In re Honeycutt

• Decision Date: 09 April 1996
• Docket Number: Bankruptcy No. 94-10110 S. Adv. No. 94-1046.
• Citation: 198 BR 306
• Parties: In re John HONEYCUTT and Jennie Honeycutt. John HONEYCUTT and Jennie Honeycutt, Plaintiffs, v. Jerry RICKMAN and Lois Rickman, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Arkansas

198 B.R. 306 (1996)

In re John HONEYCUTT and Jennie Honeycutt John HONEYCUTT and Jennie Honeycutt, Plaintiffs, v.Jerry RICKMAN and Lois Rickman, Defendants.

Bankruptcy No. 94-10110 S. Adv. No. 94-1046.

United States Bankruptcy Court, E.D. Arkansas, Batesville Division.

April 9, 1996.

COPYRIGHT MATERIAL OMITTED

Jeffrey Hance, Batesville, AR, for plaintiffs/debtors.

Howard Martin, Cabot, AR, for defendants.

Danny L. Schieffler, Chapter 7Trustee, Helena, AR.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

MARY D. SCOTT, Bankruptcy Judge.

THIS CAUSE is before the Court upon the complaint filed by the debtors for wilful violation of the automatic stay, conversion and interference with a contractual relationship.

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a),1334.Moreover, this Court concludes that these are "core proceedings" within the meaning of 28 U.S.C. § 157(b) as exemplified by 28 U.S.C. § 157(b)(2)(G), (L).

In October 1993, the debtors purchased a recreational boat dock and rights to camping grounds from Jerry and Lois Rickman.Adjacent to the dock itself, on leased property, are spaces for overnight campers and an additional eight lots leased to annual renters.¹The electric power source for the dock and the camp spaces for the annual renters originated from a single power source.The annual renters use this power source and are billed for their percentage of the power.

The land on which the business operation is situated is owned by Ruby and Simon Moye.The Moyes had previously leased the land to the Rickmans for $2,400 per year.Although the Honeycutts are unclear on the matter, it appears from the testimony that the Rickmans and the Honeycutts were to enter into a sublease.²The sublease was not entered into at the time of the purchase transaction, however, because there was a shortage on the payment.Rickman refused to sign the lease at that time.Later, when Rickman presented a sublease to Honeycutt, Honeycutt refused to sign because it did not comport with his understanding of the agreement and because he had learned that the Moyes were unaware of the proposed sublease.It appears that Rickman had not only failed to advise Mrs. Moyes³ of the dock purchase, but represented to her that the Honeycutts were merely relatives who would soon be leaving.

Rickman represented to the Honeycutts that the lessors had no objection to the arrangement.Moreover, Mr. Rickman was apparently not satisfied with his proposed arrangement, and, on February 1994, when the rent was due, without advising the Honeycutts, he made a payment of the full yearly rent, $2,400.

Although Rickman represented that there would be no difficulty with the lease or sublease, he failed, despite repeated requests, to give Honeycutt the Moyes' address and phone number.Finally, Honeycutt was able to obtain Mrs. Moyes telephone number through another person.When the Honeycutts visited Mrs. Moyes, they were rebuffed.As far as she was concerned, she had a lease with Rickman and would not consent to any sublease.Any dispute over the land was between the Rickmans and the Honeycutts.She had no interest in the dispute.

The total price of Dripping Springs Trout Dock, including motors, boats, a mobile home, and boating accessories, was $76,000.The debtors paid $21,000 in cash and signed a promissory note for $57,000.Under the bill of sale, the Rickmans sold "all other miscellaneous equipment used in the operation of a Trout Dock business known as Dripping Springs Trout Dock."A list of all of the property was prepared by Lois Rickman, and a review of the list and all of the items on it was conducted by Lois Rickman and Jenny Honeycutt.Later, the Rickmans removed the following items from the dock:

              Item               Value
                Shopheater located in the
                  shop:                           $200
                Ladder                              60
                Riding lawn mower                  800
                Weedeater                          100
                TV antenna                         100
                TV booster                          50
                3 cedar posts                       15
                Air compressor                     100
                3 50-gallon trash barrels           30
                

These items were taken without the Honeycutt's permission.⁴

After purchasing the boat dock, the Honeycutts moved into the trailer and began operating the dock, together with the bait shop and campgrounds.They removed trash from the area, cut firewood for the temporary campers, and performed all maintenance as needed.Their income from operations was derived from rentals to temporary campers, rental to some six "permanent" campers, boat rentals, and bait sales.

In the spring of 1994, the Honeycutts were severely injured in an automobile accident.While in the hospital, Mr. Honeycutt's parents operated the boat dock.However, Rickman, apparently unsatisfied with the manner in which the new owners were operating the premises, began meddling in the operations.While both Honeycutts were hospitalized, Rickman transferred the electricity to his name, and, for a period of time, locked off power to the boat dock, thereby interfering with its operations.

In May 1994, Rickman, purportedly to reimburse himself for the voluntary $2,400 rent payment he made to the Moyes on the leased land, demanded of the permanent campers that they pay their monthly rent and electricity fees directly to him.The permanent campers, most of them friends of the Rickmans for many years, complied.Inasmuch as Rickman was commandeering the rental payments, the Honeycutts deducted that amount from their monthly payments to the Rickmans on the promissory note.The Rickmans refused to accept the checks in the lesser amounts, thus refusing the payments under the mortgage.Not only did the Rickmans continue to pirate the rentals from the permanent campers, Rickman began to enter the campground on a fairly constant basis.In July and August 1994, he was there almost daily, causing confusion and hard feelings between the renters and the Honeycutts.

The Honeycutts filed a Chapter 13 petition-in-bankruptcy on July 25, 1994.⁵Even after the filing of the Chapter 13 petition, the Rickmans continued to collect from the annual renters.Indeed, although a restraining order was entered by this Court in September 1994, the Rickmans continued to accept funds from the renters.For example, on October 17, 1994, the Rickmans sent a bill to one of the annual renters who remitted a check payable to "Dripping Springs Trout Dock."The Rickmans endorsed the check and retained the funds.

The Honeycutts assert three causes of action against the Rickmans, a violation of the automatic stay under section 362(h), conversion, and intentional interference with a business relationship.In addition, they request attorneys fees and punitive damages with regard to each cause.

I.Removal of Inventory

The evidence does not support a violation of the stay or conversion with regard to the items Rickman removed from the property because the removal of property was not taken in violation of the Honeycutts' property or other rights.The removed items for which damages are sought were either not listed on the inventory of property to be transferred or were deleted from the list by Mrs. Honeycutt and Mrs. Rickman.

II.Collection of Rents and Electricity Payments

Since the spring of 1994, the Rickmans collected monies from the annual renters to compensate themselves for their gratuitous payment of the underlying lease.Despite the filing of the Chapter 13 case on July 24, 1994, the Rickmans continued this pattern of self-help collection.Even after this Court issued an Order, on September 21, 1994, prohibiting them from collecting the rents, the Rickmans not only continued to collect funds, but even billed for them.They collected funds and, incredibly, endorsed a check payable to "Dripping Springs Trout Dock," the business owned by the Honeycutts.

1.Violation of the Automatic Stay

Section 362 of the Bankruptcy Code operates as a stay of:

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;

(h) 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.

11 U.S.C. § 362(a)(1), (3), 362(h).

In order for damages to be imposed, the Rickmans' violation of the stay must be "wilful,"11 U.S.C. § 362(h), i.e., that he deliberately violated the stay, as opposed to taking accidental or inadvertent action.SeeHubbard v. Fleet Mortgage Co.,810 F.2d 778, 781(8th Cir.1997).If deliberate action against the debtor or the estate was taken with knowledge of the stay, the violation of the automatic stay is wilful.In re NWFX, Inc.,81 B.R. 500(Bankr.W.D.Ark.1987).Further, a violation may be wilful even if the actor believes himself justified or if there was no specific intent to violate the stay.In re Garofalo's Finer Foods, Inc.,164 B.R. 955(Bankr.N.D.Ill.1994), aff'd on stay issue and rev'd on other grounds,186 B.R. 414(N.D.Ill.1995).

Rickman does not deny he was aware of the bankruptcy case.Rather, in his testimony, Rickman asserts that he did not "collect" the rents, but was merely "receiving them by mail."Although he was represented by an attorney in this bankruptcy case, he complains that no one explained the stay to him.Inasmuch as both Rickmans deliberately collected the rents after the bankruptcy case was filed, and with knowledge of the bankruptcy case, their...