1 Hann v. State Treasurer, E.D. Mich. No. 04-70977 (Rosen, J.) (dismissing based on

Plaintiff’s improper removal from state court); Hann v. State of Michigan, E.D. Mich. No. 05-

71347 (Borman, J.) (dismissing claims related to SCFRA and Plaintiff’s IRA, based on RookerFeldman doctrine); Hann v. State Treasurer, E.D. Mich. No. 07-13687 (Edmunds, J.) (accepting

my Report & Recommendation that bankruptcy appeal be dismissed under Rooker-Feldman, and

as frivolous); Hann v. State of Michigan (Report and Recommendation to dismiss appeal filed,

pending resolution of objections).

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

IN RE GARY HANN, No. 08-14516

Debtor-Appellant District Judge Nancy G. Edmunds

Magistrate Judge R. Steven Whalen

 /

REPORT AND RECOMMENDATION

On October 23, 2008, Appellant Gary Hann filed this case as an appeal from

Bankruptcy Court. For the reasons set forth below, I recommend that the appeal be

DISMISSED..

I. BACKGROUND

Plaintiff-Appellant is a former prison inmate who was sentenced to a prison term

of 2 to 20 years following his conviction in state court of possession of child sexually

abusive material and using the internet to commit a crime against a minor. According to

the Michigan Department of Corrections Offender Tracking Information System (OTIS),

Plaintiff was paroled on February 27, 2008. He has filed numerous cases in this Court and

in Bankruptcy Court, as well as state court.1

 The common thread in all of these cases is

Plaintiff’s contention that the State of Michigan improperly sought remedies against him

arising out of his conviction, including payment from him under the State Correctional

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 The forfeited property, which was seized pursuant to the criminal investigation

and charges against the Appellant, includes a 1988 Toyota automobile and various

computer devices.

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Facility Reimbursement Act (SCFRA), M.C.L. § 800.401, et.seq., state forfeiture

proceedings, and other fines associated with his conviction and incarceration.

On October 12, 2005, Appellant filed a Chapter 7 petition in the United States

Bankruptcy Court for the Eastern District of Michigan, which was docketed under

Bankruptcy Court No. 05-79798. An Order Discharging Debtor was entered on February

23, 2006, and on August 9, 2007, the Bankruptcy Court entered a final decree discharging

the trustee and closing the Chapter 7 case. During the course of the bankruptcy

proceedings, both before and after the Order Discharging Debtor, the Appellant filed a

number of adversary proceedings against individuals and entities associated with his

criminal conviction and sentence.

The present case concerns adversary proceeding no. 08-4911. Named as

Defendants are Oakland County, Gary L. Tunis, Mary M. Mara, the 50th District Court,

and then Oakland County Prosecutor David G. Gorcyca. At issue is property that the

Prosecutor’s Office seized pursuant to civil forfeiture proceedings under M.C.L. §

600.4701, et. seq.2 Appellant argues that the Defendants failed to “turn over exempted

property” under 11 U.S.C. § 542(a), and also violated the “automatic stay and discharge

injunction despite repeated written notices.” Appellant sought to remove the State district

court action to Bankruptcy Court.

The Defendants-Appellees filed a motion to dismiss the adversary proceeding, or

in the alternative, for summary judgment in the Bankruptcy Court. On November 7,

2008, the Bankruptcy Court dismissed adversary proceeding no. 08-4911, and denied

reconsideration on November 20, 2008.

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II. STANDARD OF REVIEW

This Court has the inherent authority to dismiss a frivolous case. “[A] district

court may, at any time, dismiss sua sponte a complaint for lack of subject-matter

jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure when the

allegations of a complaint are totally implausible, attenuated, unsubstantial, frivolous,

devoid of merit, or no longer open to discussion.” Apple v. Glenn, 183 F.3d 477, 479 (6th

Cir.1999) (citing Hagans v. Lavine, 415 U.S. 528, 536-37, 94 S.Ct. 1372, 39 L.Ed.2d 577

(1974)). This inherent authority extends to a frivolous bankruptcy appeal. See Hann v.

State Treasurer, 2009 WL 724052 (E.D. Mich. 2009). A case is frivolous if it lacks

arguable basis in either law or fact. Neitzke v. Williams, 490 U.S. 319, 325, 109 S.Ct.

1827, 104 L.Ed.2d 338 (1989). 

III. DISCUSSION

Like most of his filings, in this action and in others that have come before this

Court, the Appellant’s adversary proceeding is a convoluted but calculated attempt to

circumvent State of Michigan civil proceedings related to his conviction and

incarceration, in this case a forfeiture action directed at instrumentalities of the criminal

offense for which he was arrested and convicted. This attempt has no basis in law.

Following Appellant’s conviction in 2002, the Oakland County Prosecutor, on

behalf of the People of the State of Michigan, filed a forfeiture proceeding in 50th District

Court, under docket no. GZ 02-124160. This proceeding was pending when Appellant

filed Chapter 7 bankruptcy proceedings on October 12, 2005. In his petition, Appellant

listed the property that was the subject of the forfeiture action as “exempt.”

A short discussion of Michigan’s forfeiture statute would be helpful. Under

M.C.L. § 600.4702(1)(a), personal property that constitutes the instrumentality of a crime

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 Under 11 U.S.C. § 522( l ), debtor may claim property as exempt. “Unless a party

in interest timely objects, property claimed as exempt is exempted from the bankruptcy estate.” 

Kretzer, at 587. Kretzer held that an automatic stay terminates when property leaves the

estate, and where, as in the present case, property is claimed as exempt, and no objection

is filed, the automatic stay is then terminated, and the property revests in the debtor. Id.

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is subject to seizure by and forfeiture to a local unit of government or the state. Property

that is seized under the Forfeiture Act “is not subject to any other action to recover

personal property but is considered to be in the custody of the seizing agency....” M.C.L.

§ 600.4703(5). Exclusive jurisdiction in a forfeiture action lies in state district court. 

M.C.L. § 600.4709.

In the adversary proceeding in Bankruptcy Court, Appellant appears to have

argued that the Defendants’ failure to “turn over” the automobile and computer

equipment, which was the subject of the ongoing forfeiture proceedings, violated the

automatic stay provisions of 11 U.S.C. § 362(a)(3). That section provides that the filing

of a bankruptcy petition operates as a stay of “any act to obtain possession of property of

the estate or of property from the estate or to exercise control over property of the estate.” 

However, notwithstanding that Appellant had designated this property as “exempt,”

which calls into question whether it was “property of the estate,” see In Re Kretzer, 48

B.R. 585 (D. Nev. 1985),3

 11 U.S.C. § 362(b)(4) excludes from the automatic stay

provisions of § (a)(3) “the commencement or continuation of an action or proceeding by a

governmental unit...to enforce such governmental unit's or organization's police and

regulatory power, including the enforcement of a judgment other than a money judgment,

obtained in an action or proceeding by the governmental unit to enforce such

governmental unit's or organization's police or regulatory power.” A state forfeiture

action comes within the police power exception of § 362(b)(4). Matter of Smith, 176

B.R. 221, 222 (N.D. Alabama 1995), citing In re James, 940 F.2d 46 (3rd Cir. 1991). 

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Thus, as in Smith, “the automatic stay does not prohibit the State...from proceeding in

state court with its forfeiture action.”

Appellant also claims that the Defendants violated 11 U.S.C. § 542(a), which

provides that an entity that has possession, custody or control of estate property must

deliver that party to the trustee. However, when read in conjunction with § 362(b)(4),

which exempts state forfeiture actions from the automatic stay provisions, it is clear that a

state government agency that has seized, and is seeking to forfeit instrumentalities of

criminal activity, is not required to deliver that property to the bankruptcy trustee under §

542(a). In Boricua Motors Leasing Corp. v. Commonwealth of Puerto Rico, 154 B.R.

834 (D. Puerto Rico 1993), the Commonwealth confiscated a vehicle under its forfeiture

laws. The Plaintiff, who had filed a Chapter 11 bankruptcy petition, then filed a

complaint under § 542(a) seeking to compel the Commonwealth to turn over the vehicle

to the trustee. Relying on In re James, supra, the court dismissed the § 542(a) complaint,

finding that the forfeiture law served an important state policy against the manufacture

and sale of narcotics, and that the state civil forfeiture action fell within the police power

exception to the automatic stay. 154 B.R. at 835.

Speaking more generally to criminal convictees who attempt to use bankruptcy

courts to circumvent state “police power” laws such as Michigan’s forfeiture statute, the

court in United States v. Grooms, 1997 WL 578752, *3 (W.D.Va.,1997), stated:

“As the legislative history to the act explains, ‘the bankruptcy laws are not a

haven for criminal offenders.’ H.R.Rep. No. 595, 95th Cong., 2d Sess, 342,

reprinted in 1978 U.S.C.C.A.N. 5963, 6299; see also, In re Caldwell, 5

B.R. 740, 741 (Bankr.W.D.Va.1980) (stating that the powers of bankruptcy

courts ‘have been invoked to the end that fraud will not prevail, that

substance will give way to form, that technical considerations will not

prevent substantial justice from being done’); In re Jerzak, 47 B.R. 771, 773

(Bankr.W.D.Wis.1985) (noting that criminal-actions not statutorily enjoined

under section 362); In re Trail West, Inc., 17 B.R. 330, 332

(Bankr.D.S.D.1982)(same and citing legislative history). As noted above, a

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forfeiture action is not part of the underlying criminal action and section

362(b)(1) does not apply to the case before the court. However, the criminal

action exception indicates the legislature's intent to turn away from

bankruptcy those with unclean hands. (Emphasis added).

For the same reasons, Appellant’s argument that the forfeiture action violates the

discharge provisions of 11 U.S.C. § 524 is without merit. That section provides that a

discharge from bankruptcy court enjoins actions “to collect, recover or offset any such

debt as a personal liability of the debtor,” or “to collect or recover from, or offset against,

property of the debtor of the kind specified in section 541(a)(2) of this title that is

acquired after the commencement of the case.” The state forfeiture proceedings,

commenced under the state’s police powers, simply do not fall within § 524.

In his many filings in Bankruptcy Court and this Court, Appellant has attempted to

do exactly what the Court in Grooms criticized, and to grant him the remedy he seeks in

this case not only has no basis in the bankruptcy code, but would impermissibly interfere

with the State of Michigan’s enforcement of its police powers and public safety laws, a

result specifically prohibited under 11 U.S.C. § 362(b)(4).

Because this appeal is frivolous–that is, it has no basis in law or fact–it should be

sua sponte dismissed.

IV. CONCLUSION

I recommend that the Court exercise its inherent authority to DISMISS this appeal

as frivolous.

Any objections to this Report and Recommendation must be filed within ten (10)

days of service of a copy hereof as provided for in 28 U.S.C. §636(b)(1) and E.D. Mich.

LR 72.1(d)(2). Failure to file specific objections constitutes a waiver of any further right

of appeal. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); Howard

v. Secretary of HHS, 932 F.2d 505 (6th Cir. 1991); United States v. Walters, 638 F.2d 947

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(6th Cir. 1981). Filing of objections which raise some issues but fail to raise others with

specificity will not preserve all the objections a party might have to this Report and

Recommendation. Willis v. Sullivan, 931 F.2d 390, 401 (6th Cir. 1991); Smith v. Detroit

Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). Pursuant to E.D.

Mich. LR 72.1(d)(2), a copy of any objections is to be served upon this Magistrate Judge.

Within ten (10) days of service of any objecting party’s timely filed objections, the

opposing party may file a response. The response shall be not more than twenty 

(20) pages in length unless by motion and order such page limit is extended by the 

court. The response shall address specifically, and in the same order raised, each issue

contained within the objections.

s/R. Steven Whalen 

UNITED STATES MAGISTRATE JUDGE

Dated: July 23, 2009

CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the foregoing order was served on the attorneys and/or

parties of record by electronic means or U.S. Mail on July 23, 2009.

s/Susan Jefferson 

Case Manager

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