In re Peterson, Case No. 01-40379 (Bankr. W.D.N.C., March 21, 2003)(Hodges) - The debtor brought a motion for sanctions against creditor, Chevy Chase Bank, for violation of the automatic stay. The court found the maintenance of the claim for sanctions to be vexatious where the violation was not willful, but resulted from "innocent clerical error," and the court therefore assessed sanctions against debtor's counsel.

In re Blountstown Health Investors, LC, Case No. 00-51128 (Bankr. W.D.N.C. Jan. 3, 2003)(Whitley) - Motion of Debtor for Determination of Application of Automatic Stay and for Permanent Injunction for refusal of the Florida Agency for Health Care Administration (AHCA) to renew the Debtor's nursing home license unless it first obtained liability insurance coverage. This Court held that this refusal did not violate 11 U.S.C. § 362 because it clearly fell within the police or regulatory powers exception to the automatic stay. See 11 U.S.C. § 362(b)(4). In addition, there was a failure of process and of service of process because: (1) the Debtor proceeded by motion rather than adversary proceeding and (2) AHCA was not properly served. As such, in personam jurisdiction did not lie.

In re Bock, Bank W.D.N.C. January 24, 2002(Whitley) - An attorney's duty of candor to the tribunal mandates he disclose the fact that he knew the defendant he was prosecuting had been given a discharge in bankruptcy, even when the defendant herself did not raise it to the court. Creditors' prosecution in a state court action of a debtor who had been discharged in bankruptcy was a violation of the 362 automatic stay and merits sanctions. State court lacked subject matter jurisdiction to determine dischargeability under section 523 when this Court already granted debtor a discharge.

In re Newkirk, Bank W.D.N.C. February 8, 2002(Whitley) - An attorney's acceptance of post-dated checks for services in filing a chapter 7 petition puts the attorney in the position of a creditor, thus creating a conflict of interest. Further, cashing these checks post-petition is a violation of the automatic stay. Further, attorney's failure to communicate by not returning client's phone calls is grounds for sanctions.

In re Perry M. Alexander Construction Co., Bankr. W.D.N.C. Sept. 7, 2001(Hodges) - Relief from stay was merited in this case where it appeared the Chapter 11 debtor had no prospect for successful reorganization and had used cash collateral unlawfully.

In re Barnes, Case No. 00-50829) (Bankr. W.D.N.C. Jan. 29, 2001)(Whitley) - Secured creditor repossessed Debtors' vehicle post-petition. Creditor claimed that it did not have notice of the bankruptcy because notice of the bankruptcy was sent to the creditor's physical address, not mailing address. The Court disagreed with the creditor's contention and held that the creditor wilfully violated the automatic stay. In addition to awarding compensatory damages for the male debtor's physical injuries and backpay, the Court struck the secured creditor's claim in the Debtors' Chapter 13 Plan and canceled the creditor's lien.

In re Jordan, Case No. 00-31161 (November 7, 2000)(Hodges) - Debtor's confirmed Chapter 13 plan contained a provision stating that "debtor will be allowed six months from date of confirmation to sell property, and debtor will not be required to make regular payments pending sale." This provision was placed in parentheses next to the listing of Citifinancial as the holder of a secured claim on real property. Citifinancial filed a motion for relief from the automatic stay to foreclose on the property encumbered by its deed of trust. The debtor objected to this motion based on the res judicata effect of the plan provision preventing modification of the automatic stay. The court granted Citifinancial's motion finding that the confirmed plan was inconsistent with the Bankruptcy Code and did not provide Citifinancial with sufficient notice under the Fifth Amendment that its security interest was affected in the debtor's plan.

IN RE DONNA GIAIMO EMORY, Case No. 99-40608 (Bankr. W.D.N.C. Sept. 14, 2000)(Whitley) - Chapter 13 debtor sought sanctions against creditor CIT, which held a lien on her 1997 Winnebago. The debtor listed the vehicle in the "Property to be Surrendered" section of the standard plan summary form, along with a notation - "Surrender in Full Satisfaction of Debt." The vehicle was surrendered and sold, and CIT filed a deficiency claim. CIT also sent the debtor a receipt accounting for the sale under NCGS 25-9-504(2). The debtor alleged that the receipt violated the automatic stay and that CIT's deficiency claim violated her plan under principles of res judicata. However, the Court held the receipt did not seek payment and was not a wilful stay violation under In re Hamrick, 175 B.R. 890 (WDNC 1994). Also, the debtor's attempt to deny CIT a deficiency claim was invalid in that use of a nonstandard notation inserted into the plan form denied the creditor due process. The debtor in effect attempted to value the creditor's lien without a proper motion and hearing under Bankr. Rule 3012.

IN RE BEAM, Case No. 97-50520 (Bankr. March 24, 1998), aff'd, 5:98CV44-V (W.D.N.C. June 28, 2000)(Whitley) - The U.S. District Court (Voorhees, J.) affirmed an order denying the motion of Anderton Associates, Inc. for relief from the automatic stay. The debtors obtained prepetition floor plan financing for their car dealership from Automotive Financing Corp. In this transaction, the debtors executed an unconditional guaranty secured by a deed of trust on their residence. Anderton also executed a separate guaranty as additional security for the loan. The debtors defaulted, and AFC settled with Anderton. Their settlement included an assignment to Anderon of AFC's rights against the debtors. The debtors then filed a Chapter 7 petition. The Bankruptcy Court denied Anderton's subsequent motion for relief from stay because the movant's guaranty contained a waiver of any rights to reimbursement from co-guarantors. Although the movant argued it was proceeding as assignee of the direct payee, rather than as a co-guarantor, such practices are disfavored under state law without the consent of the other guarantors or sureties. On appeal, the District Court agreed with the Bankruptcy Judge's analysis. The opinions of both courts are attached to this summary.

Gerald A. Stark and Cathy C. Stark v. Crestar Mortgage Co. and Fannie Mae, Bankr. W.D.N.C. 95-40300(Wooten) - Creditor was charging Debtor a monthly fee to make visual inspections of the exterior of the Debtor's real property during the administration of the Debtor's Chapter 13 case. These inspections were required of the Creditor by Fannie Mae. Provisions in the deed of trust arguably provided that the Debtor would pay for inspections. No permission was obtained from the Court to charge for these inspections. The Court held that these charges constituted a violation of the automatic stay pursuant to section 362 of the Bankruptcy Code. The Court dismissed the motion for sanctions against Fannie Mae because their guidelines did not require any contact with the Debtor, nor did they mandate charging the Debtor for these inspections.

In Re: Charles W. Walker, W.D.N.C. 99-31460 (1999)(Hodges) - This matter was brought before the Court upon the Trustee's objection to the secured claim of Hunting Ridge Homeowner's Association. The Homeowner's Association included a purported lien for community assessments in its declaration. The declaration was recorded within the chain of title of the property in question. Assessments were not paid by the property owner. A claim of lien was filed pursuant to N.C. Gen. Stat. section 47C-3-116 to perfect the lien after the automatic stay came in to effect. The Homeowner's Association made two arguments why its claim should be given secured status. First, it argued that it already had a perfected lien by virtue of the declaration being recorded in the chain of title. Next, it argued that post petition perfection was allowed by virtue of an exception to the automatic stay in section 362(b)(3) of the Code. The Trustee argued that the exception in section 362(b)(3) did not apply and that the act to perfect the lien was voided by the automatic stay. The Trustee further argued that there was no perfected lien by virtue of the recorded declaration in the chain of title. The Court agreed with the Trustee and held that the claim would be treated as unsecured.

IN RE MINNIE ANN HINES, Case No. 97-30141 (Bankr. W.D.N.C., April 10, 1998)(Hodges) - The court granted Habitat for Humanity of Charlotte, Inc.'s Motion for Relief from Stay. The court concluded that the debtor's use of her residence in violation of the terms of the Deed of Trust, which secured the promissory note executed by the debtor in favor of Habitat for Humanity, constituted "cause" for relief from the automatic stay pursuant to 11 U.S.C. § 362(d)(1) of the Bankruptcy Code and allowed Habitat for Humanity to pursue its remedies under State law, including foreclosure upon the property.

IN RE TURNER, Case No. 99-30103 (June 1, 1999)(Whitley) - Property settlement claims discharged in a Chapter 7 bankruptcy case may not be enforced after relief from stay in the state courts.

IN RE CORNETT, Case No. 95-50756 (Bankr. W.D.N.C., March 27, 1996)(J. Whitley) - The Chapter 13 debtors made only one payment on their automobile loan and filed their petition less than sixty days after their first payment was due. The lender objected to confirmation of the debtors' Chapter 13 plan alleging that their actions and their attempt to "strip down" the lender's claim was an indication of objective bad faith. The Court agreed with the lender and confirmed the Chapter 13 plan after the debtors agreed to lift the automatic stay and allow repossession of the automobile.

HILLIER V. WELLS (IN RE WELLS), Case No. 94-10516, Adv. Proc. No. 95-1115 (Bankr. W.D.N.C., Feb. 23, 1996)(J. Hodges) - The Court held that a post-petition state court judgment, which declared a pre-petition deed conveying all of the debtor's wife's interest in their marital residence to the debtor to be of "no legal effect", was itself null and void as being in violation of the automatic stay provisions of 11 U.S.C. 362. The Court held that, under North Carolina law, the resumption of marital relations after the execution of a marital agreement voids executory provision of the agreement, but it does not void any fully executed provisions. Therefore, the Court held that title to the real property in issue was vested solely in the debtor.

IN RE HASH, Case No. 95-50597 (Bankr. W.D.N.C., Dec. 11, 1995) - Automatic stay was lifted in favor of the IRS, which had been stayed from levying on debtor's ERISA qualified retirement plan when the debtor filed a Chapter 13 petition and proposed to use his ERISA benefits to fund a Chapter 13 plan. The tax debt had been discharged in a previous Chapter 7 proceeding, but the debtor failed to take action to avoid the IRS's tax lien in the previous bankruptcy proceeding.

IN RE SANDERS, Case No. 95-30447 (Bankr. W.D.N.C., Sept. 1, 1995)(J. Whitley) - As a part of a pre-petition state court action, the debtor was directed to pay a portion of his pension benefits into escrow pending a resolution of an equitable distribution action. While the action was pending, the debtor filed a Chapter 13 petition and sought turnover of the escrowed funds under 11 U.S.C. 549, contending that these funds were property of the estate because he intended to use them for distribution to his creditors. The Court held that because the funds were regular payments from an ERISA-qualified retirement plan, they were not property of the estate and they were not subject to the turnover motion. The Court also noted that because equitable distribution rights do not constitute property interests under North Carolina law, they create only unsecured claims as against the bankruptcy estate of the spouse who has legal title to the property. However, under state law, pension benefits and other deferred compensation rights are potentially marital property that is subject to equitable distribution. It was unclear to the Court to what extent the distributions represented retirement benefits (marital property) and to what extent they represented disability benefits (separate property). Therefore, the Court granted relief from stay to allow the state court to address this issue and conclude the equitable distribution proceeding.

IN RE GRIFFIN, Case No. 92-30399 (Bankr. W.D.N.C., June 12, 1995)(J. Whitley) - One day after the debtor filed her first bankruptcy petition, one of her creditors obtained a judgment in state court against her in violation of the automatic stay. The creditor also had the judgment transcribed to another county in violation of the stay. After the debtor's first bankruptcy case was dismissed, she filed another bankruptcy case. The creditor contended that it had a secured claim, but the Court held that acts that violate the stay are void ab initio. Therefore, the Court held that obtaining the judgment and having it transcribed to another county were void acts, even though the first bankruptcy case was subsequently dismissed. Accordingly, the creditor was found to have an unsecured claim.

SWAYNGIM V. DAVIS (IN RE SWAYNGIM), Case No. 94-10440 (Bankr. W.D.N.C., Feb. 6, 1995)(J. Hodges) - The court found that creditors flagrantly violated the automatic stay provisions of 11 U.S.C. 362 twice. The court awarded the debtors possession of their automobile along with full title thereto, actual damages for the period of time that they were without their car, attorney's fees, and punitive damages in the amount of $10,000 to be paid to the Chapter 13 Trustee for disbursement to other creditors.

APPLE REALTY 2000, INC. V. FIRST UNION MORTGAGE CORP. (IN RE APPLE REALTY 2000, INC.), Case No. 94-30341, Adv. Proc. No. 94-3152 (Bankr. W.D.N.C., Aug. 31, 1994)(J. Hodges) - The bankruptcy court denied the Chapter 11 debtor's request to issue a temporary restraining order and a preliminary injunction against creditors taking action against third parties and to stay these creditors from either reporting adverse credit information or filing actions against third party mortgagors. The court held that there are two categories of "unusual circumstances" where an injunction can be used to protect third parties. The first occurs when there is such identity of the debtor and the third party that the debtor may be said to be the real party-in-interest. The second situation occurs when the action would diminish property of the debtor to the detriment of creditors as a whole. The court found neither category to be relevant to the case at issue. The court also reviewed the four factors set out in Blackwelder Furniture Co. of Statesville, Inc. v. Seilig Manufacturing Co., Inc., 550 F.2d 189 (4th Cir. 1977) to be analyzed when determining whether a court should grant a preliminary injunction. These factors are 1) the likelihood of irreparable harm to the plaintiff if the injunctive relief is not granted; 2) the likelihood of harm to the defendant if injunctive relief is granted; 3) the likelihood of success on the merits; and 4) the public interest.

HAMRICK V. UNITED STATES (IN RE HAMRICK), 175 B.R. 890 (W.D.N.C.)(J. Voorhees) - Although it had processes in place to prevent demand letters from being sent to debtors subject to bankruptcy protection, a creditor sent a computer-generated "dunning" letter to the debtors as a result of an error by an employee who had not been trained in bankruptcy proceedings and who did not recognize the bankruptcy code on the creditor's computer system. The District Court reversed the bankruptcy court and held that the stay violation was not willful, but amounted to nothing more than an innocent clerical error. The Court further held that the creditor's failure to correctly train the employee did not amount to "reckless disregard" of the automatic stay. The Court opined that to accept the debtor's argument that a willful violation of the stay occurred because the employee intended for the letter to be sent would be to impose strict liability on creditors which would amount to nothing less than a windfall for debtors' attorneys where no true injury results.

THE LITCHFIELD COMPANY OF SOUTH CAROLINA LIMITED PARTNERSHIP V. THE ANCHOR BANK (IN RE THE LITCHFIELD COMPANY OF SOUTH CAROLINA LIMITED PARTNERSHIP), 135 B.R. 797 (Bankr. W.D.N.C. 1992) (J. Mullen) - Under South Carolina law, a partnership may compel its general partners to pay the partnership's debts, and this power becomes property of the partnership's estate under 11 U.S.C. 541(a). As a result, where the debtor is a partnership, 11 U.S.C. 362(a)(3) automatically stays a partnership creditor from enforcing its claim against a general partner. That is, 11 U.S.C. 362(a)(3) prohibits a creditor from asserting a claim against a third-party for its own benefit where the trustee can assert the claim for the benefit of all creditors (citingSteyr-Daimler-Puch of America Corp. V. Pappas, 852 F.2d 132 (4th Cir. 1988)(alter ego action stayed)). Moreover, even if the automatic stay did not extend to a creditor's action against a non-debtor general partner, the bankruptcy court was authorized under the circumstances of this case to affirmatively enjoin the action pursuant to 11 U.S.C. 105(a).

IN RE THE LITCHFIELD COMPANY OF SOUTH CAROLINA LIMITED PARTNERSHIP, Case No. 91-30650, Adv. Proc. No. 92-3361 (Bankr. W.D.N.C., Dec. 23, 1992) - Property is necessary to an effective reorganization in a Chapter 11 context if (1) the debtor has a viable prospect for confirming a plan within a reasonable time which calls for either a rehabilitation or liquidation of the debtor, and (2) the property will contribute in a positive way toward that plan. (The court declined to adopt a standard requiring the property to be "absolutely essential" to the plan of reorganization.)

MARTIN V. DRUG EMPORIUM (IN RE MARTIN), Case No. 92-31184, Adv. Proc. No. 92-3166 (Bankr. W.D.N.C., Sept. 3, 1992)(J. Hodges) - The debtor was granted an injunction against creditors' criminal process on several worthless checks when the primary purpose of the prosecution was for the collection of debts. Only the debt collection element of the prosecution was enjoined by the court.

CRANFORD V. N.C. DEPARTMENT OF REVENUE (IN RE CRANFORD), Case No. 91-30669, Adv. Proc. No. 92-3064 (Bankr. W.D.N.C., June 2, 1992)(J. Hodges) - The Court established a three-pronged test for determining whether a debtor was entitled to a preliminary injunction to enjoin the N.C. Department of Revenue's criminal proceedings against him. First, the relief sought by the debtor must fall within an exception to the Anti-Injunction Act (28 U.S.C. 2283), and Section 105 has been held to be such an exception. Second, the debtor must meet the balancing of hardships test that was established in Blackwelder Furniture Company of Statesville, Inc. v. Seilig Manufacturing Company, Inc., 550 F.2d 189 (4th Cir. 1977). This test requires the court to consider the likelihood of irreparable harm to the debtor if the injunction is denied, the likelihood of harm to the other party if the injunction is granted, the likelihood that the debtor will succeed on the merits, and the public interest. Finally, the debtor must satisfy the holding of Younger v. Harris, 401 U.S. 37 (1971), that principles of equity and comity prevent federal courts from interfering with pending state court criminal actions except in "unusual circumstances."

IN RE CAROLINA DEVELOPERS LIMITED I, Case No. 91-31641 (Bankr. W.D.N.C., Jan. 1992)(J. Wooten) - A secured creditor is not entitled to relief from stay to foreclose on its security interest when the collateral is not declining in value (thereby adequately protecting the creditor's interest) and there is a reasonable possibility for a successful reorganization by the debtor, even though the debtor does not have any equity in the property.

IN RE DRISCOLL, Case No. 90-30658 (Bankr. W.D.N.C., Nov. 26, 1991) - Court granted relief from stay to allow debtor's ex-husband to petition the State Court to reduce alimony payments because changed circumstances (ex-husband's sole liability for joint debt that was discharged in debtor's bankruptcy) adversely affected his ability to pay the amount that was originally awarded by the State Court. Note: Section 304 of the Bankruptcy Reform Act of 1994 amended 11 U.S.C. 362(a) to provide that the commencement of an action or proceeding to establish or modify an order for alimony, maintenance, or support from property that is not property of the estate is not stayed by the filing of a petition.

IN RE COOKE, 127 B.R. 784 (Bankr. W.D.N.C., May 1, 1991)(J. Hodges) - The Chapter 13 debtors' plan provisions attempted to redeem their real property that had been seized and sold by the IRS prior to the filing of their petition. The Court held that the redemption period provided in 26 U.S.C. 6337(b) is not tolled by 11 U.S.C. 362(a) upon the filing of a bankruptcy petition. The Court further held that upon the filing of a petition, a debtor has until the expiration of the 180-day period provided in 26 U.S.C. 6337(b) or the 60-day period provided in 11 U.S.C. 108(b), whichever is later, to redeem his property sold at a sale pursuant to 26 U.S.C. 6335.

IN RE WESTCHASE ASSOCIATES, 126 B.R. 692 (W.D.N.C. 1991)(J. Mullen) - An over-secured creditor is not entitled to maintenance of an "equity cushion" as adequate protection. Therefore, the creditor is not entitled to interim interest payments designed to prevent growth of a claim from eroding an "equity cushion." However, adequate protection is appropriate when the value of the collateral itself is declining and thereby reducing the value of a creditor's secured claim.

IN RE ROBBINS, Case No. St-B-90-50651 (Bankr. W.D.N.C. 1991)(J. Wooten), aff'd, IN RE ROBBINS, St-C-91-24-P (W.D.N.C. 1991)(J. Potter) - A state court equitable distribution proceeding is subject to the automatic stay provisions of 11 U.S.C. 362. However, "cause" will often exist for granting a movant relief from stay to maintain domestic proceedings in state court. Ultimate recovery on any claim will still be controlled by the bankruptcy court.

PEACH STATE MACHINERY, INC. V. PARRISH (IN RE PARRISH), Case No. B-B-90-20450, Adv. Proc. No. 90-0229 (Bankr. W.D.N.C., Dec. 21, 1990)(J. Hodges) - Peach State sold, rented, serviced, and repaired construction equipment. Parrish was in the realty business, operated a repair shop for heavy equipment, and operated heavy equipment on construction jobs in and around Macon County, North Carolina. Peach State's complaint essentially sought possession of several pieces of heavy equipment transferred to Parrish and a money judgment for sums allegedly due Peach State under a series of agreements related to the same pieces of heavy equipment. Peach State also filed motions for relief from stay in the base case. Peach State's complaint required the court, first, to value the heavy equipment sought by Peach State and, second, to ascertain whether the agreements between Peach State and Parrish were "leases," "sales contracts" in which Peach State retained a security interest in the equipment, either perfected or unperfected, or "sales contracts" in which Peach State failed to retain any security interest whatsoever. After valuing the equipment, the court concluded that Parrish and Peach State intended the agreements to be true leases. The court then concluded that Peach State was entitled to possession of the equipment covered by the leases, that because the leases were properly terminated by Peach State before Parrish filed his Chapter 11 petition, Parrish was not entitled to an opportunity to assume or reject the leases, and that Peach State was entitled to relief from stay.

IN RE FOSTER, Case No. C-B-90-31306 (Bankr. W.D.N.C., Dec. 12, 1990)(J. Hodges) - This Chapter 13 proceeding was the debtor's sixth bankruptcy filing and her fourth in the past two years. The debtor paid nothing to creditors in any of the four bankruptcies filed during the past two years. In the three months that this Chapter 13 case had been pending, the debtor had made no payment to the Chapter 13 Trustee. Two creditors filed objections to confirmation, motions for dismissal, and motions for relief from stay. The court sustained the objections to confirmation and denied confirmation for several reasons, including the debtor's failure to satisfy the requirements of both 11 U.S.C. 1325(a)(3) and 11 U.S.C. 1325(a)(5), the plan's proposed eighty-month duration, and the plan's failure to use the debtor's purported disposable income to pay her debts. The court also found that this filing represented an abusive serial bankruptcy filing intended to frustrate creditors' efforts to enforce their rights, rather than to reorganize the debtor by (at least partial) payment of her debts. Because of the abusive nature of the filing, the court dismissed the Chapter 13 proceeding and enjoined the debtor from further abusing the bankruptcy process. The court also found sufficient cause to grant relief from the automatic stay because of the debtor's failure to make any payments to her creditors in the two years preceding this petition. The court also concluded that because of the debtor's history of abusing the purpose of bankruptcy, the creditors should be granted prospective relief from stay in any bankruptcy case that the debtor may file in the future.

IN RE NORTH AMERICAN SHELTER ASSOCIATES, Case No. C-B-90-31418 (Bankr. W.D.N.C., Nov. 19, 1990)(J. Hodges) - The debtor owned a mobile home park on which the debtor had executed a note secured by a deed of trust. The debtor last made a payment on its secured debt in May, 1990. The debtor defaulted on its obligation, and the secured creditor instituted foreclosure proceedings. The debtor had only one secured creditor, the deed of trust holder. The debtor's only income was from the rental of the mobile home lots. The debtor filed for Chapter 11 relief. The secured creditor filed, among other things, a motion to dismiss for lack of good faith, a motion for relief from stay, and a motion to use cash collateral. The court found that the mobile home park had a value of $1.15 million, that the debtor had not equity in the property, that the property was declining in value, that the income generated from the property was insufficient to provide adequate protection to the secured creditor, and that the debtor had no reasonable prospect for a successful reorganization. Based on the evidence, the court denied the motion to dismiss, granted the motion to use cash collateral, and granted the motion for relief from stay.

IN RE NANTAHALA VILLAGE, INC., Case No. B-B-90-20449 (Bankr. W.D.N.C., Oct. 19, 1990)(J. Hodges) - Although the facts merited dismissal of the case under the two-pronged test set down in Carolin Corp. v. Miller, 886 F.2d 693 (4th Cir. 1989), the court did not dismiss the case, but it did order the sale of assets and grant relief from stay in order to minimize further delay to creditors.

IN RE FLOYD, Case No. C-B-90-30350 (Bankr. W.D.N.C., Sept. 5, 1990)(J. Hodges) - The court held that a sanctioned creditor's delivery of 50,000 pennies to the debtor's attorney in payment of a $500 award of attorney's fees was neither a violation of the automatic stay nor contemptuous of the court. Note: The court later entered an Administrative Order requiring that all amounts paid in accordance with an order of the court must be paid in the highest possible currency denomination.

IN RE WILSON, Case No. C-B-89-31560 (Bankr. W.D.N.C., June 28, 1990)(J. Hodges) - The debtor moved the court for sanctions against his homeowner's association for violating the automatic stay provisions of 11 U.S.C. 362. The association had sent notices of delinquency to the debtor on at least two occasions after it had notice of the debtor's bankruptcy. The court concluded that the sending of such notices was a willful violation of the stay, even though the association was unaware of the implications of sending this type of notice to a bankrupt.

IN RE CARMEL FINANCIAL GROUP, INC., Case No. C-B-90-30151 (Bankr. W.D.N.C., June 15, 1990)(J. Hodges) - The debtor's first and second mortgage holders moved for relief from the automatic stay provisions of 11 U.S.C. 362 to foreclose on real property that was being developed. The debtor's financial difficulties on the project had been caused by the City of Charlotte's delay in approving a proposed intersection adjacent to the project. Testimony revealed that there was approximately $200,000 of equity and that interest was accruing on the debt at approximately $22,500 per month. Despite the slim equity cushion, the court concluded that relief from stay should be denied. Several factors influenced this result, namely the fact that the intersection was one week from approval, there was a good chance of the project's success once the intersection was complete, and the intersection would only cause the equity cushion of the mortgage holders to increase.

IN RE GULLEDGE, Case No. C-B-90-30232 (Bankr. W.D.N.C., May 21, 1990)(J. Hodges) - The debtor filed a motion for sanctions against the South Carolina Tax Commission for violation of the automatic stay provisions of 11 U.S.C. 362(a). The court found jurisdiction existed over the Tax Commission by virtue of its earlier holding in In re Moster, Case No. C-B-89-30523 (Bankr. W.D.N.C., March 2, 1990). The court concluded that the notice of warrant of distraint sent to the debtors by the Tax Commission was a willful violation of 11 U.S.C. 362(a)(2), (4), and (5), and that the debtors were entitled to recover actual damages.

IN RE MOSTER, Case No. C-B-89-30523 (Bankr. W.D.N.C., March 2, 1990)(J. Hodges) - The debtors sought sanctions for violation of the automatic stay provisions of 11 U.S.C. 362 due to the Ohio Department of Taxation's repeated acts of sending tax assessments to them. The court concluded that sanctions were warranted because the acts were willful and the debtors had sustained actual damages. In addition, the court concluded that the Ohio Department of Taxation's assessment form was not excepted from the automatic stay under 11 U.S.C. 362(b)(9) as a notice of tax deficiency.

IN RE RESORT DEVELOPMENT CORP., Case No. C-B-89-31068 (Bankr. W.D.N.C., Feb. 8, 1990)(J. Hodges) - A creditor moved for relief from stay under 11 U.S.C. 362 to pursue a state court action against the debtor. The court concluded that because the interests of judicial economy out-weighed the policy of requiring all creditors to bring their claims in the bankruptcy court and the debtors' chance of reorganization was not one that was in prospect, relief from stay should be granted.

IN RE SAVAGE, Case No. C-B-89-31265 (Bankr. W.D.N.C., Jan. 11, 1990)(J. Hodges) - Two holders of deeds of trust moved for relief from stay pursuant to 11 U.S.C. 362(d) on real property. Because the debtors could not provide adequate protection to the creditors under the provisions of 11 U.S.C. 361, and the debtors had neither equity in the property nor the need for the property to accomplish an effective reorganization, the court concluded that relief from stay should be granted.

KWIATKOWSKI V. GILCRIST (IN RE KWIATKOWSKI), Case No. C-B-89-31490, Adv. Proc. No. 89-0326 (Bankr. W.D.N.C., Jan. 1990)(J. Hodges) - The court refused a Chapter 13 debtor's request under 11 U.S.C. 362(b)(1), 11 U.S.C. 105, and Federal Rule of Bankruptcy Procedure 7065 to enjoin criminal prosecution for bad checks written to creditors who would receive 100% of their claims under the Chapder 13 plan. However, the court held that any money awarded as restitution be paid to the Chapter 13 Trustee. Such criminal prosecutions can only be enjoined if their true purpose is to collect the underlying debt. In this case, the debtor failed to prove such a purpose as well as failed to meet the standard required to issue and injunction, as set forth by the Fourth Circuit Court of Appeals in Telvest, Inc. v. Bradshaw, 618 F.2d 1029 (4th Cir. 1980).

IN RE JOHNSON, Case No. A-B-89-10026 (Bankr. W.D.N.C., June 28, 1989)(J. Hodges) - The bankruptcy court denied a motion for sanctions for violation of the automatic stay by a creditor who made a series of "hang-up" telephone calls to the debtor and prosecuted a criminal charge that the debtor was making harassing telephone calls to her. The evidence before the court revealed the creditor's "general meanness," but it did not constitute an effort to collect the debt owed to her, and it would be inappropriate to impose sanctions on her for that fault.

IN RE MAXWAY CORPORATION, Case No. C-B-88-01027, and IN RE DANNERS, INC., Case No. C-B-88-01026 (Bankr. W.D.N.C., May 12, 1989)(J. Hodges) - The bankruptcy court denied the Chapter 11 debtors' request that the court utilize 11 U.S.C. 105 or 11 U.S.C. 362 to enjoin two state court actions against employees of the debtors who had given personal guarantees for the corporate debtors' advertising contracts and who were entitled to indemnity from the corporate debtors. Because "unusual circumstances" are required before a co-defendant, non-bankruptcy may avail himself of the automatic stay, and because such circumstances were not present, the court denied the debtor's motion. Before "unusual circumstances" will be found to exist, there must be such an identity between the debtor and the third party that it may be said that the debtor is the real party defendant, and that a judgment against the third party is really a judgment against the debtor.

IN RE DILLARD REAL ESTATE CORP., Case No. B-B-86-00270 (Bankr. W.D.N.C., April 5, 1989)(J. Hodges) - A creditor objected to confirmation of a Chapter 11 plan and moved for relief from stay. The debtor had proposed in its plan to sell the collateral securing the creditor's loan and pay off the debt with the proceeds from that sale. Because the debtor was asking for two years to complete this sale and even then there was no assurance that such a sale would occur, the court concluded that such a sale was not "fair and equitable" as required by 11 U.S.C. 1129(b). Therefore, the plan as proposed could not be confirmed over the creditor's objection. The court denied the creditor's motion for relief from stay, however, finding that the creditor was adequately protected by an equity cushion of approximately $10,000.

IN RE CARRIGAN, Case No. C-B-89-30038 (Bankr. W.D.N.C., April 27, 1989)(J. Hodges) - The bankruptcy court held that a creditor's knowing, willful and bodaciously flagrant violation of the automatic stay provisions of 11 U.S.C. 362 entitled the debtor to actual damages for great fear, stress, anxiety and humiliation in the amount of $1,000. The court also awarded $5,000 i punitive damages, struck the creditor's arrearage claim of $4,239, and voided the lien of the creditor on the real property of the debtor to the extent of $4,239. Attorney's fees, in an amount to be determined, were also awarded.

IN RE BRAFFORD, Case No. C-B-88-01061 (Bankr. W.D.N.C., March 9, 1989)(J. Hodges) - The Internal Revenue Service sought relief from the automatic stay to seize real property against which it had outstanding tax liens. The court determined that the property, which was raw land, was not necessary for the debtor's effective reorganization because the debtor had proposed a 100% plan without any contribution from the property, and the debtor had not listed any income from the property on her schedules. The court was unable to determine from the evidence that was presented, however, whether the debtor had any equity in the property. Therefore, the IRS's motion was denied without prejudice.

IN RE HAAN, Case No. A-B-88-20437 (Bankr. W.D.N.C., Dec. 1, 1988)(J. Hodges) - At a hearing on a motion for sanctions for violating the automatic stay, the debtors offered no evidence of injury, other than the attorney's fees required to prosecute the motion. The court found that the case involved an isolated, inadvertent stay violation in which there was no injury to the debtors. The court held that in order for the debtor to be awarded attorney's fees under 11 U.S.C. 362(h), there must be a finding of actual damage to the debtor.

IN RE ASHEVILLE BUILDING ASSOCIATION, Case No. A-B-88-10261 (Bankr. W.D.N.C., Aug. 31, 1988)(J. Hodges) - The debtor was in the business of operating a large building in Asheville. This building was the debtor's only business and its only asset. The debtor became unable to maintain mortgage payments on the property, and the mortgagee moved for relief from stay under 11 U.S.C. 362 in order to sell the property. The court granted the mortgagee's motion, finding that the debtor had no equity in the property (the value of the building was at least $400,000 below the outstanding debt), the building was not necessary for the debtor's effective reorganization (the debtor had failed to propose any plan within the exclusive period and had no prospects of its own for the building's sale), and "cause" ehisted for granting the mortgagee relief (the debtor had let the condition of the property decline dramatically and had a long history of past defaults). The debtor moved for a stay pending appeal of the court's order. The court expressed the standard applicable to the grant of a stay pending appeal as established by the Fourth Circuit Court of Appeals. The debtor could not show that 1) he would likely prevail on the merits; 2) he would suffer irreparable injury if the stay were denied; 3) other parties would not be substantially harmed by the stay; and 4) the public interest would be served by granting the stay. Therefore, the court denied the debtor's motion. Asheville Building then filed an Emergency Motion for Stay of Order Pending Appeal, and this motion was denied by the District Court in Case No. A-MISC.-956 (W.D.N.C., Sept. 29, 1988)(J. Potter).

IN RE GUIL-PARK FARMS, INC., Case No. A-B-88-10286 (Bankr. W.D.N.C., Aug. 31, 1988)(J. Hodges) - NCNB had a perfected security interest in the debtor's accounts receivable. The debtor, without notice to NCNB, exchanged its accounts receivable for promissory notes executed to it by those account debtors. The court concluded that, pursuant to N. C. Gen. Stat. 9-306(1) and 9-306(3), NCNB continued to have a perfected security interest in the notes as proceeds from the exchange of the accounts. It was only the debtor's failure to notify NCNB of the exchange that caused its security interest in the notes to become unperfected, so it was the court's view that NCNB's perfected status should continue unaffected. NCNB was granted relief from stay to take possession of the notes and to pursue any other remedy it had against the debtor.

IN RE WITHROW, Case No. C-B-87-00861 (Bankr. W.D.N.C., Aug. 30, 1988)(J. Hodges) - Notice to the former collection agents of a creditor was sufficient notice to the creditor, and the creditor violated the automatic stay when it continued collection efforts through its new collection agent. The creditor, Citibank, elected to operate through a complex system of distant agents, and it must be responsible for consequences of breakdowns in that system - its own agents failed to pass along the notice to the principal. Despite the long series of stay violations attributed to Citicorp/Citibank in the past, the court declined to assess punitive damages in this case, and it awarded the debtor $100 for actual damages.

STANDLEY V. CITICORP CREDIT SERVICES, INC. (IN RE STANDLEY), Case No. C-B-88-00407 (Bankr. W.D.N.C., Aug. 24, 1988)(J. Hodges) - The debtors sought sanctions for willful violation of the automatic stay provisions of 11 U.S.C. 362. The court denied the debtors' motion finding that they had failed to meet their burden of proof on the issue of willfulness. In the court's view, the evidence of internal operating procedures presented by Citicorp that was meant to ensure against violations of the automatic stay outweighed any evidence of willfulness presented by the debtors.

IN RE SHEALY, Case No. C-B-86-0912 (Bankr. W.D.N.C., July 20, 1988)(J. Hodges) - Several notices entitled "Notice of Assessment" that were mailed to the debtor post-petition by the South Carolina Tax Commission were not notices permitted by 11 U.S.C. 362(b)(9), which allows governmental units to notice debtors of a tax deficiency. The "notices" demanded payment, threatened warrants of distraint, warned that the debtor's wages could be garnished, and advised that the warrant for distraint was a judgment and a lien on all property. The inaction of the SCTC in failing to locate the tax file of the debtors and flag it upon receipt of notice of the pending bankruptcy, not once but twice, was deemed a willful violation of the automatic stay, and not just a clerical error. The Commission's inattention to letters from the debtor's attorney evidenced will conduct in violation of the automatic stay. Damages were assessed in the amount of $2,000, plus attorneys fees.

IN RE NIELSON, Case No. A-B-87-00439 (Bankr. W.D.N.C., July 15, 1988)(J. Hodges) - The bankruptcy court denied the FmHA's motion for relief from stay to utilize 11 U.S.C. 553(a) to offset federal disaster funds payable to the debtors and apply these funds to FmHA's lien on the debtors' apple orchards, farm equipment and machinery. The court noted that the right of setoff provided in 11 U.S.C. 553(a) must be narrowly applied and only where equitably appropriate. It found that setoff in this case would be inequitable for several reasons. First, there was no apparent legislative intent for disaster relief funds to be used to assist FmHA's debt collections. Second, under principles of equitable estoppel, setoff has been prohibited if there is a "special purpose" for the funds. The funds at issue had a special purpose of providing disaster relief for the benefit of farmers. Finally, bankruptcy policy militates against permitting an offset when the immediate effect would be to deb any possibility of reorganization. While there was no certainty that this Chapter 12 reorganization would succeed with the funds, there was a certainty that it would fail without them. The court also found that the mutuality of obligation required by 11 U.S.C. 553(a) was not present in this case. The mutuality contemplated by this section requires that both the debt and the claim be created pre-petition. Farmer's Home's claim arose pre-petition, but the "debt" owed by the United States to the debtor came about as a result of post-petition Congressional appropriations.

OCEAN ELECTRIC CORP. V. JOHNSON CONTROLS, INC. (IN RE OCEAN ELECTRIC CORP.), Case No. A-B-87-0341, Adv. Proc. No. 88-1283 (Bankr. W.D.N.C., June 14, 1988)(J. Hodges) - The bankruptcy court denied a motion for relief from stay "for cause" under 11 U.S.C. 362(d) to allow a lawsuit to continue in a foreign forum against the debtor and an insurance carrier. The court acknowledged that if the insurance carrier had assumed all liability for the claim and had agreed to defend the action, the parties should be allowed to proceed outside the bankruptcy proceeding. Although the adversary proceeding in the bankruptcy court might come out different than the action in the foreign forum, the possibility of inconsistent judgments alone is not sufficient to deprive the debtor of the bankruptcy court's protection. In an interesting aside, the court discussed the issue of the burden of proof in a proceeding seeking relief from stay "for cause." Although under 11 U.S.C. 362(g) the debtor has the burden of proof on all issues except equity, it would seem that in "for cause" actions the debtor has to prove a negative - that no ground exists for granting relief from stay. The court decided that the initial burden of showing a legally sufficient basis for granting relief must be borne by the moving party. The burden then shifts to the debtor to show it is entitled to the protection of the stay.

CONNESTEE FALLS PROPERTY OWNERS ASSOCIATION, INC. V. HERITAGE COMMUNITIES OF NORTH CAROLINA (IN RE HERITAGE COMMUNITIES), Case No. A-B-88-00107 (Bankr. W.D.N.C., May 13, 1988)(J. Hodges) - The debtor owned several lots and failed to pay yearly assessments required by the property owners' association. The association moved for relief from stay under 11 U.S.C. 362 to sell the lots on which it had perfected judgment liens, to perfect liens on those lots which still had unpaid assessments, and to have post-petition assessments paid as administrative expenses pursuant to 11 U.S.C. 503(b)(1)(A). The court modified the stay to allow perfection of liens on the delinquent lots, but refused to allow the lots to be sold. Allowing the assessments to be paid as administrative expenses was proper, in the court's view, because the funds were to be used to pay "actual necessary costs and expenses of preserving the estate."

IN RE JONES, Case No. C-B-87-215 (Bankr. W.D.N.C., May 1988)(J. Wooten) - Bankruptcy court decided the state court would be by far the preferable court to adjudicate the debtor's action to enforce her separation agreement and for distribution of marital property. Although the court promised not to disturb the distribution order of the state court, it retained the right to consider creditor claims against any and all property to be distributed, after notice and a hearing.

IN RE McCLURE, Case No. A-B-86-00305 (Bankr. W.D.N.C., Feb. 9, 1988)(J. Hodges) - The debtor sought a cramdown confirmation pursuant to 11 U.S.C. 1129(b). The court found that confirmation should be denied because the plan as proposed was not fair and equitable, as required by 11 U.S.C. 1129(b), in that the debtor was to receive all of his operating expenses, as well as 50% of the balance of funds each month. The court also denied confirmation on the ground that the plan was not feasible, as required by 11 U.S.C. 1129(a)(11). The plan did not propose a reasonable possibility of a successful reorganization within a reasonable time. Two of the objecting creditors also moved for relief from stay concerning equipment that was allegedly not necessary to an effective reorganization and contained no equity. Because the equipment was shown to be under-secured and not in working order and the debtor had made no attempt to repair it, the court concluded that the equipment was not necessary for reorganization and granted relief to the creditor who was secured by such property.

IN RE KENNEDY, Case No. SH-B-86-00268 (Bankr. W.D.N.C., Dec. 28, 1987)(J. Hodges) - A creditor sought relief from stay so that it might proceed against property owned by the debtor and his wife as tenants-by-the-entirety. The debtor and his wife had entered into a guaranty agreement with the creditor. The Court concluded that relief must be granted or the creditor would have no chance to obtain a joint judgment against the husband and wife, since the entireties property would be beyond the reach of the creditor, despite the guaranty, as property of the estate protected by the husband's discharge. The Court delayed the entry of the debtor's discharge until such time as the creditor could avail itself of the relief from stay and obtain a judgment lien.

IN RE BROWN, Case No. A-B-87-0298 (Bankr. W.D.N.C., Dec. 17, 1987)(J. Hodges) - Creditors challenged the feasibility of a Chapter 12 debtor's plan under 11 U.S.C. 1225(a)(6). The Court determined that the debtor's prior failure to accomplish a reorganization under Chapter 11 did not make the Chapter 12 plan infeasible. The creditors also asserted that the debtor's plan did not satisfy the claim payment requirement set forth in 11 U.S.C. 1225(a)(5). After separately examining each tract of land securing each creditor's claim, the Court determined that all of the land had a value no less than the amount of that particular creditor's claim, thus satisfying 11 U.S.C. 1225(a)(5)(B)(ii). The debtor's plan was then confirmed. Finally, the creditors demanded relief from stay under 11 U.S.C. 362(d). The Court granted partial relief from stay on the land which the debtor was proposing to sell. As to the rest of the land, the stay was to remain in effect as long as plan payments were timely made. Note: This order was appealed to the district court and modified in a manner which did not affect the bankruptcy court's overall reasoning. The district court's order was appealed to the Fourth Circuit Court of Appeals, which affirmed the district court's decision without opinion.

IN RE WILLIAMS, Case No. C-B-87-007 (Bankr. W.D.N.C., Sept. 10, 1987) - The Chapter 7 debtor listed Alltel Mobile Communications as a creditor, and Alltel was notified of the filing and the automatic stay by both the Court and the debtor's attorney. The debtor received demands for payment from Alltel at least once each month for five months after the creditor received notice of the bankruptcy. No representative of Alltel appeared at the sanctions hearing, and the Court awarded the debtor actual damages in the amount of $500 and attorney's fees in the amount of $750. Alltel ignored the Court's order; and one month later, Alltel's collection agent contacted the debtor and demanded payment of the debt. No representative of Alltel appeared at the second contempt hearing. The Court awarded the debtor $3,000 actual damages, $3,250 for attorney's fees, and punitive damages in the amount of $750,000. The Court also ordered Alltel's president, chairman of the board, and chief executive officer to appear and show cause why they should not be held in contempt of court, and the Court indicated that arrest warrants would be issued if they ignored the order. All of the individuals appeared at the hearing, and the punitive damages were stricken, but the actual damages and attorney's fees were paid by Alltel.

IN RE BLANTON, Case No. SH-B-87-00221 (Bankr. W.D.N.C., Sept. 1, 1987)(J. Wooten) - The Chapter 13 debtors listed Citicorp and its collection agents, a law firm, as creditors and notified them of the filing and the automatic stay provisions of 11 U.S.C. 362. The debtors' plan was confirmed, and they subsequently received a demand for payment from a different lawyer on behalf of Citicorp. After the debtors' filed a motion for sanctions against Citicorp, they received another demand for payment from the same attorney. No representative of Citicorp or its collection agents appeared at the contempt hearing. The Court took judicial notice of Citicorp's numerous recent violations of the automatic stay and Citicorp's apparent view that it was above the law provided for in the Bankruptcy Code. Therefore, the Court awarded the debtors actual damages in the amount of $2,500, attorney's fees of $2,500, and punitive damages of $500,000, and ordered the claim of Citicorp discharged whether or not the debtors completed their plan. The Court also ordered the president of Citicorp and the chairman of its board of directors to appear and show cause why Citicorp behaved in such a manner. The entire matter was later settled by the parties.

IN RE NOTTINGHAM, Case No. A-B-85-00133 (Bankr. W.D.N.C., Aug. 28, 1987)(J. Wooten) - The Chapter 7 debtor listed Citibank as a creditor, and Citibank and its collection agent were served with a copy of the debtor's discharge. Later, a new collection agent for Citibank contacted the debtor to collect the debt, and the debtor's attorney notified the collection agent in writing of the injunctive provisions of 11 U.S.C. 524. After a third collection agent attempted to collect the debt, the debtor filed a contempt action against Citibank. The Court found a willful violation of 11 U.S.C. 524 and awarded the debtor $500 actual damages, $250 attorney's fees, and punitive damages of $2,000 to be divided equally between the debtor and her attorney.

McLEAN TRUCKING COMPANY V. THE DEPARTMENT OF INDUSTRIAL RELATIONS FOR THE STATE OF CALIFORNIA (IN RE McLEAN TRUCKING COMPANY), Case No. C-B-86-0023, Adv. Proc. No. 87-0040 (Bankr. W.D.N.C., June 3, 1987)(J. Wooten) - The Court did not interpret the Fourth Circuit's decision in A. H. Robins v. Piccinin, 788 F.2d 994 (4th Cir. 1986) as standing for the broad principle that actions against third parties who have indemnity claims against a debtor are always subject to the automatic stay or to the discretionary injunctive powers of the bankruptcy court. After finding that no "unusual situation" of the Robins type existed in this case, the Court denied the injunctive relief requested as protection for the debtor's surety.

IN RE KAPORDELIS, Case No. C-B-85-01021 (Bankr. W.D.N.C., Jan. 1986)(J. Wooten) - The Court found that 78 criminal worthless check actions brought against the debtor by various creditors were initiated for punitive reasons, and not for the purpose of collecting debts. Therefore, the Court held that these actions were not brought in violation of the automatic stay because they were permitted by the provisions of 11 U.S.C. 362(b)(1).

WORDEN V. BRIMBURY (IN RE BRIMBURY), Case No. C-B-84-00664, Adv. Proc. No. 85-0147 (Bankr. W.D.N.C., July 23, 1985)(J. Wooten) - After they filed a Chapter 13 petition, the debtors entered into a partnership with another couple. After the business relationship soured, the couple decided to dissolve the partnership on the advice of their attorney, who also knew about the bankruptcy proceeding. The couple brought suit in state court to dissolve the partnership and obtain a judgment for damages against the debtors. The state court lawsuit was removed to the bankruptcy court, and the debtors moved to add the post-petition claim of their former business partners to their Chapter 13 plan. The Court held that under 11 U.S.C. 1306(a)(1), the debtors' interest in the partnership was property of the estate. The Court also held that the filing of the state court action against the debtors was a willful violation of the automatic stay in that it was an act to obtain possession of property of the estate. The Court did not impose punitive damages against the former partners, since their actions were based upon the faulty advice of their attorney, but the Court did order their attorney to pay the debtors' attorney's fees. Finally, the Court refused to permit the debtors to add the post-petition claim of their former partners to the Chapter 13 plan because 11 U.S.C. 1305 permits only a creditor, and not a debtor, to add post-petition claims to the plan, and only if the post-petition claim is for taxes or consumer debts for property or services necessary to the debtors' performance under the plan.