Mwangi v. Wells Fargo Bank, N.A. (In Re Mwangi)

Eric Mwangi and Pauline Mwicharo (collectively “the Debtors”) were account holders at Wells Fargo Bank, N.A. When Wells Fargo discovered that the Debtors had filed a voluntary Chapter 7 bankruptcy petition, it placed a “temporary administrative pledge” on the Debtors’ accounts. Wells Fargo then requested instructions from the Chapter 7 trustee regarding the distribution of account funds, a portion of which the Debtors claimed as exempt under Nevada Revised Statutes § 21.090(l)(g).

In this case, we must decide whether the Debtors can state a claim for a willful violation of 11 U.S.C. § 362 (a)(3) — which proscribes “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” — based on the operation of Wells Fargo’s administrative pledge. We hold that they cannot state such a claim. Before the account funds revested in the Debtors, they remained estate property, and the Debtors had no right to possess or control them. Accordingly, the operation of the administrative pledge could cause the Debtors no injury before the account funds revested. After the account funds revested in the Debtors, they…