Opinion ID: 6333808
Heading Depth: 1
Heading Rank: 4

Heading: Classiﬁcation of the City’s Lien

Text: A. The Lien Is “Obtained by” Adjudicating the Traﬃc Violations The very last step of the lien attachment is automatic. Under the terms of the city ordinance, the lien arises upon impoundment, without further action by a judge or quasi- judicial oﬃcial. On that basis, the City contends the impoundment lien is a statutory lien, asserting that it arises “solely” by statute. Like our colleagues on the bankruptcy and district courts, however, we see the issue diﬀerently. Under the statutory deﬁnitions of the two types of liens, we do not think we can ignore all the prior legal process that must occur before the City’s possessory lien arises. The lien is “obtained by … other legal or equitable process or proceeding,” 11 U.S.C. § 101(36), in that the lien arises from and is based upon the prior quasi-judicial adjudications and money judgments that determine the lien’s validity and amount. The lien is judicial and avoidable in bankruptcy. 6The City offers various repayment plan options for eligible drivers that might eliminate some of those fees. See § 9-100-120(d)(1); see also §§ 9-100-160 (installment payment plans), -170 (Clear Path Relief Pilot Program). The parties have not indicated to the court that Mance is enrolled in any of those programs. No. 21-1355 13 The City asks us to treat this prior process as irrelevant. The City relies on the language “shall be subject to a possessory lien” in the ordinance. The City treats the needed number of tickets, ﬁnal adjudications, and later impoundment as mere “conditions” that trigger the lien. In the City’s view, those conditions should have no bearing on the classiﬁcation of the lien because they do not govern how the lien “arises.” The City’s narrow focus on only the very last step leading to attachment of an impoundment lien is not consistent with the statutory deﬁnition of a judicial lien. A judicial lien is not a statutory lien, “whether or not such interest or lien is provided by or is dependent on a statute and whether or not such interest or lien is made fully eﬀective by statute.” 11 U.S.C. § 101(53). This language makes clear that the fact that a lien resulted from a process that is “purely a creature of statute” is not suﬃcient to classify the lien as statutory. In re Weatherspoon, 101 B.R. 533, 535 (Bankr. N.D. Ill. 1989) (citation omitted). Put diﬀerently, “[t]he fact that a statute describes the characteristics and eﬀects of a lien does not by itself make the lien a statutory lien.” 2 Collier on Bankruptcy ¶ 101.53. That description ﬁts the City’s impoundment lien in this case. A statute (the ordinance) authorizes the lien and describes its characteristics and eﬀects, but we must still consider whether the lien arises “solely by force of a statute on speciﬁed circumstances or conditions.” § 101(53). Under both deﬁnitions, the relevant inquiry is not whether a statute authorizes or governs the lien but what is necessary for the lien to arise. If the lien requires a “judgment, levy, sequestration, or other legal or equitable process or proceeding,” the lien is judicial. If the lien arises “solely” by statute once speciﬁc conditions are met, the lien is statutory. 14 No. 21-1355 In the case of a Chicago impoundment lien, without the judicial or quasi-judicial procedures needed for ﬁnal determinations for each traﬃc violation and without the quasi-judicial impoundment procedures, the City could not impose a lien on the indebted driver’s vehicle. While the lien is authorized by and deﬁned by statute, the City’s possessory lien does not arise “solely” by statute. To be sure, as Mance acknowledged at oral argument, liens on some impounded vehicles should be treated as statutory liens. If a driver has committed a violation under M.C.C. § 9-92-030, such as blocking an alleyway, obstructing traﬃc, parking in a “tow zone,” or the like, the vehicle can be towed on the spot, without any prior judicial process. Id. The City then sends the vehicle owner notice after the fact. § 9-92070. When a vehicle is towed for one of these violations, it is also subject to a lien. § 9-92-080(f) (“Any vehicle impounded by the City or its designee shall be subject to a possessory lien in favor of the City in the amount required to obtain release of the vehicle.”); see also § 2-14-132(l) (same). Such violations lead to immediate impoundment liens that do not require advance notice to drivers or any other quasi-judicial procedures before they can be imposed. Instead, a car is automatically impounded upon a violation and subject to a lien. 7 7 In the case of a violation that results in an immediate tow, the city must offer adequate post-deprivation procedures to conform with due process. See Miller v. City of Chicago, 774 F.2d 188, 192–96 (7th Cir. 1985) (City not required to provide notice to owners before towing stolen vehicles to satisfy due process); Sutton v. City of Milwaukee, 672 F.2d 644, 645– 46, 648 (7th Cir. 1982) (pre-towing notice and opportunity to be heard not required to tow illegally parked cars, but adequate post-deprivation procedures are needed to provide due process); see also Gable v. City of No. 21-1355 15 That automatic process is quite diﬀerent from what happened here. For Mance, several legal proceedings had to be completed before impoundment. Vehicle owners who incur liens like Mance’s therefore face judicial liens and can avoid them under 11 U.S.C. § 522(f). Vehicle owners whose violations resulted in immediate impoundment, by contrast, face statutory liens and cannot avoid them under the same provision. Next, the City argues that if we agree with appellee Mance, we will create a circuit split with the Third Circuit’s decision in In re Schick, 418 F.3d 321 (3d Cir. 2005). We are not convinced. There is a critical diﬀerence between the processes leading to the liens in the two cases. Schick concluded that a lien held by the New Jersey Motor Vehicles Commission was a statutory lien. Under New Jersey law, a vehicle owner who committed a traﬃc violation faces potential surcharges in various situations, such as reaching a certain number of violation points or having been convicted of refusing to take a breathalyzer test, among other examples. The amount of the surcharges was dictated by “statute and administrative regulations.” 418 F.3d at 324. If a driver failed to pay the surcharges, the Commission was entitled to a lien on the driver’s property in the amount of the surcharges and interest. The Third Circuit concluded that such a lien held by the Commission was statutory and therefore not avoidable under 11 U.S.C. § 522(f). Chicago, 296 F.3d 531, 539–40 (7th Cir. 2002) (due process rights not violated when City deprived plaintiffs of impounded vehicles because City was not deliberately indifferent and adequate post-deprivation remedies were available). 16 No. 21-1355 The statutory scheme analyzed in Schick was markedly diﬀerent from the impoundment process leading to Chicago’s lien. The New Jersey statute pertained to only the surcharges, not the underlying vehicle violations. This bifurcated structure contributed to the court’s view that “the underlying trafﬁc proceeding charging the driver with a motor vehicle offense [was] too remote to constitute the required judicial process or proceeding necessary to ﬁnd a judicial lien.” 418 F.3d at 326. The underlying proceeding therefore bore “no relation to the creation of the lien in favor of the [Commission], which instead [arose] as a result of the ﬁling of the certiﬁcate of debt and its docketing by the Clerk of the Superior Court.” Id. (emphasis added). Here, by contrast, the statutory structure does not separate the underlying vehicle violation and any fees imposed after the ﬁnal determinations of the tickets, let alone the impoundment process. These steps are all tied together. Unlike the situation in Schick, Chicago’s administrative structures for challenging tickets and pending impoundments are not too far removed from the impoundment lien. They are essential prerequisites for a valid impoundment lien, and they determine the amount of the lien. In Schick the amount of the surcharge—and therefore the amount of the lien—was “set forth either in the statute or administrative regulation and [was] not determined by the underlying proceeding against the driver.” 418 F.3d at 326 (emphasis added). The opposite is true here. The amount of the Chicago impoundment lien is determined precisely in and by the underlying proceedings. Indeed, to secure release, the driver must pay immobilization and impoundment costs, as well as “all amounts, including any ﬁnes, penalties, administrative No. 21-1355 17 fees …, if any, and related collection costs and attorney’s fees … remaining due on each ﬁnal determination for liability issued to the owner.” M.C.C. § 9-100-120(d)(2). The City says correctly that the total amount of the lien is not limited to the underlying traﬃc fees, but all of the additional charges pertain to and result directly from the quasi-judicial processes leading up to the lien. In this respect, the situation here is similar to money judgments, which routinely include interest, court costs, and sometimes attorney fees and other associated costs, yet are considered judicial despite these tacked-on fees because the resulting liens do not arise “solely” by statute. The same is true here. The additional fees do not eliminate the link to the underlying traﬃc violations and adjudications. They strengthen it. B. Tax Liens The City also argues that adopting Mance’s position will call the classiﬁcation of tax liens into question. Congress included tax liens in its examples of statutory liens in the legislative history of the Bankruptcy Code. H.R. Rep. No. 95-595, at 314, as reprinted in 1978 U.S.C.C.A.N. at 6271 (“Tax liens are also included in the deﬁnition of statutory lien.”). The City contends, however, that federal tax liens result from judicial and quasi-judicial processes (under 26 U.S.C. §§ 6212(a), 6213(a), 6214(a), and 7482) that are similar to the processes leading to a Chicago impoundment lien. If these procedures must be followed before imposing a federal tax lien, yet everyone acknowledges that a tax lien is statutory, the City asks, how could our lien be judicial based on similar prior procedures? Tax liens are unquestionably statutory. E.g., Financial Oversight & Management Board, 899 F.3d at 11; Schick, 418 F.3d 18 No. 21-1355 at 324; IRS v. Diperna, 195 B.R. 358, 360 (E.D.N.C. 1996); In re O’Neil, 177 B.R. 809, 811 (Bankr. S.D.N.Y. 1995). Our decision does not call this classiﬁcation into question. We are merely evaluating the text of statutory provisions also provided by Congress to determine where the City’s lien best ﬁts under those deﬁnitions. Classifying the City’s lien as judicial ﬂows directly from the text. Congress is entitled to single out a particular category of liens and classify it accordingly. We do not disturb that prerogative or conclusion with this opinion. Because Chicago’s impoundment lien on Mance’s vehicle did not arise solely by force of statute, the lien is a judicial lien for purposes of Mance’s bankruptcy. AFFIRMED.