United States Bankruptcy Judge Bill Parker of the Eastern District of Texas issued JUDGMENT against a creditor in one of our adversary proceedings finding that posting a sign concerning the pre-petition debt owed by the Debtor constituted a willful violation of the stay. Worse for the creditor was the fact that the Court found that the creditor should pay actual and punitive damages of $21,820.00.
In James Bradley Collier v. Paul Hill the Court found that Hill's Mobile Home Parts & Service sold various mobile home parts and materials to Brad Collier prior to Mr. Collier filing a Chapter 13 bankruptcy, and Mr. Collier owed Paul Hill a pre-petition debt of $984.23.
Initial errors by Mr. Collier and the Bankruptcy Court failed to provide actual notice to Paul Hill and his company, Hill's Mobile home Parts & Service. However, after confirmation by Paul Hill that Brad Collier had filed Chapter 13 bankruptcy, Paul Hill engaged in two improper acts in violation of the automatic stay. First, he retained Josh B. Maness to represent him in regard to collection of the pre-petition claim. Mr. Maness sent a letter to Brad Collier's bankruptcy attorney, Jean H. Taylor, confirming the bankruptcy, yet demanding the full balance of the pre-petition debt. Misstatements were made in the letter that Mr. Maness attributed to an unfamiliarity as to how to use the Bankruptcy Court's PACER/ECF system. Regardless, the Court found the letter constituted a willful violation of the automatic stay issued in Mr. Collier's Chapter 13 bankruptcy because no good faith defenses are allowed as to stay violation. The Court concluded this "ill-informed conclusion based upon an insufficient investigation" was "not a technical violation based upon an innocent mistake" as "[t]his is precisely the type of behavior that the automatic stay is intended to preclude".
Based on the letter alone, litigation was not initiated. Jean Taylor contacted Josh Maness and informed him that his assumptions as stated in the letter were incorrect.
Second, and more concerning, Paul Hill and his company posted a large sign near a major intersection of US Highway 80 and FM 2199 in Scottsville, Texas, not far from where Brad Collier, his family, his friends, and his employer lived and worked, which read - "BRAD COLLIER OWES ME $984.23 WILL YOU PLEASE COME PAY ME!" (Emphasis in original). It is unclear if Mr. Maness encouraged the sign to be posted by Paul Hill, but he did continue to represent Mr. Hill in his refusal to remove the sign. It remained posted in public view for a period of 21 days, and Paul Hill only agreed to remove the sign at the hearing scheduled by the Bankruptcy Court on Brad Collier's requested expedited hearing for an injunction.
Following the precedent of the 5th Circuit Court of Appeals in Campbell v. Countrywide and In re Chesnut, the Bankruptcy Court found the sign constituted a willful violation of the automatic stay pursuant to 11 U.S.C. § 362(k).
Paul Hill vigorously contended that the posting of the Scottsville sign did not constitute a violation of the automatic stay, "[n]otwithstanding the actual languageusd in the sign" because it was not posted to collect a debt but rather "to inform the public that Collier wouldn't pay his debts and not to give him any credit". Mr. Hill testified that he had already "written off the debt" and that the threat of a judgment and the sign were intended to create embarrassment for Mr. Hill.
The Court found that "[w]hile embarrassing the Debtor in their shared community was certainly a motive of the Defendant, the Court finds that such a motive had an objective - to coerce the Debtor into paying his debt".
Mr. Hill contended throughout the litigation that the directive on the sign -- "WILL YOU PLEAS COME PAY ME!" - did not constitute an effort to collect a debt because there was no question mark at the end of the sentence. However, the Court found that the use of an exclamation mark in lieu of a question mark demonstrated that the opposite was true. "The exclamation mark transforms the sentence into a directive, which demands that the Debtor pay the debt." The Court further found that the Bankruptcy Code was clear. "Any effort, action, or demand by a creditor to collect a pre-petition debt violates the automatic stay".
Regardless of the stay violation, Paul Hill contended that he could not be sanctioned for his action of posting the sign because of his entitlement to exercise his free speech right under the First Amendment to the United States Constitution, citing Turner Advertising Co. v. National Serv. Corp. (In re National Serv. Corp.), 742 F.2d 859 (5th Cir. 1984). Since the Scottsville sign constituted free speech, Hill through his counsel contended, it could not be curtailed by 11 U.S.C. §§ 362(a) and (k).
As to this argument the Court found:
"While there are certainly components of speech involved in virtually every expression offered about the filing of a bankruptcy case, the automatic stay and the restrictions contained therein focus not upon speech but rather upon the restraint of actions -- actions that threaten the core objectives of the Bankruptcy Code and the judicial system designed to achieve those objectives. It proscribes conduct — conduct that threatens the “breathing spell” and the “fresh start” to which an honest debtor under this system is entitled as it fulfills the duty of full disclosure of its assets and liabilities — as well as conduct that threatens the efficient marshaling of those assets in order to insure a fair and equitable distribution to creditors. The scope of the automatic stay may at times incidentally impact free speech, but those isolated intrusions are justified in order to accomplish the significant governmental interest in providing uniform bankruptcy laws and an effective means by which to implement them".
Paul Hill's decision to continue with the sign and stating it was intended to embarrass Mr. Collier might have proved fatal. The Court awarded actual and punitive damages of $21,820.00 as against Mr. Hill.
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Posted by: dulasculley | January 30, 2010 at 04:11 AM