City of Chi. v. Howard
| Decision Date | 29 January 2021 |
| Docket Number | No. 20-cv-01266,No. 20-cv-00372,20-cv-00372 |
| Citation | 625 B.R. 384 |
| Parties | The CITY OF CHICAGO, Appellant, v. Cupree HOWARD, Appellee. The City of Chicago, Appellant, v. Marcella M. Mance, Appellee. |
| Court | U.S. District Court — Northern District of Illinois |
Charles A. King, City of Chicago, Department of Law, Chicago, IL, for Appellant.
Ross Harry Briggs, Firm 13, St. Louis, MO, for Appellee.
Appellees Cupree Howard and Marcella M. Mance each filed separate petitions for Chapter 7 bankruptcy relief. Each Appellee also filed in their respective bankruptcy proceeding a motion to avoid a lien that Appellant City of Chicago ("City") held on their automobile. In both proceedings, the Bankruptcy Courts granted the motions, finding that the liens the City obtained by immobilizing and impounding Appellees’ vehicles were avoidable judicial liens under 11 U.S.C. § 522(f)(1)(A). The City now appeals both orders. For the reasons that follow, the Bankruptcy Courts’ orders are affirmed.
The facts underlying Appellants’ motions to avoid the liens are undisputed and, unless otherwise noted, taken from the respective Bankruptcy Courts’ decisions.
Appellee Howard filed a Chapter 7 bankruptcy petition on August 9, 2019. (Suppl. to Bankruptcy Appeal, Ex. at 117, The City of Chicago v. Howard , No. 20-cv-00372 (N.D. Ill. Feb. 18, 2020), Dkt. No. 6-2.) His Schedules A/B and C listed an automobile with a value of $575 and claimed an exemption of $575 for that vehicle. In his Schedule E/F, Howard listed a claim held by Appellant City for unpaid parking tickets in the amount of $8,000. Similarly, Appellee Mance filed for Chapter 7 bankruptcy relief on November 20, 2019. (Suppl. to Bankruptcy Appeal, Ex. at 35, The City of Chicago v. Mance , No. 20-cv-01266 (N.D. Ill. Mar. 23, 2020), Dkt. No. 7-2.) She listed an automobile worth $3,000 in her Schedule A/B and claimed a $2,400 exemption for that vehicle in her Schedule C. At the time of her petition, Mance owed the City $12,000 for moving and parking violations. The City had impounded both Appellees’ vehicles in connection with their unpaid tickets prior to each Appellee's bankruptcy filing and the City remained in possession of the vehicles as of the date of their petitions. (Appellant's Consolidated Br. at 3, Howard , 20-cv-00372 (Sept. 7, 2020); Mance , 20-cv-01266 (Sept. 7, 2020).)
In their respective bankruptcy proceedings, each Appellee filed a motion to avoid the possessory lien the City claimed over their automobiles. Those liens arose pursuant to a vehicle immobilization program created by § 9-100-120 of the Municipal Code of Chicago ("M.C.C."). Specifically, after following the procedures set out in the ordinance, the City is permitted to immobilize a vehicle whose owner "has accumulated (i) three or more final determinations of liability or (ii) two final determinations which are more than one year past the date of issuance" for certain traffic and parking violations. M.C.C. § 92-100-120(b). Once a vehicle is immobilized by the City, that vehicle is "subject to a possessory lien in favor of the [C]ity in the amount required to obtain release of the vehicle." M.C.C. § 92-100-120(j).
According to Appellees, because the City's ability to impound1 their vehicles under M.C.C. § 92-100-120 is conditioned on liability determinations made in quasi-judicial administrative proceedings, its liens on Appellees’ automobiles are judicial liens that may be avoided under 11 U.S.C. § 522(f)(1)(A). In response, the City argues that because it obtained its liens automatically upon its immobilization of Appellees’ vehicles, the liens are statutory liens that cannot be avoided. Both Bankruptcy Courts determined that the City's lien resulting from immobilization was a judicial lien and ruled in favor of the respective Appellee. The City has appealed those determinations.2 The sole issue on appeal is whether the lien the City obtains from immobilizing a vehicle is a judicial lien or a statutory lien.
Federal district courts have jurisdiction to review bankruptcy court decisions pursuant to 28 U.S.C. § 158(a). When considering a bankruptcy appeal, a district court reviews the bankruptcy court's findings of fact for clear error while its conclusions of law are reviewed de novo. Stamat v. Neary , 635 F.3d 974, 979 (7th Cir. 2011) ; In re Brittwood Creek, LLC , 450 B.R. 769, 773 (N.D. Ill. 2011).
The Bankruptcy Code allows a debtor to avoid a lien that impairs a debtor's exemption when the lien is a "judicial lien." 11 U.S.C. § 522(f)(1)(A). A "judicial lien" is defined by the Bankruptcy Code as a "lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding." Id. § 101(36). By contrast, a "statutory lien" is defined as a "lien arising solely by force of a statute on specified circumstances or conditions, or lien of distress for rent, whether or not statutory, but does not include security interest or judicial lien." Id. § 101(53). As these definitions make clear, "[j]udicial liens and statutory liens are mutually exclusive." In re Wigfall , 606 B.R. 784, 787 (Bankr. N.D. Ill. 2019). To determine the nature of a particular lien, the key question is "whether it arises solely by force of statute, or whether it results from some type of judicial process or proceeding." In re Schick , 418 F.3d 321, 324 (3d Cir. 2005).
To begin, the Court first considers the statutory scheme by which Appellees’ automobiles were impounded. Illinois law gives municipalities and counties the right to "provide by ordinance for a system of administrative adjudication of vehicular standing and parking violations and vehicle compliance violations[,] automated traffic law violations[,] and automated speed enforcement system violations." 625 ILCS 5/11-208.3(a). The City ordinances at issue here were established pursuant to that authority. See In re Peake , 588 B.R. 811, 817–21 (N.D. Ill. 2018), aff'd sub nom. In re Fulton , 926 F.3d 916 (7th Cir. 2019). Under M.C.C. § 9-100-020(a):
The violation of any provision of the traffic code prohibiting or restricting vehicular standing or parking, or establishing a compliance, automated speed enforcement system, or automated traffic law enforcement system violation, shall be a civil offense punishable by fine, and no criminal penalty, or civil sanction other than that prescribed in the traffic code shall be imposed.
Once a vehicle's owner is given notice of a violation, "a vehicle owner is granted the opportunity to contest the violation either in person at a hearing or by way of mail correspondence." Peake , 588 B.R. at 818 (citing M.C.C. §§ 9-100-055, 070, 080). "If the vehicle owner loses or otherwise does not contest the violation, a determination of liability is entered." Id. (citing M.C.C. § 9-100-090). A losing vehicle owner is entitled to appeal their liability determination under Illinois's Administrative Review Law, 735 ILCS 5/3-101 et seq. Peake , 588 B.R. at 818. "If administrative review of the decision is not sought or is not fruitful for the vehicle owner, the determination of liability becomes final." Id. (citing M.C.C. § 9-100-100). At the point a liability determination becomes final, it "constitute[s] a debt due and owing to the [C]ity." M.C.C. § 9-100-100(b).
As the language of the Illinois statute and the City's ordinance makes clear, these final determinations of liability for certain vehicular, parking, and traffic violations are the product of an "administrative adjudication" system. 625 ILCS 5/11-208.3(a) ; M.C.C. § 9-100-101(a). The Seventh Circuit has held that these final determinations of liability are "money judgments." Fulton , 926 F.3d at 931.3 And where a vehicle owner has the requisite number of unpaid final determinations of liability under M.C.C. § 9-100-120(b), the City may resort to the immobilization procedures available under that Section. M.C.C. § 9-100-100(b). But accumulating multiple unpaid final determinations of liability does not automatically allow the City to immobilize a vehicle. Rather, that occurrence sets in motion a separate administrative process whereby the City first sends the vehicle's owner a "notice of impending vehicle immobilization." M.C.C. § 9-100-120(b). Upon receipt of the notice, the owner has the option to pay the amounts owed within 21 days or challenge the notice by requesting a hearing in which the owner can present evidence that would disprove liability. Id. "Only after this process is completed can the vehicle be immobilized." Wigfall , 606 B.R. at 789. And once the vehicle is immobilized, the City holds a possessory lien on that vehicle. M.C.C. § 9-100-120(j).
Despite its own acknowledgment that the final determinations of liability preceding the lien created by immobilization result from administrative adjudications, the City nonetheless contends the lien is not "obtained by" the proceedings resulting in the liability determinations. It emphasizes that the definition of judicial lien in 11 U.S.C. § 101(36) requires that the lien be "obtained by" the judgment. According to the City, the phrase "obtained by" requires that the judgment itself either is a lien or becomes a lien. By contrast, here, the City argues that once each individual final determination of liability underlying the immobilization of Appellees’ vehicles was made, the administrative proceeding was over. Only later, when each Appellee accumulated the requisite number of unpaid final determinations of liability, was the City entitled without further adjudicative proceedings to immobilize their vehicles and obtain its liens. Thus, the City asserts that there is a disconnect between the administrative adjudications resulting in the final determinations of liability and the immobilization of Appellees’ vehicles, such that the two processes are separate. When the immobilization procedure is properly viewed separately, the City argues, it is...
To continue reading
Request your trial
-
City of Chi. v. Mance (In re Mance)
...requisite number of judgments, the City would have no right to immobilize the vehicles and no liens could arise." City of Chicago v. Howard , 625 B.R. 384, 390 (N.D. Ill. 2021).3 II. Lien Definitions in the Bankruptcy Code The classification of a lien under the Bankruptcy Code is a question......