Construction Supervision Services, Inc.

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
CONSTRUCTION SUPERVISION SERVICES,
INC.,
DEBTOR
CHAPTER 11
CASE NO. 12-00569-8-RDD
ORDER HOLDING MONSON OIL COMPANY,
INC. IN CONTEMPT AND AWARDING SANCTIONS
Pending before the Court is the Motion to Hold Monson Oil Company, Inc. in Contempt of
Court for Violation of Automatic Stay filed by Construction Supervision Services, Inc. on July 26,
2012 (the “Motion”) and the Response of Monson Oil Company, Inc. to Debtor’s Motion for
Contempt of Court for Violation of Automatic Stay filed by Monson Oil Company, Inc. on August
13, 2012 (the “Response”). On September 11, 2012, the Court held a hearing on the Motion and
the Response in Wilson, North Carolina.
BACKGROUND
Construction Supervision Services, Inc. (the “Debtor”) filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code on January 24, 2012. The Debtor is a full-service
construction company located in Raleigh, North Carolina. The Debtor contracted post-petition with
SO ORDERED.
SIGNED this 26 day of September, 2012.
________________________________________
Randy D. Doub
United States Bankruptcy Judge
____________________________________________________________
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Monson Oil Company, Inc. (“Monson”) to provide fuel for its construction equipment. Under the
terms of the contract, Monson provided the Debtor with fuel tanks that it filled based on the Debtor’s
fuel needs. Though Monson’s accounting system listed the Debtor’s payments as due ten days from
delivery, generally Monson expected payment for deliveries weekly. Fuel was to be delivered to the
Debtor and the amount owed was to be calculated weekly at close of business on Tuesday afternoon.
Monson would then submit an invoice to the Debtor via email on Wednesday. The Debtor was to
have a check ready for Monson’s delivery driver to pick up on Thursday at the scheduled delivery
time.
Generally, the Debtor made a check available to Monson’s driver every Thursday when he
made his delivery. However, on the date the Debtor alleges Monson violated the stay, the Debtor
failed to provide the driver with a check at the time of delivery. Finch Monson, manager of Monson
as of June 28, 2012, testified that his driver informed him that the Debtor did not have a check ready
for the previous week’s deliveries. Upon learning no check was ready, Mr. Monson called the
Debtor and spoke with the President, Jeremy Spivey. Mr. Monson informed Mr. Spivey that if
payment was not made, Monson would lock or disable the fuel pumps pending payment. Mr. Spivey
informed Mr. Monson that he would deliver a check on June 28 but the funds may not be available
for deposit until later that afternoon. The two agreed that Monson’s driver would return to the
Debtor’s office to pick up the check and Mr. Spivey would contact Mr. Monson when the funds were
available for deposit. Mr. Monson stated that he would have the fuel pumps disabled until he
received notice that the funds were available. Mr. Monson contacted a third party contractor, C-
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Store Services, to disable the fuel pumps at approximately 10:00 on the morning of June 28, 2012.1
Sometime later that same afternoon, Mr. Monson received notice that the fuel pumps had been
disabled. Subsequently, at approximately 4:30 that afternoon, Mr. Monson received notice from Mr.
Spivey that the funds were available and the check could be deposited. Mr. Spivey then contacted
Mr. Monson to find out when the fuel pumps would be operational again. Mr. Monson informed
him he would have the contractor enable them as soon as possible, but it would not likely occur until
the following morning. Mr. Spivey requested that the pumps be operational by 6:00 the following
morning.
On the morning of June 29, 2012, around 6:00 am, the Debtor’s drivers arrived at the office
location to refuel trucks and equipment. When the drivers attempted to refuel, they discovered the
fuel pumps were not operational. The drivers were instructed to use hand pumps to fuel their
vehicles. Mr. Spivey testified the employees became concerned about the situation and questioned
whether they were stealing fuel by using hand pumps to pump it from the tanks. Mr. Spivey testified
that several drivers were late to their job sites because of the delay in refueling. Mr. Spivey
explained most job owners required the Debtor to be at the job site by 7:00 am every morning, so
the delay affected several construction jobs. Furthermore, Mr. Spivey stated the events had a
negative effect on employee morale and fueled rumors that the Debtor was unable to pay its debts
At one time prior to the present instance, the Debtor failed to remit payment to Monson.	1
On that occassion, Mr. Monson informed the Debtor he would place a lock on the fuel pumps. As
he was about to lock the pumps, the Debtor brought Mr. Monson a check and he left without
locking the pumps. On this occasion, Mr. Monson discovered that his pump locks would not
properly fit these particular pumps. Therefore, when the Debtor did not pay Monson on June 28,
2012, Mr. Monson realized the pumps must be disabled by some other means.
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throughout the construction industry as employees discussed the problems with other construction
crews.2
Mr. Monson testified that on June 29, 2012, at his direction, an employee from C-Store
Services went directly to the Debtor’s location before reporting to work and reassembled the pumps.
Mr. Monson testified he received confirmation from C-Store Services that the pumps were
operational at approximately 7:45 am on June 29.
Neither Mr. Monson nor Mr. Spivey could accurately estimate the amount of fuel remaining
in the tanks at the time they were disabled. However, Mr. Monson testified he believed the tanks
were each approximately one-quarter full at the time they were disabled. Further, Mr. Monson
testified that had the Debtor not remitted payment on June 28, 2012 he eventually would have taken
action to repossess the fuel remaining in the tanks.
In the Motion, the Debtor requests the Court hold Monson in contempt for its actions as they
were in violation of the automatic stay. In particular, the Debtor asserts Monson violated 11 U.S.C.
§ 362(a)(3) by exercising control over property of the estate. The Debtor contends that as a result
of Monson’s actions, it was unable to fuel trucks and equipment in a timely manner, which caused
delays in business on June 29 and negatively impacted employee morale. The Debtor requests
sanctions in the amount of $29,559.43, the exact amount of the allowed administrative expense claim
in favor of Monson in the Debtor’s bankruptcy case.3
Mr. Spivey testified that this situation, in conjunction with a ten cent per hour salary	2
reduction for employees, fostered greater doubt and unrest among employees.
After Monson filed an application for an administrative expense claim pursuant to 11	3
U.S.C. § 503(b)(9), the parties agreed Monson should have an allowed claim of $29,559.43 for
fuel delivered within 20 days of the commencement of the bankruptcy case by an order entered
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In the Response Monson argues it should not be held in contempt for violation of the
automatic stay as its actions were based on a post-petition contract between the Debtor and Monson
and did not violate the stay. Further, at the hearing, Monson argued its actions did not rise to the
level of willful and knowing violations of the automatic stay because it was unaware the stay applied
to contracts formed post-petition.
DISCUSSION
Section 362(a) of the Bankruptcy Code imposes a stay on “any act to obtain possession of
. . . or to exercise control over property of the estate.” 11 U.S.C. § 362 (a)(3); In re Figured, No. 09-
03251-8-JRL, 2009 WL 2843320, at *2 (Bankr. E.D.N.C. Aug. 31, 2009). Except as provided in
11 U.S.C. § 541(b), (c)(2), property of the estate includes “all legal or equitable interests of the
debtor in property as of the commencement of the case” as well as “[a]ny interest in property that
the estate acquires after the commencement of the case.” 11 U.S.C. § 541(a)(1), (7); In re Figured,
2009 WL 2843320, at *2.
Further, the Bankruptcy Code provides that any “individual injured by any willful violation
of a stay provided by this section shall recover actual damages including costs and attorneys’ fees,
and, in appropriate circumstances, may recover punitive damages.” 11 U.S.C. § 362(k)(1). This
Court has held “willfulness does not refer to the intent to violate the automatic stay, but the intent
to commit the act which violates the automatic stay.” Lofton v. Carolina Fin. LLC (In re Lofton), 385
B.R. 133, 140 (Bankr. E.D.N.C. 2008) (citing Citizens Bank v. Strumpf, 37 F.3d 155 (4thCir.1994),
rev’d on other grounds 516 U.S. 16, 11 (1995)). Furthermore, “[i]f the creditor intentionally acts
on June 27, 2012.
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and its actions violate the automatic stay, the creditor’s acts are willful.” In re Jones, No. 06-00380-
8-RDD, at 3 (Bankr. E.D.N.C. June 27, 2007).
Based on the evidence received, the Court finds Monson was aware that the automatic stay
was in place on June 28, 2012. Mr. Monson testified he had knowledge of the Debtor’s bankruptcy
petition on January 24, 2012; that after filing the bankruptcy petition, the Debtor approached Monson
about supplying it with fuel; and that Monson and the Debtor entered into a post-petition agreement
for the supply of fuel. Further, Mr. Monson testified after entering into the post-petition agreement,
Monson opened a new account for the Debtor in its record keeping system, which separated pre-
petition and post-petition invoices. Mr. Monson testified that in light of the circumstances, opening
a new account for the Debtor seemed appropriate. Therefore, the Court finds Monson had
knowledge of the Debtor’s bankruptcy petition on June 28, 2012.
Furthermore, Monson acted to exercise control over property of the estate by dispatching C-
Store Services to disable the fuel pumps. Such action was in violation of the automatic stay because
the fuel in the tanks became property of the estate as the Debtor acquired an interest in the fuel after
the commencement of the case pursuant to § 541(a)(7). Further, Mr. Monson testified that if
payment was not received the company would have attempted to pump the fuel out of the tanks,
evidencing Monson’s intent to exercise control over or obtain possession of property of the
bankruptcy estate. Therefore, the Court finds Monson’s actions were willful violations of the
automatic stay.
Monson argues its actions were not willful because it had no knowledge that the automatic
stay protected property of the estate post-petition and the violation was inadvertent. Courts in this
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district have held where “a creditor is uncertain about the scope of the automatic stay, he takes the
risk of being assessed for damages if he fails to obtain clarification from the bankruptcy court.” In
re Armstrong, 96 B.R. 55, 57 (Bankr. E.D.N.C. 1989) (citing In re Outlaw, 66 B.R. 413, 419 (Bankr.
E.D.N.C. 1986)). By disabling the fuel pumps, Monson achieved the exact result it intended, to limit
the Debtor’s ability to use the fuel. Therefore, regardless of whether Monson knew the automatic
stay applied to post-petition property of the estate, its actions were willful violations of the stay and
no privilege will be allowed for its ignorance.
The Motion is GRANTED. However, the Court finds Monson took expedient action to
remedy the violation of the automatic stay, which limited the Debtor’s damages. Therefore, the
Court finds the Debtor is entitled to sanctions in the amount of $500.00. Additionally, the Debtor’s
attorney, Mr. William Janvier, is entitled to attorneys’ fees of $1,000.00 for filing and prosecuting
the Motion. The sanctions and attorneys’ fees shall offset Monson’s administrative expense claim
of $29,559.43. Monson’s administrative expense claim pursuant to § 503(b)(9) shall be reduced by
$1,500.00 and therefore be allowed in the amount of $28,059.43. Monson shall credit the Debtor’s
account accordingly within ten days from the entry of this order.
SO ORDERED.
END OF DOCUMENT
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