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Penn Terra Ltd. v. Department of Envtl. Resources

ELR Citation: 14 ELR 20475
Nos. No. 83-5448, 733 F.2d 267/20 ERC 2185/(3d Cir., 04/30/1984)

The court rules that the automatic stay provision of the federal Bankruptcy Code does not prevent the Pennsylvania Department of Environmental Resources (DER) from compelling a debtor to correct violations of state surface mining laws. The court notes that the policy behind the automatic stay is to grant the debtor temporary relief from creditors and prevent dissipation of the debtor's assets. The stay applies to state action; however, there are exceptions in the stay allowing exercises of police or regulatory power that are not attempts to collect a money judgment. The court rules that these exceptions should be broadly construed to avoid preemption of state law absent an unmistakable indication of contrary congressional intent. The court notes that if equity demands, the bankruptcy court has statutory authority to individually stay state actions exempted from the automatic stay.

Turning to the state action at issue, the court holds that DER's attempt to enforce the surface mining laws is clearly an exercise of police power and does not constitute an attempt to enforce a money judgment. Since "enforcement of a money judgment" lacks a clear definition in the Bankruptcy Code, the court construes it according to commonly accepted usage. A money judgment must involve particular parties and a sum certain. Entry and enforcement of money judgments are separate actions. In form, the DER action did not involve a money judgment: DER did not seek payment to the state or adjudication of liability for a sum certain. However, the court looks beyond form and seeks a test for whether an action is in substance an attempt to enforce a money judgment. Examining precedent, the court rules that an important factor in identifying a proceeding as a money judgment is whether the remedy sought would compensate for past wrongful acts or protect against future harms. Remedies of the first type resemble traditional money judgments; remedies of the second type resemble traditional equitable relief. The court rejects as too broad the bankruptcy court's test, which would hold any order causing the debtor to expend money to be equivalent to money damages. The court also rejects the debtor's suggestion of distinguishing between mandatory and prohibitory injunctions. The court holds that DER's action is directed at future harms and therefore is not subject to the automatic stay.

Counsel for Appellant
Dennis W. Strain
Office of the Chief Counsel
Department of Environmental Resources, 1230 Highland Bldg., 121 S. Highland Ave., Pittsburgh PA 15206
(412) 665-2900

Counsel for Appellee
T. Lawrence Palmer
120 Meadowview Dr., Wexford PA 15090
(412) 935-3818

Counsel for Amici Curiae
E. Dennis Muchnicki; Anthony J. Celebrezzi Jr., Attorney General
30 E. Broad St., 17th Floor, Columbus OH 43215
(614) 466-3376

Bankruptcy Trustee
Margaret L. McArdle
220 Grant St., Pittsburgh PA 15219
(412) 566-2235

Joined by Seitz and Becker, JJ.