In re Bartel
| Decision Date | 04 May 2009 |
| Docket Number | Bankruptcy No. 05-13134-JBR.,BAP No. MB 08-078.,Adversary No. 06-1161-JBR. |
| Citation | 404 B.R. 584 |
| Parties | Dennis M. BARTEL, Debtor. Dennis M. Bartel, Plaintiff-Appellant, v. Paul F. Walsh, Jr., District Attorney for Bristol County of Massachusetts, and Stephen M. O'Reilly, Defendants-Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, First Circuit |
David G. Baker, Esq., on brief for Appellant.
Martha Coakley, Esq. and David Hadas, Esq., on brief for Appellee.
Before VAUGHN, KORNREICH, and TESTER, United States Bankruptcy Appellate Panel Judges.
Dennis M. Bartel (the "Debtor") appeals from the October 10, 2008, bankruptcy court order (the "Order") granting the motion of Paul F. Walsh1 and Lieutenant Stephen O'Reilly ("Lieutenant O'Reilly") (together, the "Defendants") for summary judgment on the Debtor's complaint alleging violations of the Federal Civil Rights Act, 42 U.S.C. § 1983; the Massachusetts Civil Rights Act, General Laws Chapter 12 § 11I; the automatic stay provisions of the bankruptcy code, 11 U.S.C. § 362;2 and abuse of process. The bankruptcy court's decision turned on its conclusion that § 362(b)(1) categorically excepts criminal prosecutions from the automatic stay. We agree.
The Debtor was a contractor who owned a home construction company called New Dimensions Construction Services. He filed a chapter 13 petition in 2005, and later converted his case to chapter 11. After he commenced the adversary proceeding that is the subject of this appeal, but before the court issued the Order, the court converted his case to chapter 7.
While the Debtor was a debtor-in-possession under chapter 11, Lieutenant O'Reilly appeared at the Debtor's home, served the Debtor with a search warrant, and seized the Debtor's financial books and records. While doing so, he allegedly told the Debtor that the attorney general of the Commonwealth of Massachusetts had "placed a block" on the Debtor's bankruptcy case and that the Debtor was not going to be allowed to go forward with the case. Additionally, Lieutenant O'Reilly allegedly asked the Debtor, "what did you do with Berghaus' money?," which the Debtor understood to be reference to Larry Berghaus, who was a client of New Dimensions and a state police officer.
The Debtor further alleged that, the next day, the Debtor's attorney received a call from attorney James Rudser, who stated that he represented Jose and Isabelle Rodriguez in state court actions against the Debtor and New Dimensions. The Rodriguezes had filed a proof of claim in the bankruptcy case. Rudser allegedly told the Debtor's attorney that he (Rudser) was the source of the actions taken by Lieutenant O'Reilly, that such actions were only the beginning of the Debtor's troubles, and that he had Lieutenant O'Reilly on his "speed dial." Rudser also allegedly asked whether the Debtor would provide him with an affidavit that he could use in the state court proceeding, in exchange for which Rudser would withdraw the Rodriguezes' claim and arrange for Lieutenant O'Reilly's investigation to cease.
In February, 2006, the Debtor commenced the adversary proceeding that is the subject of this appeal. In his complaint, he alleged that the Defendants took the above-described actions under color of law, in exercise of the authority of the Commonwealth of Massachusetts and with knowledge that the Debtor was a debtor in a bankruptcy case. Additionally, he alleged that the actions were intended to deprive the Debtor of the rights and privileges afforded under the Bankruptcy Code, including the automatic stay, and were not related to any legitimate exercise of police power or any legitimate criminal matter. Rather, he alleged, the actions were designed and intended to harass and intimidate the Debtor to compel him to pay a debt through the unlawful use of criminal process. Moreover, the Debtor asserted that Lieutenant O'Reilly's seizure of his financial records made it impossible for him to prosecute his bankruptcy case, make payments to creditors, and fully assist his counsel in preparing the necessary pleadings and papers, and deprived him of relief available under the Bankruptcy Code.
In March, 2006, a Bristol County grand jury returned an indictment against the Debtor, charging him with multiple counts of "Larceny Over $250." In October, 2007, a jury convicted the Debtor on seven of such counts, and the Debtor was sentenced to seven and a half years in state prison. The state court will determine the Debtor's restitution obligation in further proceedings.
In July, 2008, the Defendants moved for summary judgment on the Debtor's complaint, in which they argued that the automatic stay did not apply to the Defendants' actions, that there was no merit to the Debtor's theory that Lieutenant O'Reilly's questioned him about "Berghaus' money" to intimidate him into paying Berghaus' claim, that the Defendants did not violate the Debtor's civil rights because the automatic stay was inapplicable to their actions, and that the bankruptcy court lacked jurisdiction over the civil rights claims. The Debtor objected to the Defendants' motion for summary judgment, arguing that they cannot "cloak" their abuse of authority within the police power exception to the automatic stay, that the Defendants were estopped from denying the content of Lieutenant O'Reilly's conversation with the Debtor, and that the Debtor's civil rights claims were well founded and were within the bankruptcy court's jurisdiction.
The bankruptcy court held a hearing on the matter, during which the parties essentially reiterated their positions. Additionally, the Defendants explained that the district attorney's office had given the Debtor "100 per cent access" to the Debtor's financial records by making them available to him, for any reason, during business hours. The Debtor responded that the state court judge had ordered the district attorney's office to return the documents to the Debtor, that this did not occur, and that the Debtor filed a motion to compel in the bankruptcy court while the case was pending with a different bankruptcy judge. The bankruptcy court stated that the Debtor had taken no action with respect to compelling the return of the records in the five months since the case had been reassigned to a new judge, despite the Debtor having had "plenty of opportunity" to do so. The bankruptcy court concluded the hearing by taking the matter under advisement.
The bankruptcy court issued the Order granting the Defendants' motion for summary judgment, accompanied by a memorandum of decision. In its decision, the bankruptcy court concluded that the Defendants had not violated the automatic stay as a matter of law, because § 362(b)(1) provides a categorical exception to the automatic stay and the scope of § 362(b)(1) includes property of the estate. Additionally, the court further concluded that the Debtor's allegations of civil rights violations must fail as a matter of law because they were predicated on the Debtor's allegation of a stay violation. This appeal followed.
A bankruptcy appellate panel may hear appeals from "final judgments, orders and decrees [pursuant to 28 U.S.C. § 158(a)(1)] or with leave of the court, from interlocutory orders and decrees [pursuant to 28 U.S.C. § 158(a)(3)]." Fleet Data Processing Corp. v. Branch (In re Bank of New England Corp.), 218 B.R. 643, 645 (1st Cir. BAP 1998). "A decision is final if it `ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" Id. at 646 (citations omitted). An order granting summary judgment is a final order where no counts against any defendants remain. See Segarra Miranda v. Garrido Pagan (In re Garrido Jimenez), 370 B.R. 878, 880 (1st Cir. BAP 2007). Here, the bankruptcy court had previously dismissed the complaint as to three of the Defendants; the Order resolved all claims against the remaining two Defendants. Additionally, the bankruptcy court issued an order in which it stated that the complaint was dismissed as to all counts and all Defendants. The Order is, therefore, a final appealable order. See id.
The Panel generally reviews findings of fact for clear error and conclusions of law de novo. See TI Fed. Credit Union v. DelBonis, 72 F.3d 921, 928 (1st Cir.1995); Western Auto Supply Co. v. Savage Arms, Inc. (In re Savage Indus., Inc.), 43 F.3d 714, 719 n. 8 (1st Cir.1994). On appeal, we review the grant of summary judgment de novo. See Richardson v. Preston (In re Antex, Inc.), 397 B.R. 168, 171 (1st Cir. BAP 2008).
Bankruptcy Rule 7056 incorporates Rule 56(c) as the appropriate standard for deciding a motion for summary judgment. Thus, the moving party bears the initial burden of demonstrating that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Razzaboni v. Schifano (In re Schifano), 378 F.3d 60, 66 (1st Cir.2004) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). If the initial burden is met, the burden shifts to the non-moving party to show that genuine issues of material fact exist. Id. (citing F.D.I.C. v. Municipality of Ponce, 904 F.2d 740, 742 (1st Cir.1990)). The non-moving party must set forth more than conclusory allegations, improbable inferences or unsupported speculation to establish genuine issues of material fact. Competent evidence is required. Id. (citing Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir.1990)).
As an initial matter, we are compelled to clarify the relationship between the automatic stay and a bankruptcy court's jurisdiction over property of the estate. The Debtor argues that because 28 U.S.C. § 1334(e) grants ...
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...§ 362(b)(1) is inapplicable where the criminal proceeding is initiated for the purpose of collecting a debt.”), with In re Bartel, 404 B.R. 584, 590 (BAP 1st Cir.2009) (“[A] criminal proceeding is not subject to the automatic stay, even where it relates to debt collection or where the debto......
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