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Carter v. First National Bank of Crossett

Court of Appeals of Arkansas, Division II

May 30, 2018



          Law Office of Billy J. Hubbell, by: Billy J. Hubbell, for appellants.

          Streetman, Meeks & Gibson, PLLC, by: Thomas S. Streetman, for appellee.

          WAYMOND M. BROWN, Judge

         Appellants Jim A. Carter, Jr., Logging, LLC, and James A. Carter, Jr., appeal the February 17, 2017 order of the Ashley County Circuit Court granting appellee First National Bank of Crossett (FNBC) summary judgment. Appellants maintain that appellee breached the peace when it repossessed equipment from appellants and that the decision of the bankruptcy court was not sufficient to preclude appellants from presenting the issue of damages to a jury. We affirm.[1]

         James A. Carter, Jr. (James), formed Jim A. Carter, Jr., Logging LLC (Carter Logging), with James as its sole member. Carter Logging entered into two loan agreements with FNBC on October 22, 2009, and September 21, 2012, respectively. The loans were secured by logging equipment owned by Carter Logging and were personally guaranteed by James. On October 24, 2012, James transferred the assets of Carter Logging, including the equipment used to secure the two loans, to himself. On November 2, 2012, James and his wife, Leigh, filed for relief under Chapter 13 of the United States Bankruptcy Code. That same day, FNBC filed a replevin action against Carter Logging, seeking to repossess the logging equipment. FNBC obtained an order of delivery on November 14, 2012, directing the Sheriff of Ashley County to take possession of the collateral and to immediately deliver it to appellee. The order of delivery was served on Carter Logging on November 16, 2012. After the order of delivery was issued, a motion to stay the order of delivery was filed, and served on FNBC, which included copies of the assignment and notice of the commencement of James's bankruptcy case. A telephone conference was held between appellants' counsel, appellee's counsel, and Judge Don E. Glover concerning the motion to stay. It is alleged that during this conference, the court ordered the collateral to remain in the possession of the sheriff of Ashley County and not be delivered to appellee; however, no order was entered reflecting this.

         On November 6, 2012, FNBC repossessed the collateral (a Prentice Log Loader, an Evans trailer, a CIS delimber, a Prentice grappel, a CSI slasher aaw, and a Prentice double V heel) through a repossession service named Advanced Recovery. James subsequently filed a motion for contempt in his bankruptcy case and requested an emergency hearing. A hearing took place on November 29, 2012. The bankruptcy court ordered the equipment returned to James, but specifically reserved ruling on whether the stay violation was willful. During the established time period, a motion for sanctions was filed seeking compensatory and punitive damages for FNBC's willful violation of the automatic stay. A hearing took place on April 16, 2013. At the hearing, appellants sought damages in the amount of $260, 000 ($60, 000 was for damage to two pieces of equipment, and $200, 000 was for lost profits for five months). At the conclusion of the hearing, the court found in pertinent part:

In the testimony today, there is testimony from the debtor that this equipment was leaking hydraulic oil, there's a conflict in the testimony - - well, there's testimony that when the equipment, the - - what do you call this? - - the loader/delimber was delivered back to the debtor. The day the debtor did not bother to go see to it, like I told him to, because he already suggested that there was a problem with the hydraulic oil. So I am going to hold that against the debtor, because I tried to be as careful as I could about that. But the debtor has the burden of proving by a preponderance of the evidence that whatever damage there is to this equipment was done by the bank. And I don't think that the debtor has carried their burden.
Number one, the equipment was already-from the debtor's testimony at the previous hearing, the equipment was already broken to some extent. It's leaking hydraulic oil. I told the debtor to make sure that it was given back to him, so that there would be no problem with running without the proper amount of oil. He didn't do it. The bank's representative said they checked it. So the debtor had the burden of proving that that happened.
The only testimony is he was not there. So he does not have any way to truthfully testify that they didn't check it. I'm inclined to believe they did.
Furthermore, the amount of movement was minimal.
And thirdly, and of great significance is that there's no mechanic to testify, no qualified person, to testify what the bank did has caused any damage to the equipment that did not already exist at the time it was repossessed, or for that matter that there is any serious damage to the equipment. It's the debtor's speculation that it could be damaged, but speculation is not enough to carry the burden of proof.
I have the banker's testimony as to the conversation he had with debtor, where he admitted that this equipment wasn't working properly, that nothing was working properly, except that one piece of property.
I just don't think that it has been proven that what the bank did has caused the debtor's equipment to be useless or worthless. You've changed theories on me in that in your opening statement, your theory was that you wanted the value of the equipment and the cost to repair it, and then it was changed to the money that the debtor could have earned during the period of time.
Either way, it equaled over $200, 000.00. I am just not satisfied that you have sustained your burden, number one. Number two, I don't think that whatever damages could have flowed from the bank's actions were the result of a willful violation of the automatic stay, because if the bank had known about the transfer, that it knew that the property could possibly be owned by the debtor individually, that would be one thing. But here they didn't. So that takes the willfulness completely out it.
The only thing they did that was willful was to send that notice, which they probably - most people don't understand that to be a violation of the stay. The continuation of an act against property of the estate is a technical violation. It wasn't a willful violation. The basic predicate there is not there to collect damages or attorney's fees.
The testimony about the 720 Tigercat, the 1997 model, I am just not persuaded that it is worth $25, 000.00. It was laid in the weeds for 12 to 18 months. It is 15 or 16 years old. Used equipment in the lumber business is by definition equipment without any equity because the business is so hard on equipment.
There is not sufficient evidence to prove that anything the bank, or the bank's representatives did caused any damage to this equipment. We do not have a mechanic to say that it was pulled while it was in gear, or in some other inappropriate way, that damaged the equipment. No mechanic has ...

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