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City of Chicago v. Fulton (2021)

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City of Chicago v. Fulton (2021)

Citation: 592 U.S. 154 (No. 19-357) · Court: Supreme Court of the United States · Decided: January 14, 2021 · Opinion: Alito, J., for the Court (all other Members joining, except Barrett, J., who took no part); Sotomayor, J., concurring.

Facts

The City of Chicago impounded vehicles of individuals who owed fines. Each debtor filed a Chapter 13 petition and asked the City to return the vehicle; the City refused. The Bankruptcy Courts and the Seventh Circuit held that by retaining the vehicles the City had acted “to exercise control over” estate property in violation of 11 U.S.C. § 362(a)(3).

Holding

“[M]ere retention of estate property after the filing of a bankruptcy petition does not violate §362(a)(3) of the Bankruptcy Code.” Section 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.” (Syllabus.) The Court added: “we need not decide how the turnover obligation in §542 operates. Nor do we settle the meaning of other subsections of §362(a). We hold only that mere retention of estate property after the filing of a bankruptcy petition does not violate §362(a)(3).”

Reasoning

Reading § 362(a)(3) to reach mere retention would make § 542’s turnover command — that an entity in possession of estate property “shall deliver to the trustee … such property” — largely superfluous, and would contradict § 542’s own exceptions to turnover. (Syllabus.)

Practical impact

  • An agency or creditor holding an impounded or repossessed vehicle when a bankruptcy is filed does not violate the automatic stay of § 362(a)(3) merely by keeping it; the debtor’s route to recover it is a turnover proceeding under § 542 (whose operation the Court left open).
  • A sale of the vehicle after the petition is a different, affirmative act; buyers at impound, lien and repossession auctions should confirm that no bankruptcy was pending at the time of sale.
  • Compare united-states-v-whiting-pools-1983 (property seized pre-petition is estate property subject to turnover).

Good-law status

Still good law.

Applies in →

All jurisdictions (federal bankruptcy law). See forfeiture-and-government-seizure-sales, motor-vehicles, bankruptcy-automatic-stay-federal, bankruptcy-automatic-stay.

Sources

Disclaimer. This page is legal information, not legal advice. It summarizes a court decision that may have been limited or distinguished by later authority. Nothing here creates an attorney-client relationship. Read the full opinion and consult a licensed attorney before acting.

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