In re Kolberg

• Decision Date: 02 July 1996
• Docket Number: Bankruptcy No. HL-94-85676. Adversary No. 94-8465.
• Citation: 199 BR 929
• Parties: In re James G. KOLBERG and Lisa Kolberg, Debtors. James G. KOLBERG and Lisa Kolberg, Appellants, v. AGRICREDIT ACCEPTANCE CORPORATION, Appellee.
• Court: U.S. District Court — Western District of Michigan

199 B.R. 929 (1996)

In re James G. KOLBERG and Lisa Kolberg, DebtorsJames G. KOLBERG and Lisa Kolberg, Appellants, v.AGRICREDIT ACCEPTANCE CORPORATION, Appellee.

Bankruptcy No. HL-94-85676. Adversary No. 94-8465.

United States District Court, W.D. Michigan, Southern Division.

July 2, 1996.

Richardo I. Kilpatrick, Shermeta, Chimko & Kilpatrick, Rochester Hills, MI, for appellants.

Richard C. Walsh, Walsh & Walsh, P.C., Kalamazoo, MI, for appellee.

OPINION

QUIST, District Judge.

This is an appeal from the United States Bankruptcy Court.The appellant/debtors, James and Lisa Kolberg, challenge the Bankruptcy Court's Opinion of August 24, 1995, and Order dated October 10, 1995, on two grounds.First, the Kolbergs contest the Bankruptcy Court's ruling that appelleeAgricredit Acceptance Corporation(hereinafter "Agricredit") did not breach its legal duty to use good faith and reasonable care when storing seized goods following Agricredit's execution of a lien on the Kolberg's soybean crops.The Kolbergs also challenge the Bankruptcy Court's holding that Agricredit committed only a technical violation of the automatic stay provisions of 11 U.S.C. § 362(a)(2).

Statement of Facts

Appellants Jim and Lisa Kolberg are farmers.In 1991, they purchased and leased farming equipment from appellee, Agricredit.Following a crop failure during the Summer of 1992, the Kolbergs were unable to make timely payments to many creditors, including Agricredit.As a result, Agricredit brought suit in state court and obtained a judgment for $334,000.In the Fall of 1994, Agricredit seized the Kolberg's soybeans pursuant to a crop lien issued on the state court judgment.

On December 9, 1994, Agricredit began to execute its lien on the Kolberg's soybeans.Agricredit completed the execution of the soybeans on December 15, 1994.The first issue in this case concerns the amount of soybeans that Agricredit seized during this time period.The Kolbergs contend that the maximum capacity of the storage bin for the soybeans is thirty-eight thousand five hundred eighty-four (38,584) bushels and that the bin was full at the commencement of the execution.Following the filing of a Chapter 12 bankruptcy petition by the Kolbergs, Agricredit returned a total of twenty-one thousand seven hundred (21,700) bushels of soybeans to the bankruptcy trustee, Joseph Chrystler.The trustee also recovered the proceeds from an additional five thousand four hundred (5,400) bushels that Agricredit had failed to remove from the storage bin.The Kolbergs allege that they are unable to account for the remaining eleven thousand five hundred (11,500) bushels of soybeans, and that Agricredit should be held liable for the missing bushels.

The Kolbergs filed their Chapter 12 bankruptcy petition on December 16, 1994, and promptly notified appellee Agricredit of the filing.On December 19, 1994, the Kolbergs filed an adversary proceeding in Bankruptcy Court, seeking to compel turnover of the soybeans from Agricredit.At trial, the Chapter 12trustee testified that he received the soybeans from Agricredit in April, 1995.The trustee subsequently sold the soybeans and has continued to retain the proceeds on behalf of the Kolbergs' estate.The Kolbergs contend that by failing to turn over the soybeans until April 1995, Agricredit willfully violated the automatic stay provisions of 11 U.S.C. § 362(a)(3) by continuing to exercise control over property of the estate.

Standard of Review

On an appeal from a bankruptcy court, the district court assesses the findings of fact by the bankruptcy court under the "clearly erroneous" standard but subjects the bankruptcy court's conclusions of law to de novo review.In re Charfoos,979 F.2d 390, 392(6th Cir.1992).

On review of a determination of the bankruptcy court, the district court cannot disturb or set aside findings of fact unless they are clearly erroneous.However, the district court is free to make an independent examination of any question of law or mixed questions of law and fact.The party seeking review of the bankruptcy court\'s determination bears the burden of proof.

In re Van Rhee,80 B.R. 844, 846(Bankr. W.D.Mich.1987)(citations omitted).

Discussion

I.Duty of Care

On appeal, the Kolbergs contend that the Bankruptcy Court committed reversible error when it held that Agricredit was not liable for the missing soybeans.The Kolbergs correctly maintain that Agricredit had a legal duty to use reasonable care following the seizure of the soybeans.SeeWayne Bank v. Dore,119 Mich.App. 634, 636, 326 N.W.2d 588(1982).However, the Bankruptcy Court concluded that Agricredit did not breach this duty.Following an analysis of the case, this court is unable to conclude that the Bankruptcy Court's findings of fact were clearly erroneous.To the contrary, there is a substantial amount of evidence to sustain the Bankruptcy Court's determination that Agricredit has returned the entire amount of soybeans seized during the execution of the crop lien.

At trial, Agricredit presented evidence supporting the proposition that the storage bin was not full when the execution began.An Agricredit employee testified that on December 6, 1994, three days before the execution began, she followed two trucks carrying soybean grain from the Kolberg farm to a storage facility in Indiana.After arriving at the storage facility, the Agricredit employee was informed that the grain had been stored under the name Heartland Agricultural Services.Furthermore, once the execution began, the Kolbergs delivered soybean grain to Zeeland Farm Services on December 12, 1994.This grain was stored under the name Leonard Kolberg, Sr.Although the Kolbergs contend that the grain did not come from their storage bins, a representative from Zeeland Farm Services testified that following this delivery, appellantJim Kolberg called the representative and requested a direct cash payment for the two loads.

In his bench opinion, the Bankruptcy Judge held that the issue of the missing grain presented a question of credibility.The judge found the testimony submitted by Agricredit to be more credible and suggested that any missing grain resulted from the deliveries by the Kolbergs to Indiana and Zeeland.Although he characterized the execution as "sloppy", the bankruptcy judge concluded that the Kolbergs had failed to meet their burden of proof that Agricredit had failed to use reasonable care when storing the seized soybeans.The deliveries to Zeeland and Indiana provide sufficient evidence to indicate that the bin was not full when Agricredit began to seize the soybeans.

II.Automatic Stay

The Kolbergs also contend that Agricredit willfully violated the automatic stay provisions of 11 U.S.C. § 362.This section of the Bankruptcy Code prohibits a creditor, following the filing of a bankruptcy petition, from "taking 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."11 U.S.C. § 362(a)(3)(emphasis added).Section 542 of the Bankruptcy Code requires a creditor in possession of estate property that the trustee may use, sell, or lease to turn over that property to the trustee following the filing of a bankruptcy petition, unless the property is of inconsequential value or benefit to the estate.11 U.S.C. § 542(a).If a creditor fails to turn over estate property, 11 U.S.C. § 362(h) provides the following statutory remedy for violations of the automatic stay:

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.

In this case, the Kolbergs filed an adversary proceeding on December 19, 1994, to compel turnover of the soybeans.At trial, the trustee testified that he received the soybeans in April, 1995.The bankruptcy judge held that Agricredit's failure to turn over the soybeans amounted to a "technical violation" of the automatic stay provisions.The Kolbergs urge this court to find, as a matter of law, that Agricredit's actions constituted a willful violation of the automatic stay, and to sanction Agricredit as a result.

The Kolbergs rely principally on the case of In re Knaus.In that case, the plaintiff/debtor purchased certain merchandise from a lumber company on credit.In re Knaus,889 F.2d 773, 774(8th Cir.1989).Upon nonpayment, the lumber company obtained a judgment in state court and proceeded to seize grain and equipment belonging to the debtor.Id.The debtor subsequently filed for bankruptcy.Id.He then notified the creditor of the filing and demanded the return of his property.Id.The creditor refused to comply and the debtor filed an adversary proceeding with the bankruptcy court for the return of the property.Id.On appeal, the Eighth Circuit held that when a creditor has knowledge of the bankruptcy petition the failure to automatically turn over property of the estate constitutes a willful violation of the automatic stay.Id. at 775.Other courts have also relied on the creditor's knowledge of a bankruptcy petition alone as a sufficient basis to find a willful violation of the automatic stay.See, e.g., In re Abrams,127 B.R. 239(9th Cir. BAP1991);General Motors Acceptance Corp. v. Ryan,183 B.R. 288(M.D.Fla.1995).

The Knaus decision and its prodigy, however, are not binding precedent for this court.Significantly, several other courts have rejected the reasoning employed by the Knaus court and have found that a willful violation requires more than a mere showing that the creditor had knowledge of the bankruptcy petition.See, e.g., In re Young,193 B.R. 620(Bankr.D.Dist.Col.1996)(failure to immediately turn over property rightfully seized prepetition is not a violation of the automatic stay);In re Zunich,88 B.R. 721(Bankr.W.D.Pa.1988)(willful violation requires element of...