In re Peake

• Decision Date: 15 August 2018
• Docket Number: Case No. 18-16544
• Citation: 588 B.R. 811
• Parties: IN RE: George PEAKE, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

588 B.R. 811

IN RE: George PEAKE, Debtor.

Case No. 18-16544

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

August 15, 2018

588 B.R. 815

Ryan P. Crotty, Michael Spangler, Aaron M. Weinberg, John P. Wonais, The Semrad Law Firm, LLC, Chicago, IL, for Debtor.

MEMORANDUM OPINION

Deborah L. Thorne, United States Bankruptcy Judge

Introduction

The facts in this case are familiar to thousands of debtors appearing in this district attempting to regain possession of their cars and pay accrued parking and red-light tickets through chapter 13 plans. The issue is not only important to each of these debtors but also to the City of Chicago (City), which relies upon collection of parking and red-light ticket revenue to fund approximately 7% of the City's budget.¹

George Peake (Mr. Peake or Debtor) owns a 2007 Lincoln MKZ vehicle (MKZ) with approximately 200,000 miles and valued by him at $4,310. GO Financial holds a first priority lien on the MKZ securing a debt in the amount of $7,312.79. After Mr. Peake, as owner of the MKZ, accrued several final determinations of liability for parking and automated red-light violations, the MKZ was immobilized and later impounded by the City of Chicago.² The immobilization

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took place on May 31, 2018, and, a day later, the City towed and impounded the MKZ.

Mr. Peake works at an Amazon facility in Joliet, Illinois, approximately 45 miles from his southside of Chicago residence and relies upon the MKZ to drive to and from work. Without his car, he has been forced to pay others to drive him to Joliet. Like so many others in this district, Mr. Peake chose on June 9 to file a chapter 13 petition in an attempt to pay his outstanding traffic violation fines through his plan. Mr. Peake alleges that the City would not release his MKZ unless he complied with one of two options proposed by the City: (1) wait until his plan was confirmed treating the City as a fully secured creditor with a 60-month plan, or (2) provide treatment for the City as a fully secured creditor in a 60-month plan and pay as much as $1,250 immediately for release of the MKZ. George Peake's Motion for Turnover, Docket No. 16, at 4, ¶¶ 13–14. Mr. Peake did not agree to or was unable to comply with the demand for immediate payment for the release of the MKZ. He has treated the City's claim in his proposed amended plan as secured in section 3.2. George Peake's Plan, Docket No. 31, at § 3.2. Through confirmation of his proposed plan Mr. Peake would be able to drive his MKZ and use his disposable income to make payments to the City as well as other creditors.

After trying and failing to obtain the release of his vehicle by notifying the City of his bankruptcy filing, Mr. Peake filed this motion to enforce the automatic stay and to compel the City to turn over the MKZ. The narrow question presented in this case is whether the City's retention of possession of a vehicle in which the Debtor has an ownership interest on the petition date violates the automatic stay, in particular section 362(a)(3).³ Unless one of the automatic stay exceptions, namely section 362(b)(3) or (b)(4), applies, the City's conduct in retaining possession of the vehicle violates section 362(a)(3) as that section has been interpreted by the Seventh Circuit Court of Appeals in Thompson v. General Motors Acceptance Corp., 566 F.3d 699 (7th Cir. 2009) ( Thompson ). There, the Seventh Circuit held that the act of passively retaining an asset "constitutes exercising control over it, and such action violates section 362(a)(3) of the Bankruptcy Code." Thompson , 566 F.3d at 703.

For the reasons that follow, the court concludes that neither section 362(b)(3) nor section 362(b)(4) applies to the City's retention of the Debtor's vehicle in this case. The City, therefore, has violated the automatic stay by refusing to return the Debtor's car, and it must release the MKZ to the Debtor immediately.

Discussion ⁴

I. Thompson

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The City first asks the court to decline to follow the Seventh Circuit's ruling in Thompson , which held that, upon the request of a debtor in bankruptcy, a creditor must return the debtor's vehicle to him even though the creditor was lawfully in possession of the vehicle at the time of the petition, and that, after return of the vehicle, the creditor may seek an order of adequate protection of its property interest in the bankruptcy court. Thompson, 566 F.3d at 703, 708. This court, of course, is not at liberty to decline to follow a decision of the Court of Appeals for the circuit in which this court sits, at least unless subsequent events make it "almost certain" that the Court of Appeals would repudiate its prior decision. See Colby v. J.C. Penney Co. , 811 F.2d 1119, 1123 (7th Cir. 1987) ; Olson v. Paine, Webber, Jackson & Curtis, Inc. , 806 F.2d 731, 734 (7th Cir. 1986) ; United States v. Burke , 781 F.2d 1234, 1239 n.2 (7th Cir. 1985) ; F.D.I.C. v. Mahajan , 923 F.Supp.2d 1133, 1139–40 (N.D. Ill. 2013). That certainty does not exist here, despite the fact that a circuit split has recently been created on the issue addressed by the court in Thompson . See WD Equipment, LLC v. Cowen (In re Cowen) , 849 F.3d 943 (10th Cir. 2017). The City's request is therefore denied.

II. The City's Interest in Property

The City's primary argument is that it does not have a duty to turn over the Debtor's vehicle pursuant to section 362(a) and Thompson because its act of continuing to retain possession of the vehicle is an "act ... to continue or maintain the perfection of [its] interest in property ...." 11 U.S.C. § 362(b)(3). For this provision to apply, an "interest in property" must exist as of the petition date. In re 229 Main St. Ltd. P'ship , 262 F.3d 1, 5 (1st Cir. 2001). The Debtor argues in substance that the City has no interest in property because the City ordinances giving it an interest in property are not valid exercises of the City's Home Rule authority. Because the City's ordinance-scheme is a valid exercise of the express statutory authority granted to it by the State of Illinois, and because that ordinance scheme in this case resulted in the City having a possessory interest⁵ in the Debtor's vehicle as of the date of the petition, the Debtor's argument is rejected.⁶

A. The City's Ordinances Provide the Mechanism for its Asserted Interest in Property

As the City notes, this case is a "boot and impound" case where the Debtor's vehicle was first immobilized and then towed to a City impound lot for accrued but unpaid parking and automated red-light violation tickets. The City first argues that its booting and impounding of the Debtor's vehicle is appropriate (1) under its ordinances and (2) under 625 ILCS § 5/11–208.2 et seq. , which is the portion of the Illinois Vehicle Code permitting municipalities like the City to administratively adjudicate "violations of traffic regulations concerning the standing, parking, or condition of vehicles, automated traffic law violations,

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and automated speed enforcement system violations." 625 ILCS § 5/11–208.3. Chicago's inherent Home Rule authority, while usually broad, has been explicitly curtailed in this area by the Illinois legislature, and the City may not implement ordinances that are inconsistent with the state statutory scheme. 625 ILCS § 5/11–208.2 ; City of Chicago v. Roman , 184 Ill.2d 504, 235 Ill.Dec. 468, 705 N.E.2d 81, 89 (1998).

The statute provides:

Any municipality or county may provide by ordinance for a system of administrative adjudication of vehicular standing and parking violations and vehicle compliance violations as described in this subsection, automated traffic law violations as defined in Section 11-208.6, 11-208.9, or 11-1201.1, and automated speed enforcement system violations as defined in Section 11-208.8.

625 ILCS § 5/11–208.3(a). The City has set up just such an administrative apparatus. See Municipal Code of Chicago (M.C.C.) § 9–100–010. The administrative scheme used by the City avoids the necessity of seeking adjudication in the state courts. See, e.g. , Saukstelis v. City of Chicago , 932 F.2d 1171, 1173 (7th Cir. 1991) (noting the change from judicial to quasi-judicial administrative proceedings); cf. Horn v. City of Chicago , 860 F.2d 700, 700–01 (7th Cir. 1988) (describing a parking ticket as being in part a notice of a complaint initiated in state court); Stone St. Partners, LLC v. City of Chicago Dep't of Admin. Hearings , 382 Ill.Dec. 412, 12 N.E.3d 691, 695 (Ill. App. Ct. 2014) (describing the change in the context of non-traffic municipal ordinance violations), aff'd , 417 Ill.Dec. 547, 88 N.E.3d 699 (2017). The City's ordinances further provide that:

The violation of any provision of the traffic code prohibiting or restricting vehicular standing or parking, or establishing a compliance, automated speed enforcement system, or automated traffic law enforcement system violation, shall be a civil offense punishable by fine, and no criminal penalty, or civil sanction other than that prescribed in the traffic

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