By Judith K. Fitzgerald
Tucker Arensberg, P.C.
Pittsburgh, PA
Frank Arenas is licensed in Colorado to grow and dispense
medical marijuana. He and his wife own a
building, half of which is used for the cultivation and the other half of which
is leased to a marijuana dispensary.
These activities are legal in Colorado, but, despite then Attorney
General Eric Holder’s expressed willingness to work with Congress[i] to
reschedule marijuana and remove it from the Schedule I (high potential for
abuse) drug list[ii], 21 U.S.C. §856(a) has not been amended. Thus, knowingly opening, renting, using or
maintaining any place, even temporarily, for the purpose of manufacturing,
distributing or using any controlled substance is a federal crime. Similarly, 21 U.S.C. §841(a)(1) makes it
unlawful for any person knowingly or intentionally to manufacture, distribute,
or dispense or possess with intent to do so, a controlled substance.
When Mr. Arenas tried to evict his tenant and lost the
effort, resulting in a judgment that Arenas could not pay, he and his
wife filed Chapter 7.[iii] They listed their nonexempt marijuana plants
with a value of $6,250 and their building as worth $262,725 but over-encumbered with liens. The trustee initially
filed a notice of no distribution but withdrew that notice after he received some indication that a
purchaser would take the property. He consulted with
the United States Trustee (“UST”) to determine whether he could administer the
property. The UST said no and filed a
motion to dismiss the case for cause because the property could not be
administered without violating federal law.
In response, the Debtors moved to convert their case to Chapter 13. The bankruptcy court denied the motion to convert
and dismissed the case. Debtors appealed
to the Tenth Circuit Bankruptcy Appellate Panel (“BAP”).