In re Diaz

• Decision Date: 30 September 2009
• Docket Number: No. 6:02–bk–05591–ABB.,6:02–bk–05591–ABB.
• Parties: In re Miguel A. DIAZ, Debtor.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida

452 B.R. 257

In re Miguel A. DIAZ, Debtor.

No. 6:02–bk–05591–ABB.

United States Bankruptcy Court, M.D. Florida,Orlando Division.

Sept. 30, 2009.

Barbra R. Joyner, Law Office of Barbra R. Joyner PA, Orlando, FL, for Debtor.

MEMORANDUM OPINION

ARTHUR B. BRISKMAN, Bankruptcy Judge.

This matter came before the Court on the Debtor's Motion for Sanctions (Doc. No. 172) and the Supplement to Debtor's Motion for Sanctions (Doc. No. 187) filed by Miguel A. Diaz, a/k/a Miguel A. Diaz–Collado, the Debtor herein (“Debtor”), seeking an award of sanctions against the Florida Department of Revenue (“Florida DOR”) and the Commonwealth of Virginia, Department of Social Services (“Virginia DSS”) (collectively, “Respondents”) for violations of the automatic stay of 11 U.S.C. Section 362(a) and the discharge injunction of 11 U.S.C. Section 524(a). Respondents filed a Motion to Strike Supplement (Doc. No. 188) and a Motion for Reconsideration of the Order entered on July 29, 2009 (Doc. No. 195).

The evidentiary hearing on the Motion for Sanctions commenced on January 21, 2009 and concluded on April 1, 2009; the Debtor, his counsel, counsel for Respondents, and Laurie K. Weatherford, the Chapter 13 Trustee (“Trustee”), appeared. An evidentiary hearing on the Supplement was held on June 29, 2009 at which the Debtor, his counsel, counsel for the Trustee, counsel for Florida DOR, and counsel for Virginia DSS appeared. The parties agreed the Motion for Sanctions is ready for determination.

The Motion for Sanctions is due to be granted for the reasons set forth herein. The Court makes the following Findings of Fact and Conclusions of Law after reviewing the pleadings and evidence, hearing live testimony and argument, and being otherwise fully advised in the premises.

FINDINGS OF FACT

Background: Prepetition Events

The Debtor is a pediatrician. He was formerly married to Maribel Diaz–Bieberach, f/k/a Maribel Diaz (“Diaz–Bieberach”), and they resided in the Commonwealth of Virginia. Two children were born of the marriage. The Debtor and Diaz–Bieberach divorced in May 1986 pursuant to a Decree a Vinculo Matrimoni entered by the Circuit Court for the City of Alexandria, Virginia (“Virginia State Court”) in Maribel Diaz v. Miguel A. Diaz, In Chancery No. 16523. The Decree provides the Debtor shall pay to Diaz–Bieberach “spousal support” of $200.00 per month and “child support” of $500.00 per month.

The Decree sets forth support payment arrearages would be automatically withheld from the Debtor's earnings pursuant to Virginia statutory law. The Virginia Division of Child Support Enforcement is the division of the Virginia DSS authorized to enforce child support orders and to collect and disburse child support payments.

The Debtor defaulted on his support payment obligations and the Virginia State Court entered an Order in November 1989 granting judgment of $25,900.00 in favor of Diaz–Bieberach and against the Debtor for “support arrearages.” The Virginia State Court directed the Debtor to pay $200.00 per month towards the arrearages and reaffirmed his ongoing obligation to pay $500.00 per month for child support. The Virginia State Court reduced the spousal support payments to $1.00 per month because Diaz–Bieberach was employed and no longer in need of spousal support. The Order provides: (i) the support payments would be automatically withheld from the Debtor's earnings pursuant to Virginia statutory law; (ii) and “support obligations as they become due and unpaid create a judgment by operation of law.” ¹

The Debtor relocated to Florida and opened a pediatrics practice, Miguel A. Diaz M.D., P.A., in Bartow, Florida. He was issued a Florida driver's license on August 16, 2003 with an expiration date of August 31, 2009. ² He is self-employed through his practice and employs no other physicians. The practice is the Debtor's sole source of income.

The Circuit Court of the Tenth Judicial Circuit in and for Polk County, Florida (“Florida State Court”) entered an Order in March 1996 directing the Domestic Relations Department of the Florida State Court to establish an account for the receipt and disbursement of the support payments ordered by the Virginia State Court.³ The Florida State Court, pursuant to Florida's Uniform Reciprocal Enforcement of Support Act, entered an Income Deduction Order ordering the Debtor to make regular income deductions to the Domestic Relations Department totaling $706.25 per month consisting of $1.00 for spousal support, $500.00 for ongoing child support, $200.00 “to be applied towards the existing arrearage,” plus a Clerk's fee of $5.25.⁴

Florida DOR assigned collection case number 1061639045 to the matter. Child Support Enforcement is the division of Florida DOR authorized to enforce child support orders and to collect and disburse child support payments. The Florida State Court transmitted the March 1996 Order to Virginia DSS. Respondents, having reciprocal enforcement powers pursuant to Florida and Virginia statutory law, are co-enforcers of the Debtor's support obligations. Respondents are state governmental units.

Bankruptcy Case Events

The Debtor filed this bankruptcy case on May 24, 2002 (“Petition Date”). He is represented by Barbara R. Joyner (“Joyner”), who is an experienced bankruptcy attorney. This case is governed by the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure as they were in effect on the Petition Date. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 provisions do not apply.

The Debtor listed the Child Support Distribution Unit of the Florida DOR in Schedule E as having a disputed unsecured priority claim of $40,000.00 for “child support arrearage” (Doc. No. 1). The Matrix included two mailing addresses for Florida DOR, the P.O. Box 8500 address and its Bankruptcy Unit at P.O. Box 6668, Tallahassee, Florida 32314–6668 (“Bankruptcy Unit Address”).

Notice of the Debtor's bankruptcy filing was issued by the Bankruptcy Noticing Center to Florida DOR at both addresses on May 29, 2002 pursuant to the Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines (Doc. No. 2). The Notice advised parties of the existence of the automatic stay setting forth in large bold-face type “CREDITORS MAY NOT TAKE CERTAIN ACTIONS” and stating:

In most instances, the filing of the bankruptcy case automatically stays certain collection and other actions against the debtor and the debtor's property ... If you attempt to collect a debt or take other action in violation of the Bankruptcy Code, you may be penalized. Consult a lawyer to determine your rights in this case.

The Notice was received by Florida DOR.

The Debtor filed an original Chapter 13 Plan on June 10, 2002 (Doc. No. 4) which listed Florida DOR as a priority unsecured creditor for a debt of $40,000.00 and provided for monthly payments to the Florida DOR for sixty months totaling $40,000.00. The Plan was served on Florida DOR by mail on June 10, 2002. The first Plan payment was due on July 14, 2002.

Florida DOR, through its counsel Gordon L. Kiester (“Kiester”), filed three claims in the Debtor's case:

(i) Claim No. 3 for an unsecured priority claim of $6,152.88 for “child support” was filed on August 12, 2002. Claim No. 3 appears to have been filed in error. A Final Judgment of Support unrelated to the Debtor was attached as supporting documentation.

(ii) Claim No. 4 (amending Claim No. 3) for an unsecured priority claim of $67,047.45 for “child support” was filed on August 19, 2002.

(iii) Claim No. 5 (amending Claim No. 4) for an unsecured priority claim of $67,047.45 was filed on September 3, 2002. Claim No. 4 is identical to Claim No. 3 except Claim No. 4 contains the Debtor's correct Social Security Number.

Each proof of claim contains a section for indicating whether the claim includes any additional charges. Respondents did not indicate or delineate any additional charges. Respondents failed to file with Claim No. 4 and Claim No. 5 any supporting documentation as required by the Federal Rules of Bankruptcy Procedure.

Each claim designated Kiester as Florida DOR's counsel. Kiester regularly appears before this Court as counsel for Florida DOR and is experienced in bankruptcy matters. Kiester filed a Notice of Appearance and Request for Service on September 6, 2002 (Doc. No. 18) listing the Bankruptcy Unit Address as Florida DOR's address of record.

The Debtor filed on October 22, 2002 an Objection to Claim No. 5 (Doc. No. 20) (“Claim Objection”) asserting the claim overstated the child support arrearages and the maximum arrearage amount was $47,746.49 pursuant to the Monthly Statement of Account issued by Florida DOR. The Monthly Statement of Account (Doc. No. 20) set forth an “Arrears” “Total Owed” of $47,746.49 as of July 11, 2002. The statement includes the provision “DOR court cost[s] and interest are not included on statement.” The Debtor requested Florida DOR's claim be reduced to $47,746.49.

The first page of the Claim Objection contained a negative notice provision set within a bold box giving Florida DOR thirty days to respond:

NOTICE OF OPPORTUNITY TO OBJECT AND FOR HEARING

Pursuant to Local Rule 2002–4, the Court will consider this motion, objection, or other matter without further notice or hearing unless a party in interest files an objection within thirty (30) days from the date of service of this paper. If you object to the relief requested in this paper you must file your objection with the Clerk of the Court ... and serve a copy on the Debtor's attorney ...

If you file and serve an objection within the time permitted, the Court will schedule a hearing and you will be notified. If you do not file an objection within the time permitted, the Court will consider that you do not oppose the granting of the relief requested in the paper, will proceed to consider the paper without further notice or hearing, and may grant the relief requested.

The Debtor served the Claim...