In re Brinkman, Bankruptcy No. 4-90-721
| Decision Date | 17 January 1991 |
| Docket Number | Bankruptcy No. 4-90-721,Adv. No. 4-90-282. |
| Citation | 123 BR 318 |
| Parties | In re Randal Scot BRINKMAN, Debtor. Randal Scot BRINKMAN, Plaintiff, v. CITY OF EDINA and Dennis Bible, Defendant. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
Michael T. Kallas, Harvey, Thorfinnson, Scoggin, Lucas & Kallas, P.A., Eden Prairie, Minn., for plaintiff.
Kim A. Anderson, Dorsey & Whitney, Minneapolis, Minn., for defendant City of Edina.
George C. Seltz, Mirviss, Seltz & Seltz, P.A., Minneapolis, Minn., for defendant Dennis Bible.
This proceeding came on for trial on the plaintiff's complaint to enjoin the City of Edina's criminal prosecution. Michael T. Kallas appeared for the plaintiff. Kim A. Anderson appeared for the City of Edina and George G. Seltz appeared for Dennis Bible. This court has jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334 and Local Rule 103(b). This is a core proceeding. Based on the memoranda and arguments of counsel, and the file in this proceeding, I make the following memorandum order.
Randal Brinkman is a contractor in the business of general construction and was a principal of Covenant Construction Company. In March of 1989, Dennis Bible contacted several contractors about remodeling his home and in May of 1989, Bible and Covenant Construction Company entered into a contract to remodel Bible's home for the price of $37,840.00. During the remodeling, the contract was modified and the contract price increased to approximately $55,000.00.
During the months of June through October of 1989 Bible made four payments to Brinkman totaling $44,686.08. After Bible made the October payment no more work was done on his home. In November of 1989, Bible learned that Brinkman was in severe financial difficulty and that some of the subcontractors had not been paid. Bible tried, but was unable, to contact Brinkman during November and December to find out what Brinkman had done with the $44,686.08.
During this period some of the subcontractors called Bible demanding payment for work done on his home. Bible began to investigate mechanics lien law and happened upon Minn.Stat. § 514.02.
If a person, on any improvement to real estate within the meaning of section 514.01, fails to use the proceeds of any payment made to that person on account of such improvement by the owner of such real estate or person having any improvement made, for the payment for labor, skill, material, and machinery contributed to such improvement, knowing that the cost of any such labor performed, or skill, material, or machinery furnished for such improvement remains unpaid, and who has not furnished to the person making such payment either a valid lien waiver as to any unpaid labor performed, or skill, material, or machinery furnished for such improvement, or a payment bond in the basic amount of the contract price for such improvement, conditioned for the prompt payment to any person or persons entitled thereto for the performance of labor or the furnishing of skill, material, or machinery for the improvement, shall be guilty of theft of the proceeds of such payment and upon conviction shall be fined not more than $3,000 or imprisoned not more than one year, or both.
Minn.Stat. § 514.02, subd. 1.
Bible then called the Minnesota Attorney General's office to inquire into possible criminal prosecution of Brinkman. The Attorney General's office instructed Bible to call the Hennepin County Attorney's office who in turn instructed Bible to call the Edina City Attorney's office.
On January 11, 1990, in accordance with Minn.Stat. § 514.02, Bible served Brinkman with a notice demanding payment in full for the payments made to Brinkman pursuant to the contract. A copy of the notice was sent to Marsh J. Halberg, prosecuting attorney for the City of Edina. When Brinkman failed to reply to the notice within the statutory period, Bible filed a complaint with the Edina Police Department. On January 28, 1990, a police report was compiled and sent to the prosecuting attorney's office.
On February 9, 1990, Brinkman filed for relief under Chapter 7 of the Bankruptcy Code. On February 27, 1990, the City prosecutor filed a criminal complaint against Brinkman for violating Minn.Stat. § 514.02, subd. 1. The prosecuting attorney did not consult Bible, seek his advice, or give him a voice in the decision to prosecute Brinkman.
Bible did not file a complaint to determine the dischargeability of Brinkman's debt to him and on May 8, 1990, Brinkman's debts, including his debts to Bible and the subcontractors, were discharged.
At Brinkman's first appearance on the criminal matter on May 9, 1990, Brinkman was given the chance to obtain an attorney. Brinkman hired Howard Bolter who subsequently appeared at three pretrial conferences. At the first pretrial conference on June 13, 1990, the City prosecutor discussed with Bolter options to avoid a trial. The prosecutor laid out four options. Brinkman could:
The prosecutor did not consult Bible before discussing plea options.
Bolter informed the prosecutor that Brinkman had filed bankruptcy and that it may affect the criminal prosecution. Nothing more about the effect of the bankruptcy on the criminal prosecution was discussed until after plea negotiations failed. On August 9, 1990, Bolter wrote a letter to the City prosecutors in which he informed them that the criminal prosecution was violating bankruptcy protection and asked them not to proceed any further. The City prosecutor responded that he would not discontinue the criminal prosecution.
The City of Edina prosecutes approximately 10,000 criminal cases per year. Virtually all of these cases are disposed of prior to trial. Of those cases that do go to trial, somewhere between 100-200 cases receive a court trial. Only 2-3 of the 10,000 cases result in a jury trial each year. The disposition of crimes that involve economic loss such as larceny, theft, and bad checks, virtually all result in restitution of some kind, either as a negotiated plea or a sentence by the court.
There are quite a few cases regarding the appropriateness of bankruptcy courts enjoining criminal prosecutions. These cases involve and frequently confuse at least three issues.
1. Does the prosecution violate the automatic stay provisions of § 362(a)?
2. Should the court use its equitable injunctive power under § 105 to enjoin the prosecution in order to promote certain bankruptcy goals?
3. Does the prosecution violate the discharge injunction found in § 524?
The answer to the first question is easy since § 362(b)(1) is a specific exception to the automatic stay for the commencement or continuation of a criminal action or proceeding. The answer to the second question is more problematic and involves discussion and issues about reorganization and rehabilitation, about the debtor's efforts and intention of paying certain underlying debts, the interference of the prosecution with the orderly administration of the case, and the intentions or good faith of the prosecuting authorities and the victim.
The third question, the only one present here, is whether the criminal prosecution violates the discharge injunction which provides in relevant part:
11 U.S.C. § 524(a)(2).
The automatic stay terminated as to the plaintiff and his property when the discharge was entered. 11 U.S.C. § 362(c)(2). The issues of the goals of reorganization and the debtor's attempt to deal with the underlying debt in his case are for the most part irrelevant. Therefore, the sole issue to be decided in this proceeding is whether the City's prosecution of the plaintiff is "the commencement or continuation of an action . . . to collect," Brinkman's debt to Bible. Having thus narrowed the issue, many of the cases cited by all parties are irrelevant.
Much has been made in this proceeding of the Supreme Court's opinion in Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971) and its pronouncement that federal courts should refrain from intervening in state court criminal proceedings. Id. at 43, 91 S.Ct. at 750. However, once the issue in this proceeding is identified it is clear that the policies of Younger are not implicated here. When courts are dealing with the second question, discussed above then Younger may be applicable. However, in this case, the plaintiff is not asking me to use the bankruptcy court's equitable powers to enjoin the City. Rather, he is asking me to determine that the statutory provisions of § 524(a), by their own terms, enjoin the City's prosecution and if necessary, to enforce the statutory injunction with a specific judicial injunction.
This is made clear by the statutory provision dealing with enjoining state court proceedings:
A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.
28 U.S.C. § 2283. This court entered a discharge on May 8, 1990, which by statute enjoins certain proceedings. The injunction sought here is one to effectuate that discharge and enforce that statute. Younger simply does not apply.
The City also makes much of the Supreme Court's decision in Kelly v. Robinson, 479 U.S. 36, 107 S.Ct. 353, 93...
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