In re Walton
| Decision Date | 02 June 1993 |
| Docket Number | Bankruptcy No. 92-30440. |
| Parties | In re William J. WALTON, Joyce D. Walton, Debtors. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio |
Malcolm Goodman, Marion, OH, Trustee.
William Clark, Findlay, OH, John J. Hunter, Jr., Toledo, OH, Bernard Bauer, Findlay, OH, for AG Credit.
Reginald Jackson, Toledo, OH, for Charles Bartholomew.
Charles Bartholomew, Pros. Atty., Upper Sandusky, OH, for Wyandot County.
This matter is before the Court upon William and Joyce Walton's (the "Debtors") pleading "Entry Alternative Recusal re Common Pleas Court Case No. 90-CV-89" filed with this Court on March 16, 1993. The Debtors alleged that a number of parties were in contempt of this Court for violation of the automatic stay under 11 U.S.C. § 362. These parties include the Prosecuting Attorney for Wyandot County, a state court appointed receiver, a creditor of the estate and its attorneys, and the trustee in bankruptcy. Upon consideration of the evidence adduced at the hearing, the Court finds that Debtors' request for a finding of contempt against Charles Bartholomew, William Clark, Ag-Credit, ACA, John Hunter, Jr., Bernard Bauer, and Trustee Malcolm Goodman is not well taken and should be denied.
On December 30, 1991, Debtor Joyce Walton filed a voluntary petition under chapter 7 of title 11. Joyce Walton's husband, Debtor William Walton filed a voluntary petition under chapter 7 of title 11 on February 10, 1992. These cases were consolidated on Debtors' request on March 13, 1992, and all further entries docketed on Case No. 92-30440.
The Wyandot County Court of Common Pleas had previously set aside certain transfers of Debtors' property as fraudulent under O.R.C. § 1336.04 in Case Number 90-CV-89 ("the State Court Action"). The Wyandot County Court of Common Pleas prohibited Debtors and Wheatley Corporation, a corporation which was determined to be a fraudulent transferee in the State Court Action, from transferring any assets or property until further court order and appointed a receiver to take charge of any proceeds obtained by Wheatley. William Clark ("Clark") was appointed receiver.
This Court granted creditor Ag-Credit, ACA's ("Ag-Credit") application for abandonment and an annulment of the automatic stay for certain real property which had been determined to be property of the Debtors in the State Court Action on April 10, 1992. The Court found that the Debtors had no equity in the property. Additionally, this Court dismissed Joyce Walton's allegations of contempt for violation of the automatic stay against Clark and Ag-Credit. See Opinion and Order Granting Application for Abandonment and Motion for Relief from Stay of Ag-Credit, ACA dated April 10, 1992 ("Abandonment Order").
On August 6, 1992, this Court issued an opinion denying the Debtors' demand for protection under the Farm Credit System Act in the real property which had been the subject of the Abandonment Order because the Court lacked jurisdiction over this matter under title 11. See Opinion and Order Denying Debtors' Demand for Protection Under Farm Credit System Act.
On February 18, 1993, this Court denied Debtors request to void the sale of the land which was the subject of the Abandonment Order because the Debtors did not file an adversary proceeding as required. See Order Denying Request for Order to Avoid Sale.
In this proceeding, Debtors allege that certain parties are in contempt of this Court for violation of the automatic stay. The parties include Clark, Ag-Credit, John Hunter, Jr. ("Hunter") and Bernard Bauer ("Bauer"), attorneys for Ag-Credit, Charles Bartholomew, Prosecuting Attorney for Wyandot County ("Bartholomew") and Malcolm Goodman, trustee of the Debtors' bankruptcy estate ("the Trustee"). These parties have allegedly violated the automatic stay provisions of 11 U.S.C. § 362 in regard to property held by Clark including approximately $10,000 in cash which is claimed to be the property of the Wheatley Company, $555 in cash representing the proceeds from the sale of a corn head and $130 in stock dividends made payable to Debtors. Debtors claim that they possess no interest in any of these assets. Debtors do claim an interest in a state tax refund check payable to William Walton for $920 (the "Refund") which is held by Clark, however, it was not listed as an asset on Debtors' bankruptcy schedules.
Though the subject matter jurisdiction of the bankruptcy courts is broad, this jurisdiction does not extend to property which is not "property of the estate" under 11 U.S.C. § 541. Section 541 of the Bankruptcy Code provides that the bankruptcy estate includes substantially "all legal or equitable interests of the debtor in property as of the commencement of the case". See 11 U.S.C. § 541. William Walton stated at the evidentiary hearing that the Debtors did not own nor did they have an interest in the $10,000 held by Clark which, according to William Walton, represents property of the Wheatley Company. William Walton stated that the Debtors had no interest in the proceeds from the sale of a corn head held by Clark in the amount of $555. William Walton stated at the hearing that these funds were the property of Steven Walton. Further, William Walton stated that Debtors claim no interest in the stock dividend checks made payable to Debtors totaling $130.
A review of 28 U.S.C. § 157(b) clearly indicates that an action to recover property in which the Debtors have no interest does not represent a core proceeding. Further, under 28 U.S.C. § 157(c)(1), an action to recover property in which the Debtors have no interest does not represent a proceeding which is "otherwise related to" a case under the Bankruptcy Code. See 11 U.S.C. § 157(c)(1). Even under the most expansive reading of "related to" under § 157(c)(1), Debtors' claim to recover funds in which they have no interest would not "`conceivably have any effect upon the estate being administered in bankruptcy'". Kelly v. Nodine (In re Salem Mortgage Co.), 783 F.2d 626, 634 (6th Cir.1986) (quoting Mazur v. U.S. Air Duct Corp., 8 B.R. 848, 851 (Bankr.N.D.N.Y.1981)). This Court has no subject matter jurisdiction over funds held by Clark which purportedly represent proceeds from sale of the property of the Wheatley Company and Steven Walton. Additionally, this Court has no subject matter jurisdiction over the stock dividends made payable to William and Joyce Walton in which Debtors claim no interest.
This Court finds that Debtors' motion for contempt against Bartholomew is not well taken. Debtors have alleged that Bartholomew willfully violated the automatic stay by proceeding against the Refund held by Clark. Section 362(h) of the Bankruptcy Code provides damages for willful violations of the automatic stay. See Archer v. Macomb County Bank, 853 F.2d 497 (6th Cir.1988) (). Bartholomew stated he had no knowledge that any of the funds held by Clark represented property of the estate when he applied to the Wyandot County Court of Common Pleas for payment of the attorney fees of William Walton. Bartholomew's uncontradicted testimony stated that the Trustee informed Bartholomew that the Debtors' estate had no claim against the funds held by Clark. Bartholomew's application to Clark for payment of attorney fees, therefore, cannot be characterized as willful. Further, the Sixth Circuit has held that "speculative evidence and mere conjecture" will not support an award of actual damages. Archer, 853 F.2d at 499. Since the state court denied Bartholomew's claim against the funds held by Clark, the Debtors were not damaged by Bartholomew's actions. Therefore, the Debtor's request for a finding of contempt against Bartholomew is denied.
Debtors allegations that Clark willfully violated the automatic stay in violation of 11 U.S.C. § 362 are meritless. Clark's testimony indicated that prior to learning of Debtors' bankruptcy he had attempted to cash the Refund. Upon notice of Debtors' bankruptcy, Clark mailed the Refund to the Trustee. Then, the Trustee returned the Refund to Clark. The Trustee apparently believed that the Refund was subject to liens and should be abandoned to Clark. Clark presently has possession of the Refund in his receivership account. This Court refuses to hold Clark in contempt for his actions in merely receiving the Refund from the Trustee, after the Trustee assured Clark that Debtors' estate had no interest in the Refund. In addition, Debtors have failed to show any damages resulting from Clark's actions.
This Court further finds that Clark is not in contempt of court for failure to turnover the Refund to the Trustee in violation of 11 U.S.C. § 543(b). This section requires a custodian such as Clark to turnover property of the estate to the Trustee. In the instant case, Clark did turnover property of the estate to the Trustee on learning that Debtors' had filed for bankruptcy. Therefore, this Court finds that Clark is not in contempt of this Court for violation of 11 U.S.C. § 543(b).
Debtors have not proved their...
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