## 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.
Appell ants are judgment creditors of a Chapter 7 bankruptc y debtor, Just Brakes Corporate Systems, Inc. ("Just Brakes" o r "debtor"). They appeal an order awarding Trustee David A. Sosn e $100,7 17 in damages for appellants' willful violation of th e automatic stay. See 11 U.S.C. § 362. We agree that appellant s-2-

violated the automatic stay bu t conclude that the damage award was an improper remedy and therefore reverse.-3- I. Background.

In 198 8, appellants obtained a state court judgment agains t Just Brakes for $104,583.33. In January 1991, Just Brakes a ssigned its only valuable asset, a registered trademark, to FGR Mana gement, Inc
. ("FGR"). Appellants promptly attacked the transfer as a fraudulent conveyance. The state court agreed, enjoined Jus t Brakes and FGR from further tr ansfers, and scheduled a foreclosure sale o f the trademark to satisfy appellants' judgment. Fiv e minute s before that sale, Just Brakes petitioned for Chapter 1 1 protec tionand asserted its own claim to recover the trademark

. The foreclosure sale was cancelled.
Appellants persuaded the bankruptcy court to dismiss th e Chapter 11 case as "essentially a single asset reorganizatio n case." In dismissing, the cou rt 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 adequatel y protected at less cost in state court.

The pa rties then returned to state court, and the cour t scheduleda foreclosure sale of the trademark at noon on Octobe r 15, 1991. That morning, Just Brakes filed this Chapter 7 pe tition. Though notified of the filing, the state court allowed the sale to proceed, ordering that its proceeds be held in escrow while th e parties "exhausted their legal remedies contesting the validity ofNo one chal lenged the state court's decision to complete the 1 foreclosure sale, doubtless be cause the sale proceeds exceeded the value debtor placed on the trademark in its Chapter 7 schedules. -4- th e . . . sale, or until further order of court." Nine day s 1 later, in the action here at issue, appellants applied to th e state-5-

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 su ed to recover the sale proceeds for the bankruptcy estate, attacking debtor's January 199 1 assignment of the trademark as a fraudulent conveyance, see 1 1 U.S .C. § 548, and seeking damages from appellants for willfu l violation of the automatic stay. When appellants demanded a jury tri al of the avoidance issues, the Trustee dismissed that claim , andthe district court remanded the case to the bankruptcy cour t for resolution of the "core" automatic stay issues.
The bankruptcy court granted s ummary judgment in favor of the Trustee. It found a violation of the automatic stay becaus e appe llants applied the trademark proceeds to their pre-petitio n judgment, knowing that debtor had asserted a claim to recover that asset. Turning to the question of remedy, the court conclud ed that it may award "[c]ompensation a nd punishment" for willful violation of the automatic stay in a con tempt proceeding, and may also award money damages under its broad § 105(a) power to issue "neces sary or app ropriate" orders. It awarded as the "appropriate measure" o f damages the $100,717 appellants received from the foreclosur e sale. The district court affirmed. Appellants challenge the decisio n that they violated the automatic stay and the damage award.

II. Violation of the Automatic Stay.
Appellants argue that they didnot violate the automatic stay wh enthey collected the foreclosure sale proceeds because Jus t Brakes transferred its entire interest in the trademark in January 1991, a nd state law does not allow the transferor to avoid a fraudu lent conveyance. Acknowledging that the Trustee asserts a-6-

claim to recover the trademark for the Chapter 7 estate, app ellants argue that claim is neither "p roperty of the estate" nor "property of the debtor" within the meaning of §§ 362(a)(2)-(5) until theWe note that property of the bankruptcy estate is broadl y 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 nat ure and extent of the debtor's interest in property is governed by stat e law. See Butner v. United States , 440 U.S. 48, 54-55 (1979). -7- Trustee has actually recovered the property. Thus, the Trustee's onlyremedy is to enjoin appellants' collection efforts unde r § 105(a) of the Code, as was d one 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 questi on but one that we need not resolve because, by 2 collecting the foreclosure sale proceeds, appellants violate d § 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-petitio n "claim against the debtor" -- their 1988 judgment. After th e sale, appellants applied to the state court and received the sal e proceeds out of escrow, clearly an "act to collect" on thei r judgment. See Valley Transit Mix of Ruidoso, Inc. v. Miller , 928 F.2d 354, 356 (10th Cir. 1991) . This act prejudiced the Trustee's abilityto litigate a competing avoidance claim on behalf of al l creditors and was therefore in consistent with the basic purpose of the automatic stay, "to preven t 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 t o collect creditors' independent claims against debtors' guarantors. See I n re Alcom Corp. , 154 B.R. 97, 115-16 (Bankr. D.D.C. 1993 ) (subsequent history omitted); In re Advanced Ribbons & Offic e Prods., Inc. , 125 B.R. 259, 265 (B.A.P. 9th Cir. 1991). This court has not previously addressed t he issue. In Lovett 4 v. Honeywell , 930 F.2d 625 (8th Cir. 1991), we assumed tha t § 362(h) damages could be awarded to a corporate debtor an d affirmed the denial of damage relief.

-8- 199 1) (quotation omitted). The bankruptcy court correctl y 3 concluded that appellants violated the automatic stay.
III. The Appropriate Remedy.
The Trustee urged the bankrupt cy court to award money damages under § 362(h), which provides that "[a]n individual injuredby any wi llful violation of [the automatic stay] shall recover actua l damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages." The bankruptc y court ruledthat § 362(h) only applies to "individual" debtors, not t o corporate entities such as Just Brakes. We agree. As the Second 4 Circui t persuasively explained, this construction of § 362(h) i s required by the plain meaning of the word "individual," as used in the Bankruptcy Code, supportedby the fact that § 362(h) was added to the C ode as part of the "Consumer Credit Amendments" of 1984

. See In r e Chateaugay Corp. , 920 F.2d 183, 186-87 (2d Cir. 1990) ; accord In re Goodman , 991 F.2d 613, 619 (9th Cir. 1993); In r e Calstar, Inc. , 159 B.R. 247, 260 (Bankr. D. Minn. 1993). We reject
ea rlier, contrary circuit decisions that did not give adequat e weight to the statute's plain meaning. See In re Atl. Bus. & Community Corp. , 901 F.2d 325, 329 (3d Cir. 1990); Budget Se rv. Co. v. Better Homes of Va., Inc. , 804 F.2d 289, 292 (4th Cir. 1986).-9--10-

Havi ng denied the Trustee § 362(h) damages, the bankruptc y court went on to conclude that it may compensate and punishfor a willful violation of the automatic stay under its inherent c ontempt powers, or its broad § 105(a) power to "issue any order, process,
or judgment that is necessary or appropriate to carry out th e provisions of this title." But the power to punish for a st atutory violation is a criminal law po wer. It must be expressly conferred byCongress, and its exercise is often subject to the procedura l safeguards that protect the cr iminally accused. Even the judicial power to punish for criminal contempt of a court order is ca refully distinguishedfrom the power to remedy a violation of that orde r thr oughcivil contempt. See, e.g. , Shillitani v. United States , 384 U .S. 364, 368-72 (1966); Combs v. Ryan's Coal Co. , 785 F.2 d 970, 98 1 (11th Cir.), cert. denied , 479 U.S. 853 (1986). W e conclude that Congress has conferred no power to punish for a violation of § 362(a), other t han the punitive damage authority in § 362(h).
On the other hand, we agree th at bankruptcy courts have broad equ itable powers to remedy violations of the automatic stay tha t injure a corporate debtor's estate. Many courts have said tha t those who violate the automatic stay "may be held in contemp t." 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 198 4 Amendments. Compare In re Sequoia Auto Brokers, Ltd. , 827 F.2 d 1281, 1290 (9th Cir. 1987), wi th In re Skinner , 917 F.2d 444, 448- 50 (1 0th Cir. 1990). More narrowly, it overlooks the fact tha t contempt is a remedy for violating court orders, not statute s. See In re Calstar , 159 B.R. at 257-58. Finally, even if a civi l contempt power exists, we see little if any need to resort t o it in this context because § 362(a), buttressed by § 105(a), confer s-11-

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 i n 5 § 362(h) did not grant authority to award damages to corporat e debtors, only compensatory equitable remedies are appropriate. -12- Having limited the scope of the bankruptcy court's remedia l powers, we encounter a problem with the remedy awarded in thi s
cas e, for neither the bankruptcy court nor the district cour t cla rifiedwhether the damages awarded were compensatory o r 5 puniti ve. Thus, we must examine whether the bankruptcy court' s award -- the "value of the voidable transfer that resulted f rom the violation of the automatic stay" -- was properly compensatory.
The bankruptcy court relied upon In re Calstar in awarding t he Trustee the value of the trademark as determined by the fore closure sale. But in Calstar , the bankruptcy court held that the as sets in question were part of the debt or's estate before ruling that their value wa s the appropriate remedy for violation of the stay. Se e 159 B.R. a t 252-53. Here, by contrast, the Trustee has neve r established his right to avoid debtor's pre-petition transfer and
recov er the trademark or its value for the estate. Indeed, th e 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. A t this stage of the proceedings, the Trustee's rights are preserved if appellants are ordered to pay the foreclosure sale proceed s (inclu ding interest on the proceeds from October 24, 1991) int o 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 th at appellants' violation of the automatic stay "required the Trustee to incur the additional expens e of litigating these actions." But the court made no effort to quantify this expense. In vacat ing the-13-

$100,717 award and substituting an order to pay the proceeds into escrow, we do not foreclose th e bankruptcy court from returning to-14-

the question of remedy after the avoidance issues are finall y resolved. For example, if the Trustee proves that the trademar k proceeds belong in the debtor' s estate, then appellants' violation of the automatic stay has needlessly cost the estate delay an d litig ationexpense. On the other hand, if the Trustee fails t o prove his avoidance claim, then the Trustee has pursued a los t cause, and the expense he incurred is a self-inflicted wound.

Fo r the foregoing reasons, the district court's March 29 , 1996, order is reversed and the case is remanded for furthe r proceedings consistent with this opinion.

A true copy.

Attest:

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