Thomas Joseph Kinsey

1 Debtor filed his petition immediately prior to the effective date of the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (2005)
(“BAPCPA”), and all citations herein are to the pre-BAPCPA Code, Title 11, U.S. Code.
MEMORANDUM OF DECISION - 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF IDAHO
IN RE 	)
)
KINSEY, THOMAS JOSEPH 	) 	Case No. 05-05278-TLM
)
Debtor. 	) 	MEMORANDUM OF DECISION
)
________________________________ )
INTRODUCTION
Thomas Kinsey (“Debtor”) filed a voluntary bankruptcy petition on
October 14, 2005. See Doc. No. 1. Debtor brought a motion, Doc. No. 9, seeking
sanctions for violation of the automatic stay under 11 U.S.C. § 362(h)1 against one
of his creditors, Bonneville Billing & Collections, Inc. (“Bonneville”) and its
attorney, Robert Talboy.
The motion came on for hearing on November 14, 2005, and was taken
under advisement upon submission of both parties’ written closing arguments.
The Court has reviewed those briefs, Doc. Nos. 15, 16, and the evidence presented
at hearing. The following constitutes its findings of fact and conclusions of law as
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MEMORANDUM OF DECISION - 2
required by Rule.
BACKGROUND AND FACTS
Debtor filed his chapter 7 petition and mailing matrix of his creditors on
October 14, 2005. Bonneville was listed on Debtor’s mailing matrix. The
Bankruptcy Noticing Center (“BNC”) mailed a general notice of bankruptcy to
creditors, including Bonneville, on October 16, 2005. See Doc. No. 5.
Prior to October 14, 2005, Bonneville hired Shadow Trackers Investigative
Services to serve Debtor and his ex-wife with a summons and complaint. Shadow
Trackers successfully served Ms. Kinsey at home, but was initially unable to
complete service upon Debtor at his work. Before they could attempt service
again, Debtor filed bankruptcy.
On October 26, 2005, Bonneville noted in its records that Debtor had filed
bankruptcy. It then contacted Shadow Tracker’s president, Ronald Kern, informed
him of Debtor’s bankruptcy, and attempted to retrieve the summons and
complaint. See Exs. 3 and 4.
Mr. Kern testified that, upon receiving notice of a bankruptcy, he would
inform his secretary and she would either locate the court papers in an outgoing
box and retrieve the paperwork so that service would not occur or, if the papers
were not in the box, she would contact the process server immediately and inform
the server not to proceed with service.
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MEMORANDUM OF DECISION - 3
Mr. Kern followed Shadow Trackers’ procedures in this case. Upon
receiving notice from Bonneville, he informed his secretary that Debtor had filed
bankruptcy. His secretary then searched for, but was unable to find, the papers
Bonneville intended to have served on Debtor. In addition, she checked with the
process server and confirmed he did not have the documents.
Despite these efforts, the summons and complaint were placed in Shadow
Trackers’ outgoing service box several days later and a process server picked them
up. There was no clear explanation of how this occurred, only some speculation
regarding how paperwork between Bonneville and Shadow Trackers may have
crossed after the initial bankruptcy notification occurred.
On October 30, 2005, the process server successfully served Debtor at his
place of employment, a building supply store. In order to serve Debtor, the
process server requested Debtor by his full name at the “special services” desk at
Debtor’s workplace, but he did not identify himself or why he was there. Debtor
told the individual working at the front desk it was most likely a personal matter
and he did not want to deal with the situation at work. Pursuant to Debtor’s
wishes, the individual at the special services desk did not tell the process server
where he could find Debtor.
Unable to locate Debtor through the front desk, the process server then
visited two other departments, requesting Debtor by his full name. In the end, one
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2 Section 362(h) provides:
(h) An 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.
3 Once a debtor shows the creditor was on notice of the bankruptcy, “any [collection]
actions intentionally taken thereafter are ‘willful’ within the contemplation of § 362(h).” Risner,
317 B.R. at 835, 04.4 I.B.C.R. at 173.
MEMORANDUM OF DECISION - 4
of Debtor’s co-workers indicated that the process server was asking for him and
was holding papers. The process server ultimately spoke with Debtor over the
store’s in-house phone, and Debtor accepted service.
Bonneville, as noted, did not intend for Debtor to be served. It did not take
any further actions against Debtor in that state court lawsuit.
DISCUSSION
A. Automatic stay and sanctions for violations
As this Court has noted on numerous occasions, the automatic stay is one
of the fundamental debtor protections under the Code, stopping all collection
activities. See In re Risner, 317 B.R. 830, 834, 04.4 I.B.C.R. 172, 173 (Bankr. D.
Idaho 2004). The protections of the automatic stay are enforceable through
§ 362(h).2
In order for a debtor to recover under § 362(h), he or she must prove that
(1) an action occurred in violation of the stay, (2) the creditor was on notice of the
bankruptcy and thus its actions were “willful”3 and (3) debtor suffered damages as
a consequence of creditors actions. See In re Risner, 317 B.R. at 835, 04.4
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MEMORANDUM OF DECISION - 5
I.B.C.R. at 173; In re Flack, 239 B.R. 155, 162-63 (Bankr. S.D. Ohio 1999)
(listing similar elements).
1. Was there a violation of the automatic stay?
The automatic stay arose on and was in effect from the date Debtor filed his
petition, October 14, 2005. Bonneville’s service of the state court summons and
complaint through Shadow Trackers occurred on October 30, 2005. Bonneville’s
manager, Richard Fairbanks, acknowledged that Shadow Trackers was acting as
Bonneville’s agent in serving the summons and complaint on Debtor. Thus,
Debtor has established that Bonneville violated the automatic stay. See
§ 362(a)(1).
2. Was there a willful violation of the automatic stay?
Once a creditor or actor is put on notice of a bankruptcy filing, any actions
intentionally taken thereafter are “willful” within the contemplation of § 362(h).
Eskanos & Adler P.C. v. Leetien, 309 F.3d 1210, 1215 (9th Cir. 2002). The
question is not whether the creditor intended to violate the stay, but whether the
creditor intended the act. Id. at 1215; Associated Credit Servs. Inc. v. Campion (In
re Campion), 294 B.R. 313, 316 (9th Cir. BAP 2003).
Here, Bonneville documented its receipt of the bankruptcy notice on
October 26, 2005. See Ex. 4. When its process server served Debtor on October
30, 2005, four days after Bonneville received notice of Debtor’s bankruptcy filing,
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4 As noted, Debtor brought his motion not just against Bonneville but also against its
attorney, Robert Talboy. Debtor’s motion alleges that Bonneville, through Mr. Talboy, had the
summons and complaint served on Debtor at his place of employment. However, at hearing,
Debtor did not establish that Mr. Talboy was involved in the service of the summons and
complaint on Debtor. Instead, the evidence proved that Mr. Talboy was the attorney who
initiated the state court proceeding pre-bankruptcy, but that Bonneville initiated and controlled
service of the summons and complaint through its process server, Shadow Trackers. Debtor
failed to prove Mr. Talboy violated the automatic stay.
MEMORANDUM OF DECISION - 6
Bonneville willfully violated the automatic stay.
The fact that Bonneville did not intend to violate the stay is irrelevant.
Further the fact that Bonneville had instituted a policy to avoid violating
bankruptcy stays is also irrelevant because Bonneville’s procedures were not
effective in this case. See Campion, 294 B.R. at 317-18 (noting that the “only
solace for the creditor who winds up willfully violating the automatic stay without
meaning to is that a good heart may figure in the assessment of § 362(h)
damages”); Risner, 317 B.R. at 836 n.7, 04.4 I.B.C.R. at 173 n.7 (discussing the
fact that having a procedure in place to deal with bankruptcy filings does not
innoculate a creditor from sanctions if that procedure fails and the creditor violates
the automatic stay, even inadvertently). While not egregious conduct,
Bonneville’s admitted mistake constitutes a willful violation of the automatic stay,
and Bonneville would be liable for any damages proven at hearing.4
3. Was Debtor damaged by Bonneville’s stay violation?
Debtor must prove actual damages to recover under § 362(h). See
generally, In re Jacobson, 03.2 I.B.C.R. 119, 121 (Bankr. D. Idaho 2003). Not
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MEMORANDUM OF DECISION - 7
only does § 362(h) clearly require such proof, this Court has instructed Debtor’s
counsel, on numerous occasions, that such proof is required. See, e.g., Risner, 317
B.R. at 836-37, 04.4 I.B.C.R. at 174; In re Masi, No. 05-00412, Doc. No. 55 at 12
(Bankr. D. Idaho May 24, 2005); In re McCain, No. 03-04624, Doc. No. 42 at 9
(Bankr. D. Idaho Aug. 19, 2004) (“[T]he Court declines to award Debtors
damages because the record is insufficient to prove they suffered any actual
damages, nor is there any competent proof regarding their claims for recovery of
attorney fees and costs.”). Indeed, Debtor’s motion appears to recognize this
requirement. See Doc. No. 9 at 3 (“Kinsey requests the opportunity to present
argument, testimony and evidence, for an award of actual damages, punitive
damages, and reasonable attorney fees for the prosecution of this action.”).
Debtor’s affidavit in support of his motion states that “he was greatly
humiliated and embarrassed by being served a lawsuit at [his] place of
employment,” and that “such humiliation and embarrassment . . . caused . . . great
hardship, mental anguish and distress.” See Doc. No. 10 at 2. In addition,
Debtor’s post-hearing brief argues that Bonneville’s willful stay violation caused
“great humiliation and embarrassment to Kinsey by serving him at his place of
employment witnessed by co-workers, management and customers resulting in a
hardship at his place of employment, mental anguish and distress.” Doc. No. 16 at
3.
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MEMORANDUM OF DECISION - 8
Emotional distress damages are available to a debtor under § 362(h). See
Dawson v. Washington Mutual Bank, F.A. (In re Dawson), 390 F.3d 1139, 1149
(9th Cir. 2004). However, Debtor is required to prove that he suffered significant
harm and clearly establish that harm. Id. In addition, Debtor must demonstrate
that a causal connection exists between that significant harm and the violation of
the automatic stay. Id. And while “pecuniary loss is not required in order to claim
emotional distress damages, not every willful violation merits compensation for
emotional distress.” Id.
In this case, there was no evidence presented at hearing supporting or even
addressing Debtor’s conclusory allegations of emotional harm found in his
affidavit. And, while Debtor’s affidavit and brief can be cited by the Court in this
Decision for context, they do not constitute competent evidence. As the element
of damages was clearly disputed by Bonneville, the testimony of witnesses and
introduction of admissible exhibits was required. See Fed. R. Bankr. P. 9014(d)
(“Testimony of witnesses with respect to disputed material factual issues shall be
taken in the same manner as testimony in an adversary proceeding.”); see also
Khachikyan v. Hahn (In re Khachikyan), No. 04-1589, 2005 WL 3116003 (9th
Cir. BAP November 2, 2005) (noting that “trial on a contested matter under Rule
9014, by virtue of a 2002 amendment to that rule, ordinarily requires trial
testimony in open court with respect to disputed material factual issues in the same
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5 Debtor also requests punitive damages. Since he failed to prove any actual damages,
punitive damages are not available to him. See McHenry v. Key Bank (In re McHenry), 179 B.R.
165, 168 (9th Cir. BAP 1995) (holding that “no punitive damages should be awarded in the
absence of actual damages”). In addition, even had Debtor established actual damages, he failed
to justify punitive damages or substantiate his assertion that Bonneville’s actions were
“malicious, wanton or oppressive” or that its actions demonstrated a “reckless or callous
disregard for the law.” See Doc. No. 9 at 3. Quite the opposite, it appears Bonneville took efforts
to halt service of process upon receiving actual notice of Debtor’s bankruptcy, but unfortunately a
mistake occurred and Debtor was inadvertently served.
MEMORANDUM OF DECISION - 9
manner as an adversary proceeding”).
The Court can presume being served with a lawsuit at one’s place of
employment is embarrassing, but “[f]leeting or trivial anxiety or distress does not
suffice to support an award; instead, an individual must suffer significant
emotional harm.” Dawson, 390 F.3d at 1149. As no significant emotional harm
was established in this case, emotional distress cannot serve as the basis to award
damages.
Despite knowing of the requirement that actual damages be proven,
Debtor’s counsel has presented no competent proof of actual damages, and the
Court cannot grant relief under § 362(h). 5
CONCLUSION
For the foregoing reasons, the Court cannot grant relief under § 362(h) for
Bonneville’s willful violation of the automatic stay. Debtor’s motion for
sanctions, Doc. No. 9, will be denied.
Counsel for Bonneville and Mr. Talboy shall prepare a form of order.
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MEMORANDUM OF DECISION - 10
DATED: January 10, 2006
TERRY L. MYERS
CHIEF U. S. BANKRUPTCY JUDGE
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