Victor Achinivu

FOR PUBLICATION

UNITED STATES BANKRUPTCY

COURT DISTRICT OF NEW JERSEY

Caption in Compliance with D.N.J. LBR 9004-2(c)

Case No. 17-30949 (MBK)

Chapter 13

In re VICTOR ACHINIVU, Hearing Date: 2/18/2020

Debtor. Judge: Michael B. Kaplan

Peter E. Zimnis, Esq. Edward L. Paul, Esq.

Law Office of Peter E. Zimnis Paul & Katz, P.C.

1245 Whitehorse Mercerville Rd. 1103 Laurel Oak Rd.

Suite 412 Suite 105C

Trenton, NJ 08619 Voorhees, NJ 08043

Counsel for Debtor Counsel for City of Trenton

Albert Russo, Esq.

CN 4853

Trenton, NJ 08650-4853

Standing Chapter 13 Trustee

MEMORANDUM DECISION

This matter comes before the Court on a motion filed by the Debtor, Victor Achinivu

(“Debtor”), seeking to enjoin the City of Trenton (“City”) from initiating and prosecuting any

municipal ordinance violations with respect to real estate properties owned by the Debtor and

located in the City at 63 Tyrell Avenue and 114 Chestnut Avenue (“Motion”). The City has filed

opposition to the Debtor’s motion and his efforts to enjoin the City from enforcing its property

maintenance code.

The Court has reviewed the parties’ submissions and has fully considered the arguments.

This Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(a) and

the Standing Order of the United States District Court dated July 10, 1984, as amended September

18, 2012, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding

within the meaning of 28 U.S.C. §§ 157(b)(2)(A) and 157(b)(2)(O). Venue is proper in this Court

pursuant to 28 U.S.C. § 1408.

For the reasons set forth below, the Debtor’s motion is DENIED. The following constitutes

the Court’s findings of fact and conclusions of law as required by FED. R. BANKR. P. 7052.1

I. Background

The factual background and procedural history of this matter are well known to the parties

and will not be repeated in detail here. In relevant part, the Debtor filed for relief under chapter

13 of the Bankruptcy Code on October 16, 2017. At the time of the filing, the Debtor owned real

property located at 114 Chestnut Avenue, Trenton, New Jersey a/k/a/ Block 13101, Lot 49,

Trenton, New Jersey and 63 Tyrell Avenue, Trenton, New Jersey a/k/a/ Block 1701, Lot 64,

Trenton, New Jersey (“Trenton Properties”). The Debtor has not paid real estate property taxes on

the Properties since 2011 and 2012, respectively, and the City undertook tax sales in which it

attempted to auction tax sale certificates. Since there were no bidders, the tax sale certificate

1 To the extent that any of the findings of fact might constitute conclusions of law, they are adopted as such.

Conversely, to the extent that any conclusions of law constitute findings of fact, they are adopted as such.

2

defaulted to the City of Trenton. During the bankruptcy proceedings, by order dated May 28, 2019,

the City obtained relief from the automatic stay to pursue its remedies with respect to the

outstanding real estate tax obligations. In addition, the claims register reflects a tax sale certificate

held by Daxuan Wang concerning the property at 114 Chestnut Avenue, as well as additional

secured claims by Trenton Water Works. The Debtor’s initial bankruptcy schedules did not

reference either of the Trenton Properties, nor the associated tax obligations. Furthermore, the

Debtor’s original chapter 13 plan, confirmed by the Court on February 8, 2018, did not provide

for any treatment of the tax claims. After filing amended schedules on March 16, 2019, to include

the Trenton Properties, the Debtor filed a modified plan which provided for the surrender of the

Properties and which the Court confirmed on October 17, 2019.

Almost immediately thereafter, on October 26, 2019, the Debtor filed his Motion seeking

injunctive relief against the City with respect to ongoing and future property maintenance code

violations.2 As of the filing of the Debtor’s Motion, the City had issued a single Notice of Violation

with respect to the property at 114 Chestnut, relative to overgrown vegetation and potentially

poisonous weeds, in violation of City Ordinance 132-71.1(E). At the initial hearing on December

3, 2019, the Court heard preliminary oral argument and granted the parties permission to file

supplemental submissions. The Court reviewed the supplemental submissions and entertained

additional oral argument on the adjourned hearing date of February 18, 2020.

2 At the initial hearing on the Motion, the Court noted that FED. R. BANKR. P. 7001(7) requires the filing of an adversary

proceeding in order to obtain injunctive relief. Notwithstanding, the parties agreed to continue to treat the dispute as

a contested matter, noting that there would be no need for further discovery or other procedural safeguards.

3

II. Discussion

The Debtor frames the issue as whether this Court should enjoin the City’s efforts to

enforce its property code ordinances to ensure that the Debtor receives the “fresh start” envisioned

by the drafters of the Bankruptcy Code.3 The Court, however, views the issue somewhat

differently—should the Court employ its equitable and statutory powers to absolve the Debtor

from honoring his commitments to the community when he assumes ownership of real property.

As discussed below, the Court must come down on the side of restraint and the simple answer is

“no”.

The Debtor seeks a permanent injunction with respect to the City’s property maintenance

enforcement efforts and, thus, the Court must first determine whether such injunctive relief is

appropriate. With respect to a preliminary or permanent injunction, a plaintiff—or the Debtor in

this matter—has the burden of proving the basis for a preliminary or permanent injunction. See,

e.g., Campbell Soup Co. v. ConAgra, Inc., 977 F.2d 86, 90 (3d Cir. 1992). The decision to grant a

permanent injunction is within the equitable discretion of the court. See Free Speech Coalition,

Inc. v. Att'y Gen. United States, 825 F.3d 149, 173 n.21 (3d Cir. 2016) (citing eBay Inc. v.

MercExchange, L.L.C., 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006)). To grant a

permanent injunction, the Court considers whether the party seeking such relief has demonstrated

the following:

3 One of the primary purposes of the Bankruptcy Act is to “relieve the honest debtor from the weight of oppressive

indebtedness, and permit him to start afresh, free from the obligations and responsibilities consequent upon business

misfortunes.” In re Giarratano, 299 B.R. 328, 333–34 (Bankr. D. Del. 2003), aff'd, 358 B.R. 106 (D. Del. 2004)

(quoting Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S. Ct. 695, 78 L.Ed. 1230 (1934)).

4

(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as

monetary damages, are inadequate to compensate for that injury; (3) that, considering the

balance of hardships between the plaintiff and defendant, a remedy in equity is warranted;

and (4) that the public interest would not be disserved by a permanent injunction.

ebay, Inc., 547 U.S. at 391. This four-part test applies equally to applications for injunctions sought

in the bankruptcy court. See, e.g., In re Clark Entertainment Group, Inc., 182 B.R. 73, 80 (Bankr.

D.N.J. 1995). Therefore, the Debtor bears the burden of demonstrating that the cited elements

weigh in favor of granting the injunction. See, e.g., Monsanto Co. v. Geerston Seed Farms, 561

U.S. 139, 156 (2010) (quoting ebay, Inc., 547 U.S. at 391). The Debtor has not met his burden.

Frankly, the Court need not go beyond the first two factors, to wit, a showing of irreparable

harm and the lack of adequate remedies at law. The Debtor’s Motion does not reference an

allegation of an irreparable injury, much less proof of such an injury. At best, the Debtor suggests

that being compelled to expend resources to pay fines and legal fees constitutes an injury that

warrants an injunction. In an analogous context, the United States Court of Appeals for the Third

Circuit determined that “the ‘cost, anxiety, and inconvenience’ of defending one’s self in a good

faith criminal prosecution does not constitute irreparable injury.” In the Matter of Davis, 691 F.2d

176, 178 (3d Cir. 1982). The Third Circuit in Davis, supra, has provided guidance on the

circumstances that merit imposing an injunction to stop the commencement or continuation of

criminal proceedings.4 A federal court is permitted to intervene only when the criminal complaint

is “brought in bad faith or for purposes of harassment.” Davis, 691 F.2d at 178. The Debtor has

neither alleged, nor put forward evidence suggesting that the City is acting in bad faith or with an

4 The Court is cognizant that the City’s property maintenance enforcement efforts do not constitute criminal

proceedings; notwithstanding, the analysis undertaken in Davis, supra, remains a proper guidepost for the Court.

5

intent to harass. As emphasized in Davis, principles of comity dictate that the Court presume that

the City is prosecuting the alleged violation of the municipal property maintenance code, as well

as potential future violations, in the interests of the public health and welfare. Such a course of

conduct cannot, as a matter of law, constitute irreparable harm to the Debtor.

Much of the Debtor’s argument is bottomed on a request for the Court to look beyond a

rigid application of the established test for injunctive relief and engage in a fair weighing of

interests in favor of the Debtor’s “fresh start.” The Court is willing to undertake this balancing of

hardships and public interests because it does, in fact, strike at the heart of the four-part test.

Unfortunately for the Debtor, the examination of competing policy concerns leads to the

inescapable conclusion that the Motion must be denied.

A debtor’s ability to surrender real property under a chapter 13 plan and to force a

lienholder to assume immediately all ongoing and future maintenance responsibilities has been the

subject of recent scholarly and judicial debate.5 In the past several years, bankruptcy courts have

5 As noted in Bank of New York Mellon v. Watt, 867 F.3d 1155, 1159, n.2 (9th Cir. 2017):

In the wake of the mortgage foreclosure crisis, several courts have been confronted with the question of

whether a debtor may require a creditor to take title to collateral, over that creditor’s objection. See, e.g., In

re Sagendorph, 562 B.R. 545 (D. Mass. 2017); In re Brown, 563 B.R. 451 (D. Mass. 2017); HSBC Bank,

USA v. Zair, 550 B.R. 188 (E.D.N.Y. 2016), appeal dismissed Nov. 15, 2016; In re Tosi, 546 B.R. 487

(Bankr. D. Mass. 2016); In re Arsenault, 456 B.R. 627 (Bankr. S.D. Ga. 2011). Commentators have noted

the lack of legal clarity on this question. See, e.g., Andrea Boyack & Robert Berger, Bankruptcy Weapons to

Terminate a Zombie Mortgage, 54 Washburn L.J. 451, 469–73 (2015) (stating that “[t]he Code’s provisions

and the general equitable powers of a bankruptcy court can perhaps force a lender to take title”) (emphasis

added); David P. Weber, Zombie Mortgages, Real Estate, and the Fallout for the Survivors, 45 N.M. L. Rev.

37, 58 (2014) (describing the “creative attempts” that borrowers have made to “flee their zombie mortgages,”

which have given rise to legal disputes); Amanda McQuade, Comment, The Antidote to Zombie

Foreclosures: How Bankruptcy Courts Should Address the Zombie Foreclosure Crisis, 32 Emory Bankr.

Dev. J. 507, 526 (2016) (stressing the need for courts “to clarify the inconsistencies within the case law”

regarding the validity of forced vesting).

6

addressed efforts by debtors to shift post-petition liabilities (such as condominium and homeowner

association fees) and maintenance obligations through chapter 13 plans, which not only provide

for the surrender of real estate, but the “forced vesting” of real estate in lienholders though

application of 11 U.SC. § 1322(b)(9)6 and 11 U.SC. § 1325(a)(5)(c)7. A critical factor for most

courts which have allowed such provisions is whether the affected secured creditor timely objects

to the proposed treatment.8

6

11 U.SC.§ 1322(b)(9) (b) provides, in pertinent part:

(b) Subject to subsections (a) and (c) of this section, the plan may—

***

(9) provide for the vesting of property of the estate, on confirmation of the plan

or at a later time, in the debtor or in any other entity;

7 11 U.SC.§ 1325(a)(5)(c) provides, in pertinent part:

(a) Except as provided in subsection (b), the court shall confirm a plan if—

***

(5) with respect to each allowed secured claim provided for by the plan--

***

(C) the debtor surrenders the property securing such claim to such holder;

8 See, e.g., In re Olszewski, 580 B.R. 189, 193 (Bankr. D.S.C. 2017) (noting that secured creditor that does not object

to the confirmation of a “vesting” plan, is deemed to have accepted the plan’s treatment); Wells Fargo Bank, N.A. v.

Sagendorph (In re Sagendorph), 562 B.R. 545 (D. Mass. 2017) (overturning bankruptcy court's order confirming

chapter 13 plan that vested the debtor's property into the secured creditor when the creditor objected to confirmation);

Bank of New York Mellon v. Watt (In re Watt), 2015 WL 1879680, 2015 U.S. Dist. LEXIS 54041 (D. Or. Apr. 22,

2015) (same); HSBC Bank USA, N.A. v. Zair (In re Zair), 550 B.R. 188 (E.D.N.Y. 2016) (same); In re Malave, C/A

No. 13–13348, 2014 Bankr. 5383 (Bankr. S.D.N.Y. Apr. 11, 2014) (finding that a plan providing for vesting of

property to the secured creditor is not confirmable upon an objection from the secured creditor); In re Weller, 548

B.R. 392 (Bankr. D. Mass. 2016) (same); In re Williams, 542 B.R. 514 (Bankr. D. Kan. 2015) (same); In re Tosi, 546

B.R. 487 (Bankr. D. Mass. 2016) (finding that § 1322(b)(9) may not be used to vest property into the creditor and

create a fourth option under § 1325(a)(5)); but see In re Rosen, C/A No. 11–23129, 2015 Bankr. LEXIS 4448 (Bankr.

D. Kan. Feb. 24, 2015) (permitting vesting of property to a secured creditor upon confirmation after the secured

creditor objected to confirmation).

7

In the present matter, there has been no consent to vesting title to the Trenton Properties in

the City. Pointedly, the Debtor’s confirmed plan does not include any “vesting” provisions; rather,

the Debtor simply surrenders the Trenton Properties under his plan. As noted in In re Sagendorph,

supra:

The meaning of the word ‘surrender,’ whether used in the Bankruptcy Code or

elsewhere, is plain and well-established in property law. See, e.g., Tosi, 546 B.R.

[487, 492 (Bankr. D. Mass. 2016)] (finding the meaning of ‘surrender’ “settled and

well understood,” and listing four cases stating the same). Black's Law Dictionary

defines ‘surrender’ as “[t]he giving up of a right or claim.” (10th ed. 2014). Specific

to section 1325(a)(5)(C), ‘surrender’ has been taken to mean the “‘relinquishment

of any rights in the collateral.’” In re White, 487 F.3d 199, 205 (4th Cir. 2007)

(citations omitted); In re Stone, 166 B.R. 621, 623 (Bankr. S.D. Tex. 1993) (noting,

“a number of bankruptcy courts called on to construe § 1325(a)(5)(C)” have

“formulated” the same definition).

Id. at 552–53 (citations omitted). Thus, the Debtor’s surrender of his interest in the Trenton

Properties9 under his plan serves merely as an offer to cede his property rights to the lienholders,

and without acceptance by the City (through either affirmative action or silence in the face of a

duty to object) does nothing to alter title and legal obligations relative to the properties. For sake

of guidance to the bar in future disputes involving similar fact patterns, the Court emphasizes that

had the Debtor included “vesting” language in his plan, the result would have been no different,

and the Court would not have entered injunctive relief. The Court adopts the well-reasoned

analysis by the district court in In re Sagendorph, supra, in determining that “vesting” cannot be

undertaken in a unilateral fashion by a grantor, but rather requires actual acceptance by the

9 The Court understands that there is a nondebtor co-owner with respect to the property at 114 Chestnut Avenue. In

light of the Court’s decision herein, there is no need to examine the impact of the requested injunctive relief on the

City’s ability to pursue enforcement actions against a nondebtor co-owner.

8

purported grantee in order to constitute a legal transfer of property. Id. at 553. At no time has the

City accepted the Debtor’s surrender of his property interests.

As the Bankruptcy Code fails to provide the Debtor with a statutory predicate for shifting

post-petition maintenance obligations onto the City, the Court may still consider whether equitable

considerations warrant judicial action to preserve the Debtor’s “fresh start” in the face of

competing public health and safety policy concerns. The Court is neither blind nor deaf to the

expressed needs of a debtor seeking to move forward with positive steps towards financial health

following a bankruptcy discharge. However, the Court must respect Congress’s decision to place

limits on a debtor’s “fresh start” where required to serve the public interests. Congress has already

undertaken the analysis required in this matter when it opted to included 11 U.S.C. § 362(b)(4)10,

which excepts from the scope of the automatic stay actions by governmental units to enforce its

police or regulatory powers. In Nortel Networks, Inc., 669 F.3d 128 (3d Cir. 2011), the Court of

Appeals explained that the § 362(b)(4) stay exception “discourages debtors from submitting

bankruptcy petitions either primarily or solely for the purpose of evading impending governmental

efforts to invoke the governmental police powers to enjoin or deter ongoing debtor conduct which

10

Section 362(b)(4) provides that the filing of a bankruptcy petition

does not operate as a stay—

* * *

(4) [under § 362(a)(1), (2), (3) or (6) ], of the commencement or continuation of

an action or proceeding by a governmental unit ... to enforce such governmental

unit's or organization's police and regulatory power, including the enforcement of

a judgment other than a money judgment, obtained in an action or proceeding by

the governmental unit to enforce such governmental unit's or organization's police

or regulatory power.

9

would seriously threaten the public safety and welfare (e.g., environmental and/or consumer

protection regulations).” Nortel, 669 F.3d at 137 (quoting In re McMullen, 386 F.3d 320, 324-25

(1st Cir. 2004)). “The common thread in the case law is that courts will find the § 362(b)(4)

exception applicable when the governmental litigation (or other action) was triggered by the

debtor's failure to comply with a regulatory obligation affecting public health, safety or welfare.”

In re Iezzi, 504 B.R. 777, 785 (Bankr. E.D. Pa. 2014).

On its face, the City’s ordinance appears to promote significant and valid public safety and

health goals; the issuances of notices and enforcement efforts to cure property maintenance

violations are critical to ensure the welfare and safety of the community in which the subject

properties are located. There can be no dispute that real properties with overgrown vegetation and

strewn garbage impact the values of surrounding properties and place adults, children and pets in

jeopardy of sickness and other harm. Certainly, the Debtor has not put forward any evidence of

alternative motivations underlying the City’s enforcement steps. This Court sees no reason, in law

or equity to relieve the Debtor of his obligations as a property owner in his community.

I. Conclusion

For the foregoing reasons, the Motion (ECF No. 60) is denied. The Court has entered a

form of Order consistent with this opinion.

4 che Bef

onorable Michael B. Kaplan

United States Bankruptcy Judge

Dated: February 25, 2020

10