BENJAMIN A. KAHN, UNITED STATES BANKRUPTCY JUDGE.
This case is before the Court on Debtor's Complaint for Violation of the Automatic Stay and Sanctions (the "Sanctions Motion"), ECF No. 10, against Creditor Field's Management, Inc. ("Fields") and the Affidavit and Application for Attorney Fees in Connection with Action Filed Against Field's Management, Inc. (the "Fee Application"). ECF No. 16. On November 13, 2019, the Court conducted an evidentiary hearing on the Sanctions Motion (the "Evidentiary Hearing"), at which Brandi Leigh Richardson appeared on behalf
The Court has jurisdiction over the subject matter of this proceeding pursuant to 28 U.S.C. § 1334. Under 28 U.S.C. § 157(a), the United States District Court for the Middle District of North Carolina has referred this case and this proceeding to this Court by its Local Rule 83.11. This is a statutorily core proceeding under 28 U.S.C. § 157(b)(1) and (2)(G). The Court has constitutional authority to enter final judgments in this proceeding.
The Debtor commenced her bankruptcy case by filing a voluntary chapter 13 bankruptcy petition on September 4, 2019 (the "Petition"). ECF No. 1. That same day, Debtor also filed a proposed chapter 13 plan. ECF No. 2. Debtor listed Fields as a secured creditor in Schedule D, ECF No. 1, and she included Fields on her mailing matrix with the following address: Field's Management, Inc., Attn: Officer, 335 Fields Drive, Aberdeen, NC 28315. Id. at 52. Debtor's plan proposed to retain her 2007 Mitsubishi Outlander (the "Vehicle"), which secures Fields' claim, by making payments to Fields in the amount of $99.00 per month, along with 7.25% interest, until Debtor paid the allowed secured claim in full. ECF No. 2. Additionally, the plan provides that Debtor will pay Fields five adequate protection payments in the amount of $48.00.
Debtor filed a complaint initiating an adversary proceeding on September 16, 2019. ECF No. 10. Debtor alleges that Fields willfully violated the automatic stay by activating a kill switch and repossessing the Vehicle post-petition.
On September 18, 2019, the Debtor filed the Emergency Motion in the adversary proceeding, requesting an order requiring Fields to surrender the Vehicle and not sell or otherwise dispose of the Vehicle. ECF No. 13-4. The Court held a hearing on the Emergency Motion and granted Debtor's Emergency Motion and ordered Fields to return the Vehicle to Debtor on or before October 4, 2019. ECF No. 13-13. Thereafter, the Court entered the Interim Order effectuating its ruling and directing Fields to return the Vehicle to Debtor. ECF No. 13-11. In addition, the Interim Order scheduled the Evidentiary Hearing consistent with Bankruptcy Rule 9014(e) for Tuesday, October 22, 2019, to consider whether to award actual damages, punitive damages, and attorney's fees.
Fields complied and timely returned the Vehicle to Debtor. On October 15, 2019, Fields moved to continue the Evidentiary Hearing scheduled for October 22, 2019. ECF No. 13-14. That same day, Debtor responded in opposition to the requested continuance. ECF No. 13-15. On October 17, 2019, Fields filed its Answer to the Complaint, asserting a counterclaim for common law fraud arising out of Debtor's pre-petition purchase of the Vehicle. ECF No. 13-16. The relief requested in the counterclaim is limited to actual and punitive damages, and the costs of the action, including attorney's fees.
On October 18, 2019, the Court bifurcated the Debtor's remaining claim and Fields counterclaim, and converted the Debtor's remaining claim to a contested matter. ECF No. 12. As a result, the Court rescheduled the Evidentiary Hearing for November 13, 2019.
This case reflects egregious and contumacious violations of the automatic stay by a creditor that either badly misjudged the consequences of its actions, or does not care. Its actions demonstrate a disdain for the financially vulnerable customers it purports to serve and an utter disregard for the automatic stay. The record and testimony presented at the Evidentiary Hearing established the following facts.
Fields is an automobile dealership that does business at 335 Fields Drive, Aberdeen, NC 28315.
Counsel for Fields initially contended that Debtor never made any payment toward the Vehicle, including the down payment, and Fields continued to deny that Debtor made any down payment in its Answer and Counterclaim filed with this Court and signed by counsel under Fed. R. Bankr. Pro. 9011.
After missing the first car payment on September 1, Debtor filed for bankruptcy on September 4, 2019. ECF No. 1. When Debtor got into her Vehicle on September 6 and turned the key, the car failed to start because Fields had activated the kill switch. Fields sent a representative, a "repo man," to retrieve it. Fields' repossession attempt failed, however, because Debtor was physically inside of the Vehicle and refused to surrender the Vehicle. Debtor informed the representative that she had filed bankruptcy. Soon after, Debtor phoned her attorney to alert her to the situation.
That day, Debtor, Debtor's Counsel, and her staff repeatedly attempted to contact Fields, some communications successful and some not. After the repossession agent came to her home, Debtor telephoned Fields and informed them of her bankruptcy filing. Despite this information, the receptionist who answered the phone at Fields directed Debtor to pay the full amount owed on the Vehicle, otherwise they would repossess and sell the Vehicle.
Later that day, Debtor stopped by her attorney's office. Ms. Talley, legal assistant to Debtor's Counsel, called Fields and spoke with a representative who identified himself as "Joe." Ms. Talley informed Fields of the chapter 13 case and requested that Fields deactivate the kill switch. Ms. Talley notified Fields that Debtor was currently in bankruptcy, provided Debtor's case number, and directed Fields to rectify the situation immediately. Despite being fully informed of the bankruptcy filing, Joe refused to deactivate the kill switch. In fact, Joe stated that Fields was going to repossess the vehicle and abruptly hung up the phone on her. Ms. Talley then emailed Debtor's counsel informing her of this conversation. In response, Debtor's Counsel attempted to send Fields a fax notifying Fields of the bankruptcy case and requesting that Fields release its control of the Vehicle.
Despite the multiple communications that Debtor was in bankruptcy, Fields not only refused to release the kill switch, but also repossessed the Vehicle on September 11 while Debtor was in the hospital.
Ms. Talley telephoned Fields again on September 12. At first, her call went to a voicemail that indicated that no one was available to take her call. Later that day, Ms. Talley spoke to a receptionist at Fields. Over the phone, Ms. Talley identified herself, again provided Debtor's bankruptcy case number, and informed the receptionist that Debtor had filed for bankruptcy protection and requested that the Vehicle be returned. The receptionist advised her that a woman named Molly at the vehicle department was not available by phone because she was at a conference in Charlotte. The receptionist gave Ms. Talley the contact information for Fields' attorney, Clark Campbell, the first time Fields provided a purported attorney contact. Ms. Talley then called Mr. Campbell, informing him that Fields had provided his name and indicated that he represents Fields. Ms. Talley provided him with Debtor's bankruptcy case number. Mr. Campbell stated that he did not know whether he represented Fields, but said he would look into the issue and call her back. When he failed to return her call, Ms. Talley called Mr. Campbell again on September 13 and left a message. Mr. Campbell never returned Ms. Talley's call.
Debtor's Counsel then sent another fax to Fields on September 12 that successfully transmitted. In the fax, Debtor's Counsel again cautioned Fields that repossession and retention of the Vehicle was a violation of the automatic stay. The fax also warned Fields that Debtor would commence an adversary proceeding seeking the turnover of the Vehicle and sanctions for a willful violation of the stay if Fields did not return the Vehicle and release the kill switch before September 13, 2019. At
On September 19, Frances Bumgarner, the chapter 13 standing trustee's legal assistant, called Fields. The woman on the phone stated that she had not received notice of Debtor's bankruptcy. She further stated that the person to whom Ms. Bumgarner needed to speak, Ron Jackson, was not in, but she would give him a message. Ms. Bumgarner provided her phone number, the case number, and asked the woman to let Mr. Jackson know that a staff attorney from the Trustee's office had asked her to call Fields to inform them that the automatic stay prohibits Fields from selling the Vehicle and that there would likely be a motion for sanctions. Ms. Bumgarner confirmed the following facts with the woman on the phone: (1) Fields' address, which matched the notice address; (2) that there had been no mail returned; and (3) that Fields' attorney was Mr. Campbell. The woman said she could not discuss this matter with Ms. Bumgarner, and that Ms. Bumgarner would need to talk to their attorney, Mr. Campbell. No one at Fields called Ms. Bumgarner thereafter.
Ms. Bumgarner then called Mr. Campbell. She told him about the bankruptcy case and provided Debtor's case number. The phone call was cut short when Mr. Campbell said "he understood" and abruptly hung up on her. On September 20, Mr. Campbell finally emailed Debtor's Counsel informing her that Fields had transferred representation and retained Mr. Kremer as counsel.
On September 26, Ms. Bumgarner spoke with Creditor's Counsel, who stated he had not yet reviewed any emails from Debtor's Counsel. He informed Ms. Bumgarner that Fields had not retained him yet, and he was not sure if he was even going to take the case. Ms. Bumgarner provided him with information about the case, but Creditor's Counsel wanted to contact Debtor's Counsel and review her emails. More than 22 days after Debtor filed her Petition, Fields still stubbornly refused to return the Vehicle repossessed in violation of the automatic stay. Debtor's Counsel commenced the adversary proceeding, and served Fields with the Summons and Complaint on September 17, 2019 under Fed. R. Bankr. Pro. 7004, with a courtesy copy to Mr. Clark Campbell by United States Mail, first class postage paid. ECF Nos. 13-2. On September 20, Debtor also served Fields with a copy of the Court's Order expediting the hearing on the motion for turnover, with a courtesy copy by electronic mail to Mr. Kremer. ECF No. 13-9. The case came before the Court for hearing on Debtor's emergency motion for turnover in the adversary proceeding on October 3, at which time Fields still had refused to return the wrongfully repossessed Vehicle.
On the filing of a bankruptcy petition, section 362(a) comes into effect and prohibits, among other things, "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. § 362(a)(3). The automatic stay is one of the most fundamental and important protections given to debtors under the Bankruptcy Code.
Section 362(k)(1) provides that "an 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. § 362(k)(1). To impose sanctions for a violation of the automatic stay, the injured party must show that (1) the conduct constituted a violation of the automatic stay; (2) the creditor's violation of the automatic stay was willful; (3) that the debtor was injured as a result of the violation.
The evidence presented in this case established that Fields' refusal to surrender possession of the Vehicle, post-petition demand for payment, and continued control of the Vehicle for weeks with knowledge of the bankruptcy, constitute willful violations of the automatic stay. For the reasons set forth below, the Court finds that the Debtor has met her burden and is entitled to actual and punitive damages against Fields.
Fields does not contest that it violated the automatic stay when it repossessed Debtor's Vehicle, but asserts that it did not have proper notice and any violation was merely technical. It is undisputed that the Vehicle was property of the estate. Fields' conduct in exercising control over the Vehicle through the kill switch, demanding payment of a pre-petition debt in order to release the Vehicle, and repossessing the Vehicle post-petition each violated the automatic stay.
Fields' argument wholly lacks merit. Fields was fully aware of the bankruptcy filing no later than the day of its first attempt to repossess the Vehicle post-petition, and was repeatedly told about the bankruptcy by at least five people between September 6 and September 12, 2019. First, Debtor and Ms. Talley notified Fields of the bankruptcy filing in person
Fields not only had actual knowledge of the case immediately after its filing, but the Bankruptcy Noticing Center also served Fields with formal notice on September 7. ECF No. 9. "Proof that a letter properly directed was placed in a post office creates a presumption that it reached its destination in usual time and was actually received by the person to whom it was addressed."
Fields failed to rebut the presumption that it received formal notice of the bankruptcy case. The BNC sent notice of the Debtor's bankruptcy to Fields' correct business address. Fields presented no evidence to the contrary, either through testimony or written documentation, that the bankruptcy notices were improperly addressed, returned as undeliverable, or not received. In fact, the notices were sent to the notice address provided by Fields on its proof of claim. As such, the BNC provided Fields with formal notice that future actions with regards to the Vehicle were stayed and that it could be penalized if it attempted to repossess the car or take other action in violation of the Bankruptcy
Having determined that Fields had actual knowledge and notice of the bankruptcy no later than September 6, the Court must determine whether Fields willfully violated the stay despite such notice. It did. Although Fields' activation of the kill switch sometime between September 4 and 6 may have been done without knowledge of the bankruptcy and therefore constituted only a technical violation of the stay, by thereafter refusing to deactivate the kill switch, repossessing the vehicle, demanding payment of the pre-petition obligation, and continuing to possess the Vehicle —all with full knowledge of the bankruptcy —Fields willfully, recalcitrantly, and repeatedly violated the stay. Once a creditor has been notified of the bankruptcy filing, "a creditor must act immediately to restore the status quo once it learns that it has violated the automatic stay."
Contrary to Fields' argument, the Debtor does not need to show that the creditor had the specific intent to violate the stay.
The evidence demonstrated that Fields intentionally refused to deactivate the Vehicle's kill switch that had been activated post-petition, demanded payment of a pre-petition debt, and retained the Vehicle, all in violation of the automatic stay and with full knowledge of the bankruptcy filing.
Having determined that Fields willfully violated the automatic stay, the Court now examines whether the Debtor "suffered some compensable injury as a result of the violation."
At the Evidentiary Hearing, Debtor testified that the Vehicle was her only means of transportation for herself and two grandchildren of whom she has custody. As a result of the deprivation of her Vehicle in violation of the automatic stay, Debtor paid people to transport her and her grandchildren to doctor appointments and grocery stores at a cost of $150.00.
Debtor suffered additional, but unquantified injury. Despite Fields' argument that the Vehicle is not essential to Debtor,
The Debtor requests compensatory damages, attorney's fees, and punitive damages. "[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. § 362(k)(1). The Court has no discretion to withhold an award of compensatory damages, including costs and attorneys' fees, when the automatic stay is willfully violated.
Debtor seeks $150.00 for the costs she incurred for alternate transportation to court, the grocery store, and doctors' appointments for Debtor and her grandchildren.
Debtor's Counsel submitted the Application for Compensation detailing the fees and costs incurred by Debtor in connection with the action filed against Fields. ECF No. 16. Section 362(k)(1) permits recovery of reasonable costs and attorneys' fees as components of Debtor's actual damages.
Under § 362(k), an award of punitive damages is within the discretion of the court.
Fields' conduct in this case was egregious sand warrants punitive damages. Fields' conduct in this case was egregious. Fields not only refused to comply after being repeatedly notified of the bankruptcy filing, but was obdurate and dismissive to Debtor, Debtor's counsel, and the standing trustee. Fields failed to return calls, provided false information about representation of counsel, demanded payment of a pre-petition claim in order to comply with its unconditional obligations under the United States Bankruptcy Code, asserted non-payment of amounts actually paid by Debtor despite having evidence that Debtor actually made such payments, and intentionally gave Debtor and the Trustee "the run around" for almost a month. Fields has shown no remorse for its actions, continuing to argue that it, at most, committed only a technical violation of the stay despite all the evidence to the contrary. Fields requested and obtained a continuance of the first scheduled evidentiary hearing only to request a further continuance at the commencement of the continued hearing because its witness did not appear. Its actions demonstrate a callous disregard for the automatic stay and this Court. As such, the Court will impose punitive damages.
When determining the appropriate amount of punitive damages, courts "aim at `deterrence and retribution.'"
Fields conduct was repetitive and reprehensible by any measure. The blithe and callous phlegm of the repeated notifications and warnings from Debtor, Debtor's counsel, and the Trustee's office, combined with Fields' total disregard for the strictures of the automatic stay in this case is remarkable. Fields has shown no contrition, remorse, or comprehension of the severity of its actions. This lack of contrition "portends that similar violations will continue" in the absence of sufficient deterrence.
Because the amount of actual damages is necessarily low, given the value of the Vehicle at issue and Debtor's meager financial means, the Court finds that the use of any multiple of actual damages would be meaningless and would utterly fail to serve the purposes for imposing punitive damages. Therefore, although the Court has considered the amount of actual damages, including attorneys' fees caused by Fields' conduct, the Court has given this guidepost less weight.
In applying the final guidepost provided by the Supreme Court, other courts have awarded significant punitive damages in cases with similarly small actual damages when circumstances demonstrate that creditors "simply ignored the automatic stay."
In the cases above in which creditors wrongfully retained vehicles post-petition, the sanctions vary among $25,000 (or $105 per day) in
The courts above also impose punitive damages for wrongful post-petition repossession and post-petition demands for payment.
For the reasons set forth herein, the Court concludes that Debtor is entitled to an award of damages in the amount of $150.00 incurred for her transportation, as well as the attorney's fees and costs incurred in bringing this contested matter in the amount of $3,813.90. Additionally, the Court will award punitive damages in the amount of $15,000.00. Fields shall have 14 days from the entry of the Court's Order to pay all amounts to Debtor's Counsel, and the Court will conduct a further hearing on February 13, 2020 at 9:30 a.m. EDT, at the United States Bankruptcy Court, Venable Center, Dibrell Building — Suite 280, 302 East Pettigrew Street, Durham, North Carolina 27701 to ensure compliance and to consider whether Fields should be held in contempt for any failure to timely comply. To the extent Fields does not timely comply, sanctions may include
Near the end of the Evidentiary Hearing, Fields orally moved to dismiss the case, pursuant to Rule 7052 and Rule 9014. Fields asserted that there was no direct evidence that Fields had knowledge of Debtor's bankruptcy case, and the Court denied the motion.
Claim No. 3-1, Part 2. Therefore, Fields could not have activated the kill switch under the terms of the contract until 5:00 p.m. on September 4. Debtor filed her petition four and a half hours earlier, at 12:29 p.m. on September 4. The record is unclear whether Debtor attempted to drive the Vehicle on September 4 or 5.
The question had no relevance to the factual matters before the Court. Whether Debtor overstated her income on the credit application has no bearing on whether Fields knew about the bankruptcy filing or violated the automatic stay, nor is it relevant to the amount of any damages caused to the debtor by the violation. To the extent the question was offered solely to attack the Debtor's credibility under Fed. R. Evid. 608(b), the objection is overruled. Nevertheless, the Court finds the Debtor's testimony to be credible and largely corroborated by other witnesses and the record.
