IN RE ROBERTS

MEMORANDUM OPINION DENYING MOTION OF FEDERAL LAND BANK OF ST. PAUL FOR DETERMINATION THAT AUTOMATIC STAY HAS BEEN LIFTED AS A MATTER OF LAW

ARTHUR J. SPECTOR, Bankruptcy Judge.

This case deals with a conflict between the terms of Bankruptcy Rule 4001(b) and 11 U.S.C. § 362(e). Because the statutes take precedence over any contrary provisions of the Bankruptcy Rules, the Court hereby rules that Bankruptcy Rule 4001(b) is invalid insofar as it requires a determination that the automatic stay under 11 U.S.C. § 362(a) is deemed lifted 30 days after the commencement of a final hearing on a motion by a party in interest for relief from the stay unless the Court explicitly denies the motion prior thereto.

On April 4, 1986, Federal Land Bank of St. Paul (Land Bank) filed a motion for relief from the stay pursuant to 11 U.S.C. § 362(d). It sought leave to foreclose its mortgages on various parcels of real estate owned by the debtors. A preliminary hearing on that motion was conducted on May 5, 19861 at which time the Court found that there was a reasonable likelihood that the debtor in possession, being the party opposing the motion, would prevail at the conclusion of the final hearing. We expressly ordered "That the automatic stay is continued until the further order of the Court", and set the matter for a final hearing. The final hearing was conducted on May 29 and May 30, 1986. The Court issued its findings of fact and conclusions of law with respect to the motion on July 18, 1986. At that time, we held that the debtor in possession's proposal for adequate protection, which was the subject matter of the trial, was insufficient. 11 U.S.C. §§ 361, 362(d)(1); In re Roberts, 63 B.R. 372 (Bankr.E.D.Mich.1986). However, because the debtor in possession had, prior to the close of the hearing, modified its proposal for adequate protection, we did not at that time enter an order granting the motion for relief from the stay, but instead continued the hearing to determine whether the modified proposal was sufficient.

A hearing was conducted on August 18, 1986. In the course of the argument, the debtor in possession further modified the provision for adequate protection of Land Bank's secured claim. That hearing was concluded with the admonition that the debtor file, once and for all, a final provision for adequate protection which would be unmodifiable, or that it reach an amicable negotiated settlement with Land Bank as to the provision for adequate protection. On December 19, 1986, Land Bank renewed its motion, claiming that no satisfactory settlement had been reached and that the debtor had failed to further modify its proposal, and that therefore, the stay ought now, finally, be lifted. This motion was objected to by the debtor in possession. A hearing on the motion was scheduled and conducted on January 22, 1987. At that hearing Land Bank argued that as the Court had not within 30 days after the commencement of the final hearing denied the motion for relief from the stay, the stay had terminated as a matter of law pursuant to Bankruptcy Rule 4001(b).2 That rule states:

It is true that the Court never denied Land Bank's motion for relief from the stay. However, it is also clear that the Court never granted it or even concluded the final hearing. The findings of fact and conclusions of law entered on July 18, 1986 explicitly set a new date for hearing as to the modified proposal. That hearing was conducted and likewise not concluded. Thus, the current status is that the motion still pends.

Section 362(e) of the Bankruptcy Code provides as follows:

Since the preliminary hearing on the Land Bank's motion for relief from the stay was conducted within 30 days of the date of its request, the first part of that subsection was satisfied. Since the Court found at the preliminary hearing that the debtor in possession had a reasonable likelihood of prevailing at the conclusion of the final hearing, the stay was not lifted at the preliminary hearing but instead it was continued "until further order of the Court" and a final hearing date was set. Since there has never been a "further order", the stay has continued. The final hearing was commenced not later than 30 days after the conclusion of the preliminary hearing. Therefore, the latter portion of § 362(e) was satisfied.

"[Bankruptcy] rules shall not abridge, enlarge, or modify any substantive right". 28 U.S.C. § 2075. Therefore, the terms of the Bankruptcy Code prevail over conflicting terms in the rules. In re Itel Corp., 17 B.R. 942, 8 B.C.D. 961, 6 C.B.C.2d 4 (9th Cir.B.A.P.1982); In re Management Data Services, Inc., 43 B.R. 962, 12 B.C.D. 573, 11 C.B.C.2d 934 (Bankr.W.D. Wash.1984). Under the former version of 28 U.S.C. § 2075, which existed prior to the enactment of the Bankruptcy Code, the Rules of Bankruptcy Procedure superseded contrary provisions of the Bankruptcy Act, as the section included the following sentence: "All laws in conflict with such rules shall be of no further force or effect after such rules have taken effect." Section 247 of Public Law 95-598, the law which enacted the Bankruptcy Code, repealed this latter sentence. Legislative history shows that Congress repealed this sentence because it felt that

H.R.Rep. No. 595, 95th Cong. 1st Sess. 449 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6404.

Because it purports to provide a self-executing relief from stay not contemplated by the statute and in contravention of its provision allowing a court to continue a stay until the conclusion of the final hearing, whenever that might occur, Bankruptcy Rule 4001(b) presents an irreconcilable conflict with 11 U.S.C. § 362(e) which must take precedence. For these reasons, we find that to the extent that Bankruptcy Rule 4001(b) creates such a conflict, it is invalid as violative of 28 U.S.C. § 2075.

Accordingly, an order will be entered contemporaneously herewith denying Land Bank's motion for an order declaring that the stay has been terminated as a matter of law.