In Re Adana Mortgage Bankers, Inc.

OPINION

This motion for a finding of contempt was brought by the Debtor against the Government National Mortgage Association (“GNMA”) and certain of its officers and agents for actions which the Debtor contends violated the automatic stay provisions of the Bankruptcy Code, to wit: Section 362(a)(3), which prohibits acts “to obtain possession of property of the estate or of property from the estate.” The three items of property which are the center of the controversy are: (1) certain custodial bank accounts established and maintained by the Debtor, (2) certain mortgages held by the Debtor which back GNMA securities issued by the Debtor, and (3) a contractual agreement between GNMA and the Debtor, granting the Debtor the right to hold and service these mortgages. In particular, the Debtor (sometimes referred to as “Adana”) submits that delivery, on February 6, 1980, of a letter terminating the Debtor’s issuer status under the contracts between the Debtor and Adana, and the subsequent attempt, on March 3, 1980, to seize, by letter and oral demand to the banks, all of the Debtor’s GNMA custodial bank accounts and pooled loan documents, are actions justifying contempt citations from this Court.

FINDINGS OF FACT

Debtor is a mortgage banker primarily engaged in originating or purchasing mortgage loans which it then forms into “pools” of approximately one million dollars in value. Pursuant to agreements (sometimes referred to as the “Guaranty Agreements,” as the “servicing agreements” or as the “Agreements”) between Debtor and GNMA, these mortgage pools then become the basis for the issuance of mortgage-backed securities issued by the Debtor and guaranteed by GNMA pursuant to authority granted by Section 306(g) of the National Housing Act, codified at 12 U.S.C. Section 1721(g). A separate Guaranty Agreement is executed between Adana and GNMA with respect to each “pool” of mortgages. The securities (sometimes referred to as “Certificates”) issued for each pool of mortgages are then sold by Adana to investors in the marketplace, who receive a monthly return from the issuer equivalent in amount to the principal received on the mortgages in the pool, plus a specified rate of interest set forth on the securities. The *993 issuer, Adana, then functions as servicer of the mortgages and securities; it uses the money it receives from the individual mortgagors in each pool' to pay the monthly payments to its certificate holders. In the event of a shortfall in receipts from the underlying mortgages, the issuer is, nevertheless, responsible for paying the full amount due to the security holders promptly by the fifteenth day of each month. Although the issuer will recover any payment of its own funds if it eventually recovers the delinquent payments from the underlying mortgagors, there is no assurance that such funds paid out by the issuer will be recovered. The issuer also collects tax and insurance escrows from the individual mortgagors and pays the taxes and insurance on the mortgaged properties as they become due. For all of these services the issuer collects a servicing fee based upon a percentage of the payments received from the mortgagors.

GNMA is a corporation, wholly owned by the United States government, 1 under the control and management of the Secretary of HUD. 2 GNMA was created in 1968 to take over certain of the secondary mortgage market operations of the Federal National Mortgage Association (“FNMA”) and to carry on the mortgage-backed securities program. 3 All of the benefits and burdens incident to the administration of GNMA inure to the Secretary of the Treasury, after expenses and reserves. 4

One of the numerous documents required to be submitted by the Debtor to GNMA prior to the issuance of GNMA certificates is a Guaranty Agreement, which is the primary document setting forth the relationship between the Debtor, as issuer of the GNMA certificates, and GNMA, as the guarantor of the certificates. The Guaranty Agreement provides that GNMA will pay the amounts due on the certificates, should the issuer fail to do so. Pursuant to the Guaranty Agreement GNMA (a) takes unrecorded assignments of the mortgages, (b) requires the establishment of custodial bank accounts for the receipts of principal, interest, and escrow funds from the individual mortgagors, (c) requires all the mortgage loan documents to be held by an independent custodian, and (d) charges a guaranty fee based upon a percentage of the servicing fee collected by the servicer.

The Guaranty Agreement provides that two specified events are automatic events of default by the issuer: (1) failure to make monthly payments on the certificates as they become due and (2) the application by the issuer for an advance from GNMA to pay the certificate holders. The Guaranty Agreement also sets forth numerous other obligations of the issuer which, may, upon written notice from GNMA to the issuer, be declared events of default. Among this latter category of optional defaults are the following: (1) failure to give advance notice of bankruptcy, (2) failure to maintain a specified minimum net worth established by GNMA, and (3) the actual filing of a petition in bankruptcy. Upon the occurrence of a default under the Guaranty Agreement, whether automatic or elective, GNMA is contractually entitled to issue a letter of extinguishment to the issuer. The effect of this letter is to terminate thereafter any rights that the issuer has retained in the pooled mortgages and to substitute GNMA for the debtor as the issuer of the certificates. Upon this occurrence, GNMA, as substituted issuer, is entitled to collect the receipts under the mortgages and becomes responsible for all future payments on the certificates.

The issuer’s right to service the mortgages in the Debtor’s GNMA pools and to col *994 lect the servicing fees allowed under the Guaranty Agreements is a valuable right, which can be sold to another servicer (approved by GNMA) for a substantial amount. The Debtor has stated in its Statement of Financial Affairs that its servicing portfolio has a value of $700,-000.00. There is testimony that the value of the portfolio might actually approach $1,000,000.00.

The Debtor filed its voluntary petition under Chapter 11 of the new Bankruptcy Code on Friday, February 1, 1980. On Monday, February 4, 1980 the Debtor notified GNMA of the filing by a telephone call to GNMA’s offices in Washington, D.C. On February 6, 1980 the Debtor’s president, Ramsey Agan, and the Debtor’s attorney, Benjamin C. Abney, flew to Washington, D.C. to meet with GNMA. At that meeting GNMA made the determination that the Debtor was in default under the Guaranty Agreements with GNMA. GNMA’s determination was based on a perceived change of business status of the Debtor that materially affected GNMA, the acknowledgment and confirmation of the Debtor’s insolvency, the inability of the Debtor to meet GNMA’s net worth requirements to act as issuer of securities under the Guaranty Agreements, and the fact that the Debtor had failed to give GNMA advance notice of an impending or actual default as required by section 5.03 of the Guaranty Agreements. Accordingly, at the end of the meeting on February 6, 1980, Mr. R. Frederick Taylor, Executive Vice-President of GNMA, delivered a letter, which GNMA contends terminated all of the Debtor’s rights as issuer under the Guaranty Agreements, declaring Adana in default and advising the Debtor that GNMA was exercising its contractual rights to substitute itself for the Debtor as issuer under the Guaranty Agreements. GNMA then offered a substitute contract to the Debtor which among other things, (1) reduced the compensation the Debtor would receive for its servicing of the mortgages, (2) gave GNMA the right to terminate the substitute contract at any time without compensation to the Debtor’s estate, (3) transferred control of all of the custodial bank accounts from the Debtor to GNMA, and (4) limited the term of the contract to one (1) year. The Debtor has never executed the proposed interim servicing agreement presented to it by GNMA.

In the early morning of March 3, 1980, GNMA sent one of its officers to each of the three line banks and, without any prior warning to the Debtor or the line banks or approval by the Bankruptcy Court, presented a written demand that the line banks turn over all funds in the Debtor’s custodial accounts and all mortgages and other loan documents pertaining to GNMA pools and held by the line banks as custodians. Each custodial bank refused to comply with GNMA’s demand without first obtaining direction from this Court.

The Debtor promptly filed a motion for contempt the same day alleging that the letter of February 6, 1980, attempting to terminate the Debtor’s issuer status under the Guaranty Agreements, and the attempted seizure of the custodial bank accounts and mortgage documents violated the stay. At 10:50 A.M., that morning the hearing on that motion began before this Court, with attorneys representing the Debtor, GNMA and the three line banks present. After hearing, the court entered an order to preserve the status quo until a full hearing could be held on March 11, 1980.

R. Frederick Taylor signed the February 6, 1980 default letter that allegedly terminated GNMA’s contract with the Debtor on the basis of the Debtor’s financial condition. Mr. Taylor also ordered the March 3, 1980 demand letters to the three line banks to be delivered. William Linane, Warren Lasco, and Clement Dinsmore delivered the March 3, 1980 demand letters to the three line banks that held the Debtor’s custodial accounts. Mr. Laurent is the GNMA officer who signed the March 3, 1980 demand letters.

It is undisputed that Adana has made all required payments to the certificate holders *995 as and when due, and that the defaults cited in the purported letter of termination by GNMA were of the elective nature, i. e., GNMA was required to declare in writing the occurrences as events of default. GNMA officials stated that GNMA’s actions were necessary in light of the uncertain financial situation of the Debtor and the absolute necessity of timely payments to the certificate holders. The purpose of the mortgage-backed securities program is to assure a flow of private investment capital into the housing market. Through its experience with the GNMA “straight pass-through” securities program, formerly the only GNMA securities program, GNMA knows that timely, dependable monthly payments are vitally important to investors. According to GNMA, the straight pass-through certificates, which provide for payments to certificate holders only to the extent of receipts on the underlying mortgages, were a failure in the marketplace. On the other hand, the program of “modified pass-through” certificates of the type issued by the Debtor has been highly successful with investors. For this reason, GNMA officials feel that absolute timeliness of payments on these “modified” GNMA certificates is essential to the continued viability of its program, and indirectly to the housing industry of this nation. GNMA officials felt that the Debtor’s failure to meet GNMA’s net worth requirements threatened the Debtor’s ability to make timely payments on its certificates and, consequently, elected to declare the Debtor in default under its Guaranty Agreements and to terminate its Issuer status under the Agreements, notwithstanding the filing of the Debtor’s bankruptcy petition. GNMA officials also felt that the demands made upon the line banks were necessary corollaries to the termination of the Debtor’s Issuer status.

SUMMARY OF THE MORTGAGE-BACKED SECURITIES PROGRAM

The following chronological summary of the mortgage-backed securities program is necessary to the discussion of the issues involved in this case:

1. After an investigation of information about Adana’s operations submitted to GNMA by Adana, GNMA grants the issuer authority to Adana.

2. Pursuant to the form Guaranty Agreement, GNMA issues a commitment to Adana for guaranty of securities, and assigns a pool number to Adana.

3. Adana makes loans to homeowners and receives mortgages, which are recorded in the name of Adana as Lender. Adana assembles numerous mortgages into a pool, pursuant to the commitment.

4. Adana makes arrangements with a securities dealer to market the mortgage-backed securities when they become available or may market the securities on its own behalf.

5. Adana makes arrangements for a custodian; e. g., a bank; to maintain possession of the mortgages and other documents; and for the holding of principal and interest and tax and insurance funds at such financial institution in a custodial account. Preliminary documentation is sent to GNMA by Adana and the custodian, including a schedule of mortgages certified by the custodian, custodial agreements for the mortgages and the escrow accounts and a schedule of subscribers, on which Adana sets forth the name of the purchaser(s) of the certificate(s) and the irrevocable instructions for delivery of the certificate(s).

6. When a pool is assembled, Adana submits the final documents to GNMA for final and prompt (within 2 calendar days) approval of the issuance.

7. Upon approval, GNMA instructs its transfer agent to prepare and deliver the certificates in accordance with instructions of the issuer.

8. Adana completes the sale of the certificates to the investors who become the “holders” of the certificates (securities).

9. Adana holds record title to the mortgages in the pool in its name.

*996 10. The Guaranty Agreement between Adana and GNMA includes an assignment of the mortgages to GNMA by Adana.

11. The assignments of the mortgages are not recorded.

12. Under the Guaranty Agreement, Adana is responsible for servicing the mortgages, collecting the mortgage payments from the homeowners in that pool and passing on the payments monthly, by the 15th of the month, to the holders, as provided for in the certificates (securities).

13. Under said Agreement, Adana receives a servicing fee based upon a percentage of the unpaid principal balance of the mortgages in the pool.

14. Adana is required to make periodic reports to GNMA.

15. Adana, and its custodial bank, hold the monthly mortgage collections for prompt payment to the securities holders.

16. If a homeowner fails to pay promptly, or defaults altogether, under tlie Guaranty Agreement, Adana, nevertheless, is responsible to remit promptly the total amount due to the securities holders.

17. In the event of a failure of Adana to pay the securities holders timely, on the 15th of the month, GNMA is forthwith liable to pay, as guarantor, the amount due the securities holders. By statute the GNMA guaranty is backed by the full faith and credit of the United States.

18. Any failure of Adana to pay the securities holders fully and promptly on the 15th of the month is a cause of default in the issuer’s Guaranty Agreement with GNMA.

QUESTIONS PRESENTED

This contempt proceeding presents three basic questions. First, whether the delivery by GNMA on February 6, 1980, after filing of the Debtor’s Chapter 11 petition on February 1,1980, of a letter declaring a default and terminating the Debtor’s status as issuer under all of the Guaranty Agreements between the Debtor and GNMA violated the automatic stay of 11 U.S.C. Section 362. Second, whether the March 3, 1980 letters and demands by GNMA for payment of funds and transfer of documents from custodial accounts at the three banks constituted a violation of the automatic stay. Third, if either or both actions violated the stay, whether the circumstances of such violations warrant imposition of the sanction of contempt.

SUMMARY OF THE ARGUMENTS

The Debtor’s motion for contempt seeks sanctions for acts in violation of the automatic stay provisions of the Bankruptcy Code, 11 U.S.C. Section 362, to wit: Section 362(a)(3) which prohibits acts “to obtain possession of property of the estate or of property from the estate.” The three items of property cited are (1) contractual rights to service mortgages and collect fees, pursuant to the Guaranty Agreements, (2) the custodial bank accounts, and (3) certain mortgages in the face amount of approximately seventy million dollars.

With respect to its letter of termination of the Debtor’s contract rights, GNMA contends (1) that it was permitted to do so by its enabling statute, (2) that its federal regulations requiring minimum net worth for issuers supersede the Bankruptcy Code, and (3) that the servicing contract was not “property” within the scope of Section 541 GNMA also argues that the mortgages and bank accounts did not constitute property of or from the Debtor’s estate and hence actions to seize these items could not violate the automatic stay. Finally, GNMA argues that, even if its actions were subject to the automatic stay, no contempt sanctions are appropriate since, (1) GNMA acted under color of right which must deprive its actions of being “knowing and willful;” (2) the debtor has suffered no injury, (3) GNMA was subject to conflicting responsibilities, and (4) no purpose would be served by punishing GNMA and its officials for good faith actions to execute their statutory re *997 sponsibilities or for a violation that, at most, was technical.

GNMA attorneys have informed the Court that GNMA has not been involved in any prior bankruptcy eases involving its issuers and that no decisions have been rendered concerning the respective rights of GNMA, its issuers and the securities holders under the GNMA program. 5 Thus, some of the issues presented here seem to be of first impression.

CONCLUSIONS OF LAW

SCOPE OF THE AUTOMATIC STAY

One of the fundamental protections offered a debtor in a ease under the Bankruptcy Code is the automatic stay of actions against him provided in Section 362 of the Code. 6 The stay operates to prevent a rate of diligence by creditors intent on a piecemeal dismemberment of the Debtor’s assets. 7 The stay insures that all of the property of the Debtor will be brought into the custody of the “bankruptcy court by the filing of the petition, and no interference with that custody can be countenanced without the court’s permission.” 8 Without such a provision the orderly liquidation or rehabilitation of the Debtor would be impossible. 9

Section 362 provides that a petition operates as a stay, applicable to all entities, of—

“(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other proceeding against the debtor that was or could have 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;

(4) any act to create, perfect, or enforce any lien against property of the estate;

(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;

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

• (7) the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; and

(8) the commencement or continuation of a proceeding before the United States Tax Court concerning the debtor.”

As noted above, the stay applies to all “entities.” An “entity” includes a “governmental unit” 10 which is defined as the “United States; . . . department, agency, or instrumentality of the United States. ...” 11 Apparent also, is the intention of Congress that the inclusion of the United States in the definition of “entity” *998 is “intended to be an express waiver of the sovereign immunity of the Federal government, ...” 12 This waiver is also supported by the language of Section 106(c) of the Bankruptcy Code that any provision referring to a “creditor,” “entity” or “governmental unit” applies to governmental units, and that “a determination by the court of an issue arising under such a provision binds governmental units.” Therefore, upon the filing of a petition in bankruptcy, the stay is meant to be effective against the United States or any of its agencies or instrumentalities, including GNMA, unless an exception can be found in Section 362(b) or elsewhere.

Congress considered the needs of the United States and its agencies in drafting the exceptions to the automatic stay, but provided no exception applicable to the actions taken by GNMA. Sections 362(b)(4) and (5) provide that a governmental unit may enforce its police and regulatory powers, notwithstanding the automatic stay, except enforcement of a money judgment. The legislative history indicates that the police power exception was enacted “to prevent or stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, . .. ” 13 The pursuit by the government of any other objectives not embraced by “police or regulatory power” would not be permitted under the stay. 14

The limited scope of the Section 362(b)(4) and (5) exceptions is underscored by the following statement by the managers of the Bankruptcy Reform Act of 1978;

“[tjhis section is intended to be given a narrow construction in order to permit governmental units to pursue actions to protect the public health and safety and not to apply to actions by a governmental unit to protect a pecuniary interest in property of the debtor or property of the estate.” 15

It is clear that GNMA does not fit under the police power exception to the stay by any reading of the statute or the legislation ■history, since the public health or safety is not involved here.

Another section excepting government action from the coverage of the stay is Section 362(b)(7) which provides that the Secretary of HUD may commence foreclosure actions on mortgages or deeds of trust which were insured under the National Housing Act and which cover property consisting of five or more living units. This exception is carefully limited to commencing an action, and was apparently left in the Code for tax purposes. 16 An earlier draft of this section in the Senate version of the Bankruptcy Reform Act (S.2266) was much broader and would have permitted the Secretary of HUD to commence and continue a foreclosure action by judicial ac *999 tion or by power of sale. 17 Comparison of the earlier version and the final version of the Code illustrates that “the exception granted the Secretary of HUD should be given a restricted interpretation.” 18

It is apparent from examining the exceptions to the automatic stay, the scope of the stay, and the limited waiver of sovereign immunity provided in 11 U.S.C. § 106 that Congress did not intend to exempt GNMA from the automatic stay provisions of the Bankruptcy Code. This view is supported by the absence of any reference to GNMA in the Code, despite provisions of the Code specifically referring to HUD foreclosures (§ 362(b)(7)) and the secondary mortgage market (§ 541(d)). It is hardly likely that Congress would have included references to government foreclosure actions and the secondary mortgage market in the Code, omitting from the automatic stay exceptions any reference which could be applicable to the actions taken by GNMA, if Congress had, in fact, intended that the acts taken by GNMA would be excepted from the effect of the stay. See T.I.M.E. v. United States, 359 U.S. 464, 79 S.Ct. 904, 3 L.Ed.2d 952 (1959). The active participation of GNMA to influence provisions of the Bankruptcy Reform Act of 1978, discussed infra, strongly supports the analysis that an absence of exceptions to the automatic stay for actions taken by GNMA denotes a Congressional intent that such actions are subject to the stay.

ALLEGED EXEMPTION IN SECTION 306(g) OF THE NATIONAL HOUSING ACT

GNMA has argued that its enabling statute, Section 306(g) of the National Housing Act, permits GNMA to terminate the Debtor’s rights under the Guaranty Agreement and take certain other actions, notwithstanding the automatic stay provisions of the Bankruptcy Code. Section 306(g) does not exempt GNMA from the scrutiny of the Bankruptcy Code and this Court. Section 306(g) provides, in pertinent part,

Any Federal, State or other law to the contrary notwithstanding, the Association [GNMA] is hereby empowered, in connection with any guaranty under this subsection, whether before or after any default, to provide by contract with the issuer for the extinguishment upon default by the issuer, of any redemption, equitable, legal, or other right, title, or interest of the issuer in any mortgage or mortgages constituting the trust or pool against which the guaranteed securities are issued; and with respect to any issue of guaranteed securities, in the event of default and pursuant otherwise to the terms of the contract, the mortgages that constitute such trust or pool shall become the absolute property of the Association subject only to the unsatisfied rights of the holders of the securities based on and backed by such trust or pool.

12 U.S.C. Section 1721(g) [emphasis supplied].

Although Section 306(g) of the NHA may be the “applicable law” for purposes of determining whether the Debtor may assume the Guaranty Agreement under Section 365(c) of the Bankruptcy Code, Section 306(g) of the NHA does not exempt GNMA from the operation of the Bankruptcy Code.

GNMA contends that the phrase “Any Federal, State, or other law to the contrary notwithstanding” in Section 306(g) gives it the right to terminate the Debtor’s rights under the Guaranty Agreement regardless of the provisions of the Bankruptcy Code. This reliance on a blanket statutory repealer finds no support in case law or proper statutory interpretation.

First of all, the repealer phrase modifies the phrase “is empowered ... to provide by contract.” The purpose of this repealer *1000 phrase is not mentioned in the voluminous history of the National Housing Act, but the language was apparently included to allow GNMA summarily to terminate an issuer’s rights upon default, despite other state or federal laws that might require judicial foreclosure of collateral, as opposed to unilateral action by a creditor. The effect of this phrase is that the question of whether GNMA can provide for extinguishment of the issuer’s interest in the mortgages by contract, instead of through local foreclosure procedures, is decided in favor of uniformity of procedure throughout the country. With respect to actually implementing its contractual remedies after the issuer has filed for relief under Chapter 11 of the Bankruptcy Code, GNMA is in the same position as any other party in interest. Relief from the automatic stay must be requested and granted before a party in interest is entitled to enforce contractual or judicially created remedies.

The Bankruptcy Code and Section 306(g) of the National Housing Act are not in conflict; there is no provision in the Code which prohibits GNMA and any other party from providing for the termination of one party’s interest without having to go through judicial foreclosure. What the Bankruptcy Code does say, however, is that GNMA, just as any creditor or party in interest, is stayed from enforcing its contractual remedies until authorized by the Bankruptcy Court. 19 Section 306(g) merely authorizes GNMA to create a contractual right to extinguish Adana’s rights in the mortgages after a valid declaration of an event of default. Bankruptcy Code Section 362 provides that, after the filing of a petition for relief, such contractual rights cannot be exercised without judicial relief from the automatic stay.

However, even if Section 306(g) were construed to conflict with the automatic stay provisions of the Bankruptcy Code, the provisions of the Code, having been acted subsequently to Section 306(g) would prevail. Under fundamental principals of statutory construction, if “there is an irreconcilable conflict, the latter enactment will control, or will be regarded as an exception to or qualification of, the prior statute. It is not permissible to consider the advantage from a practical point of view of one statute over another, and on that basis construe the one producing the more practical results so as to suspend the other.” 82 C.J.S. § 368 at 838-39. This analysis is bolstered by the fact that when the stay provisions of the Bankruptcy Code were enacted, Congress carefully considered the extent to which acts by the Department of Housing and Urban Development (“HUD”) and its agencies, of which GNMA is one, 12 U.S.C. Section 1723(a), would be exempted from the prohibitions of the stay. For example, subsection 362(b)(7) granted HUD a special exception from the automatic stay for the purpose of bringing foreclosure actions against multi-family dwelling units, as discussed above. The legislative history of this subsection explains that Congress consciously and deliberately narrowed the exception previously granted to HUD under Section 263 and Section 517 of the former Bankruptcy Act. 20 According to fundamental principals of statutory construction, this congressional expression of one exception for HUD and its agencies indicates a legislative intent not to allow any ether exceptions to HUD from the stay provisions of the Code. Sutherland, Statutory Construction, Section 47.23. See, e. g., 82 C.J.S. § 333; 73 Am.Jur. 2nd Section 211. Hence if a conflict between Section 306(g) and the Bankruptcy Code did exist, the Code must prevail.

In support of its position that Section 306(g) of the National Housing Act and any regulations formulated by GNMA pursuant *1001 to that statute control the Bankruptcy Court, GNMA cites several cases, including Cullen v. Bowles, 148 F.2d 621 (2d Cir. 1945); Zwick v. Freeman, 373 F.2d 110 (2d Cir. 1967), cert. den. 389 U.S. 835, 88 S.Ct. 43, 19 L.Ed.2d 96 (1967); and Tragash v. United States Department of Agriculture, 524 F.2d 1255 (5th Cir. 1975). All of these cases are inapposite to the present fact situation. Cullen v. Bowles was decided on the single holding that “the only judicial remedy lay in the Emergency Court of Appeals . . .at 624, and not bankruptcy law. All references in Cullen to bankruptcy are dicta, the case dealt with entirely different legislation than § 306(g) — the Emergency Price Control Act 21 , enacted during a period of national emergency, and the case involved the Bankruptcy Act not the Bankruptcy Code.

As discussed above, the Congress specifically considered what governmental actions should be exempt from the Bankruptcy Code provisions and the exercise of GNMA’s contractual remedies does not fall into the category of “police or regulatory powers.” Given specific statutory treatment of the interface between government regulations and the Bankruptcy Code, the vaguely analogous, distinguishable Cullen case is not controlling.

Similarly, the cases of Zwick v. Freeman, and Tragash v. United States Department of Agriculture are also inapposite to the present fact situation. In Zwick the court held that the sanction provided by the Perishable Agriculture Commodities Act was not a “provable debt” and therefore not dischargeable under the Bankruptcy Act. Zwick at 116. The court in Tragash reasoned that:

. . . “Congress did not intend to exempt bankrupts from the provisions of the Commodities Act, a view supported by the absence of any reference to the Bankruptcy Act in the provision in question although other provisions of the Commodities Act do include references to bankruptcy.” at 1257.

Applying this type of statutory construction to GNMA and the automatic stay, that is, HUD and secondary mortgages are mentioned in the Bankruptcy Code but no exception to the automatic stay is provided to GNMA, GNMA is not an entity exempt from the provisions of the Section 362 stay.

In analyzing the cases cited by defendant and the entire problem posed by this contempt action, it is important to note that the Court is not being asked to rule on the ultimate effect of GNMA’s regulations. The issue before the court is simply whether GNMA is prevented from taking unilateral action by the force and effect of the automatic stay provided by Section 362 of the new Bankruptcy Code.

PROPERTY OF THE ESTATE

GNMA contends that the property which GNMA sought to seize is not property “of the estate” within the meaning of Section 541 of the Bankruptcy Code, and that the property in question was also not “property from the estate” within the meaning of Section 362(a)(3), and that this fact gives it the unilateral right to seize the property without application to and the consent of the Bankruptcy Court.

The Bankruptcy Code clearly stays “any entity” from “any act to obtain possession of property of the estate or of ^perty from the estate.” Section 362(a)(3). Property classified in either of said categories, or in both, would be protected from the type of unilateral and unauthorized action taken by GNMA on March 3.

Property of the Estate Defined

In the Code, Section 541 defines property of the estate and actions which *1002 may be taken with respect thereto. Sub-part (a) of Section 541 defines “property of the estate” and Subparts (b), (e) and (d) create specific exceptions to the general rule stated in subpart (a). Section (a) gives a very broad definition to “property of the estate” as:

“all legal or equitable interests of the debtor in property as of the commencement of the case.” Section 541(a)(1).

The legislative history of Section 541 leaves no doubt that the definition was intended to be as broad as the language indicates.

“The scope of the paragraph is broad. It includes all kinds of property, including tangible and intangible property, causes of action . . . and all other forms of property currently specified in section 70(a) of the Bankruptcy Act. The debtor’s interest in property also includes ‘title’ to property, which is an interest, just as are a possessory interest, or leasehold interest, for example.”

House Report No. 95-595, 95th Cong. 1st Sess. (1977) 367; Senate Report No. 95-989, 95th Cong. 2d Sess. (1978) 82, U.S.Code Cong. & Admin.News 1978, p. 6323.

“. . . Section 541(a) is an ill-embracing definition which includes charges on property, such as liens held by the debtor on property of a third party, or beneficial rights and interest, that the debtor may have in property of another.”

124 Cong.Rec. Hll,096 (Sept. 28, 1978) (Statement of Rep. Edwards) S. 17,413 (Oct. 6, 1978) (Statement of Sen. DeConcini).

Carved from this “all-embracing definition” of the bankruptcy estate created by Section 541 are three limited exceptions.

(b) Property of the state does not include any power that the debtor may only exercise solely for the benefit of an entity other than the debtor.

(c)(1) Except as provided in paragraph (2) of this subsection, an interest of the debtor in property becomes property of the estate under subsection (a)(1), (a)(2), or (a)(5) of this section notwithstanding any provision—

(A) that restricts or conditions transfer of such interest by the debtor; or

(B) that is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title, or on the appointment of or the taking possession by a trustee in a case under this title or custodian, and that effects or gives an option to effect a forfeiture, modification, or term of the debtor’s interest in property.

(2) A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable non-bankruptcy law is enforceable in a case under this title.

(d)Property in which the debtor holds, as of the commencement of the case, only legal title and not equitable interest, such as a mortgage secured by real property, or an interest in such a mortgage, sold by debtor but as to which the debtor retains legal title to service or supervise the servicing of such mortgage or interest, becomes property of the estate under subsection (a) of this section only to the extent of the debtor’s legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold.

If the three types of property which the government tried to seize fall within the section 541(a) definition of the estate and are not excepted by Sections 541(b), (c) or (d), then actions against these properties are prevented by Section 362(a). Each of the three types of property will be discussed separately below.

Guaranty Agreements

The facts establish that the servicing rights under the Guaranty Agreements existing on February 1, 1980 at the time of filing of this Chapter 11 petition was a valuable asset to the Debtor, valued by the Debtor at $700,000.00 to $1,000,000.00, and *1003 that it is marketable under normal or present circumstances. 22 By the letter of February 6, 1980, GNMA attempted to terminate Debtor’s issuer status under the Agreements, thereby rendering the servicing portfolio worthless to the Debtor and creditors in this case. The servicing is virtually the sole, certainly the primary, unencumbered asset, of the Debtor. Without the servicing contract, or its value (which would provide a comparable stream of income), the chances of a successful rehabilitation would be remote, if not impossible.

It is undisputed that, as of February 1, 1980, the Debtor had a contractual right to perform the functions of an issuer and ser-vicer under the Guaranty Agreement. The record also shows that the Debtor continued to have such contractual rights through February 5, 1980. GNMA argues, however, that on February 6, 1980 when it delivered its letter of extinguishment to the Debtor, the Debtor’s rights under the contract were terminated and hence no longer property of the estate. Such termination may have occurred if the letter of extinguishment had been delivered prior to the filing of the bankruptcy petition, but, it is circular reasoning to say that the automatic stay does not apply because actions taken after the stay went into effect terminated the Debt- or’s interests. The purpose of the stay is to prevent the taking of just such actions against a debtor.

The debtor’s interest in the servicing contract is property of the estate. Section 70(a) of the prior Bankruptcy Act dealt with the issue of what property properly belonged to a bankrupt’s estate. Section 541 of the Bankruptcy Code, the successor of prior Section 70(a), includes within the definition of property of the estate “all other forms of property currently specified in Section 70(a) of the Bankruptcy Act ...” House Report No. 95-595, 95th Cong. 1st Sess. (1977) 367; Senate Report No. 95-989, 95th Cong. 2d Sess. (1978) 82, U.S. Code Cong. & Admin. News 1978, p. 6323. Thus, property covered under Section 70(a) of the prior Act is “property of the estate” under Section 541 of the new Code.

Property as defined in Section 70(a)(5) included all property “which could by any means have been transferred or otherwise seized, impounded or sequestered.”

The testimony of both the GNMA and the Debtor agree that under the Guaranty Agreements, in certain circumstances such as a valid pre-petition default, GNMA could cancel the agreements, seize the mortgages and take over the servicing functions of any mortgage banker. Moreover, GNMA has admitted that the servicing contract of Adana could have been transferred with GNMA approval. Thus, the Debtor’s interest in the servicing contract was not only subject to termination and seizure, but was transferable under certain circumstances. In a prior decision involving Section 70(a)(5) of the Bankruptcy Act, the Supreme Court held that a seat on the New York Stock Exchange was property of the estate.

“was the seat in the stock exchange property which could have been by any means transferred, or which might have been levied upon and sold under judicial process? If the seat was subject to either manner of disposition it passed to the trustee of the appellant’s estate. Page v. Edmunds, 187 U.S. 596, 23 S.Ct. 200, 47 L.Ed. 318 (1903). [Emphasis supplied]

Thus, the Debtor’s interest in the servicing contract is “property of the estate” under Section 70(a)(5) of the prior Act because it could be transferred or seized under certain circumstances. The Debtor’s inter *1004 est in the servicing is likewise property of the estate under 11 U.S.C. 541 because the legislative history makes it clear that all property covered under Section 70(a) of the prior Act is within the definition of “property of the estate.”

Contractual rights are intangible property within the scope and protection of the automatic stay. Moreover executory contracts, like the Guaranty Agreements, are specifically treated by the Code in Section 365, which grants a debtor the right to assume or reject most executory contracts in a reorganization case at any time prior to the confirmation of a plan. Although certain types of contracts are excepted from the Debtor’s right to assume by Section 365(c), any party to such a contract seeking a determination of it