107 F.3d 359 (6th Cir. 1997), 95-1379, In re Javens

Docket Nº:95-1379.
Citation:107 F.3d 359
Party Name:In re Harry JAVENS and Joyce Javens, Debtors. Harry JAVENS and Joyce Javens, Plaintiffs-Appellants, v. CITY OF HAZEL PARK and City of Royal Oak, Defendants-Appellees.
Case Date:February 19, 1997
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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107 F.3d 359 (6th Cir. 1997)

In re Harry JAVENS and Joyce Javens, Debtors.

Harry JAVENS and Joyce Javens, Plaintiffs-Appellants,

v.

CITY OF HAZEL PARK and City of Royal Oak, Defendants-Appellees.

No. 95-1379.

United States Court of Appeals, Sixth Circuit

February 19, 1997

Argued Oct. 3, 1996.

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[Copyrighted Material Omitted]

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Hugh M. Davis, Jr. (argued and briefed), Hugh M. Davis, Jr., P.C., Detroit, MI, Harry Javens, Troy, MI, for Harry Javens, Joyce Javens.

Arnold J. Shifman, Philip H. Seymour (argued), Cooper, Shifman, Gabe, Quinn & Seymour, Royal Oak, MI, Susan M. Lancaster (briefed), Sherman & Sherman, Bingham Farms, MI, for City of Hazel Park.

Lawrence A. Friedman (argued and briefed), Southfield, MI, for City of Royal Oak.

Before: KRUPANSKY, BOGGS, and SILER, Circuit Judges.

BOGGS, Circuit Judge.

Municipal authorities demolished three condemned buildings owned by Harry and Joyce Javens after they filed for bankruptcy. Should the automatic stay provisions of the Bankruptcy Code have required those authorities to desist from that exercise of local might? The district court and bankruptcy court below held that the Code did not prevent the Cities of Hazel Park and Royal Oak from sending bulldozers to enforce their laws. After careful consideration of the applicable provisions of the Code, we agree, and affirm the order of the district court.

I

In November 1989, four years and four months before the first building fell, the City of Hazel Park filed a complaint in Oakland County Circuit Court against the Javenses and others having an interest in the Blue Dot Building, an apartment house located at 20841 John R [sic] in that city. Hazel Park alleged that numerous building and fire code violations made the building a public nuisance and a danger to the public health, safety, and welfare. In July 1992, after two and a half years of procedural maneuvering, Javens (as we shall for simplicity call the plaintiffs) and Hazel Park entered into a consent judgment. Under its terms, the Blue Dot apartments were to be vacated; Hazel Park was to give Javens a definitive list of violations (it would fill five single-spaced pages); and Javens was to correct them all within one year after the premises were vacated.

A year and two months later, alleging that Javens had failed to comply with the consent judgment, Hazel Park filed a motion in the same state court for an order of immediate demolition. At a hearing on the motion, Javens claimed that he was unable to comply with the terms of the consent judgment because actions by Hazel Park employees had made it impossible for him to do so. Judge Nichols of the circuit court scheduled a bench

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trial for December 3, 1993. Javens succeeded in obtaining two adjournments, and requested a third. That prompted Judge Nichols to cancel the bench trial. Hazel Park refiled its motion for an order of immediate demolition, and, at a hearing held on January 19, 1994, Judge Nichols granted the motion. However, certain persons having minor interests in the building had not been notified of the motion, so the city had to refile the motion and serve all the parties. At a new hearing on February 2, Judge Nichols entered an amended order to the same effect.

The Blue Dot Building was not the only Javens property that attracted Hazel Park's attention. In another Oakland County Circuit Court action, the city sought a declaratory action that thirteen other houses owned by Javens were nuisances per se, and that the buildings should either be brought up to code or demolished. One of these houses, at 422 East George Street, suffered damage in a fire in June 1993. Hazel Park sought an order of immediate demolition for that building. After several adjournments, Judge Schnelz of the circuit court personally inspected the building; he still had the motion under advisement as of February 2, 1994.

Meanwhile, in the nearby City of Royal Oak, a hearing officer for the city made determinations regarding yet another building owned by Javens, at 213 Euclid Street in that municipality. At a proceeding held on November 17, 1993, the officer found that

[t]his house is in a seriously deteriorated condition requiring extensive building, plumbing, electrical and heating repairs. The owner, Mr. Javens, has had more than a year's time to repair the building but has made no apparent effort to comply with the orders of the Code Enforcement Division and the house continues to be an attractive nuisance, deteriorating the neighborhood.... THEREFORE, IT IS ORDERED that the house, all accessory buildings, and deteriorated fencing be demolished....

Five days later, Javens had the opportunity to show cause at a City Commission meeting why the order and findings of the hearing officer should not be followed. Javens spoke at length, and asserted that Royal Oak police officers had prevented him from repairing the building by keeping him and contractors from entering the premises. Mr. Krupp, a Code Enforcement officer, also testified, as did Mr. Sutton, a neighbor on Euclid Street; both spoke of the building's decrepit condition. Javens complained of having received inadequate notice and information about the nature of the hearing. Nonetheless, at the close of the hearing, the commission voted unanimously to affirm the hearing officer's order of demolition, and to seek bids for the demolition of the house at 213 Euclid Street.

Thus, at the beginning of February 1994, two buildings owned by Javens faced imminent destruction, and the same fate seemed possible for a third. Javens sought sanctuary in the Bankruptcy Code. On February 2, 1994, the same day that Judge Nichols entered his amended order of immediate demolition for the Blue Dot Building, Javens filed a voluntary petition in United States Bankruptcy Court for the Eastern District of Michigan.

II

Filing a petition under the Bankruptcy Code creates legal barriers that repel, at least temporarily, many legal attacks against the estate. The following statutory language creates these barriers:

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, 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 action or proceeding against the debtor that was or could have been 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;

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(3) 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;

...

11 U.S.C. § 362(a).

The legislative history of the Code explains the purpose of this protection:

The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.

H.R. Rep. 95-595, at 340 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 6296.

The § 362(a) shield can repel actions by "all entities," including governments. As one court explained, "the legislative history is clear that, in general, this [section] was intended to extend to governmental entities as well as private ones." Penn Terra Ltd. v. Dep't of Envtl. Resources, 733 F.2d 267, 271 (3d Cir.1984).

Some governmental attacks on the estate, however, penetrate the barrier. Pursuant to 11 U.S.C. § 362(b), the filing of a petition does not operate as a stay:

(4) under subsection (a)(1) of this section, of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power;

(5) under subsection (a)(2) of this section, of the enforcement of a judgment, other than a money judgment, obtained in an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power;

As the legislative history of the Code explains, "[t]hus, where a governmental unit is suing a debtor to prevent or stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix damages for violation of such a law, the action or proceeding is not stayed under the automatic stay." S.Rep. No. 95-989, at 52 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5838.

The Code provides for no similar exception from any stays automatically generated against the proceedings described in the other subsections of § 362(a), including subsection (a)(3). Against such actions, the barriers are fully effective, unless and until overcome by a successful petition in the bankruptcy court for relief from the automatic stay. See 11 U.S.C. § 362(d).

III

Javens notified Hazel Park and Royal Oak of his bankruptcy filing, and invoked the Code's automatic stay provisions to save his condemned buildings from destruction. Hazel Park promptly filed a motion in the bankruptcy court "for a determination that the automatic stay of § 362(a) does not apply to the litigation initiated by the City of Hazel Park to correct building code violations or obtain orders permitting demolition of properties in which the debtors or debtors' estate may have an interest." In re Javens, No. 94-41069-G (Bankr.E.D.Mich. March 15, 1994) (order exempting Hazel Park from automatic stay). Javens...

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