Valentine v. Valentine (In re Valentine)

• Decision Date: 27 January 2020
• Docket Number: Case No. 19-40593-705,Adv. No. 19-04022-705
• Citation: 611 B.R. 622
• Parties: IN RE: Jody K. VALENTINE, Debtor. Jody K. Valentine, Plaintiff, v. Christine Valentine and Eric Wulff, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Missouri

611 B.R. 622

IN RE: Jody K. VALENTINE, Debtor.Jody K. Valentine, Plaintiff,

v. Christine ValentineandEric Wulff, Defendants.

Case No. 19-40593-705

Adv. No. 19-04022-705

United States Bankruptcy Court, E.D. Missouri, Eastern Division.

Entered January 27, 2020

Andrew R. Magdy, St. Louis, MO, for Plaintiff.

Greg A. Luber, St. Charles, MO, Jeffrey R. Schmitt, St. Louis, MO, for Defendants.

AMENDED MEMORANDUM OPINION

CHARLES E. RENDLEN, III, U.S. Bankruptcy Judge

Domestic disputes that end up in bankruptcy court rarely end up there consensually, without great frustration from all parties, or with any party having followed every rule and law exactly. The instant Adversary Proceeding is no different. This is one of those very difficult situations that the Bankruptcy Code explicitly sought to avoid by outlining what narrow domestic issues may continue in state court without permission from the federal system.⁺

If ordinarily, the "plaintiff is the master of his complaint," in this Adversary Proceeding, the creditor is the conductor of the collection effort. Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc. , 535 U.S. 826, 831, 122 S.Ct. 1889, 153 L.Ed.2d 13 (2002) (internal quotation marks omitted). The collection effort is the name of the train racing down the tracks of the court system; the engine is the debt—the driving force pulling the train—with the creditor ideally monitoring the internal forces and external barriers to the progress of the train. Each additional motion or pleading filed in a collection effort is yet another boxcar on the train. In this Adversary Proceeding, the collection effort barreled down the tracks of the State Court when the Defendants added another boxcar, and the external barrier, an automatic stay, was erected. Somewhere along the way the Defendants claim to have bailed out leaving a runaway collection effort train. At the very least, the Defendants were asleep at the switch, because the collection effort train blew through the barrier without even a warning whistle. The Defendants claim to have just stood by and watched as justice derailed resulting in the Debtor's incarceration.

Christine Valentine (the "Former Spouse") and Jody Valentine (the "Debtor") are divorced from one another. Eric Wulff (the "Attorney" together with the Former Spouse, the "Defendants", together with the Debtor, the "Parties") represented the Former Spouse at a hearing as domestic counsel on February 4, 2019 where the Attorney prevailed for his client and drafted an order, which the state court judge signed, confining the Debtor to the custody of St. Louis County for transferring control of the Real Estate by filing bankruptcy (the "Order & Commitment"). Order & Commit[ ]ment, Valentine v. Valentine , Case No. 10SL-DR00231-02 (Mo. Assoc. Cir. Ct. Feb. 4, 2019) vacated by Disposition—Preemptory Writ Issued, State ex Jody Valentine Relator v. Julia Childrey Respondent , Case No. ED107588 (Mo. App. E.D. Feb. 27, 2019). There is not a clean and tidy picture of what happened on the fateful February 4 date, because the proceeding resulting in the Debtor's incarceration took place without any official record for this Court to reference. However, the hearing took place after the Debtor filed for bankruptcy protection. The hearing was the progression of a collection effort commenced by the Former Spouse through her agent, the Attorney, seeking payment on a debt incurred prepetition. The hearing did not fall into any of the very narrow exceptions to the automatic stay, nor was it immediately continued or held in abeyance. Ultimately, the Order & Commitment issued, containing language requiring payment of a Pre-Petition Debt for his release. All of these collection efforts led to the Adversary Proceeding before the Court.

The Court deems the Debtor's request for relief as a request for a declaratory judgment in his favor and actual damages and punitive damages for violations of the automatic stay.

For the reasons set forth herein, the Court FINDS in favor of the Debtor that both the Former Spouse and the Attorney willfully violated the automatic stay, and therefore the Court will enter a separate judgment in favor of the Debtor in conformity with this Opinion.

I. FACTS

A. The Pre-Petition State Court Action

Debtor and Former Spouse dissolved their marriage on October 1, 2013 in the Circuit Court of St. Louis County, St. Louis, Missouri (the "State Court") in the case number 10SL-DR00231-02 (the "State Court Action"). In March 2017, the Debtor filed in the State Court Action a Motion to Modify his domestic support obligations. Between March 2017 and January 2018, several Motions for Contempt were filed in the State Court Action by the Former Spouse through her counsel, the Attorney. All of the Motions for Contempt sought to collect funds from the Debtor previously ordered.

In January 2018, the Former Spouse's Motion for Contempt was heard and sustained at that time. The State Court entered an order, holding the Debtor in contempt of court for not paying past due support obligations (the "January 2018 Contempt Order") in the amount of $22,253.73 for child support and $41,750.00 for maintenance with interest accruing (the "Pre-Petition Debt"). The State Court, in the January 2018 Contempt Order required that the Debtor sell his house located at 747 Castle Tower Drive, Ellisville, Missouri (the "Real Estate") by March of 2018 and use the proceeds to satisfy the Pre-Petition Debt.

In the State Court Action, on the same day but by separate order, the State Court dismissed the Debtor's pending request to modify his domestic support obligations (the "Dismissal Order"). As part of the Dismissal Order, the State Court stated that should the Debtor fail to place the Real Estate on the market by March 1, 2018 a warrant would issue for the Debtor's arrest.

Although the Debtor marketed the Real Estate, the Debtor did not sell the Real Estate. In June 2018, the Attorney, on behalf of the Former Spouse, moved to appoint a real estate commissioner to force the sale of the Real Estate. Accordingly, on August 28, 2018, the State Court appointed a real estate commissioner to sell the residence, and the State Court stated in the same order that the Debtor was found in continued contempt for failing to sell the Real Estate and continuing failure to pay the Pre-Petition Debt.

On December 28, 2018, the State Court approved the sale of the Real Estate proposed by the real estate commissioner. On January 7, 2019, the Debtor filed with the Missouri Court of Appeals an appeal of an order related to the sale, which under Missouri law clouded the title. The proposed buyers of the residence then backed out of the sale.

On January 29, 2019, the Former Spouse filed a Second Motion for Contempt in the State Court Action, seeking the State Court to set a Show Cause Hearing, award the Former Spouse contempt sanctions against the Debtor for the Debtor's failure to sell the Real Estate, remit the proceeds from the sale of the Real Estate for payment on the Pre-Petition Debt, assess reasonable fees for the Attorney's efforts, and continue to hold the Debtor in contempt of court until the Debtor fully complied (the "Second Motion for Contempt"). An Order to Show Cause issued; the Show Cause Hearing was set for February 4, 2019.

From March 2018 to January 2019, the Debtor filed multiple documents with the State Court representing that he was too poor to afford certain filing fees. It is not clear from the record what standard the State Court uses to assess such a status, but the Debtor was denied in forma pauperis status at least once during that period.

B. The Post-Petition State Court Incarceration

Debtor commenced a case for bankruptcy relief under Chapter 7 of Title 11 of the United States Code (the "Bankruptcy Code"¹ ) docketed as 19-40593-705 (the "Main Case") on February 1, 2019 (the "Petition Date"). On the Petition Date, the Debtor still owned and resided in the Real Estate. In the bankruptcy schedules filed with the Court, the Debtor asserted the value of the Real Estate to be $450,000.00; the Debtor further asserted that the Real Estate was subject to liens in the amount of $312,255.75 [Doc. No. 18].

Upon filing of the Main Case, all assets of the Debtor created a separate estate (the "Estate"). 11 U.S.C. § 541. Kristin Conwell was appointed Chapter 7 Trustee (the "Trustee") to administer the Estate [Doc. No. 5]. An injunction prohibiting continued collection efforts of pre-petition debts entered contemporaneously upon commencement of the Main Case. 11 U.S.C. § 362(a).

On the Petition Date, in the State Court Action, the Bankruptcy Counsel for the Debtor, Andrew Magdy, (the "Bankruptcy Counsel") filed Suggestions of Bankruptcy. The Bankruptcy Counsel for the Debtor also called the Attorney on the same day and left a voice message regarding the commencement of the Main Case.

On February 4, 2019, the Bankruptcy Counsel and the Debtor attended the hearing on the Second Motion for Contempt and regarding the continuation of the collection efforts on the Pre-Petition Debt brought by the Former Spouse and Attorney in the State Court Action (the "February 4, 2019 Hearing").

The Bankruptcy Counsel and the Attorney spoke shortly before the February 4, 2019 Hearing commenced. The Attorney accepted the Bankruptcy Counsel's statements that the Debtor had in fact commenced the Main Case, but the Attorney did not believe the Main Case impacted the Attorney's intentions for the February 4, 2019 Hearing. The Attorney is a long-time practitioner in domestic law, and he does not appear in front of the Court with any regularity. The Attorney does not claim any familiarity with the Court or the Bankruptcy Code.

The Attorney did not require the Former Spouse to attend, nor did the Attorney require the real estate commissioner to attend. The Attorney also accepted the article from the Bankruptcy Counsel which discussed the possible ramifications for incarceration on a prior contempt...