THOMAS J. TUCKER, Bankruptcy Judge.
This case is before the Court on (1) United Car Company, Inc.'s motion entitled "Motion for Sanctions Against Frego & Associates" (Docket # 21), and (2) the sanctions part of United Car Company, Inc.'s motion entitled "Motion of United Car Company, Inc. For Relief From the Automatic Stay, for Waiver of Provisions of Fed. R. Bankr.P. 4001(a)(3), and for Contempt Sanctions Against the Debtor and her Counsel" (Docket # 37)(collectively the "Two Sanction Motions"). The Court held a hearing on the Two Sanction Motions on March 1, 2012, and then held an evidentiary hearing on April 16, 2012 and May 15, 2012. The Court then took the motions under advisement.
The Court has carefully considered all of the arguments and evidence presented by the parties at the evidentiary hearing. This opinion states the Court's findings of fact and conclusions of law. For the reasons stated in this opinion, the Court will deny each of the Two Sanction Motions.
In the Two Sanction Motions, creditor United Car Company, Inc. ("UCC") seeks monetary sanctions against the Debtor in this Chapter 13 case, Tanzil Mabone, and against Debtor's attorneys, Frego & Associates, to compensate UCC for the attorney fees and expenses it has incurred in connection with Debtor's bankruptcy case.
On the afternoon of December 16, 2012, a few hours after Debtor filed her motion for return of the Vehicle, and after consulting with its current counsel, UCC agreed to return the Vehicle to Debtor. At UCC's invitation, Debtor came to UCC's business location and retrieved the Vehicle. As discussed in more detail below, Debtor could not start the Vehicle, so she had it towed to an auto repair shop.
Debtor had the Vehicle repaired, and then began driving it again. But sometime in either January or February 2012, the Vehicle was involved in an accident, and was "totalled." The Vehicle was insured at the time, however, and UCC was later paid by the insurance company, in an undisclosed amount viewed by the insurance company as the value of the vehicle.
On December 20, 2011, UCC filed the first of its Two Sanction Motions, seeking sanctions against Debtor's counsel (Docket # 21). On January 5, 2012, UCC filed the second of its Two Sanction Motions, which motion also sought relief from stay with respect to the Vehicle. (Docket # 37). Debtor then voluntarily dismissed this Chapter 13 case, on January 17, 2012.
Because Debtor voluntarily dismissed her case after UCC filed its motion for relief from stay, Debtor is ineligible to be a debtor in any new bankruptcy case for 180 days, under 11 U.S.C. § 109(g)(2). Debtor therefore may not file any new bankruptcy case before July 16, 2012.
This Court has subject matter jurisdiction over this bankruptcy case and over these contested matters under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1), and Local Rule 83.50(a) (E.D.Mich.). This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A) and 157(b)(2)(O).
Stated generally, in the Two Sanction Motions UCC seeks sanctions against Debtor and her attorneys on the following grounds: (1) that Debtor filed this bankruptcy case, and her Chapter 13 Plan (Docket # 32), in bad faith; (2) that Debtor and her attorneys filed the motion for return of the Vehicle, on December 16, 2011, and then failed to promptly withdraw that motion after UCC returned the Vehicle to Debtor, all in bad faith; and (3) that Debtor filed false and inconsistent schedules and other documents, particularly regarding her income, projected income, and the amount of the debt she owed to UCC.
The Court will deny UCC any relief, because the Court finds that UCC has unclean hands. Based on the evidence
The repair done was described on the invoice as:
There is no credible, innocent explanation established by the evidence for why the Vehicle would not start when Debtor got it back from UCC on December 16, 2011. The Court finds that when UCC learned that Debtor had filed bankruptcy, and that UCC would have to return possession of the Vehicle to Debtor as a result of the bankruptcy filing, someone at UCC intentionally disabled the Vehicle so that Debtor would not be able to start it and drive it. Thus, the Court finds, UCC intentionally damaged Debtor's Vehicle, which upon filing of the bankruptcy case had become property of the bankruptcy estate. This was a deliberate, willful violation of the automatic stay by UCC. See 11 U.S.C. §§ 362(a)(3) and 362(a)(6).
As stated by the United States Supreme Court, "bankruptcy courts ... are courts of equity and `apply the principles and rules of equity jurisprudence.'" Young v. U.S., 535 U.S. 43, 50, 122 S.Ct. 1036, 152 L.Ed.2d 79 (2002)(quoting Pepper v. Litton, 308 U.S. 295, 305, 60 S.Ct. 238, 84 L.Ed. 281 (1939)). The Sixth Circuit Court of Appeals has similarly stated that "bankruptcy courts are courts of equity." Doss v. Green (In re Green), 986 F.2d 145, 150 (6th Cir.1993).
"A court of equity will not relieve a party with `unclean hands.'" Green, 986 F.2d at 150. The Sixth Circuit in Performance Unlimited, Inc. v. Questar Publishers, Inc. explained that the doctrine
52 F.3d 1373, 1383 (6th 1995)(internal citations and quotation marks omitted); see also Green, 986 F.2d at 150 (The "[unclean hands] doctrine `closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief....'") (citation omitted).
"Michigan courts abide by the standard maxim that one `who comes into equity must come with clean hands....'" Sutter v. U.S. Nat'l Bank (In re Sutter), 665 F.3d 722, 729 (6th Cir.2012)(citing Rose v. Nat'l Auction Grp., Inc., 466 Mich. 453, 646 N.W.2d 455, 461 (2002)(quoting 2 Pomeroy's Equity Jurisprudence, ch. I, § 397, p. 90 (1941))). In Sutter, the Sixth Circuit described the scope and purpose of the unclean hands doctrine recognized by Michigan courts as
665 F.3d at 729 (citing Rose v. Nat'l Auction Grp., Inc., 646 N.W.2d at 461)(quoting Stachnik v. Winkel, 394 Mich. 375, 230 N.W.2d 529, 532 (1975)(italics in original)).
A court may raise the unclean hands doctrine sua sponte when facts warranting its application come to its attention. Casa Nova, Inc. v. Casa Nova of Lansing, Inc. (In re Casa Nova of Lansing, Inc.), 146 B.R. 370, 379 (Bankr.W.D.Mich.1992)(citing Stachnik v. Winkel, 394 Mich. 375, 230 N.W.2d 529, 532 (1975)); see also Mitan v. Duval (In re Mitan), 573 F.3d 237, 245 (6th Cir.2009) ("[B]ankruptcy courts, as courts of equity, may always consider the presence of bad faith on the part of one of the parties when fashioning relief.") (citation omitted).
UCC's conduct, described above, gives it unclean hands. At a minimum, UCC is guilty of "unconscionability, or bad faith related to the matter at issue," see Performance Unlimited, 52 F.3d at 1383, so this Court will grant UCC no relief. It follows that UCC's Two Sanction Motions must be denied. Under the circumstances, the Court does not need to decide whether or to what extent the conduct of the Debtor or her attorneys in this case was in bad faith, wrongful, or otherwise sanctionable. The Court expresses no view on that subject.
For the reasons stated in this opinion, the Court will enter an order denying UCC's Two Sanction Motions.