In re McCormick

IN RE: MOSES MONWEAL MCCORMICK, Debtor-Appellant.

No. 17-8039

No. 17-8040

No. 18-8015

BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

December 26, 2018

By order of the Bankruptcy Appellate Panel, the precedential effect of this decision is limited to the case and parties pursuant to 6th Cir. BAP LBR 8024-1(b). See also 6th Cir. BAP LBR 8014-1(c).

File Name: 18b0006n.06

On Appeal from the United States Bankruptcy Court for the Southern District of Ohio at Columbus.

No. 2:17-bk-55146—C. Kathryn Preston, Judge.

Before: DALES, HARRISON, and WISE, Bankruptcy Appellate Panel Judges.

COUNSEL

ON BRIEF: Timothy A. Riedel, BAILEY CAVALIERI LLC, Columbus, Ohio, for Appellee. Moses McCormick, Akron, Ohio, pro se Appellant.

OPINION

SCOTT W. DALES, Bankruptcy Appellate Panel Judge. In these cases, the bankruptcy court denied the motions of debtor Moses McCormick ("McCormick") to hold two creditors in contempt, and impose sanctions, for alleged violations of the automatic stay. For the reasons stated below, the bankruptcy court's orders are AFFIRMED.

ISSUES ON APPEAL

The issue on appeal in each of these cases is whether the bankruptcy court erred in denying McCormick's motions for sanctions for alleged violations of the automatic stay.

JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit ("BAP") has jurisdiction to decide these appeals. The United States District Court for the Southern District of Ohio has authorized appeals to the BAP and no party has timely elected to have the appeals heard by the district court. 28 U.S.C. § 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1).

In determining the finality of a bankruptcy court order, the BAP will apply the test the Sixth Circuit recently prescribed in Ritzen Group, Inc. v. Jackson Masonry, LLC (In re Jackson Masonry, LLC), 906 F.3d 494, 499 (6th Cir. 2018). The Sixth Circuit articulated a two-step approach to determining whether an order of a bankruptcy court is immediately appealable under 28 U.S.C. § 158(a)(1): "a bankruptcy court's order may be immediately appealed if it is (1) 'entered in [a] . . . proceeding' and (2) 'final'— terminating that proceeding." Id. "Using this approach, the reviewing court must first identify the 'proceeding' or appropriate 'judicial unit' from which the order emanated, and then determine whether the order under review is a 'final' order that terminated the proceeding or 'unit' so identified." In re Lane, 591 B.R. 298, 302 (B.A.P. 6th Cir. 2018).

In these appeals, the contested matter relating to each of McCormick's sanctions motions constitutes the relevant judicial unit. The point of each was to determine whether the creditor had violated the stay and, if so, whether the court should impose sanctions. The proceedings were not intended to determine the outcome of the entire bankruptcy case as "[e]ach dispute was a quintessential 'piece' of the 'puzzle,' involving a discrete part of the case, but not the entire case itself." Id. And, each order under review finally and definitively resolved each discrete dispute.

Indeed, courts have consistently held that an order denying a motion for sanctions due to an alleged violation of the automatic stay is a final order. See In re Collett, No. 13-8033, 2014 WL 2111309, at *1 (B.A.P. 6th Cir. May 21, 2014) ("An order denying a party's motion for sanctions for violating the automatic stay is a final appealable order."); see also In re Glaspie, 410 B.R. 261, 266 (E.D. Mich. 2007) ("'The order in this case denied [the] motion for contempt. This ended the controversy regarding violation of the automatic stay[.]'") (quoting Anastasia Cruises, Inc. v. Exxon Mobil Corp. (In re Commodore Holdings, Inc.), 331 F.3d 1257, 1259 (11th Cir. 2003)).

The question of whether a violation of the automatic stay has occurred is a mixed question of law and fact. See In re Baer, No. 11-8062, 2012 WL 2368698 (B.A.P. 6th Cir. June 22, 2012) (citing In re Perrin, 361 B.R. 853 (B.A.P. 6th Cir. 2007)).

As the Supreme Court recently observed, "[m]ixed questions are not all alike"—those that rest primarily on the facts are reviewed for clear error and those that rest primarily on the law are reviewed de novo. U.S. Bank Nat'l Ass'n v. Vill. at Lakeridge, LLC, — U.S. —, 138 S. Ct. 960, 966, — L. Ed. 2d — (2018). "[T]he standard of review for a mixed question all depends—on whether answering it entails primarily legal or factual work." Id.

In re Felix, 582 B.R. 915, 918 (B.A.P. 6th Cir. 2018). "De novo means that the appellate court determines the law independently of the trial court's determination." Treinish v. Norwest Bank Minn., N.A. (In re Periandri), 266 B.R. 651, 653 (B.A.P. 6th Cir. 2001) (internal quotation marks and citations omitted). "No deference is given to the trial court's conclusions of law." Mktg. & Creative Solutions, Inc. v. Scripps Howard Broad. Co. (In re Mktg. & Creative Solutions, Inc.), 338 B.R. 300, 302 (B.A.P. 6th Cir. 2006) (citations omitted). With respect to the bankruptcy court's factual findings, however, the BAP applies a clearly erroneous standard of review. Through this lens, a finding of fact is clearly erroneous when "although there is evidence to support it, the reviewing court . . . is left with the definite and firm conviction that a mistake has been committed." Riverview Trenton R.R. Co. v. DSC, Ltd. (In re DSC, Ltd.), 486 F.3d 940, 944 (6th Cir. 2007) (citations omitted). This deferential standard of review of factual findings affords the trial court considerable latitude, especially in evaluating the credibility of witnesses.

Primarily, McCormick challenges the bankruptcy court's factual determination that he did not present evidence establishing a violation of the automatic stay and damages resulting therefrom. Thus, the Panel reviews the bankruptcy court's findings to determine if they are clearly erroneous. The Panel, however, would reach the same result under a de novo standard of review.

FACTS

McCormick filed a voluntary chapter 7 bankruptcy petition on August 11, 2017. On September 27, 2017, he filed a motion alleging that his landlord, Scioto Management Group, LLC ("SMG"), had willfully violated the automatic stay, causing him to incur damages. (In re McCormick, Case No. 17-55146, ECF No. 28.) McCormick based his motion principally on an email SMG sent on September 12, 2017, in which SMG acknowledged the bankruptcy stay and simply inquired about McCormick's plans to continue to occupy the leased premises. While admitting it sent the email, SMG, in its response of October 18, 2017, asserted that the email did not violate the automatic stay because it was not threatening or coercive, nor did it seek to collect a pre-petition debt. Furthermore, SMG claimed the email was exempt from the stay pursuant to 11 U.S.C. § 365(p)(2).

On October 5, 2017, McCormick filed a motion alleging that creditor WOW! Internet, Cable & Phone ("WOW") had also violated the automatic stay, claiming that it sent him a bill requesting payment of $1,451.90 for cable services and equipment. (Case No. 17-55146, ECF No. 31.) WOW's response admitted that two statements were automatically generated after the filing of the petition even though a "bankruptcy/DO NOT COLLECT" notation had been placed in the company's records. Nevertheless, WOW contended that on October 2, 2017, when McCormick called the WOW call center he was connected to the bankruptcy group and told to disregard the bill, and that WOW was not attempting to collect the debt. WOW's call center agent also informed him how he could return the equipment at issue. (Case No. 17-55146, ECF No. 62.)

The bankruptcy court held an evidentiary hearing to consider both motions on December 12, 2017. In his opening statement, McCormick asserted compensatory damages totaling $24,983.00, including: expenses for traveling to and from the bankruptcy court to file the motions and responses, lost wages from pursuing the causes of action, and unspecified medical costs. McCormick also demanded $15,000.00 in punitive damages, for a total of $39,980.00. During the hearing, McCormick called three witnesses: Antoinette Seals, a former employee of SMG; his brother, Mark McCormick; and himself. Ms. Seals testified that her employer had instructed her to contact McCormick to "find out what [his] intention was" regarding continued occupancy of the premises. (Tr. 17:12-19:24, In re McCormick, Case No. 17-55146, ECF No. 113 Dec. 12, 2017 ("Dec. Tr.").)

Mark McCormick testified that his brother had to miss work while doing the research and paperwork to bring the cause of action. He also testified that he accompanied his brother to the emergency room because his brother was experiencing a migraine headache. Mark McCormick believed his brother's migraine was caused either by the stress from bringing the stay action or from the alleged stay violation itself, his testimony was unclear. SMG's attorney objected on the basis that Mark McCormick was not an expert qualified to diagnose any medical condition or the reasons for it. However, the bankruptcy court allowed the testimony to the extent Mark McCormick was testifying to his own observations.

After the bankruptcy court reminded him that his opening statement was not evidence, McCormick called himself as his final witness. He testified that the "whole action" had caused him a lot of stress because of the "countless hours" researching. He mentioned the email and video of his meeting with SMG, as well as the WOW bill which was attached to his motion. The court informed him that those filings and other documents did not constitute testimony or evidence because they were not formally offered or admitted at the hearing. The court further stated "[t]hat's what we're here for right now." (Dec. Tr. 29:17-18.) Nevertheless, McCormick, rested his case without offering any evidence other than the testimony just described. After McCormick rested, the bankruptcy...