Matter of Raymond Const. Co. of Florida, Inc., 80-463 C.
| Decision Date | 21 October 1980 |
| Docket Number | No. 80-463 C.,80-463 C. |
| Parties | In the Matter of RAYMOND CONSTRUCTION COMPANY OF FLORIDA, INC., Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida |
Jay Molyneaux, Sarasota, Fla., for debtor.
David Gorman, St. Petersburg, Fla., trustee.
Harley Riedel, Tampa, Fla., for trustee.
ORDER ON APPLICATION TO DETERMINE ORDER OF CIRCUIT COURT NULL AND VOID AND ORDER DISMISSING CONTEMPT PROCEEDING
THIS IS a liquidation case and the matters under consideration are two applications filed by the Trustee of the estate. The first seeks a determination by this Court that an order entered by the State Court is null and void. The second seeks to impose punishment for contempt against the Pinellas State Bank (the Bank) who was the Defendant in the State Court action.
In order to put the issues raised by the two Applications in proper focus, it should be helpful to summarize briefly the sequence of relevant events which have significant and controlling impact on the merit of the two Applications under consideration.
Prior to the institution of a voluntary liquidation proceeding, Raymond Construction Company of Florida, Inc. dba Morkay Construction (the Debtor) filed a suit against the Bank in the Circuit Court for Pinellas County, Florida, Civil Case No. 80-154-11. The suit was filed by attorney Raymond C. Conklin, on behalf of the Debtor. In December of 1979, after the case became at issue, the Bank commenced discovery and on March 30, 1980 propounded a set of interrogatories to the Debtor which were to be answered by the Debtor under the Florida Rules of Civil Procedure, § 1.340, by April 20, 1980.
On April 9, 1980, the Debtor filed its voluntary petition pursuant to § 301 of the Bankruptcy Code. On April 10, 1980, David Gorman was appointed as Interim Trustee for the estate of the Debtor pursuant to § 702 of the Bankruptcy Code. The Debtor failed to answer the Bank's interrogatories and on April 22, 1980 the Bank moved in the State Court for the imposition of sanctions against the Debtor for its failure to respond to the interrogatories pursuant to Florida Rules of Civil Procedure 1.380(b)(2)(A), (B) and (C). According to the certificate of mailing, a copy of the Motion was served by mail on Mr. Conklin, counsel of record who originally filed the suit on behalf of the Debtor. It was not, however, served on the Interim Trustee.
The record further reveals that on April 30, 1980, the Circuit Court held a hearing on the Bank's Motion for Sanctions at which time the original counsel for the Debtor advised the Circuit Court of the pendency of the bankruptcy proceeding. Thereafter, on May 9, 1980, the Circuit Court issued, on its own motion, an Order to Show Cause directing the Debtor, "by and through its Trustee in bankruptcy" (sic) to appear before the Circuit Court on June 3, 1980 and show cause why the Trustee should not be substituted as the proper party "to bring claims on behalf of the Debtor or in the alternative, why the complaint should not be dismissed for failure to respond to the Bank's interrogatories." It further appears that this Order to Show Cause was mailed to the Trustee, David Gorman.
On May 23, 1980, the Trustee filed an Application for Leave to Employ Counsel and on the same date, this Court authorized the Trustee to employ Harley E. Riedel of the law firm of STICHTER & RIEDEL, P.A. as counsel.
On June 3, 1980, the Circuit Court entered an order which, after having found that "no cause has been shown by the Plaintiff" (emphasis supplied) dismissed the complaint. The Order of Dismissal is silent concerning whether the dismissal was with or without prejudice.
It further appears that on June 6, 1980, counsel for the Trustee filed a "Suggestion of Bankruptcy" in the State Court proceeding and on June 13, 1980, filed an "Application for Removal" pursuant to 28 U.S.C. § 1471 and Local Bankruptcy Rule 7004. In due course, the Bank filed a Response to the Application. On July 22, 1980, this Court entered its order treating the Bank's response as an objection to the removal and sustained that objection and remanded the case to the Circuit Court.
This is the procedural background of the matters under consideration presented by the two Applications filed by the Trustee. It is the Trustee's contention that by virtue of the automatic stay imposed by the Bankruptcy Code, § 362, all actions against the Debtor were prohibited and any party who commences or continues any action against the Debtor or against any property of the Debtor, violates the automatic stay and should be punished for contempt. In addition, so contends the Trustee, any action taken in a pending lawsuit after the institution of the bankruptcy proceeding should be declared to be null and void.
Considering the matter of contempt first, it is well to state at the outset that a willful violation of the automatic stay may subject punishment for contempt of court. This was true even before the adoption of the Code. Thus, in case of Fidelity Mortgage Investors Co. v. Camelia Builders, Inc., 550 F.2d 47 (2d Cir. 1976), cert. den., 429 U.S. 1093, 97 S.Ct. 1107, 51 L.Ed.2d 540 reh. den., 430 U.S. 976, 97 S.Ct. 1670, 52 L.Ed.2d 372, the attorneys for the party who disregarded the prohibition of the automatic stay imposed by Bankruptcy Rule 11-44 were fined $25,000 for filing a complaint in a State Court after the commencement of the arrangement proceeding against a Debtor involved in an arrangement proceeding. The fine imposed was sanctioned by the Court of Appeals for the Second Circuit even though the attorneys who filed the suit were never notified officially of the pendency of the bankruptcy proceeding, but only learned of that proceeding from an article published by the Wall Street Journal.
There is hardly any question that the protection provided by the automatic stay provision of the Bankruptcy Code, § 362, is far broader in scope and in reach than the similar provisions found in the Bankruptcy Rules. Bankruptcy Rules 401, 601, 10-601, 11-44, and 12-43. This should be apparent from the very detailed and extensive specifications set forth in § 362 of the Bankruptcy Code.
In order to support the charge that the Bank violated the automatic stay, the Trustee relies on clause (3) of § 362 of the Bankruptcy Code which provides as follows:
It is the contention of the Trustee that the complaint which was then pending in the Circuit Court was a chose of action; that by virtue of § 541 of the Bankruptcy Code, it became the property of the estate and property in custodia legis as of the date of the commencement of the bankruptcy proceeding; and any action, direct or indirect, which was designed to affect that property would be a violation of the automatic stay and in contempt of court provided the party charged with violation had knowledge of bankruptcy. In re Hailey, 23 C.B.C. 89, 621 F.2d 169 (5th Cir. 1980).
The conduct complained of was obviously not "an action to obtain possession of property of the estate or of property from the estate" by the Bank. The only act undertaken by the Bank after the commencement of the bankruptcy proceeding was filing of a motion in which the Bank sought to impose sanctions on the Debtor for its failure to comply with the applicable rules of discovery in the lawsuit then pending in the State Court. This, of course, presents a completely different picture from the one involved in the case of Fidelity Mortgage Investors Co., supra where the attorneys sought to impose a lien on the property of a debtor who was involved in an arrangement proceeding. That, of course was an obvious violation of the automatic stay imposed by Bankruptcy Rule 11-44. Even assuming, without admitting, that filing a motion for sanctions after the commencement of a bankruptcy case against a debtor could be considered to be a conduct which falls within the prohibitive parameter of § 362(a)(3) of the Bankruptcy Code, the record still fails to establish that the Bank was guilty of contempt for the following reasons:
There is no evidence before ...
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