Carver v. Carver
| Citation | 22 B.C.D. 1147,954 F.2d 1573 |
| Decision Date | 06 March 1992 |
| Docket Number | No. 91-8481,91-8481 |
| Parties | , 26 Collier Bankr.Cas.2d 865, 22 Bankr.Ct.Dec. 1147, Bankr. L. Rep. P 74,492 Edward CARVER, Plaintiff-Appellee, v. Paulette CARVER, Gasper L. Toole, III, Frampton W. Toole, III, and Richard L. Pearce, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (11th Circuit) |
A. Rowland Dye, John B. Long, Augusta, Ga., for defendants-appellants.
Terrene P. Leiden, L.E. Maioriello, Augusta, Ga., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Georgia.
Before FAY and HATCHETT, Circuit Judges, and GIBSON *, Senior Circuit Judge.
Defendants-appellants Paulette Carver, Gasper Toole, Frampton Toole, and Richard Pearce were fined by the Bankruptcy Court for the Southern District of Georgia for wilfully violating the automatic stay provisions of 11 U.S.C. § 362(a). The district court affirmed. For the reasons which follow, we REVERSE.
Edward and Paulette Carver were previously husband and wife. They were granted a divorce in October 1988 by the Family Court of Aiken County, South Carolina. The court ordered that Edward Carver pay $325 per month in child support and awarded Paulette Carver use and possession of the marital home, although Edward Carver was ordered to pay the mortgage, taxes, and insurance on the home until their youngest child reaches the age of eighteen, at which time the property is to be sold and the net proceeds divided between Edward and Paulette Carver.
In February 1989, Mr. Carver filed for Chapter 13 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Georgia. Mr. Carver did not list his ex-wife, Paulette Carver, as a creditor of his bankruptcy estate, nor was she listed on the list of creditors who would normally receive notices from the Bankruptcy Court. As a result, neither Paulette Carver nor her attorney, appellant Richard Pearce, were notified of Mr. Carver's bankruptcy petition.
On March 10, 1989, Paulette Carver, through her attorney, Richard Pearce, filed a contempt action against Mr. Carver in the Family Court because the mortgage on the marital home was approximately $6600 in arrears, and the mortgage company had instituted foreclosure proceedings. 1 Mr. Pearce learned of Mr. Carver's bankruptcy petition on March 13, 1989, when he received a copy of the first page of the petition from the Court of Common Pleas of South Carolina, in which the foreclosure action had been filed. Mr. Pearce then attempted to obtain a copy of Mr. Carver's bankruptcy petition from Mr. Carver's attorney. After repeated attempts, Mr. Pearce was unable to obtain the remainder of the petition or the Chapter 13 plan.
On March 23, 1989, the contempt matter was heard by Judge Peter Nuessle of the Family Court of the Second Judicial Circuit of South Carolina. Mr. Carver appeared at that hearing, but was not represented by counsel. 2 At the hearing, Mr. Pearce informed the court of Mr. Carver's bankruptcy petition, but argued:
[I]n the normal scheme of things bankruptcy does stay proceedings. However, in bankruptcy that does not apply to matters involving Family Court and child support payments....
....
It is readily apparent to me that Mr. Carver only pays this mortgage payment or brings it current when we file some sort of action to come before this Court to have the original decree enforced. He has given numerous excuses to his lawyer and to me of what he is going to do. What he hasn't done is comply with this Court Order.
Transcript of March 23, 1989 hearing, Family Court of the Second Judicial Circuit of South Carolina, R.Pleadings Exh. at 213-14. 3
The court then asked Mr. Carver why he had not made the payments. Mr. Carver testified that he had been trying to borrow the money, and that he wanted to bring the mortgage current. He further testified that he held the same job he had at the time of the final divorce decree, and was making the same salary.
After the hearing, the court held Mr. Carver in contempt, sentenced him to six months in jail, and issued a bench warrant for his immediate arrest. The court ruled that this sentence would be suspended if Mr. Carver paid all arrearages and charges due the mortgage holder. Further, the court awarded Paulette Carver attorneys' fees, finding that it was necessary for her to bring the contempt action. After Mr. Carver served seven and one-half days in jail, his new wife, Wilhemina Carver, paid the amount due ($8,792.48) with money borrowed from her father. Mr. Carver was then released.
Following his release from jail, Mr. Carver brought an action in the Bankruptcy Court for the Southern District of Georgia against his ex-wife, Paulette Carver, her attorney, Richard Pearce, and Mr. Pearce's law partners for damages occassioned by the willful violation of the automatic stay provisions of 11 U.S.C. § 362. After a hearing, the bankruptcy court found that appellants had willfully violated the stay and awarded Mr. Carver $18,295.78 in damages. 4 The district court affirmed the decision but allowed appellants credit for amounts spent to cure the mortgage arrearage and deducted the amount of Mr. Carver's earnings loss from his general damages. This appeal followed.
On appeal, appellants argue that the contempt action in state court was not stayed because it involved collection of delinquent support payments, and that as the arrearages were paid from money borrowed from Mr. Carver's new father-in-law, no violation of the automatic stay occurred. Although we disagree that the state court proceedings at issue in this case were excepted from the automatic stay provisions of 11 U.S.C. § 362(a), we nevertheless reverse the judgment of the district court because we hold that the bankruptcy court should have abstained from entertaining Mr. Carver's request for relief. 5
The automatic stay provisions of the Bankruptcy Code are quite broad. 11 U.S.C. § 362(a) provides in pertinent part:
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title ... operates as a stay, applicable to all entities, of--
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title....
Under this provision, all proceedings against the debtor or the debtor's property are stayed during the pendency of the bankruptcy proceedings. Unless the action comes under an exception in 11 U.S.C. § 362(b) or a party seeks relief from the stay under 11 U.S.C. § 362(d), the stay remains in effect until the case is disposed of by the court. 11 U.S.C. § 362(c). This stay relieves the debtor from financial pressure during the pendency of bankruptcy proceedings. See H.R.Rep. No. 595, 95th Cong., 2d Sess. 340 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6296-97 (hereinafter H.R.Rep.). However, the stay also protects creditors by preventing the premature disbursement of the bankruptcy debtor's estate. Id., 1978 U.S.C.C.A.N. at 6297; see also Hunt v. Bankers' Trust Co., 799 F.2d 1060, 1069 (5th Cir.1986) ().
Subsection (b) of section 362, however, provides several exceptions from the automatic stay. 11 U.S.C. § 362(b). Citing section 362(b)(2), appellants argue that the automatic stay does not apply to actions involving alimony or child support. We disagree. Section 362(b)(2) provides an exception from the automatic stay for "the collection of alimony, maintenance, or support from property that is not property of the estate." Although appellants are correct that this provision addresses alimony and child support, it clearly does not provide an exception from the automatic stay for all actions involving alimony, maintenance, or support. For example, the Ninth Circuit has interpreted the language of this exception as applying only to actions for collection of alimony, maintenance, or support, not actions for modification of child support. In re Stringer, 847 F.2d 549, 552 (9th Cir.1988).
More importantly, this provision expressly limits its coverage to actions seeking "property that is not property of the estate." Under 28 U.S.C. § 1334(d), the federal district court 6 has exclusive jurisdiction over all the debtor's property as of the date of filing in bankruptcy and over all property of the estate. "Property of the estate" generally includes all the debtor's property as of the commencement of the bankruptcy case. See 11 U.S.C. § 541. However, when a debtor files under Chapter 13 of the Bankruptcy Code, the estate also includes property and earnings of the debtor acquired after filing for bankruptcy but before the disposition of the case. 11 U.S.C. § 1306(a).
The exception in 11 U.S.C. § 362(b)(2) strikes a balance between the goals of protecting the bankruptcy estate from premature disbursement and protecting the spouse and children of the debtor.
The automatic stay is one means of protecting the debtor's discharge. Alimony, maintenance and support obligations are excepted from discharge. Staying collection of them, 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 that goal. Moreover, it could lead to hardship on the part of the protected spouse or children.
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