Wagner v. Ivory (In Re Wagner)Wagner v. Ivory (In Re Wagner)
OPINION
The debtor, Joseph Wagner, filed this action against a creditor, Hayward Ivory (“Ivory”), seeking damages for violation of the automatic stay, 11 U.S.C. § 362.
1
Trial of this case was held on December 3, 1986. After consideration of the evidence admit
I.
The debtor filed a voluntary petition under chapter 13 of the Bankruptcy Code on June 4, 1986. Ivory is an individual who was listed as a creditor on the debtor’s petition for an obligation arising from the sale of two trucks to the debtor.
The precise details regarding the underlying transaction between the parties was not well developed at trial. In approximately December 1985, the debtor and Ivory formed a partnership. It appears that the purchase of the two trucks was related to the formation of the partnership and that the funds used to purchase the trucks were supplied by Ivory. The debtor has maintained possession of the vehicle since December 1985 and it appears that, since then, he has worked, at least occasionally, as a trucker.
Since the filing of the bankruptcy petition in June 1986, the debtor has asserted that he is the owner of the two trucks subject to a debt owed to Ivory. Ivory disputes the debtor’s- ownership of the vehicles.
On July 14, 1986, the debtor’s counsel sent a letter to Ivory informing him of the filing of the bankruptcy petition. The letter also stated:
Horace Ivory was listed on the Petition as a creditor. Accordingly, please make no further attempts to collect upon this obligation. Please feel free to contact me if you have any questions about this.
Ivory received the July 14, 1986 letter and telephoned the debtor’s attorney on July 29, 1986. Counsel confirmed their conversation as follows in a letter dated July 31, 1986: “As I have indicated during our telephone conversation of July 29, 1986, you were listed on Mr. Wagner’s Chapter 13 Petition for $9,600.00.”
On September 16, 1986, Ivory visited the debtor at his residence. The debtor lives in the cab of a trailer located on the lot where the trucks are stationed. On that date, the debtor and Ivory discussed the status of the trucks; their testimony differed as to the details of the conversation. 3 During the conversation, Ivory threatened to tow the trucks away. When the debtor reminded him of the bankruptcy filing, Ivory stated words to the effect that the court order does not mean anything to him. 4
On September 16, 1986, the debtor’s counsel sent Ivory a letter which stated that Ivory’s conversation with the debtor and the threat to tow the trucks away violated the automatic stay of the Bankruptcy Code. The letter further warned that if Ivory communicated further with the debtor or made any effort to remove the trucks from the lot, counsel would file a contempt action. Ivory admitted receiving the September 16, 1986 letter.
During the evening of October 5, 1986, Ivory burst into the debtor’s home, shut the lights and, in the darkness, held up a finger to the debtor’s head (as if he were holding a gun) and screamed, “I’m not playing, I’m not playing, next time I’m going to blow your brains out, bring a gun
The debtor testified that on December 7, 1986, he saw Ivory’s automobile stop and double-park in front of his residence and he saw Ivory point at him or his truck. The next day, the debtor discovered that a license plate had been removed from one of his trucks. Without the license plate, the debtor explained that he could not operate the vehicle and, as a result, he was unable to fulfill a trucking contract which would have paid him approximately $325.00. 6
II.
The debtor has not articulated his precise legal theory for recovery in either his complaint or his post-trial submissions. Specifically, he has not distinguished between a civil contempt proceeding and a proceeding under 11 U.S.C. § 362(h). 7 He simply asks the court to award damages based on a finding that Ivory violated the automatic stay. 8
In response to the debtor, Ivory separately examines each of the three incidents and argues that the debtor has not proven his case. With respect to the September 16, 1986 incident, Ivory asserts that he is not liable because, at that time, he lacked “specific knowledge” of the existence or effect of the automatic stay. 9 Next, while conceding that his next contact with the debtor on October 5, 1986 “may be said to have violated the automatic stay,” Ivory asserts that he is not liable because he lacked a “contumacious frame of mind” when he contacted the debtor. Finally, Ivory argues that there is no competent evidence to establish that he removed the license plate from one of the trucks in December 1986 and, therefore, he is not responsible for any damages which resulted from the removal of the plate.
Based on the evidence before me, I conclude that Ivory violated the automatic stay on September 16 and October 5, 1986. The most relevant subsections of section 362 in this case are (a)(3), which stays acts to obtain possession of property of the estate and, perhaps, (a)(6), which stays acts to collect prepetition claims. Simply put, on September 16 and October 5, 1986, Ivory went to the debtor’s residence and demanded return of property of the estate. However, I find no violation of the automatic stay arising from the December 1986 incident. At most, the evidence
In light of these conclusions, I must still decide whether Ivory is liable to the debtor for the violations of the automatic stay which occurred on September 16 and October 5, 1986. The violation of the stay, by itself, does not support an award of damages and attorney’s fees.
See In re Ramage,
III.
The importance of the automatic stay was well articulated in the Bankruptcy Code’s legislative history:
The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all foreclosure action. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.
H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 340 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6296,
quoted in, Assoc. of St. Croix Condominium Owners v. St. Croix Hotel Corp.,
Prior to the enactment of 11 U.S.C. § 362(h), parties aggrieved by a violation of the automatic stay ordinarily invoked the remedy of civil contempt.
See
Kennedy,
The Automatic Stay in Bankruptcy,
11 U.Mich.J.L.Reform 177, 259-66 (1977). In order for a party to be held in civil contempt, a court must find that the party violated a specific and definite court order and that the party had knowledge of the order sufficient to put him on notice of the proscribed conduct.
Fidelity Mortgage Investors v. Camelia Builders, Inc.,
Section 362(h) was added to the Code by the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353 (“BAFJA”) and provides for recovery of actual damages, attorney’s fees, costs and, where appropriate, punitive damages, for a “willful” violation of the automatic stay. The precise reason for the enactment of subsection (h) is not clear.
See
2
Collier on Bankruptcy
11362.12, at 362-74 (15th ed. 1987) (“Collier”). It does appear, though, that the subsection (h) was meant to supplement, not replace, the civil contempt remedy.
See
130 Cong.Rec. H1942 (daily ed. March 26, 1984) (remarks of Rep. Rodino) (section 362(h) “is an additional right of individual debtors, and is not intended to foreclose recovery under already existing remedies”); 2
Collier
¶ 362.13, at 362-74 (suggesting that while recovery of damages, counsel fees and costs may be discretionary in a contempt proceeding,
Some courts have construed the term “willful” in section 362(h) to mean “deliberate” or “intentional.”
In re Mewes,
I reach this conclusion based upon the apparent purpose behind the enactment of section 362(h) and its interrelationship with the contempt remedy. Given the important interests implicated by the violation of the automatic stay,
see In re Albany Partners, Ltd.,
Since the debtor seeks an award of punitive damages, I must also briefly address the circumstances in which such an award is appropriate. I find guidance on this question in
Cochetti v. Desmond,
With the foregoing principles in mind, I turn to Ivory’s arguments that he is not subject to liability for violating the automatic stay. First, Ivory contends that he was never informed of the existence or effect of the automatic stay prior to September 16,1986 and therefore, his threat to tow the trucks was not contempuous or a willful violation of the stay. In making this argument, Ivory is apparently distinguishing between knowledge of the filing of the bankruptcy and knowledge of the existence and scope of the automatic stay, as there is no dispute that Ivory knew of the bankruptcy filing prior to September 16, 1986. There is some support for Ivory’s position.
See In re Associated Hobby Manufacturers, Inc.,
Next, I reject Ivory’s argument that his conduct on October 5, 1986 is excusable because he had a good faith, albeit mistaken, belief that he was not a creditor of the debtor and was not covered by the automatic stay. His conduct was undoubtedly deliberate, with knowledge of the automatic stay and therefore, willful. By taking matters into his own hands, rather than seeking clarification from this court as to his status and the scope of the automatic stay, Ivory “undertook a calculated risk under threat of contempt” that his legal judgment was correct.
Matter of Depay,
In addition, I conclude that this is an appropriate case for the award of punitive damages. As one court has put it, “[t]his is not a case of an ambiguity which is to be construed in favor of the alleged con-temnor.”
In re Damon,
IV.
Finally, I must determine the amount of damages. The debtor is entitled to actual damages, punitive damages, attorney’s fees and costs. 11 U.S.C. § 362(h).
The debtor produced very little evidence that he suffered any actual harm as a result of Ivory’s violations of the automatic stay. The alleged loss of the trucking contract was not linked to the stay violations which occurred on September 16 and October 5, 1986. There was no other evidence of any out-of-pocket losses. Nor was there any evidence that the debtor suffered any long term physical or emotional harm as a result of the threats Ivory made on October 5, 1986. It was apparent, however, from my observation of the debt- or’s testimony itself, that he experienced some shock, alarm and fear while the incident took place. I find it appropriate to award him $100.00 in actual, compensatory damages.
See Mercer v. D.E.F., Inc.,
(debtor awarded $1,000.00 for humiliation, embarrassment, anxiety and frustration against creditor who broke and entered her residence in violation of the automatic stay). No damages will be awarded as a result of the violation of the automatic stay which took place on September 16, 1986 as there was no evidence that the debtor suffered any harm.
See In re Promower, Inc.,
In setting the amount of punitive damages, I must consider both the nature of the defendant’s conduct and his ability to pay.
E.g., Kerr v. First Commodity Corp.,
As for attorney’s fees and costs, I will give the debtor fifteen days to file a motion in conformity with the standards set forth in
In re Fine Paper Litigation,
An order consistent with this opinion will be entered. 14
ORDER
AND NOW, this 12 day of June, 1987, it is ORDERED that:
1. The Chief Deputy Clerk in Charge of Bankruptcy Operations shall enter judgment, in accordance with Bankr.Rule 9021(a), as follows:
(a) in favor of plaintiff and against defendant for actual damages in the amount of $100.00.
(b) in favor of plaintiff and against defendant for punitive damages in the amount of $500.00.
2. The plaintiff is granted fifteen days to file a motion for award of attorney’s fees- and costs in accordance with the standards set forth in
In re Fine Paper Litigation,
Notes
. The complaint also appears to assert claims for common law assault and common law battery. The debtor makes no reference to these claims in his post-trial submissions. In any event, it is unnecessary to reach these claims, on the facts before me, since there is no contention that the measure of damages for these claims is different than for a violation of the automatic stay.
. This opinion constitutes the court's findings of fact and conclusions of law pursuant to Bankr. Rule 7052.
. The debtor testified that Ivory asked about "the problem with the trucks” and how much money it would cost to repair them. Ivory claimed that he visited the debtor to ask him not to drive the trucks because they were uninsured. Ivory believed that his name was on the title and that he could be responsible if the trucks were in an accident.
.In his testimony at trial, Ivory denied threatening to tow the trucks. He did admit the following:
Q. Well, when you stopped over on the 16th, did you tell him you wanted the trucks back? A. Yeah. I told him that. I think I told him that on the 16th, I would like to have both of my trucks back.
Based on my consideration of the witnesses’ demeanor, I credit the debtor’s testimony over Ivory’s with respect to the events of September 16, 1986.
. Ivory denied threatening the debtor or pointing a finger at his head. He did admit that he visited the debtor’s residence on October 5, 1986. He also admitted that when he entered the trailer, he "accidentally” kicked an electric cord that put the lights out and that, after doing so, he did not plug the lights back in. He claims that he then asked the debtor not to drive the trucks without insurance. I disbelieve Ivory's version of the events.
. The debtor requests that the court find that, as a result of the loss of the license plate, the debtor has been unable to operate his tractor and has lost a job and approximately $500.00 per week. There is no support in the record for this proposed finding.
. Section 362(h) provides:
An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.
. The violation of the stay, by itself, does not support an award of monetary damages and attorney’s fees. The court must also consider the state of mind of the party who has violated the stay,
i.e.,
whether the party had knowledge of the stay.
See
discussion in Part III,
infra.
By comparison, no showing of knowledge is required to obtain relief to reverse the effect of actions taken in violation of the stay, as such acts are void.
E.g., Kalb
v.
Feuerstein,
. Ivory also claims that the only evidence that he threatened to tow the trucks is found in debtor’s counsel's letter of September 16, 1986. This is not accurate. The debtor testified regarding the threat, see N.T. 6, and I have credited his testimony.
. I recognize that there has been some judicial debate whether bankruptcy courts have the authority to remedy civil contempt.
See Budget Service Co. v. Better Homes of Virginia, Inc.,
. While I need not decide the issue, some courts have expressed concern that the award of punitive damages may transform a civil contempt proceeding into a criminal contempt proceeding or have otherwise questioned the authority of the bankruptcy court to award punitive damages for violation of the automatic stay.
Matter of Depoy,
.I note that my analysis is not the first to interpret section 362(h) in accordance with its intended purpose rather than in a literal fashion.
See Budget Service Co. v. Better Homes of Virginia, Inc.,
. It would have been better practice for counsel to have made express reference to the automatic stay.
. An action under 11 U.S.C. § 362(h) is a core proceeding.
Budge Service Co. v. Better Homes of Virginia, Inc.,