Penn Terra, Ltd. v. Dep't of Envtl. Res. - 733 F.2d 267 (3d Cir. 1984)

Rule:

A suit brought by a governmental unit enforcing the Commonwealth's police power to compel a party to remedy environmental hazards is properly brought as an equitable action to prevent future harm, and does not constitute an action to enforce a money judgment. The automatic stay provision of 11 U.S.C.S. § 362 is therefore inapplicable to such an action.

Facts:

Appellant made a determination that appellee was operating mines in violation of state environmental protection statutes. A consent agreement was reached between the parties. Shortly thereafter, the appellee initiated Chapter 7 bankruptcy proceedings. Appellant brought an action to compel appellee to comply with the agreement it entered into prior to the bankruptcy proceedings but was automatically stayed pursuant to 11 U.S.C.S. § 362(a). The bankruptcy court and the district court refused to lift the automatic stay, and appellants challenged those rulings.

Issue:

Was the automatic stay provision of 11 U.S.C.S. § 362 applicable to the action which compelled the appellee to correct environmental damage? 

Answer:

No.

Conclusion:

On appeal, the court reversed and ordered that the case be remanded to the bankruptcy court with instructions that the bankruptcy court enforce the consent agreement between the parties. Appellant was attempting to force appellee to remedy environmental hazards that appellant had created. It was not an attempt to enforce a money judgment. The exception to the automatic stay provisions outweighed the contrary considerations relied upon by appellee and the bankruptcy court.