In re Geeslin

• Decision Date: 17 July 2003
• Docket Number: No. 02-42227.,02-42227.
• Citation: 296 B.R. 70
• Parties: In re Arthur GEESLIN, Jr., Debtor. Arthur Geeslin, Jr., Movant, v. Peter Skandalakis, Respondent.
• Court: U.S. Bankruptcy Court — Middle District of Georgia

296 B.R. 70

In re Arthur GEESLIN, Jr., Debtor Arthur Geeslin, Jr., Movant, v. Peter Skandalakis, Respondent.

No. 02-42227.

United States Bankruptcy Court, M.D. Georgia, Columbus Division.

July 17, 2003.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Clark Adams, Jr., Columbus, GA, for Debtor.

Michael M. Custer, Albany, GA, Chapter 7 Trustee.

MEMORANDUM OPINION

JOHN T. LANEY, III, Bankruptcy Judge.

On May 12, 2003, the Court held a hearing on a Motion for Contempt Against Peter Skandalakis ("Respondent"), a Georgia District Attorney, ("Contempt Motion") filed by Arthur Geeslin, Jr. ("Debtor"). During oral argument, the following issues were raised: Whether Respondent's actions to collect the forfeited bail bond because the principal did not appear for trial are subject to the automatic stay and the discharge injunction, when Debtor has received a discharge of debts under Chapter 7 of the United States Bankruptcy Code ("Code"). Further, if the automatic stay and discharge injunction apply, whether Respondent can claim 11th Amendment immunity. The Court took the matters under advisement and the parties were given an opportunity to submit briefs in support of their positions. The Court has considered the parties' briefs, oral arguments, and the applicable statutory and case law.

BACKGROUND INFORMATION

The parties agree that the facts are not in dispute. Debtor was a commercial surety on a criminal bail bond in the amount of $125,000 and the principal was a criminal defendant as specified under O.C.G.A. § 17-6-1 et. seq. The criminal defendant failed to appear before the Superior Court of Meriwether County on the required date. Georgia law provides that "a bond forfeiture occurs at the end of the court day upon the failure of appearance of a principal of any bond or recognizance given for the appearance of that person." O.C.G.A. § 17-6-70(a) (1997 & Supp.2002). Debtor filed a Chapter 7 bankruptcy petition on September 10, 2002. Debtor received his discharge on December 30, 2002. Respondent, the District Attorney for the Coweta Judicial Circuit, has proceeded with an action to collect the criminal bail bond forfeiture from Debtor. Debtor brought this Contempt Motion against Respondent in an effort to prevent Respondent from obtaining a final judgment on the bond and from recovering the debt from Debtor.

Debtor contends that the bail bond forfeiture was a contractual obligation between himself and Respondent. Debtor asserts that he is protected from collection of the debt by the automatic stay under 11 U.S.C. § 362(a). Further, Debtor asserts that the debt is dischargeable in bankruptcy and that it has been discharged. Therefore, Respondent is in violation of the automatic stay and the discharge injunction.

Respondent raised two policy issues in support of his position that actions to collect on bail bond forfeitures should be exempt from the automatic stay and the discharge injunction. First, Respondent argues that federal courts should not interfere with state government functions whenever possible. Moreover, bankruptcy laws do not provide exceptions to criminal proceedings. Respondent cited Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), in which the Supreme Court acknowledged that, in matters of equitable relief, a state's administration of its own criminal justice system should be free from federal interference. Younger, 401 U.S. at 44-45, 91 S.Ct. 746. Respondent urges that the Code must be read and understood in light of this federalism.

The second policy reason advanced by Respondent is that the bail system would be undermined if bail bond forfeitures were not enforced by courts as an exception to the automatic stay and discharge injunction. Respondent contends that the effect could cause danger to the public. Respondent urges that a bail bond is a way to coerce the defendant's presence at trial by the threat of forfeiture. If bail forfeitures could be undermined, it might lead to increased evasion of states' bail bond statutes and third-party sureties could prevent the effects of paying the forfeiture by hiding behind the cloak of the Code.

In addition to the above policy arguments, Respondent contends that criminal bail bond forfeitures fall under 11 U.S.C. § 362(b)(4), an exception to the automatic stay, and are exempt from discharge under 11 U.S.C. § 523(a)(7). In the alternative, Respondent has asserted the State of Georgia's Eleventh Amendment sovereign immunity.

CONCLUSIONS OF LAW

First, Debtor erred procedurally in his attempt to obtain an injunction. In pertinent part, Bankruptcy Rule 7001 provides that: "An adversary proceeding is governed by the rules of this Part VII. The following are adversary proceedings ...(7) a proceeding to obtain an injunction or other equitable relief...." FED. R. BANKR. P. 7001. The injunctive relief sought by Debtor cannot be obtained under the clear language of Rule 7001(7). F ED. R. BANKR. P. 7001(7).

While the Court cannot grant an injunction at this point, the Court may inquire whether there was a violation of the automatic stay under 11 U.S.C. § 362(a) and the discharge injunction under 11 U.S.C. § 524(a)(2). Respondent claims that the Eleventh Amendment prevents such an inquiry. This Court, like all other courts, must refrain from considering a constitutional question unless it is a required query. See United States v. Clemons, 843 F.2d 741, 750 (3d Cir.1988) citing Ashwander v. Tennessee Valley Auth., 297 U.S. 288, 341, 345, 347, 56 S.Ct. 466, 80 L.Ed. 688 (1936) (Brandeis, J., concurring); see also Burton v. United States, 196 U.S. 283, 295, 25 S.Ct. 243, 49 L.Ed. 482 (1905); Kranson v. Valley Crest Nursing Home, 755 F.2d 46, 50 (3d Cir.1985); Stoner v. Presbyterian Univ. Hosp., 609 F.2d 109, 111 (3d Cir.1979)(per curiam).

As stated by the court in Commonwealth of Virginia v. Collins (In re Collins), 173 F.3d 924 (4th Cir.1999), "A federal court's jurisdiction over the dischargeability of debt, just like its jurisdiction to confirm a plan of reorganization, `derives not from jurisdiction over the state or other creditors, but rather from jurisdiction over the debtors and their estates.'" Collins, 173 F.3d at 929, quoting State of Maryland v. Antonelli Creditors' Liquidating Trust, 123 F.3d 777, 787 (4th Cir.1997). By analogy, this Court has the fundamental power to determine whether Respondent's actions violate the automatic stay, as well as the discharge injunction. As stated in Collins, this power flows from this Court's jurisdiction over Debtor and his estate, not jurisdiction over Respondent. Id. The Eleventh Amendment is not implicated because the Court is not asserting in personam jurisdiction over Respondent. See generally, Chandler v. State of Oklahoma (In re Chandler), 251 B.R. 872, 876 (10th Cir. BAP 2000) (held that an adversary proceeding asserted in personam jurisdiction over state, thus Eleventh Amendment was implicated, but noted issues, such as discharge, fall under in rem jurisdiction, an exception to the Eleventh Amendment); but see Mayes v. Cherokee Nation (In re Mayes), 294 B.R. 145, 152-153 (10th Cir. BAP 2003)(held that a motion to avoid a judgment lien was a "suit" for sovereign immunity purposes despite the fact that an adversary proceeding had not been filed).

As noted by the court in Chandler, the United States Supreme Court held years ago that bankruptcy courts have in rem jurisdiction over matters that may affect a state. Chandler, 251 B.R. at 877, citing Gardner v. New Jersey, 329 U.S. 565, 573-575, 67 S.Ct. 467, 91 L.Ed. 504 (1947). Bankruptcy courts do have the fundamental power to determine violations of the automatic stay and the discharge injunction. See generally Collins, 173 F.3d at 930. If courts were to recognize Eleventh Amendment sovereign immunity in this context, "the bankruptcy system would be seriously undermined." Id. at 930.

If this Court is to find civil contempt, then clear and convincing evidence must demonstrate that a willful disregard of the authority of the court took place. See McGregor v. Chierico, 206 F.3d 1378, 1383 (11th Cir.2000). According to the Eleventh Circuit, "The clear and convincing evidence must establish that: (1) the allegedly violated order was valid and lawful; (2) the order was clear and unambiguous; and (3) the alleged violator had the ability to comply with the order." Id. Further, Debtor bears the burden of persuasion on each element that must be proven for an alleged violation of the automatic stay for damages to be recovered. See Christakis v. McMahon (In re Christakis), 291 B.R. 9, 18 (Bankr.D.Mass.2003). Debtor bears the same burden in order to receive damages when there is an alleged violation of the discharge injunction. See In re Arnold, 206 B.R. 560, 568 (Bankr.N.D.Ala.1997).

11 U.S.C. § 362(a) — The Automatic Stay

In relevant part, 11 U.S.C. § 362(a) states that "[e]xcept as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title... operates as a stay." 11 U.S.C. § 362(a) (1993 & Supp.2002). According to the court in United Sav. Assoc. v. Timbers of Inwood Forest Assoc., Ltd., 484 U.S. 365, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988), "When a bankruptcy petition is filed, § 362(a) of the Bankruptcy Code provides an automatic stay of, among other things, actions taken to realize the value of collateral given by the debtor." United Sav. Assoc., 484 U.S. at 369, 108 S.Ct. 626. Moreover, 11 U.S.C. § 362(a) has a twofold purpose. First, it gives the debtor a "breathing spell" from creditors. Chester v. Parker (In re Parker), 289 B.R. 779, 781-782 (Bankr.M.D.Ga.2002) (Walker, J.). The stay stops all actions directed at the debtor including efforts to collect debts. See Independent Union of Flight Attendants v. Pan Am. World Airways, Inc., 966 F.2d 457, 459 (9th Cir.1992); see also Schwartz v. United States (In re Schwartz), 954 F.2d 569, 571 (9th Cir.1992); H.R.Rep. No. 595, 95th Cong., 1st...