In re Martin
| Decision Date | 12 August 1993 |
| Docket Number | Bankruptcy No. 7-92-00358-HPR-7,Motion No. 2. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Virginia |
| Parties | In re James Michael MARTIN, Debtor. James Michael MARTIN, Movant, v. AVCO FINANCIAL SERVICES, Respondent. |
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Thomas B. Dickenson, King, Fulghum, Snead, Nixon & Grimes, Roanoke, VA, for debtor/movant.
Stephen E. Dunn, Lynchburg, VA, for respondent.
Before the Court are Motions of James Michael Martin ("Debtor" or "Movant") to reopen his Chapter 7 case and avoid certain liens on his personal property and a companion Motion to hold AVCO Financial Services of Madison Heights ("AVCO" or "Creditor") in contempt and impose sanctions for violating the permanent injunction provisions of the discharge order issued pursuant to the Bankruptcy Code by virtue of this Creditor's post-discharge detinue actions seeking to recover its collateral and also seeking the alternate value of that collateral in the form of a personal money judgment under Virginia state court procedure.
The precise issues presented are (1) whether the Creditor's post-discharge actions violate the injunctive provisions of 11 U.S.C. § 524(a), and (2) if so, whether those actions were willful and contemptuous and thus susceptible to the imposition of sanctions. This Court has jurisdiction of these core proceedings pursuant to 28 U.S.C. §§ 157(b)(2)(B) and 1334(b).
The facts in this case are essentially uncontroverted. On September 20, 1990, AVCO loaned Debtor the sum of $1,931.76, to be repaid over 36 months at 28.09%. In exchange, the Debtor granted AVCO a non-possessory, non-purchase money security interest in certain items of personal property, consisting of stereo equipment and a VCR, an exercise machine, and a lawnmower. This security interest was properly perfected under state law of Virginia.
Debtor filed his Chapter 7 petition in this Court on February 18, 1992 and in his schedules listed AVCO's obligation as a general unsecured, nonpriority obligation; the Creditor, however, filed its proof of claim listing portions of its claim as both secured and unsecured. The Debtor, while this case was open in this Court and being administered, did not formally object to the proof of claim nor attempt to have the lien avoided pursuant to § 522(f).
On July 15, 1992, following the issuance by this Court of the discharge order on May 19, 1992, the Creditor brought a Warrant in Detinue in the local general district court, seeking the return of the collateral securing the still valid lien. This first warrant did not list nor seek a judgment for any alternate value to be awarded in lieu of turnover of the collateral. For procedural reasons, a second warrant was issued on August 18, 1992; this second warrant listed an alternate value of $1,175.00.1 When the Debtor did not appear, the state court entered a personal judgment for $1,175.00.
Subsequently, the Creditor caused a garnishment summons to be issued against the Debtor and garnished approximately $300 from the Debtor's checking account. When the state court later learned of the discharge previously granted in this case, the garnishment was quashed and the $1,175.00 judgment was vacated.
The Debtor, in his petition, listed certain personal property exempt pursuant to § 522(b) and Virginia Code Ann. § 34-4, et seq., (1950, as amended). Included in the Debtor's amended schedules for personal property and property claimed exempt were the same stereo and VCR and lawnmower subject to the Creditor's lien. According to the record and stipulations agreed upon by counsel, the Movant had discarded the stereo and VCR prior to filing, due to its old and inoperable condition. The exercise bicycle had been sold prior to the filing and, thus, was listed on the Movant's amended Schedule C, filed pursuant to prior order of the Court.2 AVCO did not object to Debtor's exemptions as required by Rule 4003(b) and held to be mandatory under Taylor v. Freeland & Kronz, 503 U.S. ___, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992).
Subsequent to the discharge the Creditor began its attempts to collect on the debt owed by the Debtor. When the Creditor began threatening criminal actions for the alleged disposal of all the collateral but the lawnmower, still in the Debtor's possession, Debtor brought the within Motions.
At the hearing on the motion to reopen and for sanctions, both parties stipulated to the evidentiary documents submitted, and subsequently submitted authorities supporting their respective positions. Among those stipulated documents were copies of the judgment and garnishment issued by the state court as well as a list of other consumers with whom AVCO has previously dealt in a similar fashion as the Debtor herein. While the other instances are not before this Court, important to this Court's decision is the Creditor's stipulation that its recovery procedures enunciated herein, particularly seeking a personal judgment for the collateral's alternate value under state law after a discharge has issued, form the basis of its corporate policy toward debtors in this Court.
Initially the Court notes that remedial statutes such as the Bankruptcy Code are generally held to be liberally construed in favor of the debtor, in order to better facilitate that debtor's fresh start. Gleason v. Thaw, 236 U.S. 558, 560, 35 S.Ct. 287, 288, 59 L.Ed. 717, 719 (1915); Roberts v. W.P. Ford & Son, 169 F.2d 151, 152 (4th Cir.1948) (). This universally recognized purpose serves to "relieve the honest debtor from the weight of oppressive indebtedness and permit him to start afresh." Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934) (citations omitted). This same "honest but unfortunate debtor" is thus provided with "a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt." Grogan v. Garner, 498 U.S. 279, 286, 287, 111 S.Ct. 654, 659, 659, 112 L.Ed.2d 755, 764, 765 (1991); Perez v. Campbell, 402 U.S. 637, 648, 91 S.Ct. 1704, 1710, 29 L.Ed.2d 233, 241 (1971); Local Loan Co. v. Hunt, 292 U.S., at 244, 54 S.Ct. at 699; Johnston v. Johnston, 63 F.2d, at 26; Royal Indemnity Co. v. Cooper, 26 F.2d 585, 587 (4th Cir.1928).
The discharge order issued herein applies to all of the Debtor's pre-petition debts, and acts to generally discharge a debtor from all personal liability on those debts. See 11 U.S.C. §§ 524(a) and 727(b). The Debtor moved to reopen his case after the Creditor initiated the post-discharge actions against him and allegedly threatened him with criminal action.
A debtor is generally permitted the right to reopen a case, to "accord relief to the debtor, or for cause." See 11 U.S.C. § 350 and Bankr.Rule 5010. No other limitation exists upon the right of a debtor to reopen his or her case, and it is generally within the Court's discretion to order a case reopened to allow a debtor to move for avoidance of a lien on exempt property. Hawkins v. Landmark Finance Co., 727 F.2d 324, 327 (4th Cir.1984) (Widener, J., dissenting) (). This Court finds no prejudice to the Creditor herein by allowing the case to be reopened in order to properly consider the lien avoidance motion, 3 Collier ¶ 522.291, at 522-96, -97, as well as the propriety of the Creditor's actions.
In considering the main issue herein — whether the Creditor's post-discharge actions, taken with regard to exempt property which secured the underlying debt, violated the permanent injunction provisions of § 524(a) — the Court notes that the same rule of liberally construing a federal remedial statute in favor of the debtor is recognized in Virginia as it pertains to the Virginia exemption statutes. In re Smith, 22 B.R. 866, 867 (Bankr.E.D.Va.1982) (citing Home Owners Loan Corporation v. Reese, 196 S.E. 625, 626, 170 Va. 275 (1938)); Dickens v. Snellings (In re Snellings), 10 B.R. 949, 951 (Bankr.W.D.Va. 1981), (citing Wilkinson v. Merrill, 12 S.E. 1015, 87 Va. 513 (1891) and Linkenhoker v. Detrick, 81 Va. 44 (1885)); Goldburg v. Salyer, 50 S.E.2d 272, 274, 188 Va. 573 (1948).
The Court is mindful that, in construing the provisions which govern here, supra, it must "neither reduce nor enlarge the exemptions or read into the law an exemption not found there." Goldburg, 50 S.E.2d, at 277. Nevertheless, the Court also recognizes and agrees with the corollary principle that "any ambiguities found in state exemption laws must be resolved in favor of debtors." In re Redmon, 31 B.R. 756, 759 (Bankr.E.D.Va.1983) (citations omitted). Given the absolute nature of the language of § 524(a), and the lack of any exceptions to the injunction protection inherent in the discharge order, where exempt property is at issue the Court considers these principles applicable to questions arising under § 524(a).3
The Creditor contends that the Debtor's § 522(f) avoidance motion is not timely and should only be properly filed and heard before a discharge has issued. The Creditor relies on In re Andrews, 22 B.R. 623 (Bankr.D.Del.1982), for this argument. The Andrews court noted, as does this Court, that the Bankruptcy Code and Rules do not provide any limitations on when lien avoidance motions must be brought by a debtor. Id., at 625. See also In re Adkins, 7 B.R. 325 (Bankr.S.D.Cal. 1980) (). As herein stated, the Creditor has a duty to file objections to claimed exemptions under Rule 4003.
The Court in Andrews may arrive at a different result; however, in light of the principles and underlying case law discussed, supra, the analogy to...
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