In re City of Stockton, California

499 B.R. 802, 2013 WL 5273917, 2013 Bankr. LEXIS 3921, 58 Bankr. Ct. Dec. (CRR) 140
CourtUnited States Bankruptcy Court, E.D. California
DecidedSeptember 18, 2013
DocketNo. 12-32118-C-9; DC No. JTS-1
StatusPublished
Cited by3 cases

This text of 499 B.R. 802 (In re City of Stockton, California) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re City of Stockton, California, 499 B.R. 802, 2013 WL 5273917, 2013 Bankr. LEXIS 3921, 58 Bankr. Ct. Dec. (CRR) 140 (Cal. 2013).

Opinion

OPINION

CHRISTOPHER M. KLEIN, Bankruptcy Judge.

Here is another facet of the balance between state sovereignty and federal bankruptcy power in a chapter 9 case regarding adjustment of debts of a municipality. This time it is citizen litigation [804]*804challenging a ballot description of a tax proposed to the electorate by the City of Stockton.

The movant intends to petition a state court for an order requiring the City to modify its ballot statement describing a tax increase on the ballot in an upcoming election. The ballot-statement issue potentially presages another dispute whether state law requires that voter approval be by a simple majority or by a super-majority-

The question here is whether it is necessary for the bankruptcy court to grant relief from the automatic stay of 11 U.S.C. § 362(a) or from the additional automatic stay of 11 U.S.C. § 922(a) before the ballot-statement litigation commences. Although the analysis may be straightforward to bankruptcy specialists, the paucity of judicial decisions invites confusion. Parsing those sections in light of the Bankruptcy Code’s definition of “claim” for which the common denominator is a right to payment of money leads to the conclusion that relief is not required so long as there is no effort to obtain any kind of monetary award against the City or its officers or personal relief against the officers that would interfere with their duties. Hence, the proposed plaintiffs precautionary motion for stay relief is denied as unnecessary.

Facts

The movant and proposed plaintiff, Dean Andal, has tendered to this court a proposed pleading styled “Petition For Peremptory Writ Of Mandate And Alternative Writ Of Mandate” challenging allegedly misleading statements in the City’s ballot description of proposed “3/4-eent transaction and use(sales) tax” being placed before the Stockton voters at a special election on November 5, 2013.

The defendants are Stockton’s City Clerk and its Registrar of Voters, with the Mayor and Does 1 through 100 named as real parties in interest

The bone of contention is the difference under California law between a “general tax,” which can be approved by majority vote, and a “special tax,” which requires a two-thirds majority. The immediate issue relates to the accuracy of the City’s ballot statement. It is contended that a reference to using the tax to “pay for law enforcement and crime prevention services” is inconsistent with what the City wants categorized as a general tax, hence materially misleading.

This type of pre-election litigation is a cottage industry that has become a regular part of the California electoral process. See, e.g., Howard Jarvis Taxpayers Ass’n v. City of Roseville, 106 Cal.App.4th 1178, 132 Cal.Rptr.2d 1 (Cal.Ct.App.2003).

The City, after reviewing the proposed pleading, does not contend that the bankruptcy automatic stay of § 362(a) applies.

But the City perceives complications as to the additional automatic stay of § 922(a) previously addressed in another decision in this case. In re City of Stockton, 484 B.R. 372, 374-79 (Bankr.E.D.Cal.2012) (“Stockton III ”). Despite conceding that the proposed pleading seems innocuous, it worries that the presence of “Doe” defendants and the demand for “such other and further relief as the court may deem just and equitable” opens the door to mischief that might stray into the zone of offending the § 922(a) additional stay.

The movant has responded to the City’s fears by promising that he will not permit the litigation to be transmogrified into personal actions against City officers or inhabitants, that there will be no monetary claim of any nature, and he waives all rights to attorney fees and costs.

Discussion

The line between litigation against a chapter 9 municipal debtor that does and [805]*805does not offend the bankruptcy automatic stays of § 362(a) and § 922(a) is vague.

Although these stays generally do not block litigation merely challenging the accuracy of statements in a ballot measure proposing a municipal tax, such litigation could stray into prohibited territory when it implicates a claim.

I

First, it is important to be precise about the meaning of the term “claim” in the context of “claim against the debtor” because knowing what is, and is not, a “claim” is essential to construing the automatic stays, especially the chapter 9 additional automatic stay. 11 U.S.C. § 922(a)(1). Specialized language of bankruptcy invites confusion because “claim” has different meanings that depend on context. What is second nature to bankruptcy specialists may be counterintuitive to others.

The word “claim” means different things to different lawyers. For example, all lawyers learn that “claim” is a concept of basic jurisprudence under the rules of res judicata articulated in the Restatement(Second) of Judgments, where “claim” includes all rights of a plaintiff to relief against a. defendant arising out of a transactional nucleus of operative facts. Restatement (Second) of Judgments § 24.1 And “claim” may have other meanings in such specialized areas of the law as insurance.

The Bankruptcy Code defines “claim” as a term of art to refer to a right to payment or a right that can be reduced to a right to payment. 11 U.S.C. § 101(5).2 Although a broad concept that encompasses contingent, unmatured, and disputed rights, the common denominator of a Bankruptcy Code “claim” is an ultimate right to payment. In order to round up and corral stray and uncertain claims, the court is authorized to “estimate” the value of a “claim” for purposes of bankruptcy administration.3

[806]*806In short, the meaning of the word “claim” in a bankruptcy case requires focus on the precise context because “claim” crops up in multiple contexts. When the question is the effect of a prior judgment, claim is used in the sense of the Re statement. Or, when an insurance contract is at issue, the meaning of claim may turn on the terms of the contract at issue or of general insurance law. But when, as here, the language of the Bankruptcy Code is in question, “claim” boils down to a right to payment as defined at § 101(5).

It is the Bankruptcy Code’s § 101(5) definition of “claim” that matters for purposes of construing the § 362(a) and § 922(a) automatic stays.

II

The § 362(a) automatic stay does not apply to prevent the commencement of a judicial action challenging the accuracy of a ballot statement regarding a local tax measure placed before the voters during a chapter 9 case.

In construing the § 362(a) automatic stay, it first is necessary to restate that section, substituting the term “property of the debtor” for “property of the estate” pursuant to § 902(1). 11 U.S.C. § 901(a).

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Bluebook (online)
499 B.R. 802, 2013 WL 5273917, 2013 Bankr. LEXIS 3921, 58 Bankr. Ct. Dec. (CRR) 140, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-city-of-stockton-california-caeb-2013.