Botson v. Citizens Banking Co. (In re Botson)
| Decision Date | 01 June 2015 |
| Docket Number | Adv. Pro. No. 14–3056,Case No. 11–36509 |
| Citation | 531 B.R. 719 |
| Parties | In re: Christopher J. Botson and Kymberly A. Botson, Debtors. Kymberly A. Botson, et al., Plaintiffs, v. Citizens Banking Company, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
Donald R. Harris, Sandusky, OH, for Plaintiffs.
John A. Polinko, Wickens, Herzer, Panza, Cook & Batista, Avon, OH, for Defendant.
Plaintiffs Kymberly A. Botson and Christopher J. Botson are the debtors in the underlying Chapter 7 case. On May 2, 2014, Plaintiffs commenced this adversary proceeding, requesting injunctive relief against Defendant Citizens Banking Company (“Defendant” or “CBC”) for alleged violations of 11 U.S.C. § 524 and 11 U.S.C. § 524(a)(2). [Doc. # 1]. Specifically, Plaintiffs allege that Defendant's refusal to remove a 2009 UCC–1 financing statement, and Defendant's filing of a UCC–3 continuation statement, are violations of the discharge injunction. This proceeding is now before the court on Plaintiffs' Motion for Summary Judgment (“Plaintiffs' Motion”) [Doc. # 23], Defendant's Combined Motion for Summary Judgment and Memorandum Contra to Plaintiffs' Motion (“Defendant's Motion”) [Doc. # 24], Plaintiffs' Response in Opposition to Defendant's Motion (“Plaintiffs' Response”) [Doc. # 29], and Defendant's Reply to Plaintiff s Response (“Defendant's Reply”) [Doc. # 33].
Having considered the parties' respective arguments, for the reasons that follow, Plaintiffs' Motion will be denied, and Defendant's Motion will be granted.
Unless otherwise indicated, the following facts are not in dispute. In 2009, Plaintiffs and Defendant entered into a loan and security agreement.2 At the time they received the loan, Plaintiffs were the owners of The Fremont Agency, Inc., an insurance agency with two locations. [Case No. 11–36509, Doc. # 12, p. 4]. On March 20, 2009, as part of the loan transaction, Defendant filed a UCC–1 financing statement with the Ohio Secretary of State. [Doc. # 1–4, Ex. C]. Pursuant to the terms of the financing statement, Defendant was granted a lien in “[a]ll accounts receivable and all business assets, whether now owned or hereafter acquired by debtor, wherever located, together with any replacements thereof and additions and accessions thereto and all products and proceeds of the foregoing.” [Id. ].
On December 8, 2011, Plaintiffs filed for Chapter 7 bankruptcy protection. [Case No. 11–36509, Doc. # 1]. Defendant was not initially notified of Plaintiffs' Chapter 7 filing, as Plaintiffs did not list Defendant as a creditor in their bankruptcy schedules. [Id., Doc. ## 1, 6].
In its Motion, CBC states that it “happened upon the [Plaintiffs'] bankruptcy filing in February of 2012, when Plaintiffs and Defendant were discussing a possible settlement of the outstanding balance owed to Defendant. [Doc. # 24, p. 3]. Upon discovery of Plaintiffs' bankruptcy filing, CBC discontinued all contact with Plaintiffs. These factual allegations were also asserted in the affidavit of Misty A. Baker, CBC's Vice–President, Special Assets Group. [Doc. # 24–1, Exhibit A]. Ms. Baker's affidavit avers that between the time of Plaintiffs' filing on December 8, 2011, and January 31, 2012, CBC was not notified, either informally by Plaintiffs or formally through the court, that Plaintiffs had filed for Chapter 7 protection. [Id., ¶ 4]. On March 2, 2012, Plaintiffs filed an Amended Summary of Schedules and an Amended Schedule F, adding CBC to their schedules as a creditor holding unsecured nonpriority claims. [Case No. 11–36509, Doc. # 18]. This caused the adjournment of the § 341 Meeting of Creditors, which was continued to April 2, 2012. [Id., Doc. # 19].
On August 2, 2012, the Plaintiffs received their order of discharge from the court. [Id., Doc. # 49]. The Debtors' Chapter 7 was an asset case, and court records reflect that Citizens Banking Company received a dividend of $324.32 on its claim for $49,987.10. [Id., Doc. # 59–1].
At an unspecified point in time, between August 2, 2012 and January 1, 2014, Plaintiffs allege that they contacted Defendant and requested that CBC remove the UCC–1 filing, based upon the underlying obligation having been discharged in their bankruptcy. Plaintiffs further allege in their Motion that CBC replied that the UCC–1 would “only be withdrawn after Plaintiff surrendered the full amount demanded by [CBC].” [Doc. # 23, p. 3]. On January 1, 2014, Plaintiffs' attorney sent a letter to CBC, requesting that CBC withdraw the UCC filing, as “11 USC 524 of the bankruptcy code requires that all collection actions on the part of a creditor be discontinued” after debtors receive their discharge. [Doc. 1–6, Ex. E]. CBC did not respond to Plaintiffs' request.
On January 14, 2014, Defendant filed a UCC–3 continuation statement with the Ohio Secretary of State. Several months later, on May 2, 2014, Plaintiffs filed the Complaint now before the court, requesting the court to find that CBC violated the discharge injunction. Plaintiffs seek injunctive relief, in the form of the court ordering that Defendant remove the UCC–1 filing. Plaintiffs also request punitive damages in the amount of $10,000.00, along with legal fees “and any other remedy this Court would find appropriate.” [Doc. # 1].
In its answer to the Complaint, CBC states that it is a secured creditor, and as such, may file pursuant to 11 U.S.C. § 362(b)(3) “a UCC continuation statement to continue perfection of its security in its collateral.” [Doc. # 5, ¶ 2]. CBC also maintains that filing a UCC continuation statement in an effort to maintain its perfection of a security interest in collateral is not a violation of the discharge injunction under 11 U.S.C. § 524(a)(2).
Under Rule 56 of the Federal Rules of Civil Procedure, made applicable to this proceeding by Federal Rule of Bankruptcy Procedure 7056, summary judgment is proper only where there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). In reviewing a motion for summary judgment, however, all inferences “must be viewed in the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
The party moving for summary judgment always bears the initial responsibility of informing the court of the basis for its motion, “and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits if any’ which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the moving party has met its initial burden, the adverse party “may not rest upon the mere allegations or denials of his pleading but ... must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
A genuine issue for trial exists if the evidence is such that a reasonable factfinder could find in favor of the nonmoving party. Id. “The non-moving party, however, must provide more than mere allegations or denials ... without giving any significant probative evidence to support” its position. Berryman v. Rieger, 150 F.3d 561, 566 (6th Cir.1998).
Where the parties have filed cross-motions for summary judgment, the court must consider each motion separately on its merits, since each party, as a movant for summary judgment, bears the burden to establish both the nonexistence of genuine issues of material fact and that party's entitlement to judgment as a matter of law. Lansing Dairy v. Espy, 39 F.3d 1339, 1347 (6th Cir.1994) ; Markowitz v. Campbell (In re Markowitz ), 190 F.3d 455, 463 n. 6 (6th Cir.1999).
The fact that both parties simultaneously argue that there are no genuine factual issues does not in itself establish that a trial is unnecessary, and the fact that one party has failed to sustain its burden under Rule 56 does not automatically entitle the opposing party to summary judgment. See, Parks v. LaFace Records, 329 F.3d 437, 444–445 (6th Cir.2003) ; B.F. Goodrich Co. v. U.S. Filter Corp., 245 F.3d 587, 593 (6th Cir.2001) ; 10A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure: Civil 3d § 2720 (1998).
Plaintiffs move for summary judgment on their claims seeking injunctive relief, punitive damages, and legal fees, arguing that Defendant committed a contemptuous act and violated the discharge injunction set forth in 11 U.S.C. § 524(a)(2), in both refusing to remove the UCC–1 financing statement and in filing a UCC–3 continuation statement in January 2014.
Once an order granting a discharge is entered, § 524(a) of the Bankruptcy Code gives rise to an injunction against “an act, to collect, recover or offset any such debt [discharged under § 727] as a personal liability of the debtor....” 11 U.S.C. § 524(a)(2).
In the Sixth Circuit, there is no statutory private right of action for damages under 11 U.S.C. § 524 or 11 U.S.C. § 105 for violation of the discharge injunction. Pertuso v. Ford Motor Co., 233 F.3d 417, 421–23 (6th Cir.2000). However, violation of the discharge injunction does expose a creditor to potential contempt of court. Id. ; Cox v. Zale Del., Inc., 239 F.3d 910, 916 (7th Cir.2001) ; Lohmeyer v. Alvin's Jewelers (In re Lohmeyer), 365 B.R. 746, 749 (Bankr.N.D.Ohio 2007). “A creditor who undertakes to collect a discharged debt from a debtor violates the discharge injunction and is in contempt of the court that issued the discharge order.” Former v. Overdorf (In re Former), 262 B.R. 350, 358 (Bankr.W.D.Pa...
To continue reading
Request your trial
-
In re Biery
...for a purely informational purpose. The discharge injunction is a protection for discharged debtors. Botson v. Citizens Banking Co. (In re Botson), 531 B.R. 719, 725 (Bankr.N.D.Ohio 2015) ("It is well-established that the purpose of the discharge injunction of § 524 is to promote the fresh ......