the writ of garnishment and unfreeze the three bank accounts. It had cited

Bayley in support of its decision, which in turn relied on Del Mission. We

agree with the bankruptcy court that its initial holding was no longer

viable after Fulton. Simply stated, the City’s inaction did not violate

§ 362(a)(3).

The bankruptcy court for the Middle District of Pennsylvania

recently reached the same conclusion on similar facts. In Margavitch v.

Southlake Holdings, LLC (In re Margavitch), Case No. 5:19-bk-05353-MJC,

(Bankr. M.D. Pa. Oct. 6, 2021), the creditors served a

prepetition writ of execution on the debtor’s bank that froze his bank

accounts. When the debtor filed a chapter 13 petition, the creditors refused

to release the funds or otherwise terminate the attachment lien but took no

other action to collect on the debt. The debtor sought sanctions for violation

of the automatic stay. Id. at *2.

On cross-motions for summary judgment, the bankruptcy court held

that Fulton dictated that the creditors’ inaction did not violate the

automatic stay. Considering § 362(a)(3), the court held that:

Defendants admittedly took no post-petition affirmative action as to the garnished accounts. They maintained the status quo as of the petition date. They were not required to withdraw the attachment because to do so would put them in a more

16 disadvantageous position than they had been as of the petition date and they were entitled to maintain the status quo.

Id. at *6 (citations omitted). The bankruptcy court further considered the

other subsections of § 362(a) and concluded that the creditors’ inaction did

not amount to a stay violation.

Margavitch is directly on point and comports with our analysis here.

Where a creditor has executed a prepetition writ of garnishment against a

debtor’s bank account, it is under no affirmative obligation to release the

funds and need only maintain the status quo.

Mr. Stuart attempts to distinguish Fulton by arguing that it applied

only to the exercise of control over estate property, 9 while the stay violation

in this case arose from the City’s opposition to his efforts to quash the writ

of garnishment.

Mr. Stuart is correct, but only to a point. It is true that Fulton

considered only the retention of estate property under § 362(a)(3).

However, Fulton dictates that the City had no affirmative duty to ensure

the return of estate property to Mr. Stuart.

C. The bankruptcy court did not err in holding that the City did not otherwise violate the automatic stay.

We agree with the bankruptcy court that the City did not violate any

9 Mr. Stuart argues that Fulton cannot apply, because the City never had physical possession of the bank account funds. We reject this argument; nothing in § 362(a)(3) requires actual or physical possession of estate property. See In re Margavitch,

, at *6 (rejecting this exact argument).

17 other subsection of § 362(a).

1. The City did not “continue” a proceeding against Mr. Stuart under § 362(a)(1).

Section 362(a)(1) prohibits the “continuation . . . of a judicial,

administrative, or other action or proceeding against the debtor . . . .”

Mr. Stuart thinks that, in order to avoid the “continuation of” its action

against him, the City had to quash the garnishment. We disagree.

In Eskanos & Adler, P.C., the Ninth Circuit held that a creditor must

“dismiss or stay” pending collection actions:

The continuation against judicial actions includes the maintenance of collection actions filed in state court. . . . A party violating the automatic stay, through continuing a collection action in a non-bankruptcy forum, must automatically dismiss or stay such proceeding or risk possible sanctions for willful violations pursuant to § 362(h).

(emphasis added). The court emphasized that “the

automatic stay requires an immediate freeze of the status quo by

precluding and nullifying post-petition actions.”

This leaves the question whether it is sufficient to simply stay a case

or whether dismissal is required. In the Eskanos case, the creditor filed a

new action against the debtor after the petition date. The Ninth Circuit

repeatedly referred to it as a “post-petition collection action.”

. In

such a case, the creditor has disturbed the status quo existing at the petition

date by filing a new lawsuit. In order to restore the status quo, the creditor

must dismiss the postpetition action. But in this case, the action was 18 pending and the garnishment existed when Mr. Stuart filed his petition.

Leaving the action and the garnishment in place did not disturb the status

quo. Cf. Perryman v. Dal Poggetto (In re Perryman), --- B.R. ----, BAP No. NC-

21-1036-BFS,

, at *3 (9th Cir. BAP Oct. 8, 2021) (holding

that a postpetition “‘continuance’ or status hearing in a stayed

nonbankruptcy proceeding” is not a “continuation of a judicial

proceeding” under § 362(a)(1) because those “actions did not disturb the

status quo”). Therefore, staying the case was sufficient to avoid

“continuation” in violation of § 362(a)(1).

The City fulfilled its duty by taking prompt steps to stay the case.

Mr. Stuart filed his petition on a Saturday; the City learned of the

bankruptcy petition on the following Monday or Tuesday, May 6 or 7; and

it filed a motion to stay the State Court Action on Tuesday, May 7. 10

Mr. Stuart argues that the City “actively objected to the release of

funds.” This misstates the record. Although the City stated that it opposed

quashing the writ of garnishment, it indicated in e-mail correspondence

and twice in its response to Mr. Stuart’s motion “that it does not oppose

release of the funds by [BOA] and does not object to a court order

instructing [BOA] to release the funds.”

10 Mr. Stuart further argues that the City was “disingenuous” when it filed the motion for stay, because the State Court Action was already stayed by a previous order. To the contrary, the City’s actions suggest that it understood its duty to discontinue any prepetition collection action and sought to make clear that it intended to comply with the automatic stay.

19 Mr. Stuart argues that a creditor has an affirmative obligation to

dismiss an existing writ of garnishment. He primarily relies on In re Mims,

(Bankr. M.D. Fla. 1997), where the bankruptcy court held that

the creditor had an affirmative duty to release bank accounts frozen

pursuant to a prepetition writ of garnishment. The court said that “a

garnishment action is unique insofar as it requires affirmative action to

comply with the requirements of the automatic stay.”

.

In contrast, the bankruptcy court for the Middle District of

Pennsylvania held in Margavitch that Ҥ 362(a)(1) was not violated because

Defendants did nothing to further or ‘continue’ the garnishment process.

Nothing has been alleged in the record indicating that the status quo was

somehow changed regarding the [bank accounts] after the bankruptcy

petition was filed.”

, at *8.

Neither party has cited any binding Ninth Circuit authority that

dictates whether a creditor has an affirmative duty to dismiss a prepetition

writ of garnishment under § 362(a)(1), and we have found none. We think

that the decision in Margavitch comports more closely than Mims with the

Ninth Circuit’s holding in Eskanos, which merely requires a creditor to

“dismiss or stay” a judicial proceeding. In this case, the City promptly

sought a stay of the State Court Action and took no further steps to

advance that case. The failure to affirmatively release the frozen bank

20 account funds, in and of itself, is not a violation of § 362(a)(1). See id.11

2. The City did not seek to enforce a prepetition judgment against Mr. Stuart under § 362(a)(2).

Mr. Stuart contends that the City violated § 362(a)(2) when it sought

to enforce the State Court Judgment by continuing the writ of garnishment.

We disagree.

Subsection (a)(2) prohibits “the enforcement, against the debtor or

against property of the estate, of a judgment obtained before the

commencement of the case under this title[.]” § 362(a)(2).

Mr. Stuart again argues that the City opposed his efforts to quash the

writ of garnishment. But as we discussed above, the City took no position

on whether the state court should order the release of the account funds.

The bankruptcy court was correct that the City did not do anything to

enforce the State Court Judgment. See In re Margavitch,

, at

*8 (“[T]he failure to withdraw a valid pre-petition attachment lien cannot

be construed as, or equated with, taking an affirmative action to enforce a

judgment. The Court concludes that Defendants’ passive maintenance of its

valid pre-petition attachment lien in no way changed the status quo and

11 Many of Mr. Stuart’s arguments conflate a judicial proceeding with the retention of estate property. While discussing subsection (a)(1), he cites cases imposing on creditors an obligation to return property under subsection (a)(3). For example, he relies on both In re Hernandez,

(Bankr. S.D. Cal.), aff’d,

(9th Cir. BAP 2012), and In re Johnson,

(Bankr. D. Idaho 2001). However, those cases cited Del Mission and other cases relying on § 362(a)(3) regarding the retention of estate property; those cases were effectively overturned by the U.S. Supreme Court’s Fulton decision. 21 therefore, did not constitute a violation of § 362(a)(2).”).

Mr. Stuart claims that the City’s stated intent clearly indicated that it

meant to pursue the State Court Judgment in violation of the automatic

stay. The City represented to the state court that it was concerned that, if

Mr. Stuart obtained the frozen funds, he could quickly dismiss his

bankruptcy case, thus frustrating the purpose of the garnishment. The

City’s concern with a hypothetical situation is irrelevant; it only reflected

the City’s desire to maintain the status quo.

Mr. Stuart relies on the Ninth Circuit’s unpublished decision in

Bayley. In that case, the Ninth Circuit upheld the finding of a stay violation

under subsection (a)(2), where the creditor “direct[ed] the Sheriff to hold

the levied funds . . . .”

. In contrast, in the present case, the

City did not direct BOA as to the postpetition disposition of the frozen

funds and in fact repeatedly stated that it would not oppose the release of

the funds. In other words, unlike in Bayley, the City did not take any

affirmative action to enforce or further the garnishment.

Similarly, In re Banks,

(Bankr. E.D. Mich. 2000), is

distinguishable. The creditor obtained relief from the automatic stay but

was unaware that the order lifting the stay was itself stayed for ten days

pursuant to Rule 4001(a)(3). The creditor obtained and executed on a writ

of restitution during the ten-day period and refused to vacate it. In other

words, the creditor took action postpetition in violation of the automatic

stay (before the bankruptcy court’s order lifting the automatic stay went

22 into effect). The bankruptcy court found that the creditor violated

§ 362(a)(1). Id. at 30. In the present case, the City both obtained and

executed the writ of garnishment prepetition, which did not violate the

automatic stay. It did not take any action postpetition to enforce the writ.

3. The City did not take any act to obtain estate property under § 362(a)(3).

Mr. Stuart further argues that the City’s state court filings constituted

an act to obtain possession of the garnished funds. He contends that the

City had power and authority over the frozen funds, so it had an

affirmative obligation to withdraw the writ and make the funds available

to Mr. Stuart. We agree with the bankruptcy court that the City took no

“act” in violation of the automatic stay.

Section 362(a)(3) prohibits “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[.]”

As the bankruptcy court correctly held, Fulton precludes Mr. Stuart’s

argument that the City took any act to “exercise control over property of

the estate.” We also agree with the bankruptcy court that the City did not

take any “act to obtain possession of property of the estate” when it did not

immediately move to quash the writ of garnishment. On the petition date,

the City had already obtained the writ of garnishment, and BOA had

frozen the three bank accounts. There was no further “act to obtain

possession.” The City’s acts (or omissions) merely preserved the status

23 quo. 12

4. The City did not take any other “act” against Mr. Stuart in violation of § 362(a)(6).

Finally, Mr. Stuart argues that the City’s refusal to dismiss the writ of

garnishment and desire to freeze the bank accounts indefinitely violated

subsection (a)(6). For the reasons discussed above, we disagree.

Section 362(a)(6) prohibits “any act to collect, assess, or recover a

claim against the debtor that arose before the commencement of the case

under this title[.]” Mr. Stuart repeats arguments that he raised in

connection with the other subsections.

As we explained above, the City did not do anything to enhance its

position and only sought to maintain the status quo. See In re Margavitch,

, at *7 (“[T]he mere retention of a valid pre-petition state

court attachment or lien without more, is not a violation of § 362(a)(4)-

(6).”). The City did not take any act to “collect, assess, or recover” a claim

against Mr. Stuart, because everything was stayed. Further, it stated

multiple times that it did not oppose the release of the frozen funds.

12 We emphasize that the City’s garnishment did not capture any more funds postpetition. The result would likely be different, as in certain cases cited by Mr. Stuart, e.g., In re LeGrand,

(Bankr. E.D. Cal. 2020), if this were a wage garnishment which attached to the debtor’s postpetition wages or a bank account garnishment that encompassed postpetition deposits to the account. Here, neither BOA nor the City was actively collecting any debt from Mr. Stuart; staying the State Court Action and maintaining the freeze on the accounts was merely a continuation of the status quo as it existed on the petition date and collected nothing further from Mr. Stuart. 24 CONCLUSION

Because the City immediately asked the state court to stay the case

and did nothing to change the status quo that existed when Mr. Stuart filed

his bankruptcy petition, it did not violate the automatic stay. We AFFIRM.

25