United States District Court, N.D. Indiana, Hammond Division
OPINION AND ORDER
S. VAN BOKKELEN UNITED STATES DISTRICT JUDGE.
pertains to this appeal, Appellant Jacqueline Sterling
claimed in bankruptcy court that Appellees Southlake Nautilus
Health & Racquet Club and the law firm of Austgen, Kuiper
& Associates willfully violated that court's
injunction against collecting her debts, see 11
U.S.C. § 524(a)(2), which resulted in her being arrested
pursuant to a state court bench warrant. The bankruptcy court
held a trial and found in favor of the Appellees. Sterling
has appealed the bankruptcy court's judgment, but as
sometimes is the case, the hurt and suffering Sterling
experienced cannot be remedied through legal channels: her
burden is just too high to prevail under the facts elicited
courts have jurisdiction to hear appeals from the final
rulings of bankruptcy courts. Findings of fact “shall
not be send aside unless clearly erroneous.” Bankruptcy
Rule 8013. On the other hand, a bankruptcy court's legal
rulings are reviewed de novo. In re Newman, 903 F.2d
1150 (7th Cir. 1990).
Bankruptcy Court's Findings
injuries arose out of Austgen's aggressive attempts to
collect her debt through state court proceedings---even as,
unbeknownst to it, Sterling's bankruptcy case was
pending---and Sterling's failure to attend state court
hearings. The following is a summary of the bankruptcy
court's trial findings.
turn of the century, Sterling owed $518 to Southlake.
Believing that Sterling would not pay the debt, Southlake
referred her account to the Austgen law firm for collection.
In 2001, the firm filed a collection action in state court. A
year later, a default judgment was entered against Sterling
in the amount $957. The firm then started supplemental
proceedings to collect on the judgment. During this period,
Sterling made sporadic payments on the debt but did not pay
it in full.
2008, Sterling told an Austgen representative that she was
planning to file for bankruptcy, but that didn't happen
until the end of 2009.
Sterling filed a Chapter 7 petition in the bankruptcy court,
she listed Southlake, but not Austgen, on her Schedule F; nor
did she provide notice of the bankruptcy in the state court
case. By law, the notice is designed to protect the debtor
from the creditors and operates as an injunction against
collecting any debts.
trial court found that the notice of Sterling's
bankruptcy was mailed to and received by Southlake but
Southlake did not pass it on to Austgen, even though its
customary practice was to pass on such notices to Austgen.
The trial court found that, although the notice was received
at Southlake's office, Plaintiff was unable to prove that
anyone at Southlake handled it.
Austgen, unaware of the bankruptcy filing, resumed its
supplemental proceedings against Sterling in state court.
After Sterling failed to appear at the hearings, Austgen
petitioned for a bench warrant which the state court issued
at the beginning of 2010, several months after Sterling's
Chapter 7 petition had been filed.
January 2011, the bankruptcy court discharged Sterling's
debts, including the debt owed to Southlake.
March 2011, Sterling was driving a car when it got a flat
tire. A police officer stopped to assist her, but then to her
surprise arrested her due to the outstanding warrant.
Sterling spent three days in jail, until she was able to
contact her bankruptcy attorney.
basis of these facts, the trial court found that Austgen did
not act willfully to violate the bankruptcy court's
injunction against collecting Sterling's debt because,
since no notice was sent to it either by Sterling or
Southlake, it was unaware of the bankruptcy filing. As for
Southlake, the trial court found that, although the
bankruptcy notice was properly mailed to and received at
Southlake's office, no one at Southlake saw it or was
aware of it. The trial court also found that Southlake did
not have formal procedures for recording receipts of
bankruptcy notices in cases which it had referred to Austgen
for collection. The trial court found that no one at
Southlake directed Austgen to take any specific action in
relation to Sterling's debts, especially action related
to supplemental proceedings in state court. As a result of
these conclusions, the trial court found both Austgen and
Southlake not liable because neither of them willfully acted
contrary to the bankruptcy court's injunction.
Bankruptcy court's factual findings were not clearly
erroneous and its legal ...