Not a Lexis Advance subscriber? Try it out for free.

United States v. Klein (In re Chapman)

United States Bankruptcy Appellate Panel for the Ninth Circuit

May 25, 2001, Argued and Submitted, Seattle, Washington ; July 12, 2001, Filed

BAP No. WW-00-1124-RyRH

Opinion

 [*567]  RYAN, Bankruptcy Judge:

Darryl S. Chapman ("Debtor") owned a home in Silverdale, Washington (the "Property") that was the subject of a civil forfeiture action (the "Action") brought by the United States in the United States District Court, Western District of Washington, at Tacoma (the "District Court"). The Property was arrested and seized because the government alleged that it was used for the manufacture and distribution of marijuana. Before a ruling on the Action, Debtor filed a chapter 7 2 bankruptcy [**2]  case. The government and the chapter 7 trustee ("Trustee") stipulated to have the reference withdrawn in order for the District Court to rule on Trustee's motion to sell the Property. The District Court granted Trustee's request to sell free and clear of interests to the extent that the government's interest in the Property did not vest by forfeiture and remanded the issue of the applicability of the automatic stay to the bankruptcy court. On remand, the bankruptcy court held that (1) the Action was automatically stayed, (2) § 362(b)(4) did not except the Action from the automatic stay, and (3) to the extent that the government had a forfeiture claim, it should be submitted by a proof of claim under § 726(a)(4).

The government timely appealed the bankruptcy court order, arguing that the Action was excepted from the automatic stay as an exercise of its police or regulatory [**3]  power. We agree with the government's position and REVERSE and REMAND.

I. FACTS

On September 14, 1998, the government commenced the Action against the Property. The government alleged that the Property was used to facilitate the illegal growing of marijuana and was therefore subject to forfeiture to the United States. Before the Action was heard by the District Court, Debtor filed his chapter 7 case on July 14, 1999. Later, Debtor abandoned any interest he had in the Property, and Trustee moved to sell it and stay the Action. The government and Trustee stipulated to the withdrawal of reference of the matter to the District Court.

The government argued to the District Court that the Property was not property of the estate because under the forfeiture law the government's right to the Property related back and vested when the wrongful act was committed, which was prior to the filing of the bankruptcy case. Trustee responded that the Property was property of the estate because the relation-back doctrine did not apply unless the government first obtained a judgment of forfeiture. The District Court agreed with Trustee's position on the relation-back issue.

Read The Full CaseNot a Lexis Advance subscriber? Try it out for free.

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.

264 B.R. 565 *; 2001 Bankr. LEXIS 931 **; 2001 Cal. Daily Op. Service 6373; 2001 Daily Journal DAR 7845

In re DARRYL S. CHAPMAN, Debtor. UNITED STATES OF AMERICA, Appellant, v. MICHAEL P. KLEIN, Chapter 7 Trustee, Appellee.

Prior History:  [**1]  Appeal from the United States Bankruptcy Court for the Western District of Washington. Bk. No. 99-08206. Honorable Thomas T. Glover, Chief Bankruptcy Judge, Presiding.

Disposition: REVERSED and REMANDED for the bankruptcy court to vacate the portion of its order imposing the automatic stay of on the Action.

CORE TERMS

forfeiture, bankruptcy court, automatic stay, property of the estate, power to regulate, governmental unit, forfeiture claim, Proceeds, public policy, pecuniary, bankruptcy case, marijuana

Bankruptcy Law, Judicial Review, Standards of Review, De Novo Standard of Review, Civil Procedure, Appeals, De Novo Review, Administrative Powers, Automatic Stay, Judicial Review, Procedural Matters, General Overview, Trials, Jury Trials, Province of Court & Jury, Claims, Scope of Stay, Claims Against Estate Property, Exceptions to Stay, Police & Regulatory Actions, Liquidations, Estate Property Distribution, Distributions Among Unsecured Classes, Real Property Law, Inverse Condemnation, Regulatory Takings, Entry of Judgments, Stays of Judgments, Automatic Stays, Criminal Law & Procedure, Sentencing, Forfeitures, Proceedings, Controlled Substances, Manufacture, Admiralty & Maritime Law, Maritime Bankruptcy, Judgments, Enforcement & Execution, Claims Against Debtors, Judgments & Rulings, Enforcements, Appellate Stays, Money Judgments, Nonmoney Judgments, Relief From Stay, Relief From Judgments, Remedies, Discharge & Dischargeability, Exceptions to Discharge, Government Penalties & Taxes