In re Jove Engineering, Inc., CV 93-PT-1544-S.

• Decision Date: 13 April 1994
• Docket Number: No. CV 93-PT-1544-S.,CV 93-PT-1544-S.
• Citation: 171 BR 387
• Parties: In re JOVE ENGINEERING, INC., Debtor.
• Court: U.S. District Court — Northern District of Alabama

171 B.R. 387 (1994)

In re JOVE ENGINEERING, INC., Debtor.

No. CV 93-PT-1544-S.

United States District Court, N.D. Alabama, Southern Division.

April 13, 1994.

Romaine S. Scott, III and Valrey W. Early, III, Rives & Peterson, Birmingham, AL, for debtor Jove Engineering.

Cynthia L. Stier, U.S. Dept. of Justice, Washington, DC, for U.S. Government.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

PROPST, District Judge.

This cause came on to be heard on March 30, 1994 at 8:30 a.m. at a final evidentiary hearing.

The parties agreed that the following facts set out in this court's Memorandum Opinion filed on January 18, 1994 are true and correct.

Stipulated Facts

On October 20, 1992, debtor in possession, Jove Engineering, Inc., filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. This filing precipitated an automatic stay as to most all collection or enforcement actions by creditors. See, 11 U.S.C. § 362(a).

When the case was filed, the I.R.S. was listed as a creditor of Jove, although Jove disputes the listed debt. On or about November 6, 1992, the Clerk of the Bankruptcy Court for the Northern District of Alabama sent notices of the pendency of this case to the I.R.S. as well as to other creditors in this action. Jove submits a series of Exhibits (A-I) in support of its motion for contempt and these exhibits provide the factual and chronological bases for its motion.¹

Exhibit A, dated November 12, 1992, refers to correspondence from Judy Hibbard, Special Procedures Staff with the Birmingham office of the I.R.S., to Mr. Walter Brough, President of Jove, informing him of her knowledge of Jove's filing for bankruptcy and stating that the purpose of the letter is to inform Brough of some of the I.R.S.' concerns when a taxpayer files for bankruptcy. (Plaintiff's Exhibit A, at 1). The letter includes the subheadings, "Post-Petition Taxes, Plan of Reorganization, Objections to Internal Revenue Claims, Post-Petition Levy or Seizure by Internal Revenue Service, Notices of Hearings and File Your Plan of Reorganization." The letter includes a notation that a copy will be sent to attorney for Jove, Romaine Scott.²

Exhibit B, dated November 18, 1992, is a letter from Scott to Hibbard thanking her for the information contained in the above letter and requesting that all further correspondence and information be directed to himself instead of to his client.

Exhibit C, dated November 25, 1992, is a letter from Scott to Hibbard thanking her again for the stated information, reiterating his request that all future correspondence be sent to his office and alerting her to the enclosed copy of the "notice of first meeting of creditors." Scott recommends that if the I.R.S. believes it has a valid claim against Jove, it should file a proof of claim.

Exhibit D is a letter from I.R.S. offices in Memphis to Jove, dated December 21, 1992, with the heading "Request for Payment," stating that its records show that Jove owes $92,923.57 in taxes, $18,558.37 in penalties and $951.71 in interest for a total of $112,433.65. The letter states that in order to "avoid additional penalty and/or interest," the payment should be received by December 31, 1992.

Exhibit E, dated January 7, 1993, is a letter from Scott to the office of the I.R.S. in Memphis stating that his firm represents Jove and that Jove filed for Chapter 11 bankruptcy on October 20, 1992. Enclosed with the letter is a notice of the first meeting of creditors and a request that the I.R.S. file its claim with the Clerk of the Bankruptcy Court.

Exhibit F is a letter from Della Sanford, Chief of the Correspondence Section in the Memphis office, responding to Scott's letter stating, "we are sorry, but we cannot give you the information you requested."³ The letter further states that the I.R.S. has no record that Scott is authorized to receive information on behalf of Jove, and that, in order to receive confidential tax information, Scott must provide a power of attorney, a tax information authorization or "other written evidence of . . . his authority." The letter included enclosed "power of attorney" and "tax information authorization" forms.

On March 4, 1993, the I.R.S. filed its proof of claim with the Bankruptcy Court for unpaid federal taxes in the amount of $304,239.08.

Exhibit G, dated March 29, 1993, is a certified letter from the I.R.S. in Memphis to Jove with the heading "Notice of Intent to Levy — Immediate Response Requested." The letter states that Jove owes the I.R.S. $41,307.71 in unpaid taxes, $171.26 in late payment penalty and $266.64 in interest. The letter further warns that if the payment is not received by April 28, 1993, "the law allows us to seize your property or rights to property such as real estate and personal property to collect the amount you still owe." The letter references the tax period ending December 31, 1992.

Exhibit H, is a letter dated April 5 from Scott to the I.R.S. offices in Memphis. The letter reiterates the information contained in the prior letters from Scott regarding the notice for the first meeting of creditors and the fact that Jove has filed for bankruptcy. Scott repeated his request that all further information be sent to his offices and stated that "any further direct communications with Jove . . . will be interpreted as a willful violation of the automatic stay and appropriate action will be taken."

Although not submitted with the exhibits to this court, contained within the case file is a copy of the "power of attorney" form sent by Scott to the I.R.S. offices in Memphis. The form is marked received on April 8, 1993.

Exhibit I, the last item submitted, is another "Notice of Intent to Levy — Immediate Response Required" letter from I.R.S. offices in Memphis addressed to Jove. The notice is dated April 15, 1993. The notice states that Jove owes $3,773.43 in unpaid taxes, $16.16 in unpaid penalties and $24.32 in interest. Again, it references the tax period ending December 31, 1992.

On April 28, 1993, Jove filed a motion with the Bankruptcy Court to hold the I.R.S. in Civil Contempt and Liable for Damages for Willful Violation of Automatic Stay. After both Jove and the I.R.S. filed briefs addressing the contempt motion, Jove submitted a motion with the Bankruptcy Court to withdraw the contempt motion for consideration by this court stating questions as to whether the bankruptcy court had the authority to rule on this type of motion.

Although not formally submitted to this court, Jove also possessed exhibits, dated after the filing of its motion for contempt, that purport to further support its allegations of willful violation of the stay. On May 3, 1993, the I.R.S. office in Memphis sent Jove a letter stating that it had no record that Romaine Scott was authorized to act for Jove and directed Jove to clear up this matter with the personnel in its Birmingham office. On May 17, 1993, Jove received a notice from the I.R.S. stating "balance due on 3rd Q and 4th Q 941 returns for 1992. Plus 1992 940. Failure to keep appointment could result in enforcement action." It appears that on June 1, 1993, Jove received a visit from a member of the I.R.S. staff. An interoffice memo from Paul Nickerson to Walter Brough outlines Nickerson's interaction with a woman from the I.R.S. seeking to speak with senior personnel in Jove. The memo states that the woman asked for an officer of the company or whoever handled taxes and that no one was available to meet with her. Nickerson claims that he asked her if she had made an appointment and he claims that she replied "that she was new on the case, and that she did not set up appointments by phone. She found it better just to drop in and set up an appointment if the person(s) she wanted to see were unavailable." The woman from the I.R.S. refused to discuss the details of her visit with an non-officer of the corporation and left some papers in a sealed envelope with Nickerson to pass along to the president of Jove. These forms included a 433-B, "Collection Information Statement for Businesses" and a sheet outlining one's rights as a taxpayer.

On July 19, 1993, Bankruptcy Judge Clifford Fulford filed an order granting the motion to withdraw the contempt motion to the district court. The majority of Judge Fulford's order discusses the obscurity surrounding the issue of whether bankruptcy judges should exercise civil contempt powers or whether such matters should be heard by district courts. Judge Fulford was, however, quite clear as to his opinion regarding certain issues involved in the finding of contempt under 11 U.S.C. 362(h).⁴

In response to the above stated order, Jove filed a motion requesting clarification as to whether Judge Fulford's order actually constituted a denial of Jove's request for relief under 11 U.S.C. § 362(h). On July 23, 1993, Judge Fulford amended his order of July 19, 1993, stating

The Court, therefore, hereby amends its Order of July 19, 1993, to clarify that the intent of its original Order was to withdraw the reference as to all issues presented in Jove\'s Motion for Contempt, including issues related to the application of 11 U.S.C. § 362(h), and that the Court\'s original Order is not in any way to be considered or construed to be a ruling on the merits of Jove\'s request for relief under 11 U.S.C. § 362(h). . . .

Evidentiary Hearing

The evidentiary hearing shed significant light on the history of the case and gave added context to the above mentioned exhibits. The court will find further facts with regard to the circumstances under which the various exhibits were created and various contacts made.⁵ The exhibit references will be to the exhibits as identified at trial combined with the identification in the above mentioned Memorandum Opinion. Exhibits E and F mentioned in the Memorandum Opinion were not offered at the evidentiary hearing.⁶

Jx-11(A) does not, in any way, violate the automatic stay. It is an informational letter from Judy...