In re Smith

• Citation: 180 BR 311
• Decision Date: 06 April 1995
• Docket Number: Bankruptcy No. 93-63431. Adv. No. 93-6790.
• Parties: In re Leonard E. SMITH, Debtor. MITCHELL CONSTRUCTION CO., INC., Plaintiff, v. Leonard E. SMITH, Defendant.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia

180 B.R. 311 (1995)

In re Leonard E. SMITH, Debtor.

MITCHELL CONSTRUCTION CO., INC., Plaintiff, v. Leonard E. SMITH, Defendant.

Bankruptcy No. 93-63431. Adv. No. 93-6790.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

April 6, 1995.

COPYRIGHT MATERIAL OMITTED

Robert Fleming, Smith & Fleming, Atlanta, GA, for plaintiff.

Frank B. Wilensky, Macey, Wilensky, Cohen, Wittner & Kessle, Atlanta, GA, for defendant.

ORDER

MARGARET H. MURPHY, Bankruptcy Judge.

Before the court are (1) Debtor's motion in the main case for imposition of sanctions against Mitchell Construction Company, Inc. ("Mitchell") and its attorney, David Rutherford, for willful violation of the automatic stay of 11 U.S.C. § 362(a); and (2) Debtor's motion to dismiss as untimely the adversary proceeding filed by Mitchell. The issue central to both motions is when Mitchell received actual notice of the filing of Debtor's Chapter 7 bankruptcy case.

Mitchell is a creditor of Debtor as a result of a state court judgment obtained by default May 14, 1992. After entry of the judgment, Mitchell, through its attorney David Rutherford, served Debtor with postjudgment interrogatories. When Debtor failed to respond to those interrogatories, Mitchell filed a motion to compel November 3, 1992. Unknown to Mitchell, because Debtor had not listed Mitchell as a creditor, Debtor had a Chapter 13 bankruptcy case pending at the time the motion to compel was filed and at the time the order granting the motion to compel was entered February 4, 1993.¹ The Chapter 13 case was dismissed² shortly thereafter, February 18, 1993, and Debtor then filed the instant Chapter 7 case March 3, 1993. In Debtor's Chapter 7 Statement of Financial Affairs, item 4, Debtor disclosed the lawsuit³ but failed to list Mitchell as a creditor in either his schedules⁴ or on the mailing matrix.⁵ Therefore, Mitchell received no written notice of the filing of the instant case or of the bar dates for filing complaints objecting to discharge or to determine dischargeability.⁶

On April 7, 1993, as a result of Debtor's failure to respond to the state court order compelling postjudgment discovery, Mitchell filed a motion for contempt. A hearing on the motion for contempt was scheduled for Wednesday, June 2, 1993 (Monday, May 31, 1993, was the Memorial Day holiday). On Friday, May 28, 1993, Debtor contacted Mitchell's attorney by telephone and by telefacsimile (hereinafter referred to as a "fax") to notify him that Debtor was currently protected by the automatic stay of 11 U.S.C. § 362(a) as a result of his pending Chapter 7 case. The document which Debtor faxed to Mitchell's attorney and to the state court judge, however, was a notice from Debtor's prior Chapter 13 case (dismissed in February, 1993) and, therefore, contained an incorrect case number.⁷

After contacting the state court judge, Mitchell's attorney sent a message by fax to Debtor June 1, 1993, to inform Debtor that the state court judge intended to go forward with the contempt hearing. Late in the day after 5:00 p.m. on June 1, 1993, Debtor visited his attorney, Milton Jones,⁸ to show Mr. Jones the letter faxed from Mitchell's attorney.

Later on June 1, 1993, at approximately 6:00-7:00 p.m., Mr. Jones telephoned the offices of Mitchell's attorney. A senior associate, Mr. Weber, answered the phone, announcing that David Rutherford, the attorney handling Mitchell's case, was not in the office. A conversation ensued. Mr. Jones testified that it is his habit and practice in similar situations to provide to a creditor's attorney the following information:

a. his name and telephone number;

b. the debtor\'s name;

c. the fact that a Chapter 7 or Chapter 13 case had been filed;

d. the case number of the bankruptcy case filed;

e. the date of filing; and

f. information regarding the automatic stay.

Mr. Jones further testified that it was not his habit and practice to send copies of bankruptcy petitions to creditors and it was not his habit and practice to file pleadings, such as Pleas of Bankruptcy, in pending state court cases. Debtor testified he overheard Mr. Jones' end of the conversation and heard Mr. Jones identify himself and Debtor and heard Mr. Jones discuss the nature and extent of the automatic stay.

The associate attorney, Mr. Weber, to whom Mr. Jones spoke recalls only that Mr. Jones seemed to be in a hurry and that Mr. Jones informed him that Jones had a conflict and could not attend the next morning's hearing. Mr. Weber thought it unusual for an attorney to call so late in the day about a conflict for the next morning's hearing. Mr. Weber testified that if any more specific information, such as a case number, had been provided, he would have prepared a written memorandum of such information. Mr. Weber testified he attempted to contact Mr. Rutherford at home but was unable to reach him. Mr. Rutherford confirmed that he had a telephone answering machine which was in working order. Mr. Rutherford testified he received no message about Mr. Jones' conflict or about Debtor's bankruptcy. Mr. Rutherford testified he was not even aware that Mr. Jones had called until after Mr. Jones filed his affidavit April 21, 1994, ten months later.

Mitchell's attorney attended the contempt hearing June 2, 1993. Neither Debtor nor an attorney for Debtor appeared at that hearing. The state court judge, having received a fax from Debtor regarding a pending bankruptcy case, instructed Mitchell's attorney to investigate and report regarding Debtor's bankruptcy status. Mitchell's attorney called the Chapter 13 Trustee's office.⁹ That office reported to Mitchell's attorney that Debtor's Chapter 13 case (of the erroneous case number which Debtor had provided to Mitchell's attorney) had been dismissed and that Debtor had no other Chapter 13 case pending.¹⁰

Mitchell's attorney then called the office of the Clerk of the U.S. Bankruptcy Court (the "Bankruptcy Clerk") to determine whether the records maintained by the Bankruptcy Clerk showed a pending case for Debtor.¹¹ Mitchell's attorney reported that it was his habit and practice when in need of information regarding a case pending in a state court to call the state court clerk's office. He stated he was consistently able to obtain reliable information regarding case status through such telephonic communication. Mitchell's attorney also testified, however, that he does not regularly practice in bankruptcy court and, in fact, in the few years since he began his practice of law in 1990, Mitchell's attorney had worked on cases on only one or two occasions which had even tangential involvement with bankruptcy court. Therefore, Mitchell's attorney was unaware of the technical and procedural differences between the state courts' docketing systems and the bankruptcy court's docketing system.

The docketing system maintained by the Bankruptcy Clerk allows for a search of the dockets only by name or by case number.¹² A search by case number is reliable. A search by name, however, is not reliable for several reasons including, inter alia, the wide latitude for differences inherent in data entry of names. In the instant case, Debtor's surname, Smith, is very common, which may have further expanded the possibility of an inaccurate search.¹³ As a result, while it is possible to obtain information over the telephone from personnel in the Clerk's office of the Bankruptcy Court, it is not relied upon by attorneys familiar with bankruptcy law and practice. The reliance an attorney must place on such information is similar to that required in a title search of real estate records.

The report Mitchell's attorney received during a telephonic conversation with personnel in the Bankruptcy Clerk's office was that no case was currently pending in which Leonard Smith was a debtor. Unknown to Mitchell's attorney, that information was inaccurate.¹⁴ Nevertheless, as a result of the oral information Mitchell's attorney received, which Mitchell's attorney related to the state court judge, the state court hearing on the motion for contempt was reset to July 14, 1993. Notice of the hearing was sent to Debtor.

Debtor's attorney, Mr. Jones, testified that approximately a week to ten days after his first call to Mitchell's attorney June 1, 1993, Mr. Jones again called Mitchell's attorney to confirm that Mitchell's attorney knew of Debtor's bankruptcy case. Mr. Jones testified he had a long, substantive conversation with Mitchell's attorney, including discussing the automatic stay and Mitchell's right to file a proceeding to determine the dischargeability of Debtor's debt to Mitchell. That conversation, however, could have taken place no earlier than Monday, June 7, 1993.¹⁵ The bar date for filing complaints to determine dischargeability was June 7, 1993. Mr. Jones did not allege that he informed Mitchell's attorney of that bar date. Mitchell's attorney testified that he requested, and that Mr. Jones agreed, to send a copy of the first page of Debtor's bankruptcy petition or a copy of the § 341 Notice to Mitchell's attorney, either of which would have confirmed the Chapter 7 filing and provided a case number by which Mitchell's attorney could have verified the information from Debtor's attorney and enabled him to obtain other information about the case — such as the bar dates. Mr. Jones does not deny that he agreed to send one of those two documents to Mitchell's attorney and does not deny that he did not send either document to Mitchell's attorney.

The hearing on the motion for contempt was held July 14, 1993. Neither Debtor nor Mr. Jones appeared at that hearing. An order holding Debtor in contempt was entered July 16, 1993. Mitchell's attorney had no further contact with Debtor or Debtor's attorney until he received a letter dated September 22, 1993, from Debtor. That letter was apparently prompted by a visit to Debtor's place of business by the Sheriff to enforce the July 16, 1993 contempt order. The letter from...