In re Skinner, Civ. No. C-88-49W
| Decision Date | 10 August 1988 |
| Docket Number | Civ. No. C-88-49W,Bankruptcy No. 87A-03646. |
| Citation | 90 BR 470 |
| Parties | In re Stephen Wayne SKINNER and Marlene McCausland Skinner, Debtors. UTAH STATE CREDIT UNION, Appellant, v. Stephen Wayne SKINNER, Marlene McCausland Skinner, Respondents. |
| Court | U.S. District Court — District of Utah |
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Phillip Harding, Salt Lake City, Utah, for respondents and debtors, Stephen Skinner and Marlene Skinner.
Dale R. Kent, Salt Lake City, Utah, for appellant Utah State Credit Union.
This matter is before the court on an appeal of a decision rendered by the bankruptcy court on December 11, 1987. The court held a hearing regarding this appeal on June 29, 1988. Dale R. Kent appeared on behalf of the appellant, Utah State Credit Union (the "Credit Union"). Phillip A. Harding appeared on behalf of the respondents and debtors, Mr. and Mrs. Skinner.
Prior to the hearing, the court had carefully reviewed the appellate briefs filed by counsel. Since the hearing, the court has thoroughly reviewed the transcript of the evidentiary hearing held before the Honorable John H. Allen on December 9 and 11, 1987. After taking this matter under advisement, the court has further considered the law and facts, and now renders the following memorandum decision and order reversing the bankruptcy court's decision and remanding the matter for further proceedings consistent with this memorandum decision.
The debtors, Stephen and Marlene Skinner, filed a petition under Chapter 7 of the Bankruptcy Code on July 16, 1987. Prior to that date, the Credit Union had repossessed from the Skinners a 1985 Oldsmobile station wagon, in which the Credit Union had a valid security interest. On the date of the Skinners' bankruptcy filing, the automobile was in the possession of the Credit Union.
On July 29, 1987, notice of the bankruptcy filing and of the first meeting of creditors was sent by a deputy clerk of the bankruptcy court to all creditors listed on the official mailing matrix. (Tr. at 40-41). The Credit Union and its post office box number were correctly listed on the mailing matrix. (Tr. at 86). The notice was sent and received by the Credit Union. (Tr. at 91). However, the exact date on which the Credit Union received notice of the Skinners' bankruptcy filing is uncertain. Based upon the evidence presented, the bankruptcy court concluded that the notice was received at the Credit Union's post office box on or about July 31, 1987. (Tr. at 120-21).
On August 4, 1987, the Credit Union sold the 1985 Oldsmobile station wagon in a commercially reasonable manner for a sale price of $7,900. (Tr. at 46, 122). However, the low book value of the automobile, considering all of the car's options, was $10,300. (Tr. at 65-68). Mrs. Schwartz was the employee responsible for reading all notices received from the bankruptcy court and alerting other Credit Union employees of bankruptcy filings. (Tr. at 75, 78-80). However, during the last week of July and first week of August, 1987, Mrs. Schwartz was on vacation. (Tr. 90-91). The notice of the Skinners' bankruptcy finally came to the attention of Mrs. Schwartz of the Credit Union on August 6, 1987, after the sale had taken place. (Tr. at 92-93). Nevertheless, the Credit Union did not make any attempt to compensate the Skinners for any losses resulting from the sale of their vehicle after the petition date.
Subsequently, the debtors filed a motion requesting the bankruptcy court to cite the Credit Union for contempt and to award damages arising from the violation of the automatic stay. The Credit Union contested the motion. The bankruptcy court held an evidentiary hearing during which several witnesses testified over a period of two days. Based upon the evidence presented, the bankruptcy court found that the Credit Union, as a legal entity, had actual notice of the Skinners' bankruptcy filing by virtue of the bankruptcy court's sending a notice to the Credit Union's post office box and the Credit Union's receipt of the notice on or about July 31, 1987. (Tr. at 120-21). The court further concluded that the Credit Union's employees did not have any malice or actual intent to violate the automatic stay by selling the Skinners' vehicle. (Tr. at 121). Nevertheless, the court concluded that the Credit Union willfully violated the automatic stay and awarded the debtors actual damages and attorney's fees and costs in the amount of $4,617.67 pursuant to 11 U.S.C. § 362(h).1 (Tr. at 123).
In reviewing the decision of the bankruptcy court, this court must accept the findings of fact of the bankruptcy court unless the findings are clearly erroneous. Bankr. Rule 8013; In re Mullet, 817 F.2d 677, 678 (10th Cir.1987). In addition, this court must make a de novo review of all legal determinations and conclusions of law. Mullet, 817 F.2d at 679; In re Yeates, 807 F.2d 874, 877 (10th Cir.1986); In re Branding Iron Motel, Inc., 798 F.2d 396, 399-400 (10th Cir.1986).
The initial question before this court is whether the bankruptcy court erred in awarding sanctions against the Credit Union pursuant to 11 U.S.C. § 362(h). To resolve this question, this court will review whether the conduct of the Credit Union constituted a willful violation of the automatic stay as required under section 362(h) of the Bankruptcy Code. In addition, this court will consider whether a civil contempt citation is appropriate under the circumstances of this case.
Section 362(h) Sanctions:
Generally, section 362 provides an automatic stay of any and all proceedings against a debtor immediately following the filing of a bankruptcy petition. The importance of the automatic stay in bankruptcy is made clear in the legislative history of section 362:
The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 340-42 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 54-55 (1978); reprinted in 1978 U.S.Code Cong. & Admin.News 5787 at 5840, 6296-97.
Recognizing the need to compensate and even punish for violations of the automatic stay, Congress added subsection (h) to section 362 in 1984. This provision empowers the bankruptcy court to impose sanctions for willful violations of the automatic stay. Subsection (h) provides as follows:
(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.
Pursuant to this provision, the bankruptcy court must compensate an individual2 injured by a willful violation of the automatic stay for actual damages, including attorney's fees and costs. In appropriate circumstances, the bankruptcy court can impose punitive damages and thereby punish the individual or entity violating the stay.
Because section 362(h) provides broad compensatory and even punitive remedies for a violation of the automatic stay, the provision contains fairly rigid threshold requirements. In particular, subsection (h) only provides a remedy for willful violations of the stay. For purposes of section 362(h), "willful" means deliberate or intentional. In re Advanced Professional Home Health Care, Inc., 82 B.R. 837, 844 (Bankr.E.D.Mich.1988); In re Rinehart, 76 B.R. 746, 756 (Bankr.D.S.D.1987); In re Shafer, 63 B.R. 194, 198 (Bankr.D.Kan. 1986).
In the present case, the bankruptcy court concluded that the Credit Union had willfully violated the automatic stay. This conclusion was based on the court's finding that the Credit Union had actual notice of the Skinners' bankruptcy filing through receipt of the bankruptcy court's notice at its post office box before the Skinners' automobile was sold. Nevertheless, the bankruptcy court found that the Credit Union's employees possessed no malice or actual intent to violate the automatic stay.
After a thorough review of this matter and giving due regard to the bankruptcy court's opportunity to judge the credibility of witnesses, this court concludes that the bankruptcy court's findings were supported by the evidence and not clearly erroneous. The evidence presented suggested that the bankruptcy notice was received at the Credit Union's post office box prior to the sale. There was no evidence to the contrary. In addition, the evidence supported the finding that the Credit Union's employees possessed no malice or actual intent to violate the automatic stay.
Nevertheless, the bankruptcy court erred in concluding that the Credit Union willfully violated the automatic stay in light of its finding that the Credit Union's employees did not intend to violate the automatic stay. The Credit Union can only act through its agents and employees. In order to justify sanctions pursuant to section 362(h), the bankruptcy court had to have found that the Credit Union's agents or employees deliberately and intentionally violated the automatic stay by selling the automobile after receiving notice of the Skinners' bankruptcy filing. Accordingly, the bankruptcy court did not have a sufficient factual basis to impose sanctions pursuant to section 362(h).
Although this court must set aside the bankruptcy court's imposition of sanctions pursuant to section 362(h), this court observes that civil contempt sanctions pursuant to 11 U.S.C. § 105(a) may be appropriate under the circumstances of this case. Based upon the following analysis of the contempt powers of the bankruptcy court, this court believes that the bankruptcy court may impose civil contempt sanctions in order to compensate the Skinners for the...
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