Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-1_06-cv-04819/USCOURTS-alnd-1_06-cv-04819-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BA

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

EASTERN DIVISION

PHILLIP A. TALLEY,

Appellant,

v.

ALABAMA DEPARTMENT OF PUBLIC

SAFETY and W.M. COPPAGE, IN

HIS OFFICIAL CAPACITY

Appellees.

}

}

}

}

}

}

}

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CIVIL ACTION NO.

06-AR-4819-S

BK Case #05-4442

MEMORANDUM OPINION

On July 27, 2006, the Bankruptcy Court of the Northern

District of Alabama (the “Bankruptcy Court”), Hon. James J.

Robinson, ordered the dismissal of an adversary proceeding brought

by appellant, Phillip A. Talley (“Talley”), against appellees, the

Alabama Department of Public Safety (the “DPS”) and W.M. Coppage

(collectively, the “appellees”). Talley now brings a timely appeal

from that order. 

The court’s jurisdiction over this appeal is based on 28

U.S.C. §158(a)(1). 

I. Standard of Review

The Bankruptcy Court’s findings of fact are subject to a

clearly erroneous standard of review, while its conclusions of law

are subject to de novo review. In re Richard W. Paschen, 296 F.3d

1203, 1205 (11th Cir. 2002).

II. Procedural History

FILED

 2007 Jan-30 AM 10:18

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 1:06-cv-04819-WMA Document 8 Filed 01/30/07 Page 1 of 8
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On January 24, 2006, Talley, who was and is the debtor in a

Chapter 13 proceeding, brought an adversary proceeding, alleging

that the suspension of his driver’s license violated the automatic

stay imposed by §362 of the Bankruptcy Code (the “Code”). The

Bankruptcy Court concluded that the suspension was merely a

continuation of a prior criminal proceeding under §362(b)(1) of the

Code and was therefore exempted from the automatic stay.

Accordingly, Talley’s action was dismissed. Talley’s motion to

alter was denied on September 9, 2006. 

III. Facts

Talley has a poor driving record. He has numerous traffic

convictions and has regularly failed to pay the fines levied

against him. On October 14, 2005, Talley filed a petition for

relief under Chapter 13 of the Code. The only debts listed on his

petition were eight unpaid fines for traffic violations, totaling

$3,280.50. Talley’s Chapter 13 plan proposed to pay 100% of the

fines and fees over a 60 month period. The plan was confirmed on

December 19, 2005.

On November 2, 2005, before the proposed plan had been

confirmed, the St. Clair County District Court ordered the

suspension of Talley’s driver’s license. Although this suspension

occurred after Talley filed his petition, the state court’s action

was in response to his continuing failure to pay his criminal

Case 1:06-cv-04819-WMA Document 8 Filed 01/30/07 Page 2 of 8
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fines. A copy of the order was forwarded to the DPS, which

suspended Talley’s license, effective November 7, 2005. 

 IV. Analysis

§362(b)(1) creates an exception to the usual protections

afforded to a debtor who petitions for relief under the Code.

Normally, the automatic stay created by §362(a) prevents creditors

from recovering against a post-petition debtor outside of a

repayment plan sanctioned by the bankruptcy court. However,

§362(b)(1) provides: “[t]he filing of a petition . . . does not

operate as a stay under subsection (a) of this section, of the

commencement or continuation of a criminal action or proceeding

against a debtor . . . .” 11 U.S.C. §362(b)(1). 

The purpose of this provision is to ensure that the Code does

not shield those who would avoid a fine or punishment properly

imposed by a court of law. In other words, “[t]he bankruptcy laws

are not a haven for criminal offenders, but are designed to give

relief from financial overextension.” H.R. No. 95-595 at 342, 95th

Cong., 1st Sess. (1977). §362(b)(1) is also indicative of the

general policy that federal courts should abstain from interfering

in state criminal proceedings. The Supreme Court has stated that

the language of the Code must be considered “in light of the

interests of the States in unfettered administration of their

criminal justice systems.” Kelly v. Robinson, 479 U.S. 36, 44, 107

Case 1:06-cv-04819-WMA Document 8 Filed 01/30/07 Page 3 of 8
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S.Ct. 353, 358 (1986). See also In re Sims, 101 B.R. 52, 53 (W.D.

Wis. 1989). 

The Bankruptcy Court rightly concluded that the suspension of

Talley’s license was a “continuation of a criminal action or

proceeding” and was therefore not prohibited by the automatic stay.

Mem. Op. at 3. This court is in full agreement with that

conclusion, which, arguably was a mixed question of fact and law.

To the extent it was a factual question, the Bankruptcy Court’s

answer was not clearly erroneous. To the extent it was a legal

question, the Bankruptcy Court was correct. Both a plain reading

of the statute and a review of the relevant case law indicate that

the suspension of Talley’s license is precisely the type of conduct

§362(b)(1) excludes from bankruptcy protection.

Talley argues that the purpose of the Code will be thwarted

unless a debtor facing criminal fines is granted the protection of

the automatic stay. According to Talley, the “‘adjustment of

debts’ of an individual” is the foundation of the Chapter 13

proceeding. Because an unpaid criminal fine should be

characterized as a debt, the argument runs, it should be treated by

the Code as the equivalent of other, non-punitive debts. In the

abstract, Talley’s argument is not so far-fetched. Indeed, the

Supreme Court seemed to recognize as much in Pennsylvania Dept. of

Public Welfare v. Davenport, 495 U.S. 552, 110 S.Ct. 2126 (1990),

a case heavily relied upon by Talley. In that case, the Court held

Case 1:06-cv-04819-WMA Document 8 Filed 01/30/07 Page 4 of 8
 Congress left in place the general holding in Davenport 1

regarding the breadth of the definition of a “claim” under the

Code. See Johnson v. Home State Bank, 501 U.S. 78, 111 S.Ct. 2150

(1991).

5

that a restitution obligation imposed as a condition of probation

in a state court criminal proceeding constituted a “debt” for

purposed of bankruptcy protection. Id. at 560. However, Talley is

mistaken in thinking that the Davenport decision buttresses his

position in this case for two reasons. First, and most

importantly, Congress statutorily superceded the relevant portion

of the holding in Davenport, amending the Code to except

restitution orders from discharge under Chapter 13. See Pub.L. 1

101-581, 104 Stat. 2856 (Nov. 15 1990) (adding 11 U.S.C.

§1328(a)(3)). Second, Davenport held that state-imposed

restitution awards do not fall within the scope of the §362(b)

exemption. Where, as in this case, the issue is not one of

restitution awards but rather of criminal sanctions, Davenport,

even were it not statutorily superceded, is irrelevant. 

Talley’s second, and equally unsuccessful, argument is that

the suspension of his license is merely an under-handed ploy to

exact payment from him in contravention of the bankruptcy

protection he now enjoys. In support of his argument, Talley

offers the following quote: “§362(b)(1) does not exempt from the

stay a criminal proceeding whose sole purpose is to collect a

debt.” In Re Muncie, 240 B.R. 725 (Bank. S.D. Ohio 1999)(emphasis

Case 1:06-cv-04819-WMA Document 8 Filed 01/30/07 Page 5 of 8
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added). Appellant’s Br. at 15. What Talley understandably fails

to mention in his discussion of the case is that the criminal

“prosecution” at issue in Muncie was instigated by a private debtor

and was, in the court’s view, merely “a guise for a collection

effort.” Muncie, 240 B.R. at 727. Moreover, even were the court

to ignore the marked factual differences between Muncie and this

case, Talley’s argument fails because there is no indication that

appellees’s conduct was solely, or even partially, designed to

strong-arm Talley to pay his fines ahead of schedule. To the

contrary, it seems that Talley’s bankruptcy filing was more likely

a ploy to frustrate criminal sanctions.

Talley ultimately lost his license because he did not pay the

fines that were levied against him before he filed for Chapter 13

protection. There is no question but that the fines are criminal

in nature; they were levied against Talley because of his

convictions for violating multiple traffic laws. Nor is there any

indication that the appellees were attempting a type of “end-run”

around the strictures of the Code, suspending Talley’s license to

secure prompt payment of the outstanding fines. Therefore, the

court easily concludes, as did the Bankruptcy Court, that the

action taken by appellees was a part of a prior criminal

proceeding. 

Thus, the sole remaining question is whether the suspension of

Talley’s license was a “commencement or continuation” of a criminal

Case 1:06-cv-04819-WMA Document 8 Filed 01/30/07 Page 6 of 8
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proceeding for purposes of §362(b)(1). The Bankruptcy Court

answered in the affirmative, holding that the suspension was a

continuation of multiple criminal proceedings against Talley.

Therefore, that court held that the suspension of Talley’s license

was not prohibited by the automatic stay. In its memorandum

opinion, the Bankruptcy Court stated:

[U]pon the Plaintiff’s default on his monetary obligations

(orignally ordered in lieu of incarceration), the District

Court had two options: incarceration or revocation of the

Plaintiff’s driver’s license. Certainly if the District Court

could incarcerate the Plaintiff upon his default, and such

incarceration would be a continuation of criminal proceedings,

it could also revoke the [license] as a continuation of the

criminal proceedings. Mem. Op. at 4

This statement accurately places the suspension into its proper

context: this was not an independent action on the part of

appellees, but rather the inevitable consequence of Talley’s not

paying criminal fines. Therefore, for purposes of §362, the

suspension constituted a continuation of a criminal action.

Other courts have reached the same, or a similar, conclusion.

For example, multiple courts have held that incarcerating a debtor

does not violate the automatic stay if the incarceration results

from the failure to pay criminal fines or costs. In re Perez, 220

B.R. 216 (Bankr. D.N.J. 1998); In the Matter of Cuevas, 205 B.R.

457 (Bankr. D.N.J. 1997); In the Matter of Sims, 101 B.R. 52

(Bankr. W.D. Wis. 1989). In this case, where the debtor is not

faced with incarceration, Talley’s position is even less

compelling. 

Case 1:06-cv-04819-WMA Document 8 Filed 01/30/07 Page 7 of 8
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Finally, appellees argue that they were not properly joined as

parties to the original adversarial proceeding brought by Talley.

This position is based on appellees’ ignorance of Talley’s filing

of his petition. The proper party, they argue, is the St. Clair

County District Court which actually ordered the suspension of

Talley’s license on November 3, 2003. While appellees may, in

fact, be correct on this procedural point, the argument is mooted

by this court’s conclusion that the dismissal of the adversary

proceeding is due to be affirmed. 

V. Conclusion

For the foregoing reasons, the court finds that Talley’s claim

is without merit. Therefore, the Bankruptcy Court’s order

dismissing Talley’s action is AFFIRMED.

DONE this 29th day of January, 2007. 

 

 

_____________________________

WILLIAM M. ACKER, JR.

UNITED STATES DISTRICT JUDGE

 

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