Alley Cassetty Companies, Inc. v. Wren

502 B.R. 609, 70 Collier Bankr. Cas. 2d 1, 2013 WL 6502873, 2013 U.S. Dist. LEXIS 114294
CourtDistrict Court, N.D. Georgia
DecidedJuly 22, 2013
DocketCivil Action No. 2:12-CV-196-WCO
StatusPublished
Cited by2 cases

This text of 502 B.R. 609 (Alley Cassetty Companies, Inc. v. Wren) is published on Counsel Stack Legal Research, covering District Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Alley Cassetty Companies, Inc. v. Wren, 502 B.R. 609, 70 Collier Bankr. Cas. 2d 1, 2013 WL 6502873, 2013 U.S. Dist. LEXIS 114294 (N.D. Ga. 2013).

Opinion

ORDER

WILLIAM C. O’KELLEY, Senior District Judge.

The captioned case is before the court on appeal from the following two orders of the bankruptcy court: 1) finding appellant in contempt of the automatic stay; and 2) awarding $2,500 in attorney’s fees as actual damages to appellees. Appellant has also filed a motion to stay the appeal and to remand to the bankruptcy court for further proceedings [5].

I. Factual Background

Appellant was hired by Hard Rock Pav-ers, LLC (“Hard Rock”), a subcontractor that did brick paving for a public works project (the “Project”) to provide bricks for the Project. Appellant extended credit to Hard Rock with Kevin Wren’s personal guaranty.

On May 1, 2011, Kevin Wren (“Wren”) filed a Chapter 13 bankruptcy, which was later converted to Chapter 7. On May 24, 2011, appellant hired Isenberg & Hewitt, P.C. (“Isenberg & Hewitt”) to collect the amounts due from Hard Rock to appellant. Isenberg & Hewitt sent a letter to Hard Rock and its owner, Wren, demanding payment of the balance owed on the account together with accrued interest (the “Demand Letter”). On June 6, 2011, a demand on the bond was sent to the bonding company and the general contractor of the Project.

Having received no notice of the bankruptcy or a response to the Demand Letter, appellant filed a state court lawsuit against Hard Rock, Wren, and Hartford Insurance Company, the bond insurer, on June 27, 2011. On June 29, 2011, Isenberg & Hewitt received a letter from Wren’s counsel that included a notice of the bankruptcy. On June 30, 2011, Isenberg & Hewitt notified Wren’s counsel, in writing, that no further action would be taken in pursuit of the debt against Wren in the state court and asked that he notify the state court of the bankruptcy. Subsequently, on June 30, 2011, Wren responded, demanding that the case against him be dismissed by the end of the week. Wren also sent a suggestion of bankruptcy to the state court.

On July 15, 2011, Wren filed a motion for contempt of the automatic stay in the bankruptcy court. On August 10, 2011, a [612]*612hearing was held on the contempt motion (the “Contempt Hearing”). On February 6, 2012, the bankruptcy court entered an order finding appellant in contempt and allowing Wren to recover reasonable attorney’s fees as actual damages. Wren’s counsel, Douglas Jacobson (“Jacobson”), filed an affidavit in support of Wren’s claim for attorney’s fees in the amount of $3,915, and appellant filed its objections. On June 27, 2012, the bankruptcy court held a hearing to determine the amount of attorney’s fees (the “Fee Hearing”). On June 28, 2012, the bankruptcy court entered an order awarding $2,500 in attorney’s fees incorporating the reasons announced in the record at the hearing.

II. Legal Analysis

This court has jurisdiction of this appeal pursuant to 28 U.S.C. § 158(a). The court must accept the bankruptcy court’s findings of fact unless they are clearly erroneous. Equitable Life Assurance Soc’y v. Sublett (In re Sublett), 895 F.2d 1381, 1383 (11th Cir.1990). The bankruptcy court’s conclusions of law, however, must be reviewed de novo. Id. “Although [a] review [of] the court’s grant or denial of civil contempt in bankruptcy proceedings [is based on an] abuse of discretion [standard], ... less deference [is applied] in the context of an automatic stay violation.” Jove Eng’g, Inc. v. I.R.S., 92 F.3d 1539, 1546 (11th Cir.1996).

Appellant argues that the bankruptcy court erred in finding appellant in contempt of the automatic stay. Appellant contends that no automatic stay violation had occurred because it took no further action against Wren in the state court. Appellant explains that it was sufficient that the case against Wren was stayed pending its ability to determine how to proceed given that it could not unilaterally dismiss one party, and a dismissal of the entire complaint could affect its right to recover on the payment bond.

The statute at issue is § 362(a)(1) of the Bankruptcy Code, which automatically stays:

the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title.

11 U.S.C. § 362(a)(1). In addition, 11 U.S.C. § 362(k)(l) provides, in pertinent part, that “an individual injured by any willful violation of a stay ... shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”

The plain language of this statute prohibits the commencement or continuation of judicial actions once a bankruptcy petition is filed. In this circuit, “[a]ctions taken in violation of the automatic stay are void and without effect.” Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir.1982). See also Albany Partners, Ltd. v. Westbrook, Jr., 749 F.2d 670, 675 (11th Cir.1984). “Regardless of whether [appellant] received notice of [Wren]’s pending bankruptcy petition, the automatic stay was in effect.” Cyrus v. Wells Fargo Bank, N.A., No. 1:12-CV-01156-TWT-LTW, 2013 WL 869398 (N.D.Ga. Feb. 7, 2013). “Since the automatic stay is effective against the world, regardless of notice, acts in violation of the stay are automatically void ab initio.” In re Peralta, 317 B.R. 381, 389 (9th Cir. BAP 2004). See also Wombles v. Hagans, No. 3:12-cv-532, 2012 WL 5512336, at *3 (M.D.Ala. Nov. 14, 2012) (holding that “even actions taken [613]*613without notice of the bankruptcy are void ab initio.”); S. Dallas Water Auth. v. Guarantee Co. of N. Am., 767 F.Supp.2d 1284, 1297 (S.D.Ala.2011) (holding that “[i]t is the law in this Circuit that actions taken in violation of the automatic stay are void and without effect .... even though [the creditor] did not have notice of [the debtorfs bankruptcy at the time it initiated [an] action in state court.”). Accordingly, appellant’s filing of the state court lawsuit was in violation of the automatic stay and is void. It is not disputed, however, that the filing was not a willful violation because appellant had no notice of the bankruptcy stay at the time of filing.

Once appellant was notified of the bankruptcy stay, “§ 362(a) imposes an affirmative duty to discontinue post-petition collection actions.” Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 (9th Cir.2002). “If a creditor acts without knowledge of the bankruptcy in violation of the automatic stay it must affirmatively act immediately to restore the pre-violation status quo.” S.

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Bluebook (online)
502 B.R. 609, 70 Collier Bankr. Cas. 2d 1, 2013 WL 6502873, 2013 U.S. Dist. LEXIS 114294, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alley-cassetty-companies-inc-v-wren-gand-2013.