AMENDED ORDER
This Amended Order corrects typographical errors in the Court’s previous Order entered on September 30, 2004. Appellant Logan T. Johnston III, a Chapter 11 debtor, filed an adversary proceeding pursuant to 11 U.S.C. § 362(h) against his former wife and her lawyer alleging that they had prosecuted contempt proceedings in state court in willful violation of the Bankruptcy Code’s automatic stay. After Johnston presented his case at trial, the Appellees made an oral motion for a directed verdict. The bankruptcy court granted the motion in a written decision, finding no liability on the part of the Ap-pellees as a matter of law. The Court affirms in part, reverses in part, and remands for proceedings consistent with this opinion. 1
BACKGROUND
In 1993, Appellant Logan T. Johnston III (“Johnston”) filed for divorce from Ap-pellee Paula Parker (“Parker”) in Superior Court in Maricopa County. (See Divorce Decree, Appellant Johnston’s Excerpts of Record (“JER”) 13.) Johnston, a lawyer, represented himself in the divorce proceedings. The Superior Court entered its findings of facts and conclusions of law on July 19,1995. (Id.) The court awarded the couple’s ownership interest in Johnston’s law firm, Johnston Maynard Grant & Parker (“JMGP”), to Johnston and assigned a value of $1.18 million to this community asset. (Id.) To equalize its award, the court awarded Parker much of the couple’s remaining property and a judgment in the amount of $332,078.00, with interest at 10% per annum. (Id.) It also awarded spousal maintenance to Parker in the amount of $4,000.00 per month for 24 months and $2,000.00 per month thereafter. (Id.)
On January 22, 2001, Parker and her lawyer, Appellee Melvin Sternberg (“Sternberg”) filed a motion in the Superi- or Court to hold Johnson in contempt for nonpayment of spousal support. (Pet. for Order to Show Cause Re: Contempt, attached as Exh. A. to Def. Sternberg’s Mot. to Dismiss, Bankr.Doeket Entry (“BDE”) 14.) Parker alleged that Johnston had not made any spousal maintenance payments to her since October 1998 and that his arrearage as of January 1, 2001 was $79,422.88. (Id.) She asked that “the Court enter an Order that [Johnston] be incarcerated; that his professional law license be suspended; and his drivers’ [sic ] license be revoked or suspended until [Johnston] purges himself of contempt by immediately paying ALL sums found to be due and owing to [her].” (Id. (emphasis in original); see also Joint Pretrial Statement ¶ 34, JER 22.)
On February 20, 2001, Johnston filed a response to Parker’s motion for contempt and also moved to modify the Superior
The Superior Court denied Johnston’s motion to modify on May 7, 2001. (Def. Parker’s Mot. to Dismiss Compl. at 2, BDE 17.) Shortly thereafter, on May 14, 2001, Johnston filed a Chapter 11 petition with the United States Bankruptcy Court for the District of Arizona. (Chapter 11 Petition, JER 14.) Johnston’s schedules showed total liabilities of $960,961.00, total assets of $359,595.00, and a gross annual income of $96,000.00 (Id.) Among Johnston’s liabilities were $270,000.00 in mortgage loans on a home valued at $300,000.00, $110,185.00 in tax liabilities owed to the IRS, and $428,000.00 owed- to Parker pursuant to the divorce decree. (Id.) Johnston’s assets mainly consisted of his $300,000.00 home, his $25,000.00 partnership interest in his new law firm, a $15,000.00 interest in two timeshares, an $8,000.00 car, and $11,000.00 in household furniture, collectibles, and other items. (Id.)
On May 17, 2001, the Superior Court proceeded as scheduled with its hearing on Parker’s request that Johnston be held in contempt for nonpayment of spousal maintenance. (See May 17, 2001 Hr’g Tr., JER 15.) Earlier in the day, Johnston’s bankruptcy attorney, Ronald J. Ellett (“El-lett”), had filed a Notice of Filing of Chapter 11 Bankruptcy in the state court. (See Notice of Filing, JER 17.) The Notice stated:
Please take notice that Petitioner Logan T. Johnston has filed a Chapter 11 Bаnkruptcy Petition with the U.S. Bankruptcy Court on May 14, 2001. Accordingly, this action is stayed except those portions that relate to § 362(b). Mr. Johnston will be purposing [sic ] a plan under Chapter 11 to cure any arrears on pre-petition bankruptcy maintenance payments owed to Ms. Parker.
(Id.)
The bankruptcy court found that neither the state court, Parker, nor Sternberg were aware of the Notice of Chapter 11 Filing when the May 17 hearing began.
Johnston v. Parker (In re Johnston),
The parties presented the bankruptcy court with a transcript of the May 17 hearing at trial, and the transcript was admitted in evidence by stipulation. (March 26, 2003 Trial Tr. at 48, JER 10.). Johnston acted as his own lawyer at the hearing. The transcript shows that after roughly fifteen minutes of argument on discovery issues, Johnston informed the court that he had recently filed for bankruptcy, stating: ‘Tour Honor, could I bring one thing to the Court’s attention now? Simply not to appear to be blindsiding anybody, I filed for personal bankrupt
Appellee Sternberg responded: “Your Honor, we — once more I was handed a copy of his filing of bankruptcy. I am no bankruptcy expert by any means. I don’t know if it stаys the proceedings or not. I have no idea.” (Id. at 23.) He continued: “This is a spousal maintenance proceeding, and I know spousal maintenance and attorney’s fees in connection with these proceedings, I believe, are not exempt from bankruptcy. Whether or not we need to lift [the] stay or not is another matter.” (Id. at 23-24.) Johnston responded that he was not a bankruptcy expert either and that “what [his] bankruptcy attorney told [him] was that the effect of the bankruptcy is to stay anything regarding the property settlement ....” (Id.) “With respect to the spousal maintenance,” Johnston said, “we are going to be putting together a Chapter 11 plan that will pay all the arrearages, and it’s unclear to me, you know, whether that stays anything that we would be doing today or not.” (Id.)
Sternberg then suggested going forward with “the action,” but limiting it to a determination of the arrears on spousal maintenance and attorney’s fees. (Id. at 23.) He remarked: “Then, perhaps, we can get another hearing at some future [date] for the remainder of these things.” (Id. at 24.) Johnston apologized for “not knowing exactly what’s going on here” and responded: “I object in the abstract to anything that would contravene the bankruptcy laws, but since I don’t know what those are, I can’t tell you what I’m objecting to.” (Id.) He then stated: “I don’t think there’s much dispute about whether I am in arrears on these matters. There may be some dispute about the numbers. I don’t object to those numbers being established if we can do that today.” (Id.)
As the bankruptcy court noted, “it is clear from the transcript [of the hearing] that the state court judge struggled with how and whether to proceed.”
Johnston,
In a minute entry dated June 22, 2001 and filed on July 13, 2001 (the “Minute Entry Order” or “Order”), the Superior Court judge found that Johnston was ordered to pay spousal maintenance in the amount of $2,000.00 per month pursuant to the divorce decree; that he had knowledge of the order; that he had the ability to comply with the order; and that he was in arrеars in the amount of $87,525.60 through April 1, 2001. (Minute Entry Order, JER 15; Joint Pretrial Statement ¶ 4, JER 22.) The judge granted judgment in favor of Parker for $87,525.60, found Johnston in contempt, and — though she had indicated that she would not proceed further — ordered Johnston to pay the judgment by August 1, 2001. (Minute Entry Order, JER 15.) Significantly, she ordered that if Johnston failed to pay the judgment by that date, he would be “incarcerated in the Maricopa County Jail for an indefinite period of time until the full amount of arrearages was paid in full.” Id.
The bankruptcy court found that “all parties to the State Court litigation were
Here is the notice of filing Chpt. 11 bankruptcy. Mr. Johnston is prohibited by federal bankruptcy law from transferring or encumbering any of his property. On the other hand, Judge O’Connor’s ruling seems to require Mr. Johnston to immediately liquidate his property or else face immediate incarceration. Therefore, I firmly believe that Judge O’Connor’s order is a violatiоn of the automatic stay under 11 U.S.C. § 362. I can only assume that she was unaware that 11 U.S.C. 1 [sic] 362 applied to this case. I hope she will immediately withdraw her order. If she does not intend to do so, please let me know by noon on July 17, 2001 so that I can seek relief from Chief Judge Curly.
(Letter from Ellett to O’Connor of 7/16/01, at 1, JER 17.) Appellee Sternberg was copied on the letter. (Id.)
Ellett continued his efforts to vacate the Minute Entry Order the next day. On July 17, 2001, he faxed a letter to Stern-berg requesting that Sternberg take affirmative action to cure the alleged stay violation:
The [state court’s] Minute Entry reflects that you were the attorney who appeared on May 17, 2004 and sought relief ... The Court’s ruling is a stay violation, and clearly so. Moreover, as counsel of record you have also violated the stay, as has your client. Further, under Federal Bankruptcy Law you will be deemed to be in continuing violation of the stay if you do not take appropriate remedial measures to cure your violation of the stay. Unless this stay violation is immediately cured, I will be filing a complaint in Judge Curly’s Court naming Ms. [Parker] and yourself as two of the defendants. My overwhelming preference is that you and Ms. [Parker] bring yourself into compliance with Federal Bankruptсy Law voluntarily. You will have until July 19, 2001, at 3:00 p.m. to take remedial measures.
(Letter from Ellett to Sternberg of 7/17/01, at 2, JER 17.) On July 19, after Appellees did not take action, Johnston filed a petition for special action in the Arizona Court of Appeals seeking a stay of the state court’s Minute Entry Order. (Joint Pretrial Statement ¶ 5, JER 22.) He also filed a motion for stay in the Superior Court.
(Id.)
The Superior Court, however, “did not set a hearing until August 2, 2001, the day
after
Johnston was to pay the amount of $87,525.60 or face incarceration.”
Johnston,
The Appellees filed a response to Johnston’s petition for special action and requested that the petition be denied, arguing that the automatic stay did not prevent the May 17 hearing from continuing or prevent the state court from entering its Order. (Joint Pretrial Statement ¶ 6.) The Arizona Court of Appeals held an expedited hearing, and, on July 31, 2001, granted a temporary stay of the Superior Court’s Order. (Order, JER 21.) By then, Johnston and his bankruptcy counsel had filed the complaint in this adversary proceeding as well as an emergency motion to set aside the Minute Entry Order.
Johnston,
CONTENTIONS
Johnston argues that the bankruptcy court erred in holding that the Appellеes did not willfully violate the automatic stay. (Opening Br. of Appellant at 9.) He also argues that the court erred by prohibiting him from introducing certain evidence of Parker’s alleged malice; prohibiting him from introducing evidence of the value of Parker’s alleged interest in a real estate trust; prohibiting him from introducing evidence of emotional distress; allowing Parker to make “a false and prejudicial speech to the Court;” and preventing him and his counsel from testifying at trial about attorney’s fees incurred during the adversary proceeding. (Id. at 10.)
JURISDICTION
The Court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a)(1), which grants district courts jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy judges.
DISCUSSION
I. The Motion to Strike
Appellee Parker has moved to strike portions of the record on appeal. (See Mot. to Strike, [Doc. # 2].) The only parts of the Motion that have merit are Parker’s objections to documents related to a motion to remand in a different adversary proceeding that were erroneously docketed by the bankruptcy court clerk in this proceeding. Johnston agrees that those documents should be stricken, and the Court will enter an order to that effect.
II. The Directed Verdict on Liability
A. Standard of Review
The Appellеes moved for a directed verdict at trial, and the bankruptcy court granted the motion. “A directed verdict is more properly applicable to cases tried before a jury, and is essentially comparable to a motion for summary judgment.”
3
Kuan v. Lund (In re Lund),
If during a trial without a jury a party has been fully heard on an issue and the court finds against the party on that issue, the court may enter judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue, or the court may decline to render any judgment until the close of all the evidence. Such a judgment shall be supported by findings of fact and conclusions of law as required by subdivision (a) of this rule.
Fed.R.Civ.P. 52(c). Rule 7052 of the Federal Rules of Bankruptcy Procedure makes Rule 52(c) applicable in adversary proceedings.
When ruling on a Rule 52(c) motion, “the court acts as both judge and jury.”
Regency Holdings (Cayman), Inc. v. Microcap Fund, Inc. (In re Regency Holdings (Cayman), Inc.),
Whether the automatic stay provisions of 11 U.S.C. § 362(a) have been violated is a question of law reviewed
de novo. Eskanos & Adler, P.C. v. Leetien,
B. The Automatic Stay
Title 11 U.S.C. § 362(a) automatically stays a wide array of collection and enforcement proceedings against the debtor and his or her property. The stay is self-executing and is effective upon the filing of the bankruptcy petition. 11 U.S.C. § 362(a);
The Minoco Group of Companies v. First State Underwriters Agency of New England Reinsurance Corp. (In re The Minoco Group of Companies),
The automatic stay has three basic purposes. First, by stopping collection efforts against the debtor, the stay gives the debtor time to devise a reorganization plan
The scope of the automatic stay is set forth in a series of overlapping provisions in § 362(a). The stay bars the commencement or continuation of any judicial, administrative or other action against the debtor that was or could have been commenced before the commencement of the bankruptcy case or to recover a claim against the debtor that arose before the bankruptcy case. 11 U.S.C. 362(a). It “provides for a broad stay of litigation, lien enforcement and other actions, judicial or otherwise, that are attempts to enforce or collect prepetition claims.” 3 Collier on Bankruptcy, supra, ¶ 362.01 (Matthew Bender 15th ed. Revised 2004). “It also stays a wide range of actions that would affect or interfere with property of the estate, property of the debtor or property in the custody of the estate.” Id.
Although the reach of the automatic stay is broad, it is not without limits. Some actions that would otherwise fall within the scope of the stay are excepted. Among these exceptions is § 362(b)(2), which provides that the stay shall not apply to (A) the “commencement or continuation of an action or proceeding” for “the establishment of paternity” or “the establishment or modification of an order for alimony, maintenance, or support,” or (B) “collection of alimony, maintenance, or support from property that is not property of the estate.” 11 U.S.C. § 362(b)(2). “When this exception is applicable, seeking relief from the stay is unnecessary, since the stay never comes into effect.” Som-mer & McGarity, supra, ¶ 5.03[3].
Section 362(b)(2)(B) is particularly relevant here. That section exempts from the stay collection of alimony, maintenance, or support from property that is “not property of the estate.” 11 U.S.C. § 362(b)(2)(B). In Chapter 11 cases, property of the estate is defined by 11 U.S.C. § 541. “[Generally it includes virtually all property rights and interests of whatever kind that the debtor had at the time the bankruptcy case commenced.” Sommer & McGarity, supra, ¶ 5.03[3][a][i] (citing 11 U.S.C. § 541(a)(1)). Property of the estate “does not generally include any property interests or income acquired by the debtor after the commencement of the bankruptcy case, except to the extent that they are rents and proceeds of estate property.” Id. (citing 11 U.S.C. § 541(a)(5)). Thus, in a Chapter 11 case, “collection of support or alimony solely from the debtor’s postpetition income or property is not stayed.” Id.
C. Enforcement of the Automatic Stay
Enforcement of the automatic stay is accomplished in two ways. First, “[c]ourts have consistently held that legal proceedings in violation of the automatic stay are void, regardless of whether the party initiating or continuing thе proceedings has knowledge of the stay.” Sommer
Second, “parties who violate the stay after notice of the bankruptcy case, and often their counsel as well, have been subject to sanctions including damages, attorney’s fees, and punitive damages.”
Id.
The automatic stay has the same effect as a court-ordered injunction.
Id.
As a result, “any violation of the stay’s provision is contempt of court.”
Id.
(citing
In the Matter of Carter,
D. Collection of Alimony, Maintenance, or Support from Property That is Not Property of the Estate
As a threshold matter, this Court must decide whether proceedings to enforce alimony or support orders — like the state court contempt proceedings at issue here — are included in § 362(b)(2)(B)’s exception to the automatic stay, even when those proceedings seek to collect only from non-estate property. Both the bankruptcy court and the parties have assumed that § 362(b)(2)(B) excepts actions to hold the debtor in contempt for failing to comply with a court order so long as the actions seek to collect only from postpetition or exempt property. The issue, however, is not as simple as it appears. Some debate over the breadth of the exception exists.
The editors of Collier Family Law and the Bankruptcy Code and Collier on Bankruptcy argue that § 362(b)(2)(B)’s exception for the “collection of alimony, maintenance, and support” does not extend to contempt proceedings to enforce such obligations. 3 Collier on Bankruptcy, ¶ 362.05[2] (Matthew Bender 15th ed. Revised 2004); Sommer & McGarity, supra, 5.03[3][b]. In support of their position, they draw а distinction between the words “enforcement” and “collection.” Id. They argue that the “collection” as used in the statute means nothing more than the passive receipt of funds pursuant to a prior order or judgment. Id. Although they admit that “collection” may be “interpreted to encompass the continuation of a proceeding for the purposes of collecting,” they argue that such an interpretation was not likely intended because “other exceptions to the stay specifically speak of enforcement of judgments.” Sommer & McGarity, supra, 5.03[3][b] (citing 11 U.S.C. 262(b)(5), now repealed).
Second, the editors focus on the absence of the words “enforcement” or “collection”
While
Collier on Bankruptcy
and
Collier Family Laio and Bankruptcy
are persuasive authority for the interpretation of § 362(b)(2)(B), they are not binding. The Court has found no case in the Ninth Circuit that addresses the distinction between the mere passive collection of alimony, maintenance, or support and a proceeding to collect. The vast majority of cases in fact assume that the commencement or continuation of actions or proceedings to collect
are
excepted from the automatic stay, so long as those proceedings seek to collect only from non-estate property.
See, e.g., Buyser v. Montgomery County Domestic Relations (In re Buyser),
No. 99-17642DAS,
The
Collier
interpretation of § 362(b)(2)(B) stands or falls on whether the word “collection” in § 363(b)(2)(B) is active or passive and whether any significance attaches to Congress’ decision not to use the word “enforcement” in that section or in § 363(b)(2)(A)(ii). As a general rule, “exceptions to the automatic stay are read narrowly to secure the broad grant of relief to the debtor.”
Stringer v. Huet,
Because the analysis of § 362(b)(2)(B) is governed by the traditional rules of statutory construction, the Court begins by looking to the plain meaning of the word “collection.”
Webster’s Third New International Dictionary
defines the noun “collection” as “the
act
of collecting (as taxes by a tax collector),” specifically “the securing of payment of a check, bond, coupon, or other credit instrument by presentation to the buyer.”
Webster’s Third New Int’l Dictionary
444 (Merriam-Webster ed.1986) (emphasis added). To “collect,” in turn, means “to
claim
and receive in payment or fair recompense” or “to
present as due
and receive payment for.”
Id.
(emphasis added). In contrast to the definition of “collection” adopted by the editors of
Collier on Bankruptcy
and
Collier Family Laiu and Bankruptcy,
these definitions imply that collection is an active, not merely a passive undertaking. While collection may involve the mere passive receipt of something, this is not the “ordinary, contemporary, common meaning of the word.”
A-Z, Int’l,
The editors of
Collier on Bankruptcy
and
Collier Family Law and Bankruptcy
acknowledge that “collection” may be interpreted to encompass a proceeding to collect, but contend that such an interpretation is unlikely because Congress spoke of “enforcement” of judgments in other exceptions to the stay and could have used that same language in § 362(b)(2)(B).
See
Sommer
&
McGarity,
supra,
5.03[3][b]. In making this argument, they are presumably relying on the general rule of statutory construction that teaches that courts should not construe different terms within the same statute to embody the same meaning.
See Russello v. United States,
The Court finds that the plain meaning of the term “collection” in § 262(b)(2)(B) encompasses a proceeding
Even if the Court were to rely on § 362(b)(2)’s legislative history, the result would be the same. “The exception in 11 U.S.C. § 362(b)(2) strikes a balance between the goals of protecting the bankruptcy estate and protecting the spouse and children of the debtor.”
Carver v. Carver,
The automatic stay is one means of protecting the debtor’s discharge. Alimony, maintenance, and support obligations are excepted from discharge. Staying collection of [alimоny, maintenance, and support], when not to the detriment of other creditors (because the collection effort is against property that is not property of the estate), does not further [the goal of protecting the debtor’s discharge]. Moreover, it could lead to hardship on the part of the protected spouse or children.
H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 342-43 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6299; S.Rep. No. 95-989, 95th Cong., 2d Sess. 51 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5837. Significantly, this passage speaks of “collection” in terms of “collection effort[s].” Id. This again implies that “collection” as used in § 362(b)(2)(B) encompasses active collection efforts, not merely the passive receipt of funds from a wage attachment or garnishment entered pursuant to a pri- or order. The plain meaning of the word “collection” in § 362(b)(2)(B) as well as the legislative history of that section support the conclusion that “collection” as used in the statute extends to active proceedings to enforce alimony, maintenance, and support obligations.
E. Did a Violation of the Stay Occur?
Having found that § 362(b)(2)(B) does provide an exception to the stay for proceedings to collect alimony, maintenance, or support so long as the collection efforts are made against property that is not property of the estate, the Court now turns to the question of whether a willful stay violation occurred during the state court contempt proceedings, keeping in mind that it reviews findings of fact of the
1. The State Court’s Minute Entry Order
Appellee Sternberg argues that automatic stay is “simply inapplicable to collection activities related to spousal maintenance” and that the Court “may affirm [the bankruptcy court] solely on the legal basis that the domestic relations state court action was clearly within the § 362(b) statutory exception to the automatic stay[.]” (Appellee Sternberg’s Opening Br. at 8-9.) This is simply incorrect. As the discussion in Sections 11(B) and (C) above shows, § 362(b)(2)(B) excepts proceedings to collect of alimony, maintenance, or support from the automatic stay, but only when the collection is against property that is not property of the estate. The bankruptcy court found that the evidence demonstrated that Johnston “could not pay the sum certain set forth in the Minute Entry Order — even with estate property.”
Johnston,
As the bankruptcy court noted, “[i]f the State Court had qualified its Order to reflect only the amount of arrearages, or if the State Court had been advised of what constituted non-estate property, so that the Minute Entry Order could be tailored only to the collection of the arrearages from non-estate property, then the State Court would have been acting within the § 362(b)(2)(B) exception to the automatic stay.”
Johnston,
The bankruptcy court in
In re Sutton,
In the proceedings below, the Appellees relied on
In re Bezoza,
On appeal, the debtor was released but failed to meet certain conditions and was reincarcerated. Id. at 50-51. While in jail, he filed a Chapter 11 bankruptcy petition and а motion seeking relief from the bankruptcy court based on the premise that his continuing confinement violated the automatic stay. Id. at 48. The bankruptcy court noted that given the broad ruling from the state court, it was “tempting to infer” that the ex-wife was pursuing property of the estate. Id. at 51. The court, however, concluded that the debtor’s continuing confinement did not violate the automatic stay because the hearing examiner’s conclusion that the debtor had the ability to pay support was not based on the availability of resources that, after the bankruptcy petition was filed, became property of the estate. Id. at 52. But in that case, the bankruptcy court had a detailed prepetition record reflecting the debtor’s assets and determined that the non-estate assets were so substantial that no coercive effect was placed on the debtor to use estate assets to pay the judgment. Id. at 53. Unlike the court in In re Bezo-za, the bankruptcy court here had no such record to review from the state court. Moreover, the court found that Johnston could not pay the judgment from even from estate property. Given the breadth of the State Court’s Minute Entry, the bankruptcy court correctly concluded that the Superior Cоurt’s Minute Entry Order violated the stay.
2. The Appellees’ Actions
a. Before Entry of the Minute Entry Order
Finding that the state court’s Minute Entry Order violated the automatic stay is necessary but not sufficient to find Parker and Sternberg hable for the stay violation under 11 U.S.C. § 362(h). A statutory cause of action arises under § 362(h) only when a
willful
violation of the automatic stay occurs. 11. U.S.C. § 362(h). The test for determining whether a violation of the automatic stay is willful is: (1) whether the appellees knew of the stay and (2) whether the violation of the stay was intentional.
Goichman v. Bloom (In re Bloom),
The bankruptcy court found that the state court acted on its own in issuing the Minute Entry Order
Johnston,
The Court equates the bankruptcy court’s finding that the state court acted on its own with a finding that there was no willful violation of the automatic stay at that point in time by the Appellees. Willfulness is a question of fact reviewed for clear error.
Kaiser Aluminum Corp.,
There is sufficient evidence to support the bankruptcy court’s conclusion that the state court acted on its own in issuing the Order. The transcript of the May 17 hearing shows that after learning of Johnston’s bankruptcy filing at the May 17, 2001 hearing, Sternberg suggested limiting the hearing to a determination of whether Johnston failed to comply with the support order and to a determination of the amount of arrears, reserving any remaining issues for a future date. The state court judge agreed, and concluded that she should proceed with the hearing to determine whether Johnston failed to comply, but that the issue of sanctions would not be taken up until the. question of whether the issue the automatic stay applied to the collection of unpaid support obligations could be clarified. Although Sternberg later mentioned incarceration while cross-examining Johnston on his intent to pay maintenance,
5
the remark appears to have
b. After the Entry of the Minute Entry Order
Johnston argues that even if the state court issued the Minute Entry Order on its own, Parker and Sternberg must still be held responsible for a willful violation of the automatic stay under § 362(h) because they took no affirmative action to vacate the Order once they were notified by Johnston’s counsel that it violated the stay and because they actually opposed Johnston’s requests for a stay of the Order in the Arizona Court of Appeals. The Court finds the rationale of the Ninth Circuit’s decision in
Eskanos & Adler, P.C. v. Leetien,
Before discussing
Eskanos’s
holding and its applicability to this case, a brief discussion of the facts of that case is necessary. The debtor in
Eskanos
filed a voluntary Chapter 7 bankruptcy petition on August 18, 2000.
Eskanos,
The bankruptcy court found that Eska-nos willfully violated the automatic stay.
Id.
It concluded that sanctions were appropriate under § 362(h) because Eskanos knew of the bankruptcy filing on September 6, 2000 but did not discontinue the collection action until September 29, 2000.
Id.
In upholding the bankruptcy court’s determination, the Ninth Circuit held that the Bankruptcy Code imposes an
affirmative duty
on the part of creditors to “dismiss
or
stay” postpetition collection actions filed in non-bankruptcy fora against the debtor.
Id.
at 1214 (emphasis added). The Court rested its holding on the plain language of the automatic stay statute, 11 U.S.C. § 362(a). Section 362(a) prohibits “the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of [the bankruptcy case],
Eskanos argued that § 362(a)(l)’s prohibition against “continuation” should be read narrowly to encompass only conduct that goes beyond maintaining an active claim and that additional efforts in prosecuting the claim should be required. Id. The Ninth Circuit rejected these contentions. It found that “[t]he maintenance of an active collection action alone adequately satisfies the statutory prohibition against ‘continuation’ of judicial actions.” Id. at 1215. “Active state filings” (i.e., collection actions that are not stayed or dismissed), the Court noted, “exist as more than placeholders — the risk of default judgment looms thrоughout” and counsel must be engaged to defend against such a judgment Id. at 1214. Further, the Court noted that such filings threaten the proper execution of bankruptcy proceedings by exposing the debtor’s estate to multiple collection actions, undermining the debt- or’s ability to reorganize her financial affairs, and jeopardizing creditors as a class with the possibility that one creditor will obtain payment to the detriment of all others. Id.
The Ninth Circuit’s holding in
Eskanos
is consistent with established precedent in other jurisdictions. Based on the language of § 362(a)(1), many courts have emphasized the obligation of creditors to take affirmative action to terminate or undo any action that violates the automatic stay.
See, e.g., Patton v. Shade,
The responsibility is placed on the creditor and not on the debtor because to place the burden on the debtor to undo the violation “ ‘would subject the debtor to the financial pressures the automatic stay was designed to temporarily abate.’ ”
Ledford v. Tiedge (In the Matter of Sams),
In its memorandum decision granting the Appellees’ Rule 52(c) motion, the bankruptcy court found that the Appellees had no affirmative obligation to stay or vacate the Minute Entry Order and sought to distinguish
Eskanos
on several grounds. First, the bankruptcy court pointed out that
Eskanos
involved the commencement of a
postpetition
action while this case involves a
prepetition
action.
Johnston,
Second, the bankruptcy court sought to distinguish
Eskanos
by stating that the decision should be confined to “a specific type of proceeding, a ‘collection action,’ ” implying that the Appellees’ state court action was not a collection action.
In re Johnston,
Third, the bankruptcy court suggested that Parker and Sternberg should not be subject to the same rules as the defendant in
Eskanos
because of “separate policy issues to provide and protect for the family[.]”
Johnston,
Fourth, the bankruptcy court placed significant emphasis on the fact that the Ap-pellees “took no affirmative action to execute on or cоntrol bankruptcy estate or non-estate assets to collect on the obligation.”
Johnston,
Fifth, the bankruptcy court pointed out that the Appellees’ brief in the Arizona Court of Appeals “was appropriately researched and the arguments presented were not frivolous.”
In re Johnston,
Finally, the bankruptcy court concluded that applying Eskanos to creditors continuing prepetition actions in violation of the automatic stay would require creditors to dismiss those actions and that such a result could not have been intended bеcause 11 U.S.C. § 108(e) contemplates that prepetition actions will remain pending until the bankruptcy court is able to rule on a motion to vacate the stay. The court has misread Eskanos. Eskanos does not require dismissal of actions in violation of the stay, but rather discontinuation. It defines discontinuation as either a dismissal or stay of proceedings. Eskanos, at 1214 (“A party violating the automatic stay, though continuing a collection action in a non-bankruptcy forum, must automatically dismiss or stay such proceeding or risk possible sanctions for willful violations pursuant to § 362(h)” (emphasis added)). In this case, the Appellees were required to take affirmative action to stay or vacate the state court’s overbroad Minute Entry Order. Johnston’s bankruptcy counsel notified Sternberg of the stay violation on July 17, 2001, yet Appellees took no action to vacate the order and in fact opposed Johnston’s request to stay the Order in the Arizona Court of Appeals. 6 The Appellees had an obligation to remedy the violation and their failure to do so exposes them to sanctions for a willful violation under § 362(h). The bankruptcy court’s decision is reversed on this point.
F. Remand
If a judgment on partial findings is reversed on appeal, the matter ordinarily will be returned to the trial court for further proceedings. 9 Moore’s Federal Practice, § 52.53 (Matthew Bender 3d ed.2003). In this case, remand is necessary because the Appellees’ have not yet presented their defense and, at least on appeal, have argued that Johnston is barred by waiver and judicial estoppel from invoking the benefits of the automatic stay. The bankruptcy court has made no findings on the legal or factual merits of these defenses, and the Court leaves the issues of waiver and estoppel to the bankruptcy court assuming that the Appellees have properly raised those defenses below. Further, should the bankruptcy court find that no defenses are applicable, then the issue of damages must also be resolved below.
On remand, the trial court “may hear any evidence that was not heard before the judgment on partial findings was entered.” 9
Moore’s Federal Practice, supra,
§ 52.53. “[I]t is not necessary to repeat the evidence that was heard before the judgment, although the party against whom the judgment was entered may supplement the evidence already supplied with any evidence that would have been admissible at the first trial.”
Id.
II. The Evidentiary Rulings
In addition tо challenging the bankruptcy court’s finding of nonliability, Appellant has also challenged a number of evidentiary rulings that the bankruptcy court made concerning damages. These rulings are not yet ripe for review. To reverse on the basis of an evidentiary ruling — as Johnston urges the Court to do— the Court must conclude not only that the bankruptcy court abused its discretion, but also that the error was prejudicial.
McEuin v. Crown Equip. Corp.,
Accordingly,
IT IS ORDERED THAT Appellee Paula Parker’s Motion to Strike [Doc. # 2-1] is GRANTED IN PART and DENIED IN PART. Bankruptcy Docket Entry numbers 126, 127, and 128 are hereby stricken from the record on appeal. Parker’s remaining requests to strike are denied.
IT IS FURTHER ORDERED the decision of the bankruptcy court is AFFIRMED IN PART and REVERSED IN PART. This action is remanded to the bankruptcy court for proceedings consistent with this opinion.
Notes
. The Court vacated the hearing scheduled for July 14, 2004, because the parties submitted memoranda thoroughly discussing the law and evidence in support of their positions, and oral argument would not have aided the Court's decision. See Fed R.App. P. 34(a)(2)(C), incorporated by 28 U.S.C. § 158(b)(2).
. Johnston explains his arrearage as follows: "In November 1997, Ms. Parker and Mr. Johnston entered into a stipulation providing that 80% of the distributions of JMGP were to be paid directly to her. [ER 18]. Five years later, and in spite of this stipulation, Mr. Johnston’s divorce decree debt to Ms. Parker was still not retired because the State Court's projections of the value of Mr. Johnston's interest in JMGP greatly exceeded the amount actually realized. Indeed, Paula Parker only received $268,339.80 because the JMG & P distributions only totaled $381,663 — almost $800,000 less than predicted by Ms. Parker's expert. Thereafter, Ms. Parker has successfully taken the position that even though she had received $268,339.80, none of these proceeds counted towards Mr. Johnston’s 'spousal maintenance’ obligation.” (Opening Br. of Appellant at 6 (emphasis in original).)
. Motions for directed verdicts are now called motions for judgment as a matter of law, and are governed by Rule 50 of the Federal Rules of Civil Procedure.
. Another case,
Tipton v. Adkins (In re Tipton),
. Sternberg asked: "Even after receiving [the contempt petition], you have not paid [Parker] one penny; correct? ... And so would it be a fair statement to say that, unless Judge
. To the extent that the bankruptcy court relied on its finding that Sternberg was out of town from the time he learned of the July 13, 2001 Minute Entry Order until the July 31 hearing in the bankruptcy court, that finding is clearly erroneous. Sternberg admitted that he was in town and working on the state court case on July 19, 2001 (.5 hours), July 20, 2001 (1.5 hours), and again on July 23, 2001 (2 hours). (March 26, 2003 Trial Tr. at 55-57.) Sternberg also testified that by July 20, 2001, he had received Johnston’s request for a stay of the Minute Entry Order that had been filed in the Arizona Court of Appeals. (Id. at 55.)