In re Fintel

• Decision Date: 03 March 1981
• Docket Number: Adv. No. 80-0348.,Bankruptcy No. 379-03617
• Citation: 10 BR 50
• Parties: In re Otto Henry FINTEL, Alma Maxine Fintel fka Alma Maxine Phillips, Debtors. Otto H. FINTEL, Plaintiff, v. The STATE OF OREGON, Jane Huston, in her capacity as Director of the Department of Commerce of the State of Oregon, Warren Hearle, in his capacity as Administrator of the State of Oregon Builders Board, Candace Sullivan and Dan Nichols, Defendants.
• Court: U.S. Bankruptcy Court — District of Oregon

10 B.R. 50 (1981)

In re Otto Henry FINTEL, Alma Maxine Fintel fka Alma Maxine Phillips, Debtors Otto H. FINTEL, Plaintiff, v. The STATE OF OREGON, Jane Huston, in her capacity as Director of the Department of Commerce of the State of Oregon, Warren Hearle, in his capacity as Administrator of the State of Oregon Builders Board, Candace Sullivan and Dan Nichols, Defendants.

Bankruptcy No. 379-03617, Adv. No. 80-0348.

United States Bankruptcy Court, D. Oregon.

March 3, 1981.

Clarence R. Kruger, Asst. Atty. Gen., Salem, Or., for State of Oregon, Jane Huston and Warren Hearle.

Ruth Cinniger, Portland, Or., for plaintiff Fintel.

Defendants Sullivan and Nichols did not appear.

FINDINGS SETTING ASIDE JUDGMENT VOIDING BUILDERS BOARD ORDERS

DONAL D. SULLIVAN, Bankruptcy Judge.

The defendant, State of Oregon, filed a motion under Rule 60(b) FRCP to set aside the judgment and determination of December 23, 1980, entered in this case on the grounds of mistake. This judgment and determination voided orders of the State Builders Board as having been entered in violation of the automatic stay provisions of 11 U.S.C. § 362(a). The Builders Board orders determined that the plaintiff, the debtor, was liable to claimants, Candace Sullivan and Dan R. Nichols for the sums of $750 and $500, respectively, under ORS 701.145 — 701.150 regarding builders.

Plaintiff in his response requested that the Court stay the Board from enforcing its order as a matter of discretion if the judgment is set aside.

I find that the described orders of the Builders Board did not violate the automatic stay provisions of 11 U.S.C. § 362(a), and that the judgment previously entered in this Court should be set aside because it was mistakenly entered. I further find that it would be unfair to enjoin the claimants and the Board from enforcing the Board's order against the contractor's bond.

This Court, in previously determining that the orders of the Builders Board had violated the automatic stay, mistakenly construed the wording of the Board's orders as an attempt to impose post-bankruptcy liability on the debtor. In spite of the peremptory wording of those orders, this construction was incorrect because 11 U.S.C. § 524(a) discharges the debt and prohibits enforcement against the debtor. The Board's orders, contrary to the unfortunate initial interpretation, can only be enforced against the surety.

11 U.S.C. § 362(a) does not stay actions against property which is not a part of the estate. A corporate surety bond which is provided by a debtor in order to obtain a contractor's license from the State is not property of the estate. In the Matter of Buna Painting and Drywall Co., Inc., 503 F.2d 618 (9th Cir. 1974). 11 U.S.C. § 362(a) does not stay actions to enforce dischargeable debts against third parties. Even Chapter 13 does not stay actions against third parties who guarantee debts in the normal course of their business such as a bonding company. Third party liability is not affected by the bankruptcy. 11 U.S.C. § 524(e). Under 11 U.S.C. § 362(b)(4) and (5), the automatic stay does not restrain the exercise of police or regulatory powers of the state except where enforcement of a money judgment is sought. Government agencies should not be enjoined from performing regulatory duties if their actions will not reduce the estate or interfere with the bankruptcy. In the Matter of Shippers Interstate Service, Inc., 618 F.2d 9, 13 (6th Cir. 1980); In re Bel Air Chateau Hospital, Inc., 611 F.2d 1248 (9th Cir. 1979).

Chapter 701 of the Oregon Revised Statutes, which created the Builders Board, is a remedial statute passed for the protection of those persons dealing with builders. Robinson v. Builders Board of Oregon, 20 Or.App. 340, 531 P.2d 752, 754 (1975). The statute is a consumer act designed to protect the public from financially irresponsible builders. Seaton v. Builders Board, 29 Or.App. 467, 564 P.2d 710, 711 (1977). Neither the claimant nor the Board interfered with the plaintiff's bankruptcy or did anything to reduce the bankruptcy estate. The legislative history of the Code, therefore,...