In re Galmore

• Decision Date: 25 July 2008
• Docket Number: Adversary No. 07-2114.,Bankruptcy No. 07-22058 JPK.
• Citation: 390 B.R. 901
• Parties: In re Lacaya Lynn GALMORE, Debtor. Lacaya Lynn Galmore, Plaintiff, v. Edward Dykstra, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Indiana

390 B.R. 901

In re Lacaya Lynn GALMORE, Debtor Lacaya Lynn Galmore, Plaintiff, v. Edward Dykstra, Defendant.

Bankruptcy No. 07-22058 JPK.

Adversary No. 07-2114.

United States Bankruptcy Court, N.D. Indiana, Hammond Division.

July 25, 2008.

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COPYRIGHT MATERIAL OMITTED

David Dabertin, Hammond, IN, for Plaintiff Lacaya Lynn Galmore.

Edward C. Lawhead, Highland, IN, for Defendant Edward Dykstra.

MEMORANDUM OF OPINION AND ORDER

J. PHILIP KLINGEBERGER, Bankruptcy Judge.

On August 3, 2007, Lacaya Lynn Galmore ("Galmore") filed a petition for relief under Chapter 7 of the United States Bankruptcy Code. The first meeting of creditors was held on September 11, 2007. On November 19, 2007, the court entered an order granting the debtor a discharge under 11 U.S.C. § 727.

Prior to the discharge being entered, on October 18, 2007, Galmore filed an adversary proceeding against Edward Dykstra ("Dykstra") alleging that Dykstra violated the automatic stay when he appeared at the Debtor's § 341 meeting on September 11, 2007 and demanded that Galmore be arrested pursuant to a bench warrant previously issued by the Lake Superior Court under cause number 45D09-0611-SC3605.¹ The complaint further alleges that as a result of Dykstra's insistence, Galmore was taken into custody by the United States Marshals Service on that date. Galmore requests that as a result of this conduct, she be awarded damages, costs of this action and an order specifically enjoining the Defendant from any further action in violation of 11 U.S.C. § 362.

On November 15, 2007, Dykstra filed an Answer denying the allegation that the stay was violated and denying that he demanded that Galmore be taken into custody pursuant to the bench warrant previously issued by the Lake Superior Court. The answer also states that Dykstra had no authority to insist that Galmore be taken into custody and that the, "United States Marshalls (sic.) Service took it upon themselves to follow through and execute the valid bench warrant for the debtor/plaintiff's arrest, which the defendant had in his possession as he was being cleared for admittance at the security station posted at the main entrance at the Hammond Federal Building/Courthouse, located at 5400 Federal Plaza, Hammond, Indiana 46320." See Defendant's Answer, ¶ 5. As an affirmative defense, Dykstra claims that the complaint fails to state a cause of action upon which relief can be granted due to the fact that Galmore suffered no measurable amount of harm and/or monetary damages due to her detainment at the hands of the Marshals Service.

The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(a) and (b), 28 U.S.C. § 157(a) and (b) and N.D.Ind.L.R. 200.1(e). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(O) in which the court can enter a final judgement thereon, and venue before this Court is proper pursuant to 28 U.S.C. § 1409(a).

A bench trial was held on March 27, 2008, and the matter is now before the Court for final disposition. The record before the Court is comprised of Galmore's complaint, Dykstra's answer to that complaint, the trial transcript and the following exhibits entered into evidence at trial:

A recording of the § 341 meeting held on September 11, 2007 (Plaintiff's Exhibit "A");

Final Judgment Order of Possession — marked as Defendant's Exhibit "1";

Order [for Default Judgment] — marked as Defendant's Exhibit "2";

Verified Motion to Enforce Judgment by Proceedings Supplemental to Execution — marked as Defendant's Exhibit "3";

Plaintiff's Verified Motion [as to Garnishee Defendant] — marked as Defendant's Exhibit "4";

Petition for Rule to Show Cause — marked as Defendant's Exhibit "5";

Citation for Civil Contempt — marked as Defendant's Exhibit "6";

Order [Issuing Bench Warrant] — marked as Defendant's Exhibit "7";

Order [Recalling Bench Warrant] — marked as Defendant's Exhibit "8".²

LEGAL ANALYSIS

When a bankruptcy petition is filed, the automatic stay provisions of 11 U.S.C. § 362(a) take effect and pre-petition creditors are prohibited from taking certain actions to collect their debts. See, 11 U.S.C. § 362; In re Vitreous Steel Products Co., 911 F.2d 1223, 1231 (7th Cir.1990). The automatic stay is self-executing, effective upon filing of the bankruptcy petition. In re Gruntz, 202 F.3d 1074, 1081 (9th Cir.2000). The automatic stay is a powerful tool of the bankruptcy courts that prohibits, among other things, "the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other proceeding against the debtor that was or could have been commenced before the commencement of the case under this title" [11 U.S.C. § 362(a)(1)]; "the enforcement, against the debtor ... of a judgment obtained before the commencement of the case under this title" [11 U.S.C. § 362(a)(2) ]; and "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case" [11 U.S.C. § 362(a)(6)]. See, In re Lyckberg, 310 B.R. 881, 890 (Bankr. N.D.Ill.2004). The stay is imposed automatically in part to give the bankruptcy court an opportunity to assess the debtor's situation and to embark on an orderly course resolving the estate. United States v. Michalek, 54 F.3d 325, 333 (7th Cir. 1995). As stated in, In the Matter of Holtkamp and Holtkamp Farms, Inc., 669 F.2d 505, 508 (7th Cir.1982):

The purpose [of the automatic stay] is to preserve what remains of the debtor's insolvent estate and to provide a systematic equitable liquidation procedure for all creditors, secured as well as unsecured, H.R.Rep. No. 595, 95th Cong., 1st Sess. 340 (1977), reprinted in (1978) U.S.Code Cong. & Ad. News 6296-97, thereby preventing a "chaotic and uncontrolled scramble for the debtor's assets in a variety of uncoordinated proceedings in different courts." In re Frigitemp Corp., 8 B.R. 284, 289 (S.D.N.Y.1981) citing Fidelity Mortgage Investors v. Camelia Builders, Inc., 550 F.2d 47, 55 (2d Cir.1976), cert. denied, 429 U.S. 1093, 97 S.Ct. 1107, 51 L.Ed.2d 540 (1977).

Galmore's debt to Dykstra was determined in a default judgment entered by the Lake Superior Court, on February 21, 2007, in the amount of $6,000.³ After the entry of the judgment Dykstra commenced collection proceedings. On March 6, 2007, Dykstra filed a Verified Motion to Enforce Judgment by Proceedings Supplemental to Execution, requesting that Galmore be ordered to appear in court and answer as to any non-exempt property subject to execution which might be applied to the $6,000 judgment.⁴ As a result of this motion, the Lake Superior Court ordered Galmore to appear on June 13, 2007, which she failed to do. On June 15, 2007, the Lake Superior Court entered an order directing the clerk to issue a citation for Galmore to appear before that court to show cause why she should not be held in contempt.⁵ However, Galmore failed to appear for this hearing and the Lake Superior Court, on July 12, 2007, issued a bench warrant and set a cash bond in the amount of $6,075.⁶

Prior to Galmore's filing of her petition for relief, Dykstra was actively attempting to collect a debt: this is perfectly fine, up until the point a bankruptcy petition is filed and the automatic Stay goes into effect. The debtor has the burden of providing the creditor with actual notice of the bankruptcy and, upon so providing, the burden shifts to the creditor to prevent violations of the automatic stay. Fleet Mortg. Group, Inc. v. Kaneb, 196 F.3d 265, 269 (1st Cir.1999). If a creditor is uncertain about the applicability of the automatic stay, the creditor may petition the court for clarification; otherwise, the creditor risks exposure under 11 U.S.C. § 362(k)(1) when he undertakes his own determination of the manner in which § 362(a) affects his actions. Matter of Batla, 12 B.R. 397, 400 (Bankr.N.D.Ga. 1981); In re Clark, 49 B.R. 704, 707 (Bankr.Guam 1985); In re Kearns, 161 B.R. 701, 705 (D.Kan.1993), opinion modified on reconsideration, 168 B.R. 423; In re Gray, 97 B.R. 930, 936 (Bankr.N.D.Ill. 1989). Sanctions should not be imposed where there has been a technical violation of the stay. In re Welch, 296 B.R. 170, 172 (Bankr.C.D.Ill.2003); In re Zunich, 88 B.R. 721 (Bankr.W.D.Pa.1988). However, 11 U.S.C. § 362(k) provides monetary relief for willful violations of the automatic stay as follows:

(k) (1) Except as provided in paragraph (2), an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages.

(2) If such violation is based on an action taken by an entity in the good faith belief that subsection (h) applies to the debtor, the recovery under paragraph (1) of this subsection against such entity shall be limited to actual damages. (Emphasis added)

In this case, for Galmore to successfully recover damages under § 362(k)(1), she has the burden of establishing the following elements by a preponderance of the evidence: (1) that a bankruptcy petition was filed; (2) that she is an "individual" under the automatic stay provision; (3) that the creditor had notice of the petition; (4) that the creditor's actions were in willful violation of the stay; and, (5) that she is entitled to a form of relief provided by § 362(k); Radcliffe v. International Painters and Allied Trades Industry Pension Fund, 372 B.R. 401, 419-20 (Bankr.N.D.Ind.2007); In re Gossett, 369 B.R. 361, 375 (Bankr.N.D.Ill.2007); In re Pincombe, 256 B.R. 774, 782 (Bankr. N.D.Ill.2000) (analyzing § 362(h), the pre-BAPCPA analog to the current § 362(k)(1)); see also In re Sumpter, 171 B.R. 835, 843-45 (Bankr.N.D.Ill.1994). The critical question is whether the violation was willful. Willfulness under § 362(k) requires knowledge that a bankruptcy petition has been filed, whether through formal notice or otherwise. In re Lyckberg, 310 B.R. 881, 891...