ENRIQUE S. LAMOUTTE, Bankruptcy Judge.
This adversary proceeding is before the court upon the Motion for Partial Summary Judgment filed on December 6, 2012 (Docket No. 24) by Zaida I. Otero Lopez ("Debtor" or "Plaintiff") alleging that the Puerto Rico Treasury Department ("PR Treasury") wilfully violated the automatic stay pursuant to 11 U.S.C. § 362(a)(6) because it sent to the Debtor various notices and requests for payment of income tax liabilities after the filing of the bankruptcy petition. PR Treasury filed a Motion in Opposition to Plaintiff's Motion for Partial Summary Judgment on January 16, 2013 (Docket No. 32) arguing that the post-petition notices and demand for payments fall within the exception of the automatic stay under 11 U.S.C. § 362(b)(9)(D) and consequently they do not constitute a violation of the automatic stay. For the reasons set forth below, the Plaintiff's Motion for Partial Summary Judgment (Docket No. 24) is hereby granted in part and denied in part.
On March 28, 2011, the Plaintiff filed her Chapter 13 Bankruptcy Petition (Lead
Upon the filing of the Plaintiff's Bankruptcy Petition, notice was given to PR Treasury, which was included in the master list, and the pre-petition tax debt was listed in Schedule E. See ¶¶ 7, 8, 9 and 11 of the Complaint (Docket No. 1), ¶¶ 12, 13, 14 and 16 of the Answer to the Complaint (Docket No. 16), ¶¶ 1-4 of the Plaintiff's Statement of Uncontested Facts (Docket No. 25, p. 2) and ¶¶ 1-4 of the Reply to Plaintiff's Statement of Material Facts (Docket No. 33, p. 1).
On October 26, 2011, PR Treasury sent the Plaintiff a Notification and Demand for Payment in the amount of $370.71 on account of her 2010 income tax liability indicating that "upon review of the income tax return submitted by the taxpayer ... it was determined ... that the return has an adjustment which, according to the 1994 Internal Revenue Code of Puerto Rico, as amended, represents a mathematical error" (Docket No. 30, p. 3).
On November 4, 2011, the Plaintiff visited PR Treasury's Main Office in Old San Juan, where she was personally attended to by a female officer whose last name was "Cintrón". During that visit, the Plaintiff informed Ms. Cintrón that she had filed her bankruptcy case and that her plan contemplated the payment of her debt to PR Treasury. See Docket No. 25, Exhibit 3, ¶¶ 3-4.
On December 1, 2011, PR Treasury sent a letter to the Plaintiff advising her that she owed $393.42 including interest, fees and penalties accruing as of December 18, 2011, and that in order to avoid the accrual of additional interest and fees, she should pay her debt at the nearest PR Treasury collections office. See Docket No. 30, p. 4.
On December 19, 2011, PR Treasury sent the Plaintiff another letter informing her that she had outstanding tax debts in the amount of $392.65, and that Public Law No. 218-2011 to Strengthen Security and Public Health was enacted to allow taxpayers to clear their tax records with the PR Treasury and to make their tax debts current, releasing taxpayers who paid their tax debts on or before February 29, 2012 from the payment of interest, fees and penalties. See Docket No. 30, pp. 6-7.
On December 26, 2011, PR Treasury sent the Plaintiff a Second Collections Notice informing her that she had an outstanding tax debt that amounted to $413.36 including principal, interest and penalties calculated as of January 12, 2012 and that in order to avoid the accrual of additional interest and fees, she should pay her debt at the nearest PR Treasury collections office. See Docket No. 30, p. 8.
On March 16, 2012, PR Treasury sent the Plaintiff a Final and Urgent Collections Notice indicating that according to its records, she had a tax debt with amounted to $421.15, including principal, interest and penalties accruing as of April 2, 2012, that prior attempts to collect said debt had been fruitless and that the 1994 Internal Revenue Code of Puerto Rico empowers the Secretary of the Treasury to use certain collection mechanisms to recover the amounts owed such as to demand her employer to deduct payment of the debt form her salary, demand her financial institution to withhold payment of the debt from her bank accounts, seize and auction her personal and real property in an expedited way, or order withholding of her payments if she were a supplier of goods and services to the Government of Puerto Rico. PR Treasury also suggested that she pay her debt at the nearest collections
On April 11, 2012, the Plaintiff filed the instant Complaint (Docket No. 1) claiming actual and punitive damages for PR Treasury's alleged violation of the automatic stay and attorney's fees.
On June 29, 2012, PR Treasury filed its Answer to the Complaint (Docket No. 16) claiming it did not violate the automatic stay.
On December 6, 2012, the Plaintiff filed her Motion for Partial Summary Judgment and Memorandum in Support Thereof with its Statement of Uncontested Facts (Docket Nos. 24 and 25). The Plaintiff sustains that PR Treasury wilfully violated the automatic stay provision under 11 U.S.C. § 362(a)(6) and therefore is entitled to actual and punitive damages and attorneys' fees.
On January 16, 2013, PR Treasury filed its Opposition to Plaintiff's Motion for Partial Summary Judgment with its Reply to Plaintiff's Statement of Material Facts (Docket Nos. 32 and 33) arguing that it did not violate the automatic stay because the documents it sent to the Plaintiff were only notices that constitute an administrative procedure allowed as an exception to the automatic stay under 11 U.S.C. § 362(b)(9). In addition, PR Treasury alleges that pursuant to 42 U.S.C. § 1981a(b)(1), the Plaintiff is not entitled to punitive damages against an arm of the Commonwealth of Puerto Rico. PR Treasury also requests the dismissal with prejudice of the Complaint in the instant adversary proceeding.
On February 13, 2013, the Plaintiff filed a Reply to Opposition to Motion for Summary Judgment (Docket No. 45)
On March 3, 2013, PR Treasury filed a Sur-Reply to Plaintiff's Reply to Defendants' Opposition to Motion for Partial Summary Judgment (Docket No. 55) reaffirming that the notices and demand for payment of Plaintiff's 2010 tax assessment fall within the exception of the automatic stay under 11 U.S.C. § 362(b)(9)(D).
Rule 56 of the Federal Rules of Civil Procedure, is applicable to this proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure, provides that summary judgment should be entered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Bankr.P. 7056. See also In re Colarusso, 382 F.3d 51 (1st Cir.2004), citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
"The summary judgment procedure authorized by Rule 56 is a method for promptly disposing of actions in which there is no genuine issue as to any material fact or in which only a question of law is involved." 10A Wright, Miller & Kane, Federal Practice and Procedure 3d § 2712 at 198. "Rule 56 provides the means by which a party may pierce the allegations in the pleadings and obtain relief by introducing outside evidence showing that there are no fact issues that need to be tried." Id. at 202-203. Summary judgment is not a substitute for a trial of disputed facts; the court may only determine whether there are issues to be tried, and it is improper if the existence of a material fact is uncertain. Id. at 205-206.
Summary judgment is warranted where, after adequate time for discovery and upon motion, a party fails to make a showing sufficient to establish the existence of an element essential to its case and upon which it carries the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party must "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).
For there to be a "genuine" issue, facts which are supported by substantial evidence must be in dispute thereby requiring deference to the finder of fact. Furthermore, the disputed facts must be "material" or determinative of the outcome of the litigation. Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976). When considering a petition for summary judgment, the court must view the evidence in the light most favorable to the nonmoving party. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Daury v. Smith, 842 F.2d 9, 11 (1st Cir.1988).
The moving party invariably bears both the initial as well as the ultimate burden in demonstrating its legal entitlement to summary judgment. Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). See also López v. Corporación Azucarera de Puerto Rico, 938 F.2d 1510, 1516 (1st Cir.1991). It is essential that the moving party explain its reasons for concluding that the record does not contain any genuine issue of material fact in addition to making a showing of support for those claims for which it bears the burden of trial. Bias v. Advantage International, Inc., 905 F.2d 1558, 1560-61 (D.C.Cir.1990), cert. denied, 498 U.S. 958, 111 S.Ct. 387, 112 L.Ed.2d 397 (1990).
The moving party cannot prevail if any essential element of its claim or defense requires trial. López, 938 F.2d at 1516. In addition, the moving party is required to demonstrate that there is an absence of evidence supporting the nonmoving party's case. Celotex, 477 U.S. at 325, 106 S.Ct. 2548. See also, Prokey v. Watkins, 942 F.2d 67, 72 (1st Cir.1991); Daury, 842
The moving party has the burden to establish that it is entitled to summary judgment; no defense is required where an insufficient showing is made. López, 938 F.2d at 1517. The nonmoving party need only oppose a summary judgment motion once the moving party has met its burden. Adickes, 398 U.S. at 159, 90 S.Ct. 1598.
Fed.R.Civ.P. 56 was extensively rewritten in 2010. See 10B Wright, Miller & Krane Federal Practice & Procedure: Civil 3d § 2737. Amended subsection (a) of Fed.R.Civ.P. 56 now includes express authority for judgment on less than the entire case denominating it in its subsection title as "Partial Summary Judgment", which allows summary judgment "upon all or any part" of a claim or defense by any party.
In the instant case, the uncontested facts are supported from the admissions to the pleadings and the uncontested documents and sworn statements in the record.
The automatic stay provision is one of the fundamental debtor protections in the Bankruptcy Code. It gives the debtor a "breathing spell" from creditors and stops all collection efforts, all harassment, and all foreclosure actions. H.R.Rep. No. 95-595, 95th Cong. 1st Sess. 340-342 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 54-55 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5840, 6296-97. Also see ICC v. Holmes Transp., Inc., 931 F.2d 984, 987 (1st Cir.1991); In re Smith Corset Shops, Inc., 696 F.2d 971, 977 (1st Cir. 1982). "It allows the debtor to attempt a repayment or reorganization plan or simply be relieved of the financial pressures that drove him into bankruptcy." Id. at 977. Section 362 of the Bankruptcy Code provides that upon filing for bankruptcy, a debtor is immediately protected by an automatic stay that prohibits, inter alia, the "continuation ... or other action or proceeding against the debtor that was or could have been commenced before the [bankruptcy petition] or to recover a claim against the debtor that arose before the commencement of the case under this title" and "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case ..." 11 U.S.C. §§ 362(a)(1) and (a)(6). "This respite enables debtors to resolve their debts in a more orderly fashion and at the same time safeguards their creditors by preventing different creditors from bringing different proceedings in different courts, thereby setting in motion a free-for-all in which opposing interests maneuver to capture the lion's share of the debtor's assets." Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 975 (1st Cir.1997) (citations omitted). "Section 362(a)(6) is intended to prevent creditor harassment of the debtor in attempting to collect pre-petition debts. The conduct prohibited ranges from that of an informal nature, such as by telephone contact or by
Section 362(b) of the Bankruptcy Code lists the exceptions of a debtor's right to the automatic stay. Section 362(b)(9) provides an exception to the automatic stay provisions under subsection (a) of Section 362 of the Bankruptcy Code by allowing: "(A) an audit by a governmental unit to determine tax liability; (B) the issuance to the debtor by a governmental unit of a notice of tax deficiency; (C) a demand for tax returns; or (D) the making of an assessment for any tax and issuance of a notice and demand for payment of such an assessment (but any tax lien that would otherwise attach to property of the estate by reason such an assessment shall not take effect unless such tax is a debt of the debtor that will not be discharged in the case and such property or its proceeds are transferred out of the estate to, or otherwise revested in, the debtor)." 11 U.S.C. § 362(b)(9). "As amended in 1994, Section 362(b)(9) also permits a governmental unit to conduct an audit to determine tax liability, to make a demand for tax returns and to make an assessment, issue notice and demand payment of any tax." Alan N. Resnick & Henry J. Sommer, 3 Collier on Bankruptcy ¶ 362.05[9] (16th ed. 2013). Section 362(b)(9) limits the impact of Section 362(a)(6) in certain circumstances regarding tax liabilities. See Rosas v. Monroe County Tax Claim Bureau, 323 B.R. 893, 898 (Bankr.M.D.Pa.2004).
In the instant case, PR Treasury mailed the Plaintiff the following notices:
The first Notification and Demand for Tax Payment issued by PR Treasury on October 26, 2011 informing the Plaintiff of a mathematical in her income tax return (Docket No. 30, p. 3) clearly falls within the scope of Section 362(b)(9)(B), which permits the "issuance to the debtor by a governmental unit of a notice of tax deficiency." 11 U.S.C. § 362(b)(9)(B). Thus, that first Notification does not constitute a violation to the automatic stay.
The tax notices in the instant case issued by PR Treasury on December 1, 2011 (Docket No. 30, pp. 4-5), December 19, 2011 (Docket No. 30, pp. 6-7), and December 26, 2011 (Docket No. 30, p. 8) resemble the ones considered in In re Centeno Sanchez, 2013 Bankr.LEXIS 137, 2013 WL 140453. In Centeno Sanchez, this court found that the notices sent by PR Treasury fell within the exception to the automatic stay afforded in Section 362(b)(9)(D) of the Bankruptcy Code since they were notices that only demanded payment and differentiated them from notices with an intent to levy. Moreover, the court also found that one of the documents issued by PR Treasury was merely an informative notice by which the taxpayer was informed of the enactment of a new law from which any taxpayer could benefit
The Final and Urgent Collections Notice issued by PR Treasury on March 16, 2012, however, is different. In that Final and Urgent Collections Notice, PR Treasury indicated to the Plaintiff that if it "fail[ed] to receive payment for the amount owed in full [$421.15] within the next ten (10) days as of th[at] notification, [it] would proceed to use any of the collection mechanisms described above [referring to seizing and auctioning off her personal and real property in an expedited way] and [it would] provide information about [her] debt to the Credit Information Bureau" (Docket No. 30, p. 9). PR Treasury alleges that Notice was "not a collections effort but an administrative procedure of the agency" (Docket No. 32, p. 14). This court is not moved by such argument.
The exception to the automatic stay afforded in Section 362(b)(9)(D) is not absolute and does not give PR Treasury free leeway to collect, garnish or seize the bankruptcy estate's funds to pay a pre-petition tax debt. For instance, in Jimenez Garcia v. Dep't of Treasury (In re Jimenez Garcia), 2012 Bankr.LEXIS 5191 at **18-19, 2012 WL 5439021 at *6 (Bankr. D.P.R.2012), this court concluded that although "Section 362(b)(9) of the Bankruptcy Code operates as an exception to the
In In re Covington, supra, the debtors filed amended tax returns for six years, which the IRS determined were frivolous. Accordingly, the IRS mailed a Form 866A document to the debtors which stated "you filed a Form 104X excluding taxable income. Your claim has been disallowed." 256 B.R. at 464. The IRS then imposed a "frivolous return penalty" of $500 for each of the returns. The IRS sent the debtors Form 6335 documents that notified them that they must pay the entire amount of the penalty. A month later, the IRS sent the debtors Notices of Intent to Levy with pamphlets entitled "Understanding the Collection Process". Id. at 466. The IRS contended that the Notice of Intent of Levy was nothing more than a notices of assessment under Section 362(b)(9)(D). The court found that the six notices informing the debtors of the $500 assessment for each return qualified for the exception set forth at Section 362(b)(9)(D). Id. at 465-466. However, the court found that the Notice of Intent of Levy did not constitute an assessment and demand for payment, and concluded that the IRS was in violation of the automatic stay as to those notices:
In In re Shealy, 90 B.R. 176 (Bankr. W.D.N.C.1988), the first notice sent by the South Carolina Tax Commission stated that "demand is made for ... payment" and "if payment is not made a warrant for distraint will be issued." Id. at 179. The court found that this notice contained "strong language threatening issuance of a `warrant of distraint'" if the debt was not paid. Id. at 179. A subsequent notice sent by the Tax Commission threatened seizure of wages and bank accounts, among others. Id. at 179. The court concluded that the notices were "`junk yard dogs' of tax notices designed for no other purpose than scaring the debtors into paying up before a `warrant of distraint' is filed." Id. at 179. Based upon the content of the notices, the court found that they were more than just a notice of tax deficiency and that its strong threatening language
In In re Layton, 220 B.R. 508 (Bankr. N.D.N.Y.1998), the court was asked to address motions filed by debtors seeking sanctions against Tioga County in three separate cases. Letters were sent to the debtors in each of the three cases notifying them that they owed real property taxes for 1996. The letters provided that if the taxes were not paid by December 10, 1997, Tioga County would file a "Notice and Petition of Foreclosure" which would be published in the local newspapers. 220 B.R. at 511. A subsequent letter also stated that failure to pay the taxes would result in the eventual loss of the debtors' property. Id. at 511. The court found that Tioga County violated the automatic stay by threatening "to publish a notice in the newspapers, file a list of delinquent taxes and file a notice and petition of foreclosure. Due to the content of these letters, the court finds that they are more than mere notices and constitute a demand for payment in violation of the stay." Id. at 516.
In In re LTV Steel Co., 264 B.R. 455 (Bankr.N.D.Ohio 2001), the notices sent by the Minnesota Department of Revenue to the debtor stated that "if [the tax] amount [due was] not remitted immediately, collection action will be initiated with no further notice to you. This may include levying upon your bank account or other property." Id. at 472. In addition, subsequent notices by the Minnesota Department of Revenue also stated that "immediate payment of [the tax amount due] is demanded. If not paid, tax liens will be filed against you, copies of which are enclosed." Id. at 472. The court found that insofar as the mailings by the Minnesota Department of Revenue "were notices of a tax deficiency, they were indeed not subject to the stay pursuant to Section 362(b)(9)(D). However, Section 362(b)(9) does not allow a taxing authority [like PR Treasury] to threaten the seizure of a debtor's property". Id. at 472. Thus, the court concluded that "to the extent that these collection notices threatened seizure of [the debtor's] property, they were not exempted from the automatic stay." Id. at 472.
In In re Curpier, 2009 Bankr.LEXIS 2896 at **17-18, 2009 WL 2929245 at *6, the court found no violation of the automatic stay by the taxing authority under Section 362(b)(9)(D) because (a) there was no suggestion that it made any efforts to collect the tax due from the debtors, either by seizure or levy of the debtors' property, and (b) there were no allegations of coercion or harassment. Instead, the court weighed that "[i]ts participation in the debtors' case consisted of filing its proof of claim ... and then mailing the Notice and Demand", that is, "[i]t simply took advantage of the exception set forth at Section 362(b)(9)(D) allowing it to send out its Notice and Demand and informing the debtors' of the liability." Id.
The instant case differs from In re Centeno Sanchez, 2013 Bankr.LEXIS 137, 2013 WL 140453, because, although the initial notices sent by PR Treasury to the Plaintiff (Docket No. 30, pp. 3-8) were exempted under Section 369(b)(9)(B) and (D), the last one dated March 16, 2012 (Docket No. 30, pp. 9-10) constituted a threatened seizure to the Plaintiff, which is not protected by Section 369(b)(9)(D). The exception to the automatic stay afforded in Section 362(b)(9)(D) applies to notices by PR Treasury that only demand payment without an intent to levy, like in Centeno Sanchez. Conversely, post-petition notices that involve threats by a taxing authority to collect, garnish, lien and/or levy the debtor's property to secure pre-petition tax debts do not fall under the exception provided in Section 369(b)(9)(D).
The automatic stay imposes on non-debtor parties an affirmative duty of compliance. Sternberg v. Johnston, 595 F.3d 937, 943 (9th Cir.2010). To ensure compliance, Section 362(k) of the Bankruptcy Code provides the necessary means to redress violations of the stay: "an individual injured by a 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. § 362(k)(1). "A debtor seeking damages under this section bears the burden of proving by a preponderance of the evidence the following three elements: (1) that a violation of the automatic stay occurred; (2) that the violation was willfully committed; and (3) that the debtor suffered damages as a result of the violation." Slabicki v. Gleason (In re Slabicki), 466 B.R. 572, 577-578 (1st Cir. BAP 2012), citing In re Panek, 402 B.R. 71, 76 (Bankr. D.Mass.2009). A willful violation does not require a specific intent to violate the automatic stay. "The standard for a willful violation of the automatic stay ... is met if there is knowledge of the stay and the defendant intended the actions which constituted the violation." Fleet Mortgage Group v. Kaneb, 196 F.3d 265, 269 (1st Cir.1999). "The debtor has the burden of providing the creditor with actual notice. Once the creditor receives actual notice, the burden shifts to the creditor to prevent violations of the automatic stay." Id. at 269. "In cases where the creditor received actual notice of the automatic stay, courts must presume that the violation was deliberate." Id. at 269.
In the case at bar, the Plaintiff satisfies the first requirement established In re Slabicki, 466 B.R. at 577-578, because, as discussed above, the court finds that the notice by PR Treasury dated March 16, 2012 (Docket No. 30, pp. 9-10) constitutes a threatened seizure that is not protected by the exception afforded in Section 369(b)(9)(D), and consequently, it is a post-petition collection against the debtor of a pre-petition debt under 11 U.S.C. § 362(a)(6).
As to the second requirement, the court also finds that the violation of the automatic stay was willful. PR Treasury acknowledged having been given notice of the filing of her bankruptcy petition, that the Plaintiff included PR Treasury in the master list and that the Plaintiff listed her prepetition tax liability with PR Treasury in Schedule E. See ¶¶ 7, 8 and 9 of the Complaint (Docket No. 1), ¶¶ 12, 13 and 14 of the Answer to the Complaint (Docket No. 16), ¶¶ 1-4 of the Plaintiff's Statement of Uncontested Facts (Docket No. 25, p. 2) and ¶¶ 1-4 of the Reply to Plaintiff's Statement of Material Facts (Docket No. 33, p. 1). Thus, the Plaintiff met the burden of demonstrating that she provided PR Treasury with actual notice of her bankruptcy petition. Therefore, the burden shifts to the creditor to prevent violations of the automatic stay. Fleet Mortgage Group v. Kaneb, 196 F.3d at 269. To contest that the violation of the stay was willful, PR Treasury only avers that the notices sent to the Plaintiff were only "notices" of an assessment for taxes permitted under Section 362(b)(9)(D). As previously discussed, the last notice by PR Treasury dated March 16, 2012 (Docket No. 30, pp. 9-10) does not fall under the exception provided in Section 369(b)(9)(D). Therefore, this court "must presume that the violation was deliberate." Fleet Mortgage Group v. Kaneb, 196 F.3d at 269.
Having been demonstrated that a violation to the automatic stay occurred and that it was willful in regards to the notice dated March 16, 2012, partial summary judgment can be issued as to PR Treasury's
The Plaintiff seeks punitive damages against PR Treasury under 11 U.S.C. § 362(k). See Docket No. 1, p. 12, and Docket No. 24, p. 17.
Section 362(k) of the Bankruptcy Code provides for the recovery of damages, costs and attorneys' fees by an individual damaged by a willful violation of the automatic stay. In appropriate circumstances, an individual injured by the violation of the automatic stay may also recover punitive damages if the individual establishes the normal elements of a claim for punitive damages, to wit, egregious activity beyond the pale that was not only willful, but also sanctionable as out of the bounds of normal behavior. See Nancy C. Derher & Joan N. Feeney, Bankruptcy Law Manual, Volume 1 § 7:57 (2012-2), p. 1745. The Court has wide discretion to award punitive damages or not. Varela v. Quiñones Ocasio (In re Quiñones Ocasio), 272 B.R. 815, 825-828 (1st Cir. BAP 2002).
PR Treasury argues that pursuant to 42 U.S.C. § 1981a(b)(1), a party may not recover punitive damages against a government, government agency or political subdivision. The argument is misplaced, as that statute refers to actions brought by citizens against the United States under the Civil Rights Act of 1964, not under the Bankruptcy Code. See 42 U.S.C. § 1981a(a). But the misplacement of the argument does not mean that the Plaintiff is entitled to punitive damages ipso jure.
Puerto Rico is a considered a State for bankruptcy purposes pursuant to 11 U.S.C. § 101(52). The PR Treasury Department is a "governmental unit" pursuant to Section 101(27) of the Bankruptcy Code, which provides as follows:
Section 106 of the Bankruptcy Code states that:
"Notwithstanding the bankruptcy court's power to award damages under 11 U.S.C. § 362(k)(1) and its statutory contempt powers under 11 U.S.C. § 105(a), a court may not award damages against [a governmental unit] unless sovereign immunity has been expressly and unequivocally waived" and "punitive damages are expressly excepted from the waiver of sovereign immunity". Duby v. United States (In re Duby), 451 B.R. 664, 670-671 (1st Cir. BAP 2011), citing In re Rivera Torres, 432 F.3d 20, 26 (1st Cir.2005) (holding that the IRS was immune from award of emotional distress and damages as contempt sanction for violation of the discharge injunction because "Congress has not definitely and unequivocally waived sovereign immunity under [11 U.S.C. § 106]"). Also see In re Schroeder, 2009 Bankr.LEXIS 3498, 2009 WL 3526504, 62 Collier Bankr. Cas.2d 1279 (Bankr.D.Neb.2009) (holding that sovereign immunity is not a defense that can be asserted by an agency that has violated the automatic stay, but punitive damages are not available against the State).
Therefore, no punitive damages can be awarded against PR Treasury pursuant to 11 U.S.C. § 106(a)(3). Although PR Treasury waived its sovereign immunity in this case by filing its Proof of Claim (Claims Register No. 8-1), this court "may issue against [it] an order, process, or judgment... including an order or judgment awarding a money recovery,
In view of the foregoing, the Plaintiffs' Motion for Partial Summary Judgment (Docket No. 24) is partially granted in regards to PR Treasury's liability for having willfully violated the automatic stay. The Plaintiff's claim for punitive damages is hereby denied and dismissed. An evidentiary hearing on the damages resulting from the violation of the automatic stay is hereby scheduled for July 23, 2013 at 2:00 p.m. The parties shall file proposed findings of fact and conclusions of law 10 days prior to the hearing. Each finding shall refer to a document or a witness indicating the proffered testimony.
Partial judgment shall be entered accordingly.
SO ORDERED.
