United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 96-2078

___________

------------------------------- 

 *

In Re: Just Brakes *

Corporate Systems, Inc., *

*

Debtor. *

------------------------------- 

*

David A. Sosne, Trustee, *

* Appeal from the United States

Plaintiff - Appellee. * District Court for the

* Eastern District of Missouri.

v. *

*

Reinert & Duree, P.C.; Gary *

Robbins; Robbins & Associates, *

Inc.; Estes & Estes, Inc.; *

James C. Landes, *

*

Defendants - Appellants. *

___________

 Submitted: December 11, 1996

 Filed: March 13, 1997

___________

Before FAGG, FLOYD R. GIBSON, and LOKEN, Circuit Judges.

___________

LOKEN, Circuit Judge.

Appellants are judgment creditors of a Chapter 7 bankruptcy

debtor, Just Brakes Corporate Systems, Inc. ("Just Brakes" or

"debtor"). They appeal an order awarding Trustee David A. Sosne

$100,717 in damages for appellants' willful violation of the

automatic stay. See 11 U.S.C. § 362. We agree that appellants
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violated the automatic stay but conclude that the damage award was

an improper remedy and therefore reverse.
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I. Background.

In 1988, appellants obtained a state court judgment against

Just Brakes for $104,583.33. In January 1991, Just Brakes assigned

its only valuable asset, a registered trademark, to FGR Management,

Inc. ("FGR"). Appellants promptly attacked the transfer as a

fraudulent conveyance. The state court agreed, enjoined Just

Brakes and FGR from further transfers, and scheduled a foreclosure

sale of the trademark to satisfy appellants' judgment. Five

minutes before that sale, Just Brakes petitioned for Chapter 11

protection and asserted its own claim to recover the trademark.

The foreclosure sale was cancelled.

Appellants persuaded the bankruptcy court to dismiss the

Chapter 11 case as "essentially a single asset reorganization

case." In dismissing, the court observed that Just Brakes's claim

to avoid its pre-petition assignment of the trademark to FGR "is an

asset of the Bankruptcy estate," and that the rights of Just Brakes

and others asserting claims to the trademark could be adequately

protected at less cost in state court. 

The parties then returned to state court, and the court

scheduled a foreclosure sale of the trademark at noon on October

15, 1991. That morning, Just Brakes filed this Chapter 7 petition.

Though notified of the filing, the state court allowed the sale to

proceed, ordering that its proceeds be held in escrow while the

parties "exhausted their legal remedies contesting the validity of
 No one challenged the state court's decision to complete the 1

foreclosure sale, doubtless because the sale proceeds exceeded the

value debtor placed on the trademark in its Chapter 7 schedules.

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the . . . sale, or until further order of court." Nine days

1

later, in the action here at issue, appellants applied to the state
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court and were granted pay-out of the net sale proceeds, $100,717,

without obtaining relief from the Chapter 7 automatic stay.

One year later, the Trustee sued to recover the sale proceeds

for the bankruptcy estate, attacking debtor's January 1991

assignment of the trademark as a fraudulent conveyance, see 11

U.S.C. § 548, and seeking damages from appellants for willful

violation of the automatic stay. When appellants demanded a jury

trial of the avoidance issues, the Trustee dismissed that claim,

and the district court remanded the case to the bankruptcy court

for resolution of the "core" automatic stay issues.

The bankruptcy court granted summary judgment in favor of the

Trustee. It found a violation of the automatic stay because

appellants applied the trademark proceeds to their pre-petition

judgment, knowing that debtor had asserted a claim to recover that

asset. Turning to the question of remedy, the court concluded that

it may award "[c]ompensation and punishment" for willful violation

of the automatic stay in a contempt proceeding, and may also award

money damages under its broad § 105(a) power to issue "necessary or

appropriate" orders. It awarded as the "appropriate measure" of

damages the $100,717 appellants received from the foreclosure sale.

The district court affirmed. Appellants challenge the decision

that they violated the automatic stay and the damage award.

II. Violation of the Automatic Stay.

Appellants argue that they did not violate the automatic stay

when they collected the foreclosure sale proceeds because Just

Brakes transferred its entire interest in the trademark in January

1991, and state law does not allow the transferor to avoid a

fraudulent conveyance. Acknowledging that the Trustee asserts a
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claim to recover the trademark for the Chapter 7 estate, appellants

argue that claim is neither "property of the estate" nor "property

of the debtor" within the meaning of §§ 362(a)(2)-(5) until the
 We note that property of the bankruptcy estate is broadly

2

defined in § 541(a)(1) of the Code. See United States v. Whiting

Pools, Inc., 462 U.S. 198, 204-05 & n.9 (1983). But the nature and

extent of the debtor's interest in property is governed by state

law. See Butner v. United States, 440 U.S. 48, 54-55 (1979).

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Trustee has actually recovered the property. Thus, the Trustee's

only remedy is to enjoin appellants' collection efforts under

§ 105(a) of the Code, as was done in Celotex Corp. v. Edwards, 115

S. Ct. 1493, 1498-1500 (1995).

The nature of debtor's present interest in the trademark is an

interesting question but one that we need not resolve because, by 2

collecting the foreclosure sale proceeds, appellants violated

§ 362(a)(6), which provides:

[A] petition filed under . . . this title . . . operates as a

stay . . . of (6) any act to collect, assess, or recover a

claim against the debtor that arose before the commencement of

the case under this title.

Here, the trademark was sold to satisfy appellants' pre-petition

"claim against the debtor" -- their 1988 judgment. After the sale,

appellants applied to the state court and received the sale

proceeds out of escrow, clearly an "act to collect" on their

judgment. See Valley Transit Mix of Ruidoso, Inc. v. Miller, 928

F.2d 354, 356 (10th Cir. 1991). This act prejudiced the Trustee's

ability to litigate a competing avoidance claim on behalf of all

creditors and was therefore inconsistent with the basic purpose of

the automatic stay, "to prevent creditors from stealing a march on

each other." Brown v. Armstrong, 949 F.2d 1007, 1010 (8th Cir.
 This factor distinguishes this case from cases holding that 3

§ 362(a)(6) does not automatically stay post-petition acts to

collect creditors' independent claims against debtors' guarantors.

See In re Alcom Corp., 154 B.R. 97, 115-16 (Bankr. D.D.C. 1993)

(subsequent history omitted); In re Advanced Ribbons & Office

Prods., Inc., 125 B.R. 259, 265 (B.A.P. 9th Cir. 1991).

 This court has not previously addressed the issue. In Lovett 4

v. Honeywell, 930 F.2d 625 (8th Cir. 1991), we assumed that

§ 362(h) damages could be awarded to a corporate debtor and

affirmed the denial of damage relief. 

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1991) (quotation omitted). The bankruptcy court correctly

3

concluded that appellants violated the automatic stay.

III. The Appropriate Remedy.

The Trustee urged the bankruptcy court to award money damages

under § 362(h), which provides that "[a]n individual injured by any

willful violation of [the automatic stay] shall recover actual

damages, including costs and attorneys' fees, and, in appropriate

circumstances, may recover punitive damages." The bankruptcy court

ruled that § 362(h) only applies to "individual" debtors, not to

corporate entities such as Just Brakes. We agree. As the Second 4

Circuit persuasively explained, this construction of § 362(h) is

required by the plain meaning of the word "individual," as used in

the Bankruptcy Code, supported by the fact that § 362(h) was added

to the Code as part of the "Consumer Credit Amendments" of 1984.

See In re Chateaugay Corp., 920 F.2d 183, 186-87 (2d Cir. 1990);

accord In re Goodman, 991 F.2d 613, 619 (9th Cir. 1993); In re

Calstar, Inc., 159 B.R. 247, 260 (Bankr. D. Minn. 1993). We reject

earlier, contrary circuit decisions that did not give adequate

weight to the statute's plain meaning. See In re Atl. Bus. &

Community Corp., 901 F.2d 325, 329 (3d Cir. 1990); Budget Serv. Co.

v. Better Homes of Va., Inc., 804 F.2d 289, 292 (4th Cir. 1986). 
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Having denied the Trustee § 362(h) damages, the bankruptcy

court went on to conclude that it may compensate and punish for a

willful violation of the automatic stay under its inherent contempt

powers, or its broad § 105(a) power to "issue any order, process,

or judgment that is necessary or appropriate to carry out the

provisions of this title." But the power to punish for a statutory

violation is a criminal law power. It must be expressly conferred

by Congress, and its exercise is often subject to the procedural

safeguards that protect the criminally accused. Even the judicial

power to punish for criminal contempt of a court order is carefully

distinguished from the power to remedy a violation of that order

through civil contempt. See, e.g., Shillitani v. United States,

384 U.S. 364, 368-72 (1966); Combs v. Ryan's Coal Co., 785 F.2d

970, 981 (11th Cir.), cert. denied, 479 U.S. 853 (1986). We

conclude that Congress has conferred no power to punish for a

violation of § 362(a), other than the punitive damage authority in

§ 362(h).

On the other hand, we agree that bankruptcy courts have broad

equitable powers to remedy violations of the automatic stay that

injure a corporate debtor's estate. Many courts have said that

those who violate the automatic stay "may be held in contempt." In

re Computer Commun., Inc., 824 F.2d 725, 731 (9th Cir. 1987).

Calling this remedial power contempt overlooks a serious question

whether bankruptcy courts have contempt powers after the 1984

Amendments. Compare In re Sequoia Auto Brokers, Ltd., 827 F.2d

1281, 1290 (9th Cir. 1987), with In re Skinner, 917 F.2d 444, 448-

50 (10th Cir. 1990). More narrowly, it overlooks the fact that

contempt is a remedy for violating court orders, not statutes. See

In re Calstar, 159 B.R. at 257-58. Finally, even if a civil

contempt power exists, we see little if any need to resort to it in

this context because § 362(a), buttressed by § 105(a), confers
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broad equitable power to remedy adverse effects of automatic stay

violations. See Celotex, 115 S. Ct. at 1498-99 & n.6; In re Taco

Ed's, Inc., 63 B.R. 913, 931-32 (Bankr. N.D. Ohio 1986). 
 Damages are not an equitable remedy. Because Congress in

5

§ 362(h) did not grant authority to award damages to corporate

debtors, only compensatory equitable remedies are appropriate.

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Having limited the scope of the bankruptcy court's remedial

powers, we encounter a problem with the remedy awarded in this

case, for neither the bankruptcy court nor the district court

clarified whether the damages awarded were compensatory or

5

punitive. Thus, we must examine whether the bankruptcy court's

award -- the "value of the voidable transfer that resulted from the

violation of the automatic stay" -- was properly compensatory.

The bankruptcy court relied upon In re Calstar in awarding the

Trustee the value of the trademark as determined by the foreclosure

sale. But in Calstar, the bankruptcy court held that the assets in

question were part of the debtor's estate before ruling that their

value was the appropriate remedy for violation of the stay. See

159 B.R. at 252-53. Here, by contrast, the Trustee has never

established his right to avoid debtor's pre-petition transfer and

recover the trademark or its value for the estate. Indeed, the

Trustee dismissed his adversary avoidance claims so that he could

pursue this § 362 claim in the bankruptcy court. Thus, the value

of the trademark is not an appropriate compensatory remedy. At

this stage of the proceedings, the Trustee's rights are preserved

if appellants are ordered to pay the foreclosure sale proceeds

(including interest on the proceeds from October 24, 1991) into

escrow pending determination of whether those proceeds now belong

to appellants, or to debtor's estate. 

In making its damage award, the bankruptcy court observed that

appellants' violation of the automatic stay "required the Trustee

to incur the additional expense of litigating these actions." But

the court made no effort to quantify this expense. In vacating the
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$100,717 award and substituting an order to pay the proceeds into

escrow, we do not foreclose the bankruptcy court from returning to
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the question of remedy after the avoidance issues are finally

resolved. For example, if the Trustee proves that the trademark

proceeds belong in the debtor's estate, then appellants' violation

of the automatic stay has needlessly cost the estate delay and

litigation expense. On the other hand, if the Trustee fails to

prove his avoidance claim, then the Trustee has pursued a lost

cause, and the expense he incurred is a self-inflicted wound. 

For the foregoing reasons, the district court's March 29,

1996, order is reversed and the case is remanded for further

proceedings consistent with this opinion.

A true copy.

Attest:

 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.