In re Ashby, Bankruptcy No. 83C-01156.
| Decision Date | 25 January 1984 |
| Docket Number | Bankruptcy No. 83C-01156. |
| Citation | 36 BR 976 |
| Parties | In re Richard Mark ASHBY, Debtor. |
| Court | U.S. Bankruptcy Court — District of Utah |
Richard F. Bojanowski and Peter J. Kuhn, Salt Lake City, Utah, for debtor.
Duane H. Gillman, Boulden & Gillman, Salt Lake City, Utah, for standing trustee.
Leon A. Halgren, Asst. Utah Attorney General, Salt Lake City, Utah, for the Office of Recovery Services of the Dept. of Soc. Serv., Utah, for state.
Debtor filed a petition for relief under Chapter 13 on April 23, 1983. His schedules list a debt for child support due to the Office of Recovery Services (ORS) of the Department of Social Services of the State of Utah in the amount of $400.00. ORS received notice of debtor's filing and, on June 8, 1983, filed a proof of claim for a $1,000.00 priority claim. ORS did not explain why it believed it was entitled to a priority claim.
On June 17, 1983, debtor filed a plan proposing to pay unsecured claims such as the claim of ORS thirty cents on the dollar. On November 3, 1983, debtor filed a plan with identical treatment of the ORS obligation. This plan was confirmed on November 18, 1983.
Debtor filed his state income tax return for the 1982 tax year in early 1983. He was entitled to a refund of a $406.00 overpayment. After waiting several months for his return, he contacted ORS to inquire about the refund on June 30, 1983.
On July 14, 1983, debtor came to the ORS office in Salt Lake City and spoke with an ORS investigator. He signed a wage assignment to cover his support debt.
On July 18, 1983, debtor phoned the ORS office and asked for his refund check, which the ORS office subsequently received in August of 1983 from the State Tax Commission under a State program which applies tax refunds to child support obligations. An ORS officer contacted the standing trustee and the ORS' attorney. The ORS officer testified she was told by the standing trustee that if the tax return was filed pre-petition, the money was to go to ORS but that if the tax return was filed post-petition, the money was to go to the bankruptcy court. The ORS attorney, when contacted, told the ORS officer that this information appeared correct to him. Consequently, ORS applied the state tax refund to its debt. The ORS officer testified that it is the policy of her office to make inquiries in cases of bankruptcy before acting on the setoff of tax refunds. In this case, ORS did not seek or obtain relief from the automatic stay before setting off its debt against debtor's tax refund.
On August 12, 1983, debtor filed an application for an order to show cause against ORS. On September 20, 1983, the court issued an order to show cause against ORS requiring it to appear and show cause why it should not be held in contempt, required to pay debtor's attorneys fees and costs, and required to turn over debtor's tax refund. At a hearing held on debtor's motion for an order to show cause against ORS on October 5, 1983, ORS admitted that it violated the automatic stay when it applied debtor's tax refund to its debt. ORS tendered a check for the full amount of the tax refund. Debtor accepted the check. Thus, the issue of turnover is moot. The issues of contempt and attorneys fees and costs remain.
In this case, an order was embodied in the notice of the meeting of creditors mailed to ORS on June 1, 1983. It cautioned creditors that "as a result of the filing of the petition, certain acts and proceedings against the debtor and his property are stayed as provided in 11 U.S.C. § 362(a)." Violations of the automatic stay, and thus of the order, may be addressed under 11 U.S.C. § 105(a) and 28 U.S.C. § 1481. A comprehensive explanation of the contempt powers of this court is found in In re Reed, 11 B.R. 258 (Bkrtcy.D.Utah 1981).
This is a proceeding involving civil not criminal contempt because its purpose is to compensate for injuries suffered by debtor from ORS' disobedience of a court order. The purpose of this proceeding is not to punish ORS by fine or imprisonment of any of its officers. See Reed, supra at 266. The sanctions sought against ORS are "not punitive but remedial, i.e., to compensate debtor for injuries in connection with violation of the stay." Id. at 267. The proceeding was held under the assumption that only civil contempt was at stake. No notice of criminal contempt as required by law was given. ORS did not challenge the jurisdiction of this court to determine the issues. The U.S. Attorney was not present to press criminal charges against ORS. The fact that debtor sought a contempt citation believing he was denied the statutory relief to which he was entitled under 11 U.S.C. § 362(a) indicates the civil nature of the contempt.
ORS argued that it should not be held in contempt because the facts of this case do not demonstrate gross misconduct or bad faith or willful and malicious conduct. ORS relies on In re Hammett, 28 B.R. 1012 (D.C.E.D.Pa.1983).
The disobedience, in civil contempt, need not be willful. Reed, supra at 268. The United States Supreme Court has held that McComb v. Jacksonville Paper Co., 336 U.S. 187, 191, 69 S.Ct. 497, 499, 93 L.Ed. 599 (1949) (). The principle of law announced in McComb applies with equal force to the injunction of the automatic stay imposed by 11 U.S.C. § 362(a). Thus, notwithstanding the alleged good faith of ORS, the court finds that the ORS acted in contempt of its order.
Having found a civil contempt, the court may award compensation to the debtor. Actual loss measures compensatory fines for civil contempt. Reed, supra at 276. Attorneys fees may be a part of compensation. Id. See also Allied Materials Corp. v. Superior Products Co., 620 F.2d 224 at 227 (10 Cir.1980).
ORS argues that compensatory remedies are not appropriate in this case because,...
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In re Warden
...in two of the four cases are issued simultaneously with this opinion. See In re Alan E. and Vickie Burrow, 36 B.R. 960 and In re Richard Mark Ashby, 36 B.R. 976. An opinion in the fourth case was issued on December 12, 1983. See In re David Paul and Penolepe A. Johnson, 36 B.R. ...