In re Almond, Case No. B-06-50324C-7W (Bankr.M.D.N.C. 5/7/2007)
| Decision Date | 07 May 2007 |
| Docket Number | Case No. B-06-50324C-7W.,Adversary Proceeding No: 06-6089W. |
| Court | U.S. Bankruptcy Court — Middle District of North Carolina |
| Parties | IN RE: TIMOTHY MICHAEL ALMOND, and RITA G. ALMOND Chapter 7, Debtors. TIMOTHY MICHAEL ALMOND, and RITA G. ALMOND Plaintiffs, v. FORD MOTOR CREDIT COMPANY, and CAROLINA INVESTIGATIONS AND RECOVERY, INC. Defendants. |
THIS MATTER came before the Court for hearing, upon proper notice, on November 29, 2006 upon Ford Motor Credit Company's Motion to Dismiss Adversary Proceeding and Alternative Motion to Compel Arbitration (the "Motion to Dismiss"). Martha R. Sacrinty appeared on behalf of Ford Motor Credit Company ("Ford"), and Thomas C. Flippin appeared on behalf of the above-referenced debtors (the "Debtors"), who are the plaintiffs in this adversary proceeding.
This adversary proceeding was brought by the Debtors to recover damages and to obtain injunctive relief based upon alleged violations of the Section 524(a) discharge injunction by Ford and by Carolina Investigations and Recovery, Inc. ("Carolina Recovery")(collectively the "Defendants"). The Debtors also seek to recover for breach of contract and for various violations of the "North Carolina Debt Collection Act" codified in Chapter 75 of the North Carolina General Statutes. See N.C. GEN. STAT. ANN. §§ 75-50 — 75-57 (West 2005). Ford's Motion to dismiss this adversary proceeding is brought pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.1
On May 1, 2004, the Debtors executed a contract (the "Contract") to buy a 2001 Lincoln LS (the "Vehicle"). The Contract was eventually assigned to Ford. On March 15, 2006, the Debtors filed their petition for relief under Chapter 7 of the Bankruptcy Code.2 On June 29, 2006, an Order discharging the Debtors was entered. On July 12, 2006, the Debtors' bankruptcy was closed.3 The Debtors complain about certain actions of the Defendants after the Debtors received their discharge. On September 21, 2006, an order was entered that reopened the Debtors' bankruptcy case to allow them to file this adversary proceeding.
The pertinent factual allegations in the Debtors' complaint are as follows:
1. The Debtors were offered but never signed a reaffirmation agreement on any of their vehicles. (Comp. ¶ 15).
2. Ford was a creditor listed on the Debtors' bankruptcy petition. (Comp. ¶ 16).
3. Ford was properly served by the Debtors in their bankruptcy case and received actual notice of the bankruptcy as evidenced by a letter from Ford suggesting that the Debtors execute a reaffirmation agreement. (Comp. ¶ 17).
4. Ford is secured by the Vehicle. (Comp. ¶ 18).
5. After the Debtors' bankruptcy was closed, Ford retained Carolina Recovery to repossess the Vehicle. (Comp. ¶ 19).
6. The Debtors are current on their monthly payments to Ford. (Comp. ¶ 20).
7. Post-petition, the Defendants telephoned the Debtors on numerous occasions, and on at least one occasion an agent of Carolina Recovery stated, "If you don't give us the car we will have you arrested." (Comp. ¶ 21).
8. Post-petition, Carolina Recovery had come onto the Debtors' premises on at least three occasions demanding the Vehicle. (Comp. ¶ 22).
9. The Debtors were told by both Defendants that they were attempting to repossess the Vehicle because the Debtors' filed a bankruptcy petition and chose not to reaffirm the debt secured by the Vehicle, even though the payments were current. (Comp. ¶ 23).
10. The Debtors have been forced to keep the Vehicle locked in their garage since August 7, 2006 out of fear that Carolina Recovery will, in violation of the Contract, take the Vehicle. (Comp. ¶ 24).
11. The Defendants continued to call the Debtors after the Debtors' counsel called Ford on their behalf. (Comp. ¶ 25).
12. The Debtors have been damaged by the actions of the Defendants in that they have been and continue to be forced to expend their time and money toward the resolution of the false accusation by Ford that the Debtors are in default and the implication that the Vehicle will be repossessed. The Debtors have worried about this situation and have been emotionally distressed by the conduct of the Defendants. The Debtors have suffered actual damages. The Debtors allege that they have been harassed by the actions of the Defendants and have feared losing the Vehicle. (Comp. ¶ 26).
For the purpose of considering Ford's Motion to Dismiss, the Court must review these allegations4 to determine if they state a claim for relief that may be granted.
The Court has jurisdiction over the subject matter of this proceeding pursuant to 28 U.S.C. §§ 1334 & 157(b)(2)(A) & (O), and the General Order of Reference entered by the United States District Court for the Middle District of North Carolina on August 15, 1984. This is a core proceeding within the meaning of 28 U.S.C. § 157(b), which this Court may hear and determine.
In reviewing a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a court must accept as true all of the factual allegations in the complaint as well as the reasonable inferences that can be drawn from them. Franklin v. Gwinnett County Public Schools, 911 F.2d 617, 619 (11th Cir. 1990) rev'd on other grounds by Franklin v. Gwinnett County Public Schools, 503 U.S. 60 (1992)(facts of the complaint must be accepted as true and the allegations are to be favorably construed to the pleader). A court may dismiss the complaint "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); see In re Servico, 144 B.R. 557 (Bankr. S.D. Fla. 1992)(no complaint should be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief). "As a practical matter, a dismissal under Rule 12(b)(6) is likely to be granted by the district court only in the relatively unusual case in which the plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to securing relief." 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1357 (3d ed. 2004); Bramlet v. Wilson, 495 F.2d 714, 716 (8th Cir. 1974); First Financial Sav. Bank, Inc. v. American Bankers Ins. Co. of Florida, Inc., 699 F. Supp. 1158, 1161 (E.D.N.C. 1988). The plaintiff's allegations are to be construed "liberally, because the rules require only general or `notice' pleading, rather than detailed fact pleading." 2 James Wm. Moore et al., Moore's Federal Practice ¶12.34[1][b] (3d ed. 2006).
Ford argues that the Debtors' first claim for relief should be dismissed because the Debtors failed to allege sufficient facts to find that Ford is in contempt for violating the Discharge Order. Ford argues that there is no private right of action for a violation of the discharge injunction. Rather, a contempt action is the only remedy for such action. The Court agrees.
In In re Barbour, 77 B.R. 530 (Bankr. E.D.N.C. 1987), Judge Small wrote:
Courts are divided on the bankruptcy court's authority to find a person in contempt for violation of the bankruptcy court's orders. . . . Notwithstanding the lack of specific statutory authority in § 524, the bankruptcy court has the authority as a unit of the district court (28 U.S.C. § 151) to which all bankruptcy cases have been referred (28 U.S.C. § 157(a); General Order of Reference dated August 3, 1984) to `issue any order, process, or judgment that is necessary or appropriate to carry out the provisions' of the Bankruptcy Code. 11 U.S.C. § 105(a). This necessarily includes orders imposing sanctions for violating the discharge injunction. . . . The court is of the opinion that it has the authority to impose sanctions for the violation of the discharge injunction.
Id. at 532 (internal citations omitted). Barbour holds that a bankruptcy court has the authority to find persons in contempt of the bankruptcy court's orders, but it does not go so far as to hold that there is a private right of action for a violation of the discharge injunction.
The issue was considered in Thomas v. Resolution Trust Corp. (In re Thomas), 184 B.R. 237 (Bankr. M.D.N.C. 1995). In Thomas, Judge Stocks noted that "[b]ankruptcy courts have frequently sanctioned creditors for willfully violating the discharge injunction." Id. at 240. The Thomas court noted that, although in some cases "the court has simply found that the debtor is entitled to compensation[,] . . . [t]he more common approach . . . has been to find the party in contempt based on the bankruptcy court's authority under 11 U.S.C. § 105." Id. at 240-41 (internal citations omitted). Applying the more common approach, Judge Stocks concluded that "[i]n order to be found in civil contempt, the offending party must have knowingly and willfully violated a definite and specific court order." Id. (citing In re Ryan, 100 B.R. 411, 417 (Bankr. N.D. Ill. 1989)).
The issue was again considered in In re Bruce, No. 00-50556 C-7, 2000 WL 33673773 (Bankr. M.D.N.C. Nov. 7, 2000). In Bruce, Judge Carruthers stated that "[a]lthough section 524 does not explicitly authorize monetary damages for violation of a discharge injunction, the court may award actual damages pursuant to the statutory contempt powers set forth in 11 U.S.C. § 105." Id. (citing In re Hardy, 97 F.3d 1384 (11th Cir. 1996); In re Thomas, 184 B.R. 237). Several other courts in the Fourth Circuit have addressed the issue and held that a contempt action is proper. See In re Bock, 297 B.R. 22, 29 (Bankr. W.D.N.C. 2002)(citing In re Cherry, 247 B.R. 176 (Bankr. E.D. Va. 2000))("[D]...
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