On July 7, 2006, the United States Bankruptcy Appellate Panel for the Ninth Circuit, in Johnson v. TRE Holdings LLC (In re Johnson), BAP No. CC-05-1268 (9th Cir. B.A.P. 2006), held that bankruptcy courts do not have authority under section 105(a) of the Bankruptcy Code to preclude the application of the automatic stay in subsequent cases via an "in rem" order.
In Johnson, the debtor had an undivided fifty percent interest in certain real property at the time of his bankruptcy filing. Without seeking relief from the automatic stay, the trustee of the property caused a nonjudicial foreclosure sale. When the debtor moved for sanctions under Section 362(h) of the Bankruptcy Code for violation of the automatic stay, the trustee asserted that the automatic stay was inapplicable. The trustee argued that the real property was previously owned by another debtor and in that debtor’s bankruptcy case the bankruptcy court had entered an "in rem" order precluding the application of the automatic stay to the real property. The trustee concluded that the automatic stay was inapplicable to the present case.
The BAP rejected the trustee’s argument and held that the "in rem" relief was void because the bankruptcy court lacked the authority to enter such order. While the ultimate outcome of this case is unremarkable in light of the 2005 Bankruptcy Amendments, which expressly authorize such "in rem" orders under Sections 362(b)(20) & (d)(4) of the Bankruptcy Code, the BAP’s analysis of a bankruptcy court’s inherent authority under section 105(a) of the Bankruptcy Code is still instructive. In reaching its holding, the BAP noted that a bankruptcy court’s inherent authority is limited to the authority appropriate and necessary to carry out the provisions of the Bankruptcy Code: "[W]e adhere to the limiting propositions that § 105(a) is not a revolving commission to do equity or to do anything inconsistent with the Bankruptcy Code. [Citations.]"