Unpublished Dispositionin Re: Bobby Dayton Newman and Teresa Ruth Newman, Debtors.bobby Dayton Newman and Teresa Ruth Newman, Plaintiffs-appellees v. Gary Ethridge D/b/a Mr. Juliet Motors, Defendant-appellant, 803 F.2d 721 (6th Cir. 1986)

WELLFORD, circuit Judge.

Creditor Gary Ethridge appeals a district court order dismissing his appeal from a bankruptcy court order finding him in contempt of court for violating the automatic stay of 11 U.S.C. § 362. Pursuant to this finding, Mr. Ethridge was required to reimburse the debtor for lost wages and attorney's fees. We agree with the district court that the bankruptcy court order was proper.

On May 10, 1984, Mr. and mrs. Bobby Dayton Newman filed a petition under Chapter 13 of the Bankruptcy Code. Mr. Ethridge, the proprietor of Mt. Juliet Motors, was owed $1,062.29 by the Newmans, and he held a security interest in the Newmans' 1973 Oldsmobile 98 automobile. On Sunday, May 13, 1984, agents of Mr. Ethridge went to the Newmans' residence to repossess the automobile. Mr. Newman told the agents that he had filed a bankruptcy petition. This is an old trick in the repossession game, according to Mr. Ethridge, and the agents asked Mr. Newman for proof of the filing. All that Mr. Newman was able to produce was a receipt from his attorney; the receipt did not say what it was for. The agents telephoned Mr. Ethridge, who instructed them to repossess the automobile. They did so. Because of the repossession, Mr. Newman was unable to transport himself to work that evening and missed an eight hour shift. The next day the Newmans' attorney obtained a temporary restraining order pursuant to which the car was retrieved.

The bankruptcy court found Mr. Ethridge to have been in contempt for violating the automatic stay of 11 U.S.C. § 362. The Newmans were awarded $63.12 for the wages lost as a result of the repossession and $935.00 in attorney's fees incurred in getting the car back. Senior District Judge L. Clure Morton affirmed the bankruptcy court's order, finding it "a very practical solution."

Both parties agree that the repossession action was a violation of the automatic stay.

"However, in determining whether to impose sanctions, courts must determine whether the creditor acted innocently or with a knowing or reckless disregard for the authority of the court as embodied in the stay. Where the party held in contempt did not have notice that the debtor filed a petition in bankruptcy . . ., this court has held the [action] to be technical contempt and has refused to impose sanctions." Matter of Van Riper, 25 B.R. 972, 978 (Bkrtcy. W.D. Wis. 1982).

Notice of the bankruptcy need not be formal; the court is to look to whether the creditor had actual knowledge. Matter of Behm, 44 B.R. 811, 812 (Bkrtcy. W.D. Wis. 1984). We must determine, therefore, whether Mr. Newman's oral representation was sufficient to put Mr. Ethridge on notice.

Oral notice was found sufficient in Mercer v. D.E.F., Inc., 48 B.R. 562 (Bkrtcy. D. Minn. 1985), where the creditor did not receive "official" notice until January 15. On January 8 the debtor spoke by telephone with an employee of the creditor and informed him that she had filed a bankruptcy petition. On January 10 the employee phoned the debtor to demand immediate payment or return of certain stereo equipment. The repossession was accomplished on January 11, over the protest (by telephone) of the debtor's attorney. The bankruptcy court concluded that:

"Clearly, Color Tyme knew of the pending bankruptcy from at least Tuesday, January 8, 1985. In addition, Mr. Werthiemer [attorney] indicated to Mr. Bryan [manager] that he could not repossess the stereo on January 11, 1985. Color Tyme had sufficient notice of the bankruptcy and that its action against the Debtor was not permitted. When Color Tyme wilfully repossessed the collateral, with knowledge of the bankruptcy, it did so at its own peril. The Court finds that, under the circumstances of this case, Color Tyme T.V. acted in contempt of this Court's Order for relief entered January 4, 1985, upon the filing of the Debtor's petition." 48 B.R. at 565 (emphasis added).

In the case at bar the bankruptcy court found "the notice provided the creditor in this case to be very close to insufficient; however, the creditor did indeed have notice and has admitted to a technical violation of the automatic stay." We agree that Mr. Ethridge had notice; he was told about the filing and his agents were given the name of the Newmans' attorney and shown a receipt which indicated that the attorney's services had been recently engaged. The repossession of the automobile apparently was not preceded by any attempt to contact the attorney, and under the circumstances such an attempt would have been appropriate.

We agree with the bankruptcy court that Mr. Ethridge should put the Newmans back in the position in which he found them. The judgment of the district court is AFFIRMED.

WELLFORD, Circuit Judge, concurring.

I concur in the disposition of this case with some reluctance. The bankruptcy court acknowledged that "the notice provided . . . [was] . . . very close to insufficient." It was undisputed that an oral claim of bankruptcy is sometimes made by a debtor to avoid the effect of repossession. Wariner v. First State Bank, 16 Bankr. 216 (Bankr. N.D. Tex. 1981), relied upon by the bankruptcy court, appears to me to be distinguishable. We are to determine whether appellant creditor had "actual notice" in a case of this kind in order to find that there was a contemptuous violation of a stay order. I have reservations that there was actual notice here; had the creditor's agent attempted to contact the debtor's attorney before seizure I would find this to be sufficient to avoid the sanctions. This case is not to be read as precedent that a mere oral statement claiming to have taken bankruptcy by a debtor, without more, is sufficient to put the creditor on notice of the fact that bankruptcy proceedings have been instituted.