Davis v. American Investment Bank, NA et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
JUBAL JIMMY DAVIS
DEBTOR
CASE NO.
06-01101-5-ATS
JUBAL JIMMY DAVIS
Plaintiff
v.
AMERICAN INVESTMENT BANK, N.A.
AMERICAN INVESTMENT HOLDINGS, LLC
Defendants.
ADVERSARY PROCEEDING NO.
S-06-00145-5-AP
DEFAULT JUDGMENT
The matter before the court is the motion filed by Jubal Jimmy Davis, plaintiff, for default
judgment against the defendants, American Investment Bank, N.A. and American Investment
Holdings, LLC (“defendants”). A hearing took place in Raleigh, North Carolina on August 2, 2007.
The complaint commencing this adversary proceeding was filed on November 6, 2006. The
defendants were served with the summons and complaint on November 8, 2006. 	An amended
SO ORDERED.
SIGNED this 03 day of August, 2007.
________________________________________
A. Thomas Small
United States Bankruptcy Judge
____________________________________________________________
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summons was issued and served along with the complaint upon the defendant, American Investment
Bank, N.A., on March 6, 2007.
In his complaint, the plaintiff seeks to recover preferential payments and other damages from
the defendants as a result of an improper wage garnishment. The plaintiff first alleges that within
90 days prior to his chapter 7 bankruptcy filing on July 24, 2006, a total of $805.09 was transferred
to the defendants on account of an antecedent debt owed by the plaintiff to the defendants. The
funds were transferred in response to an order of garnishment issued to the plaintiff’s employer by
an Illinois court, at a time when the plaintiff was insolvent. 	The plaintiff seeks to avoid the
preferential payments pursuant to § 522(h) of the Bankruptcy Code, which provides:
The debtor may avoid a transfer of property of the debtor or recover a setoff to the
extent that the debtor could have exempted such property under subsection (g)(1) of
this section if the trustee had avoided such transfer, if—
(1) such transfer is avoidable by the trustee under section . . . 547 . . . of this
title; and
(2) the trustee does not attempt to avoid such transfer.
Section 547(b) allows the trustee to avoid a transfer of the debtor’s property when made as
follows: to a creditor; on account of an antecedent debt owed by the debtor prior to the transfer;
while the debtor was insolvent; within 90 days before the debtor filed his petition. The trustee in
the plaintiff’s bankruptcy case has not attempted to recover these funds and the plaintiff has claimed
any preferential payments recovered from the defendants as exempt from property of the bankruptcy
estate.
Additionally, the plaintiff alleges that the defendants garnished his paycheck in the amount
of $174.00 on April 5, 2006, prior to the 90 day period during which the preferential payments
occurred. The plaintiff claims that this garnishment, along with the garnishments during the period
immediately prior to the plaintiff’s bankruptcy filing, violates various North Carolina debt collection
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laws. Under North Carolin. law, wages generally cannot be garnished to satisfy a judgment of a
general creditor. Specifically, a debtor’s earnings for personal services within 60 days prior to the
order providing for garnishment cannot be applied to the debt when it appears that the earnings are
necessary to support the debtor’s family. 	N.C. Gen. Stat. § 1-362. 	Further, the courts have
expanded the rule to preclude execution on any of the debtor’s future earnings to satisfy a judgment.
Harris v. Hinton, 87 N.C. App. 148, 360 S.E. 2d 118 (1987).
At the time the garnishments occurred, the plaintiff was a citizen and a resident of North
Carolina, employed by Crate & Barrel. Crate & Barrel is headquartered in Illinois; however, the
plaintiff worked in a Raleigh, North Carolina store location. The plaintiff claims that the funds
transferred to the defendants represent wages from the plaintiff’s personal services and that the funds
were needed to provide for the plaintiff and his family.
The plaintiff also claims that the funds taken were exempt from execution pursuant to North
Carolina General Statute § 1C-1601(a)(2), which allows an individual (“debtor,” under the statute)
to retain certain interests in property free of enforcement of claims by creditors. Specifically, a
debtor may retain his aggregate interest in any property (up to $5,000.00 in value) of any unused
exemption amount allowed under certain other provisions of § 1C-1601, such as the $18,500
exemption for the debtor’s residence.
The plaintiff further alleges that the defendants’ actions in obtaining the order for
garnishment violated North Carolina General Statute § 75-51, which provides:
No debt collector shall collect or attempt to collect any debt alleged to be due and
owing from a consumer by means of any unfair threat, coercion, or attempt to coerce.
Such unfair acts include, but are not limited to, the following:
* * *
(8) Threatening to take any action not permitted by law.
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The plaintiff contends that since threatening to take unlawful action is an unfair collection
practice, actually taking the unlawful action is also prohibited by the statute, given the inclusive
language used in defining “unfair acts.” Thus, the plaintiff argues that by collecting the debt in a
manner prohibited by North Carolina law, the defendants committed an unfair act in violation of §
75-51.
Finally, the plaintiff contends that damages are available under § 75-56 for violations of
Article 2 of Chapter 75 of the North Carolina General Statutes. 	As a consequence to a debt
collector’s use of an unfair debt collection action, civil penalties may be imposed of up to $2,000.00
per Article 2 violation. N.C. Gen. Stat. § 75-56; Wall v. City of Raleigh, 121 N.C. App. 351, 465
S.E. 2d 551 (1996). The plaintiffs allege six instances of garnishment in the form of preferential
payments, and one garnishment prior to the preferential payments, for a total of seven unfair debt
collection acts.
The defendants in this action failed to respond to the plaintiff’s complaint. Consequently,
the bankruptcy clerk entered a default on May 1, 2007. In addition, the defendants did not respond
to the plaintiff’s motion for default judgment and did not attend the hearing on the motion. The
court therefore assumes that the defendants have no defenses to the allegations raised. Accordingly,
the plaintiff is entitled to a default judgment.
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that the plaintiff, Jubal
Jimmy Davis, shall recover from the defendants, American Investment Bank, N.A., and American
Investment Holdings, LLC, the sum of $979.09 plus interest at the rate of 4.91 % per annum from
the date of this judgment until paid.
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IT IS FURTHER ORDERED, ADJUDGED AND DECREED that defendants shall pay
$3,500.00 in statutory damages to the plaintiff.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the defendants shall
pay $1,200.00 in attorney’s fees to William E. Brewer, Jr., counsel for the plaintiff, at 619 N. Person
Street, Raleigh, North Carolina 27604.
SO ORDERED.
END OF DOCUMENT
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