In re James
| Decision Date | 01 May 1990 |
| Docket Number | Bankruptcy No. 89-12637S,Adv. No. 89-0866S. |
| Citation | 112 BR 687 |
| Parties | In re Norma Y. JAMES a/k/a Norma Y. Reynolds, Debtor. Norma Y. JAMES, Plaintiff, v. Jacqueline DRAPER; State of New Jersey, Department of Law and Public Safety, Division of Criminal Justice; Peter N. Perretti, Jr., Attorney General of State of New Jersey; and Robert T. Winter, State of New Jersey, Department of Law and Public Safety, Division of Criminal Justice, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Berneter Mallory, Velmin & Johnson, Philadelphia, Pa., for debtor-plaintiff.
Stephen Raslavich, Silverman, Markovitz, Meo & Raslavich, Philadelphia, Pa., trustee.
Steven L. Scher, Sr. Deputy Atty. Gen., State of N.J., Trenton, N.J., for defendants.
The instant proceeding, concerning the Debtor's efforts to recover $7,990 in cash (hereinafter "the Funds") which the State of New Jersey (hereinafter "the State") is attempting to retain as the fruits of a civil forfeiture proceeding, placed several interesting and difficult issues before the court. We cannot finally resolve all of issues because we find that the Chapter 7 Trustee, who is not a party hereto, is a necessary party and must be joined before this proceeding may go forward. We must therefore schedule a supplemental hearing to allow the Trustee, if joined, and the parties to present further evidence in light of our conclusion that the final disposition of the Funds should be resolved by this court.
We are, however, able to conclude that we have subject matter jurisdiction over his proceeding because the Debtor's cause of action against the Defendants with respect to the Funds is clearly property of the estate. We are also able to conclude that the Supreme Court's recent decision in Hoffman v. Connecticut Department of Income Maintenance, ___ U.S. ___, 109 S.Ct. 2818, 106 L.Ed.2d 76 (1989), does not preclude the basically injunctive and declaratory relief to which we find that the Debtor is or may be entitled. Further, since we hold that the action in issue is not excepted from the automatic stay pursuant to § 326(b)(4), we find that the Defendants' Default Judgment in the Forfeiture Action against the Debtor, having been entered post-petition, was obtained in violation of the automatic stay imposed by § 362(a) of the Bankruptcy Code and must be stricken. Finally, we find that the Debtor's counsel is entitled to attorneys' fees under 11 U.S.C. § 362(h) because the state failed to acknowledge the effect of the stay even after it became aware of the Debtor's bankruptcy filing.
The Debtor, NORMA Y. JAMES a/k/a NORMA Y. REYNOLDS (herein "the Debtor"), filed the underlying voluntary Chapter 7 bankruptcy case in this court on July 19, 1989. On September 21, 1989, the Debtor commenced this proceeding by filing what was designated as a Complaint Seeking to Have Creditors and Agents Held in Contempt and Seeking Damages for Violation of Automatic Stay (hereinafter "the Complaint"). The only Defendant named in the Complaint was JACQUELINE DRAPER (hereinafter "Draper"), a Deputy Attorney General of the State's Department of Law and Public Safety, Division of Criminal Justice (hereinafter "the Division"). By a "Praecipe for Change of Defendants' Names," filed November 27, 1989, named as Defendants were PETER N. PERRETTI, JR., the State's Attorney General; and ROBERT T. WINTER, Director of the Division. Because it is unclear whether this filing was meant to delete Draper as a party, we have retained her as a party defendant in the caption. Although neither the State nor any of the Defendants have filed a proof of claim in the Debtor's bankruptcy case, the Debtor, in paragraph 2 of the Complaint, claimed that the State is a creditor of the Debtor "by virtue of a claim for a forfeiture . . ."
A trial was originally scheduled in this matter for November 7, 1989, and continued until December 5, 1989. Although the Debtor and her counsel appeared on the latter date, Draper failed to appear at either hearing. Fearing some problem with service had occurred, we called the Division on the court record and advised Peter R. Richards, Esquire, Section Chief of the Division's Civil Remedies & Forfeiture Bureau and Draper's superior, directly of this proceeding. We subsequently issued an Order scheduling the trial on January 11, 1990.
On December 26, 1989, the Defendants filed an Answer including five Affirmative Defenses: (1) the adversary proceeding was barred by the Eleventh Amendment; (2) the bankruptcy court lacked subject matter jurisdiction over the action; (3) the adversary proceeding failed to state a claim upon which relief can be granted; (4) the actions of the Defendants were excepted from the automatic stay by Bankruptcy Code § 362(b)(4); and (5) the Debtor lacked standing to bring this action.
The Defendants also filed a Motion to Dismiss pursuant to Bankruptcy Rule 7012 and Federal Rule of Civil Procedure (hereinafter "F.R.Civ.P.") 12(b)(1) and (b)(6) and a "Certification" of Draper. In the Certification, Draper recites a history of a civil forfeiture proceeding instituted in the Superior Court of New Jersey, Law Division, Burlington County, entitled New Jersey v. $7990 in United States Currency, Docket No. W-027603-88 (herein "the Forfeiture Action"), and alleges that, in all pertinent actions, she was acting in good faith in her official capacity as a Deputy Attorney General for the State.
The testimony at the trial was very sparse. The Debtor, who spoke with a pronounced West Indian accent, testified that, in March, 1988,1 she obtained the Funds, which she intended to use to open a restaurant in New York with a friend, by making a loan from her credit union. She presented the Funds to one Patrick Brown (hereinafter "Brown"), who was to deliver them to her friend in New York in her car. In the course of this trip, Brown was apprehended by the New Jersey State Police, apparently for speeding, and neither he nor any passengers in the car (which did not include the Debtor) could produce a driver's license. The Funds were located in the car by the troopers and Brown apparently gave conflicting stories regarding the Funds' ownership. The State seized the Funds and began the Forfeiture Action on May 31, 1988. The Debtor, as a potential claimant, was served with a copy of the Complaint in the Forfeiture Action.
After receiving the State's Complaint, the Debtor retained William Bowe, Esquire, a New Jersey attorney (hereinafter "Bowe"), to represent her in the Forfeiture Action. Bowe contacted Leah A. McMahon, Esquire, a State Deputy Attorney General, and requested a continuance to file an Answer on behalf of the Debtor. Although the State granted the continuance, Bowe never filed an Answer. Nor was an Answer filed on behalf of any of the other potential claimants. The Debtor indicated that she was unable to pay Bowe his requested fee, which apparently caused him to cease his representation of her.
On July 18, 1989, the day before the Debtor filed her bankruptcy petition, the Debtor, as a potential claimant of the Funds, received notice of a hearing scheduled in Burlington, New Jersey, on July 21, 1989, to consider the entry of a Default Judgment in the Forfeiture Action. When the Debtor did not appear, the Default Judgment was entered on that date with respect to the Funds and all potential claimants, including the Debtor, and the Funds were forfeited to the State, thereby purportedly extinguishing all rights which any of the potential claimants may have had in the Funds.
At trial, the Debtor called Sharon Barkley, formerly a legal assistant in the law office of the Debtor's counsel, who testified that, on July 19, 1989, counsel for the Debtor called Draper and left her a message informing her of the Debtor's Chapter 7 filing. Draper testified that she did not receive any message from anyone on behalf of the Debtor until a telephone conversation with the Debtor's counsel in the afternoon of July 21, 1989, after the Default Judgment was entered. On August 4, 1989, Draper sent the Debtor a copy of the Default Judgment. Draper also testified that her file indicated that trained police dogs had detected a drug odor when they sniffed the Funds. However, she did not dispute the Debtor's testimony that no criminal charges were ever brought against anyone as a result of the incident and that the Debtor's car was returned to her.2
Subsequent to our announcement of the briefing schedule after the trial, we entered an Order of January 17, 1990, directing the Debtor to file her Brief by January 22, 1990; the Trustee, Stephen Raslavich, Esquire (hereinafter "the Trustee"), to provide a statement of his position by January 30, 1990; and the Defendants to file their Brief by February 12, 1990. The Trustee responded by stating, in an apparent misreading of the Debtor's Brief, that, since the Default Judgment had been entered prior to bankruptcy, the prospects of recovery were dim; he did not intend to pursue same; but he nevertheless believed that the Debtor lacked standing to maintain this proceeding.
We are not able to finally resolve this proceeding at this juncture and hence we need now render few Findings of Fact. However, we will include a narrative Discussion containing our resolution of the legal issues which we are able to decide at this time and then order the joinder of the Trustee and the scheduling of the requisite supplemental trial.
The Defendants argue that this court lacks subject matter jurisdiction to hear this proceeding. The argument advanced is that the Forfeiture Action, having been pending prior to the...
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