In re Flack
| Decision Date | 02 September 1999 |
| Docket Number | Bankruptcy No. 99-52376. |
| Parties | In re Jamie Jo FLACK, Debtor. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio |
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Stephen E. Schafer, Columbus, OH, for debtor.
Robert J. Morje, Columbus, OH, for creditor.
Amy L. Bostic, Columbus, OH, Chapter 7 Trustee.
Alexander G. Barkan, Columbus, OH, Assistant U.S. Trustee.
This Memorandum Opinion and Order constitutes the findings of fact and conclusions of law on the Motion to Impose Sanctions Under 11 U.S.C. § 362(h) filed by the Debtor, Jamie Jo Flack ("Debtor"), and the Memorandum Contra filed by National Check Cashers ("Creditor"). The dispute between the parties involves the post-petition dishonor of a check drawn on the Debtor's account and post-petition collection efforts for which the Debtor seeks sanctions. Based upon a review of the pleadings, testimony, documents received into evidence, and statements of counsel, the Court has concluded that only a limited portion of the Creditor's actions constitute a willful stay violation. To understand the bases for the Court's decision, a summary of the history of the relationship between the Debtor and Creditor is necessary.
The Debtor is employed at The Ohio State University, earning approximately Twenty-One Thousand Dollars ($21,000.00) per year. The Creditor is engaged in the business of providing payroll advance loans, with nine locations in the Columbus, Ohio, area. Typically, these transactions involve a loan based upon the receipt of a post-dated check for the amount of the loan, a loan origination fee, and interest. The Debtor testified that she had obtained commencing in December 1998, numerous biweekly payroll advance loans from the Creditor in the amount of Three Hundred Dollars ($300.00) each. She testified these transactions included finance charges in the amount of Forty-Five Dollars ($45.00) each, and estimated she paid on the payroll advance loans with the Creditor a total of Two Thousand Dollars ($2,000.00). On cross examination, the Debtor testified she was obtaining similar payroll advance loans from other entities, such as National Cash Advance and CheckSmart and the Creditor's other locations, that she was utilizing the proceeds of all of these loans to fund the loan payments, and without these loans her checks would bounce.
The payroll advance loan at issue in this case was made on March 5, 1999, at the Creditor's 4154 West Broad Street location. In exchange for a loan in the amount of Three Hundred Dollars ($300.00), the Debtor agreed to pay finance charges in the amount of Forty-Five Dollars ($45.00), and she issued the Fifth Third National Bank check number 436 in the amount of Three Hundred Forty-Five Dollars ($345.00), post-dated to March 19, 1999.
On or about March 8, 1999, the Debtor made her first visit to consult bankruptcy counsel, Stephen E. Schafer ("Mr. Schafer"). The purpose of this meeting was to explore the Debtor's financial options, including the filing of a bankruptcy; however, at that time the Debtor did not decide to file. A second meeting was held between the Debtor and Mr. Schafer on March 12, 1999, at which time she decided to file bankruptcy. The Debtor testified that during the course of the meeting she overheard speaker phone conversations Mr. Schafer had with personnel of the Creditor, National Cash Advance and CheckSmart. The gist of the conversations overheard, according to the Debtor, was that Mr. Schafer was in the process of preparing a bankruptcy petition, and that he had instructed her to close her checking account. On this basis, post-dated checks should not be cashed, and he would send follow-up information, i.e., the bankruptcy petition. The Debtor did not testify as to the names of the parties receiving these calls.
The Court was presented with a letter dated March 12, 1999 ("the letter"), signed by Mr. Schafer and addressed to the Creditor at its 4154 West Broad Street address and directed to the attention of "Steve Davis, Collections." Mrs. Shirley Schafer ("Mrs. Schafer"), the secretary to and wife of Mr. Schafer, testified that the letter was mailed on March 12, 1999, from the Columbus, Ohio, main post office to ensure it was received the next day. Similar letters were addressed to National Cash Advance and CheckSmart. In the letter, Mr. Schafer stated:
This is to confirm our telephone conversation earlier today during which I advised you that I have been retained by the above-referenced Jamie Jo Flack to file a chapter 7 bankruptcy for her. As I explained to you, I have instructed Ms. Flack to close her checking account which will result in the dishonoring of the negotiable instrument you hold, a post-dated check, for payment of the most recent payroll advance loan you gave her. I requested you not attempt to negotiate the post-dated check for the reason that you are now on notice she will be filing bankruptcy. Any questions regarding this matter should be directed to my office. (emphasis supplied)
The Creditor's collection manager to whom the letter was addressed, Cary Carnes ("Mr. Carnes"),1 testified that he does not recall talking to Mr. Schafer on March 12, 1999, or any other time, and that the letter was not received until on or about April 9, 1999. The record indicates that the Creditor has arranged for mail addressed to 4154 West Broad Street and its other locations to be forwarded to a post office box, as a tool to centralize the receipt of mail. At the hearing, the Court was presented with the Creditor's copy of the letter and its accompanying plain envelope, according to the Creditor. The envelope bears an incorrect, transposed address, shows that it was corrected manually by some unknown party, and bears forwarding information to the Creditor's post office box, dated April 8, 1999. Mrs. Schafer testified the letter was mailed in a window envelope rather than a plain envelope; however, she testified the plain envelope introduced into evidence by the Creditor was from Mr. Schafer's office and was typed there. Mrs. Schafer testified that a plain envelope would not be used for such a letter, but she could only surmise that the plain envelope may have contained an unidentified amendment.
There is a significant variance in testimony on the existence of a March 12, 1999, phone conversation between Messrs. Carnes and Schafer and/or the date of the mailing and receipt of the letter. At the trial, Mr. Schafer did not introduce any internal or external contemporaneous record of a March 12, 1999, phone conversation, and did not introduce any internal contemporaneous log of documents mailed or a postal receipt verifying the date of mailing. The Court finds, however, based upon its opportunity to observe the demeanor of witnesses and assess their relative veracity and accuracy of recollection, that the testimony offered on behalf of the Debtor is more credible regarding the phone conversation. On the other hand, the Court finds more credible the testimony on behalf of the Creditor regarding the mailing and receipt of the letter. In sum, the Court finds that the March 12, 1999, conversation did take place as offered by the Debtor; however, the Court finds that delivery of the letter was delayed, in part due to the apparent transposition of the address on the envelope prepared in Mr. Schafer's office, and that the Creditor did not receive the letter until on or about April 9, 1999.
Mrs. Schafer testified that on March 17, 1999, she received a telephone call from a representative of CheckSmart regarding the similar letter mailed to them. The gist of the conversation was that in the absence of notification of an actual bankruptcy filing, their post-dated check would be presented for payment. This was brought to the attention of Mr. Schafer, who issued instructions to contact the Debtor for an immediate appointment to prepare a bankruptcy petition. According to Mrs. Schafer, when the Debtor was contacted she was unable to come to the office on March 17, 1999, but an appointment was scheduled for the morning of the next day.
On March 18, 1999, at 10:39 a.m., a chapter 7 bankruptcy petition was filed by Mr. Schafer on behalf of the Debtor, and according to Mrs. Schafer, a copy of the petition was immediately faxed to a CheckSmart representative. A copy was not faxed to the Creditor. The Creditor, however, was scheduled on Schedule F— Creditors Holding Unsecured Nonpriority Claims utilizing the address on 4154 West Broad Street and directed to the attention of "Steve Davis." On March 27, 1999, the official notice of the bankruptcy was issued to all parties, including the Creditor, and the 4154 West Broad Street address was utilized. Mr. Carnes testified that the notice of filing was not received until on or about April 7, 1999. The Court received into evidence the Creditor's copy of the notice of filing and its envelope which bears the 4154 West Broad Street address and forwarding information to the post office box dated March 31, 1999. The Court finds, based upon its opportunity to observe the demeanor of witnesses and assess their relative veracity and accuracy of recollections, that the Creditor did not receive official notice of the bankruptcy filing until on or about April 7, 1999.
The Court notes that the receipt of the letter and the official notice of bankruptcy filing were also delayed by the forwarding process to the Creditor's post office box. Such delay, albeit unintentional, would have been eliminated had the Creditor informed its customers to forward correspondence directly to the post office box. On the other hand, this stay violation litigation may have been obviated by faxing a courtesy copy of the petition to all of the payroll advance creditors holding post-dated checks. This combination of error and lack of attention to detail by the Debtor, Mr. Schafer, and the Creditor led to the March...
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