United States Bankruptcy Appellate Panel

For the Eighth Circuit

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No. 13-6038

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In re: James Allen Carter, Jr., also known as Jim Carter; Leigh Emory Carter

 Debtors

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James Allen Carter, Jr.; Leigh Emory Carter

 Debtors - Appellants

v.

First National Bank of Crossett

 Creditor - Appellee

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Appeal from United States Bankruptcy Court 

for the Western District of Arkansas - El Dorado

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Submitted: October 17, 2013

Filed: December 5, 2013

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Before SCHERMER, SALADINO and SHODEEN, Bankruptcy Judges. 

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SHODEEN, Bankruptcy Judge.

The Debtors, James Allen Carter, Jr. and Leigh Emory Carter, appeal from the 

Bankruptcy Court’s1order entered on April 22, 2013 denying the Debtors’ Motion 

for Sanctions against First National Bank of Crossett. For the reasons that follow, 

we AFFIRM. 

BACKGROUND

Jim A. Carter, Jr. Logging, LLC (the “LLC”) was formed with James Allen 

Carter (“Carter”) as its sole member. First National Bank of Crossett (the “Bank”) 

entered into two loans with the LLC dated October 22, 2009 and September 21, 

2012. Each of these loans was secured by logging equipment owned by the LLC,

and personally guaranteed by Carter. On October 24, 2012, Carter, as the only 

signatory, executed a document identified as an Assignment2 which stated:

For valuable consideration, receipt of which is hereby 

acknowledged, Jim A. Carter, Jr., member, and Jim A 

Carter Logging, LLC, by Jim A. Carter, Jr., the sole 

member, sells, transfers, assigns and conveys to Jim A. 

Carter, Jr., his heirs and assigns, all of the right, title, 

and interest of assignors in and to the following 

property: all interests and assets of Jim A. Carter 

Logging, LLC.

 

 

1

The Honorable James G. Mixon, United States Bankruptcy Judge for the 

Western District of Arkansas.

 

2As explained by the record, the apparent purpose of this transaction was to 

qualify the Carters for Chapter 13 relief, and to economically address the liabilities 

of both the LLC and Carter, individually by way of a single bankruptcy case. 
The Bank was not informed of this transaction nor provided a copy of the 

Assignment at this time. The following day, Carter filed a joint chapter 13 petition 

with his spouse, which was later dismissed for failure to file a listing of creditors. 

A second chapter 13 petition was filed on November 2, 2012. On this same date, 

naming only the LLC as a defendant, the Bank commenced a state court action to 

recover the collateral subject to its secured loans. 

The Ashley County Clerk of Court provided notice of the replevin suit and 

the time period to object to the issuance of an order requiring delivery of the 

identified equipment to both the LLC and Carter as its registered agent. No 

objections were filed. The right to immediate possession of the equipment was 

granted under an Order of Delivery issued on November 14, 2012. On November 

16, 2012, Carter filed, and served upon the Bank, a Motion requesting that the 

Order of Delivery be stayed which included copies of the Assignment and Notice 

of Commencement of his bankruptcy case. After conducting a telephonic hearing 

on Carter’s stay request, the Ashley County Circuit Judge directed the Sheriff to 

pick up the equipment and retain the items pending further order. 

Carter then filed a Motion for Contempt in his bankruptcy case and 

requested an emergency hearing. The Bankruptcy Court ordered the equipment 

returned to Carter, and specifically reserved ruling on whether the stay violation 

was willful. Within the established time period, a Motion for Sanctions was filed 

seeking compensatory and punitive damages for the Bank’s willful violation of the 
automatic stay. On April 16, 2013, at the conclusion of the hearing3

on this 

Motion, the Bankruptcy Court ruled that there was no willful violation of the stay, 

and that Carter failed to establish his claim for damages. The Debtors appeal this 

ruling. 

STANDARD OF REVIEW

A bankruptcy court’s findings of fact are reviewed for clear error and its 

conclusions of law are reviewed de novo. First Nat’l Bank v. Pontow, 111 F.3d 

604, 609 (8th Cir. 1997) (quoting Miller v. Farmers Home Admin. (In re Miller), 

16 F.3d 240, 242 (8th Cir. 1994)). A decision on sanctions is reviewed for an 

abuse of discretion. Garden v. Cent. Neb. Housing Corp., 719 F.3d 899, 906 (8th 

Cir. 2013) (citing Schwartz v. Kujawa (In re Kujawa), 270 F.3d 578, 581 (8th Cir. 

2001). Under this standard, our review focuses upon whether there was a failure to 

apply the proper legal standard or whether the findings of fact are clearly 

erroneous. Official Comm. Of Unsecured Creditors v. Farmland Indus. (In re 

Farmland Indus.), 397 F.3d 647, 651 (8th Cir. 2005). A bankruptcy court’s ruling 

will not be reversed unless there is a “‘definite and firm conviction that the 

bankruptcy court committed a clear error of judgment in the conclusion it reached 

upon a weighing of the relevant factors.’” Apex Oil Co. v. Sparks (In re Apex Oil 

Co.), 406 F.3d 538, 541 (quoting Dworsky v. Canal St. Ltd. P’ship (In re Canal St. 

Ltd. P’ship), 269 B.R. 375, 379 (B.A.P. 8th Cir. 2001)).

 

 

3

The Bankruptcy Court and parties agreed that the record from the emergency 

hearing conducted on November 19, 2012 would be included as evidence in the 

Motion for Sanctions. 
DISCUSSION

Effective upon the filing of a bankruptcy petition is the fundamental right 

afforded to debtors by the automatic stay which stops collection actions by 

creditors on pre-petition obligations. 11 U.S.C. § 362(a) (2012). “[A]n individual 

injured by any willful violation of a stay provided by this section shall recover 

actual damages, including costs and attorneys’ fees, and, in appropriate 

circumstances, may recover punitive damages.” 11 U.S.C. section 362(k) (2012). 

A debtor seeking such sanctions must demonstrate, by a preponderance of the 

evidence, that a creditor acted willfully in violation of the stay and that an injury 

resulted from that conduct. Frankel v. Strayer (In re Frankel), 391 B.R. 266, 271 

(Bankr. M.D. Pa. 2008); In re Cedar Falls Hotel Properties. Ltd. P’ship, 102 B.R. 

1009, 1014 (Bankr. N.D. Iowa 1989). 

To be willful, a creditor must take deliberate action “with the knowledge” 

that a bankruptcy petition has been filed. Knaus v. Concordia Lumber Co. (In re 

Knaus), 889 F.2d 773, 775 (8th Cir. 1989); In re Cullen, 329 B.R. 52, 57 (Bankr. 

N.D. Iowa 2005). A willful violation does not require a finding of specific intent. 

Associated Credit Servs. v. Campion (In re Campion), 294 B.R. 313, 316 (B.A.P. 

9th Cir. 2003). “[A]n act is deemed to be a willful violation if the violator knew of 

the automatic stay and intentionally committed the act regardless of whether the 

violator specifically intended to violate the stay.” Preston v. GMPQ, LLC (In re 

Preston), 395 B.R. 658, 663 (Bankr. W.D. Mo. 2008) (citing Jove Eng’g, Inc. v. 

IRS, 92 F.3d 1539, 1555 (11th Cir. 1996)).

Carter argues that the Bankruptcy Court’s decision is erroneous because the 

Bank clearly had notice of the Debtors’ bankruptcy filing prior to the time the 
repossession occurred. See Knaus v. Concordia Lumber Co. (In re Knaus), 889 

F.2d 773, 775 (8th Cir. 1989) (a violation is willful if a creditor acts deliberately 

with knowledge of the bankruptcy). He further asserts that the Bank’s refusal to 

return the equipment until ordered to do so establishes a continuing willful 

violation. These arguments are not persuasive. 

Carter’s argument is misplaced. Although the evidence suggests that the 

Bank may have been aware of Carter’s personal bankruptcy filing, there is no 

evidence that the Bank had knowledge of the Assignment and the purported 

transfer of the LLC’s assets to him. The replevin action filed by the Bank did not 

name Carter, individually, and sought only to repossess equipment owned by the 

LLC in which the Bank had a properly perfected security interest. Consequently, 

there can be no knowing or deliberate conduct attributed to the Bank in its conduct 

to enforce its lien against the collateral it believed was owned by the LLC. At 

issue here is not whether the Bank had knowledge of Carter’s personal bankruptcy 

filing; but rather, whether it knew that its collateral had been transferred from the 

LLC to Carter, personally, which it did not. Absent a showing that the Bank was 

aware of the Assignment, a willful stay violation cannot be found. At the hearings 

and in its brief, the Bank disputed whether the Assignment constituted a valid 

transfer of the assets.4 Under this circumstance, its refusal to return the equipment 

until ordered to do so was neither unreasonable nor willful.

 

 

4

The Bankruptcy Court made no dispositive determination on this issue. 

Because our review is not dependent upon the validity of the Assignment, and 

would not change the outcome of our decision, it is not addressed in this appeal. 
The Bank admitted that after it had knowledge of the Assignment and 

Carter’s bankruptcy filing, it sent a required UCC notice to Carter. The Bank sent 

the letter believing the Assignment was of no force and effect and was invalid. 

The notice involved a legal process to liquidate the collateral and apply the 

proceeds to its indebtedness. In Cash Am. Pawn, L.P. v. Murph, a creditor’s postpetition letter to the debtor did not intentionally violate the automatic stay because 

“it is not a violation of the automatic stay for a creditor to advise debtor’s counsel 

that he will take any action that he may legally take under the Bankruptcy Code.” 

209 B.R. 419, 424 (E.D. Tex. 1997) (quoting United States ex rel. Farmers Home 

Admin. v. Nelson, 969 F.2d 626, 630 (8th Cir. 1992)). Here, the notice sent by the 

Bank was a letter advising Carter of his rights under the Uniform Commercial 

Code. Although this action violated the automatic stay, we agree with the 

Bankruptcy Court that any violation was technical and not willful in nature. 

A finding that there has been a willful violation of the automatic stay is a 

prerequisite to an award of sanctions. Courts are unwilling to impose sanctions if 

the violation is merely technical. In re Reisen, No. 03-01999, 2004 WL 764628, at 

*6 (Bankr. N.D. Iowa Mar. 4, 2004). Accordingly, the legal notice provided to 

Carter does not warrant an award of damages. Although the Bankruptcy Court 

determined that there was no willful violation of the automatic stay by the Bank in 

the repossession of the equipment, it further held that Carter failed to meet his 

burden of proof to establish either compensatory or punitive damages. Because we 

agree that there was no willful violation, it is not necessary to address the issue of 

damages. 
Based upon the record and the applicable legal standards, the Bankruptcy 

Court did not abuse its discretion when it denied the Motion for Sanctions. 

Accordingly, the Bankruptcy Court’s Order is affirmed.

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