Matter of Holland, 80-11027.
| Decision Date | 19 July 1982 |
| Docket Number | No. 80-11027.,80-11027. |
| Citation | 21 BR 681 |
| Parties | In the Matter of Wilbert Glenn HOLLAND, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Indiana |
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Frederick Wehrwein, Fort Wayne, Ind., for debtor.
John J. Wernet, Fort Wayne, Ind., for creditor.
This matter is before the Court on the debtor's motion for a determination that Dana Credit Union (creditor) is in contempt of this Court in that the creditor, after notice of the debtor's petition in bankruptcy and of the Court's order of a stay pursuant to Section 362 of the Bankruptcy Code,1 received post-petition wages of debtor as a result of a pre-petition payroll deduction agreement and applied these funds toward payment of a pre-petition debt. Furthermore, debtor alleged that the creditor had refused to return the monies even after notice of the debtor's discharge. Debtor contends that creditor has violated the Automatic Stay of Section 362 and has ignored the Court's order of discharge. Debtor seeks damages in the amount of money deposited as a result of the payroll deduction from the date of the filing of his petition in bankruptcy, costs, and reasonable attorney's fees.
The creditor has answered in its memorandum in opposition to the motion and at the hearing that any payments made to it via the voluntary payroll deduction agreement between the debtor and his employer after the date of the filing of the bankruptcy petition were voluntary payments which may be applied to the loan and thus not in violation of orders of this Court. The Credit Union contends that it took no act to collect its claim against the debtor. The creditor pointed out that the payroll deduction agreement was between the debtor and his employer, not between the debtor and the creditor. To have the deductions discontinued, the creditor contends, the debtor need only have executed a stop payroll deduction notice and given same to the employer.
A hearing was held, briefs were filed, and the matter was taken under advisement.
The issues to be decided are (1) whether the creditor has violated the automatic stay by receiving the post-petition wages from the payroll deduction and applying the same toward a pre-petition debt owed by the debtor to the Credit Union; (2) whether the creditor has violated the provisions of the order granting the debtor a discharge by refusing to return the deposits made pursuant to the payroll deduction; (3) and whether these violations, if established, constitute contempt.
The debtor filed his petition for bankruptcy on November 21, 1980 seeking a discharge under Section 727 of the Bankruptcy Code.2 Prior to this date the debtor had voluntarily executed an authorization for payroll deduction form to the attention of the payroll department of his employer, Dana Corporation. The form authorized Dana Corporation to deduct $80.00 per pay period (weekly) and to deposit this amount with the Dana Corporation Federal Credit Union (creditor). The authorization was revocable at the option of the debtor by written notice to the employer.
The Dana Corporation Federal Credit Union was listed on debtor's bankruptcy schedules and received notice from the Court of the filing and of the automatic stay sent by the Court on December 5, 1980. A copy of the discharge order was sent to creditor on January 7, 1981.
The debtor executed a form to stop payroll deductions on March 2, 1981. At the time of this hearing the creditor still retained the payroll deduction deposits and had applied some of those deposits toward payments of the pre-petition debt after having received notice of the filing and the stay.
The above facts were undisputed by the parties and the Court hereby so finds.
The debtor testified that on the day he filed his petition or within a few days thereafter he went to the Credit Union with his file marked petition papers in hand in order to tell the Credit Union to stop making the deductions from his payroll check and to stop applying the deductions to his debt. He showed his bankruptcy papers to a representative of the loan department, who, according to the debtor, told the debtor that she would not be able to help the debtor with his requests and that he should call Mr. Morris, Operations Manager, who was not in at the time. The debtor did thereafter call Mr. Morris, who, according to the debtor, said that the money would be "frozen."
The debtor testified that once he had received his order of discharge he went to the Credit Union to withdraw the money but was told it had been applied against the debt and would not be returned to him.
Mr. Morris testified that he knew of the debtor's visit to the Credit Union and his discussion with the representative regarding stopping the deductions and not applying money to the debt. Mr. Morris acknowledged that the debtor had followed-up his visit by phone call. Mr. Morris remembered that the debtor told him he had filed his petition in bankruptcy but could not otherwise remember what they had talked about. Furthermore he could not recall saying that the money would be "frozen," and he stated that the Credit Union has no such policy.
When asked about the Credit Union's procedures, Mr. Morris stated that forms to start and to stop payroll deductions are available from any teller at the Credit Union. Furthermore each teller is instructed regarding the forms and regarding making them available to members. The representative with whom the debtor first presented his requests was a teller. Mr. Morris had no answer to why this representative would not have provided the form to stop payroll deduction to the debtor and have explained the procedure. It was agreed by the parties that the debtor had executed the payroll deduction at the Credit Union only for the purpose of paying a loan from the Credit Union. So while the agreement was in fact between the debtor and his employer, all steps that the debtor took regarding his loan and automatic withdrawal were done through the Credit Union.
The debtor admitted that he did not ask for a stop payroll form. He said he did not understand that he had to. He thought his money would be held in his savings account. When asked if he (debtor) had gone to the employer to have the deduction stopped, he replied that he did not believe he had to.
The debtor stated that on the date (January 7, 1981) he received his discharge order he went to the Credit Union to withdraw his money. When he discovered that the money had been applied to his loan, he again asked to get the withdrawal stopped. He stated that he was told that since he was not working at the time (he had been laid off) that he could not accomplish the termination while he was not working. He says he was told he would have to be working before he could cancel the deductions.
Mr. Morris testified that the procedure regarding the automatic withdrawal was that the money received pursuant to the deduction agreement each week was put into the debtor's share draft account. Then on the 15th day of each month the Credit Union makes a transaction whereby it withdraws the accumulated payroll deduction deposits from the share account and transfers this money to be applied toward payment of the loan. The Statement of Account submitted into evidence by the debtor confirms this above procedure. (Debtor's Exhibit A.)
Having heard the testimony presented and having reviewed the evidence related to this case and the memoranda filed, the Court also finds the following to be fact:
The trustee has not involved himself in this matter and has therefore apparently abandoned any interest in funds paid from the debtor's earnings toward this loan during the ninety days prior to filing of the bankruptcy petition. Therefore the Court hereby finds that the Credit Union is entitled to retain money applied to the loan up to the date of debtor's filing of his petition in bankruptcy, November 21, 1980, including the transfers made from his share account to the loan account pursuant to the payroll deduction arrangement up to the same date.
For the reasons stated below, the Court further finds that the Credit Union has violated the Automatic Stay of Section 362(a)(6) of the Bankruptcy Code, and that the Credit Union has failed to conform to the order of this Court in granting the debtor's discharge, and, finally, that the conduct of the Credit Union in this matter constitutes contempt of this Court.
There is no doubt that the Credit Union had actual notice of the debtor's petition in bankruptcy and of the automatic stay before it continued to make transfers from the debtor's share draft account to the loan account with the Credit Union. There is no question that at the time the Credit Union made...
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