In Re L.H. & A. Realty, Inc.

62 B.R. 910, 15 Collier Bankr. Cas. 2d 144, 1986 Bankr. LEXIS 5711
CourtUnited States Bankruptcy Court, D. Vermont
DecidedJuly 10, 1986
Docket19-10046
StatusPublished
Cited by17 cases

This text of 62 B.R. 910 (In Re L.H. & A. Realty, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Vermont primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re L.H. & A. Realty, Inc., 62 B.R. 910, 15 Collier Bankr. Cas. 2d 144, 1986 Bankr. LEXIS 5711 (Vt. 1986).

Opinion

FRANCIS G. CONRAD, Bankruptcy Judge.

Because this debtor has obdurately continued for over six months to disregard orders of this Court requiring it to turn over to the trustee money that belongs to the estate, we are now left with no choice but to hold the debtor in civil contempt and to attempt to coerce compliance with our turnover orders.

I

The debtor, L.H. & A. Realty, Inc., owned and managed the New Avenue Hotel in St. Johnsbury, Vermont. On November 15, 1985 the debtor, turning for protection to the Bankruptcy Code, filed a petition under Chapter 7. The bank that held a mortgage on the hotel promptly filed a motion for relief from the automatic stay of 11 U.S.C. section 362(a). On December 18, 1985, at the hearing on the bank’s motion, Mr. Louis Ferris, Jr., son of the debt- or’s president and either an officer, employee, or agent of the debtor’s, testified that he had received, on the debtor’s behalf, five thousand dollars ($5000.00) from a Mr. Arnold Budish as a deposit for the sale of the New Avenue Hotel. This deposit, like the hotel itself, is manifestly property of the estate under 11 U.S.C. section 541.

Mr. Ferris purported not to understand that he had no authority to sell the assets of the estate, but his demeanor and attitude on the witness stand suggest to us that he was being less than candid about the scope of his comprehension. Indeed, neither the debtor nor Mr. Ferris himself is a stranger to bankruptcy, having each filed in this Court before in 1982.

*911 In any event, if there is room for doubt about whether the debtor was aware of the impropriety of accepting money for the sale of estate property, there is no doubt the debtor is aware of the wrongfulness of retaining this money. At the hearing on December 18, 1985, we ordered from the bench that the debtor turn the $5000.00 deposit belonging to the estate over to the trustee, as required by 11 U.S.C. sections 521(4) and 542(a). We repeated the Order on January 28, 1986 in our written decision granting the bank relief from stay to pursue foreclosure against the hotel that Mr. Ferris had tried to sell to Mr. Budish. In re L.H. & A. Realty Company, Inc., 57 B.R. 265, 270 (Bkrtcy.D.Vt.1986).

On March 3, 1986, we held a hearing on the debtor’s application to convert the case from Chapter 7 to Chapter 11. At this hearing, we again ordered the debtor to turn the deposit over to the trustee within three days. Although no representative of his client chose to attend, the debtor’s attorney represented that he understood and would seek to secure compliance with our turnover Order. We granted the debt- or’s application to convert on March 7th.

On March 25th, we held a hearing on a motion by the Chapter 7 trustee to hold the debtor in contempt for failing to relinquish the $5000.00 and on separate motions by two creditors for appointment of an independent trustee now that the case had been converted to a case in Chapter 11. We granted the motions to appoint a trustee and directed the trustee in Chapter 7 to continue to serve as trustee in the converted case. The trustee’s motion for contempt is the subject of this decision.

Over six months have elapsed since our original Order to the debtor on December 18th of last year to turn the $5000.00 the debtor received as a deposit on the sale of estate property over to the trustee. We have since reiterated the Order several times to no avail. Despite the representations of debtor’s counsel at the several hearings, the money remains in the possession of the debtor or its agent. At some point, patience, tolerance, and the accorded benefit of every doubt must yield in the face of unequivocal orders repeatedly ignored. By the most generous standard, this debtor’s protracted refusal to comply with a legitimate directive of this Court to surrender money to which the debtor has no claim constitutes willful contempt. The debtor’s recalcitrance leaves us no alternative except to grant the trustee’s motion to hold the debtor in civil contempt.

II

Difficulties in interpreting the decision in Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (“Marathon ”) and the Bankruptcy Amendments and Federal Judgeship Act of 1984 (“1984 amendments”) have raised doubts about our authority to issue an order of civil contempt. Compare Martin-Trigona v. Shiff, 702 F.2d 380, 383-84 (2d Cir.1983) (Marathon raises doubts about constitutionality of power of civil contempt conferred on bankruptcy courts by 28 U.S.C. section 1481); In re Magwood, 785 F.2d 1077, 1078 (D.C.Cir.1986) (with apologies to all, declining to resolve the issue). In view of this uncertainty, several bankruptcy courts have elected to submit proposed findings of fact and conclusions of law to the district court rather than entering a final contempt order themselves. See In re Taylor, 59 B.R. 197, 200-01 (Bkrtcy.M.D.La.1986); Matter of Kalpana Electronics, Inc., 58 B.R. 326, 335 (Bkrtcy.E.D.N.Y.1986); In re Crabtree, 47 B.R. 150, 155, 12 B.C.D. 1043 (Bkrtcy.E.D.Tenn.1985). With all due respect to their circumspection and restraint, we cannot shy away from what we perceive to be our judicial responsibility to decide, subject to review on appeal, problematical, pivotal, or controversial questions of law.

Like many courts, this Court had in the past taken for granted the power to hold a party in civil contempt. In re Barrup, 51 B.R. 318, 319-20 (Bkrtcy.D.Vt.1985). See also, e.g., In re Northeastern International Airways, Inc., 56 B.R. 247, 248 (S.D.Fla.1986) (taking for granted that a violation of *912 the automatic stay places the creditor in contempt of the bankruptcy court).

The power of civil contempt inherent in the judicial responsibilities of the bankruptcy judge is recognized by statute, 11 U.S.C. section 105(a), by rule, Bankruptcy Rule 9020, 1 and has been acknowledged or simply assumed to subsist in various non-Article III tribunals. Congress has safeguarded the constitutionality of the bankruptcy court’s circumscribed contempt power by making the power contingent on the reference of bankruptcy cases and proceedings from the district court, 28 U.S.C. section 157(a) and (d), confining it to orders issued within core proceedings, 28 U.S.C. section 157(c)(1), and subjecting it to appellate review by the federal judiciary, 28 U.S.C.

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62 B.R. 910, 15 Collier Bankr. Cas. 2d 144, 1986 Bankr. LEXIS 5711, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-lh-a-realty-inc-vtb-1986.