Ashely M. Chan, United States Bankruptcy Judge.
In February 2015, the City of Philadelphia ("City") sold real property ("Property")
Following the sale, the Debtor had nine months from the date of acknowledgment of the sheriff's deed to redeem the Property under state law by paying the purchase price to Abdoun. 53 P.S. § 7293(a). Prior to the expiration of the redemption period, Abdoun impermissibly attempted to collect rent from the Debtor and evict her from the Property on numerous occasions. When the Debtor filed for bankruptcy before the redemption period expired, Abdoun continued his attempts to impermissibly collect rent from the Debtor and filed overstated proofs of claim which improperly included amounts for rent.
In this adversary proceeding, the Debtor seeks to avoid the transfer of the Property to Abdoun as a constructively fraudulent transfer pursuant to 11 U.S.C. § 548(a)(1)(B)(i)-(ii)(I). Additionally, Debtor seeks to recover damages pursuant to Pennsylvania's Fair Credit Extension Uniformity Act ("FCEUA"), 73 P.S. § 2270.1 et seq., as enforced through Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. § 201-9.2, on account of Abdoun's unlawful attempts to collect rent from the Debtor and evict her from the Property prior to the expiration of the redemption period. Finally, the Debtor seeks to hold Abdoun liable pursuant to 11 U.S.C. § 362(k)(l) for violating the automatic stay by attempting to collect postpetition rent after she filed for bankruptcy.
Because the Debtor fails to meet her burden to establish that the Property was transferred for less than its reasonably equivalent value, the Court concludes that the sale of the Property was not a constructively fraudulent transfer subject to avoidance under 11 U.S.C. § 548(a)(1)(B)(i)-(ii). However, because Abdoun's egregious and unlawful attempts to collect rent and evict the Debtor violated several provisions of the FCEUA and caused the Debtor ascertainable financial loss, the Court will award the Debtor $300, which represents one-and-a-half times the amount of her actual damages of $200 on account of those claims pursuant to the UTPCPL, 73 P.S. § 201-9.2. The Court will also award reasonable attorneys' fees for litigating and prosecuting the FCEUA claims.
Finally, Abdoun's attempt to collect postpetition rent from the Debtor is not a violation of the automatic stay because 11 U.S.C. §§ 362(a)(1) and (a)(6) only prohibit the collection of prepetition claims.
Based upon the foregoing, Abdoun will hold a total secured claim in the amount of $28,700, which will constitute the amount that the Debtor must pay under her chapter 13 plan to redeem the Property.
On March 31, 1997, the Debtor and her now-estranged husband, Raymond Marshall ("Husband"), became owners of the Property, which is located at 715 Cobbs Creek Parkway, Philadelphia, PA, as tenants by the entireties.
Based upon delinquent real estate taxes against the Property totaling $9,777.13 in 2014, the City filed a petition in State Court for a rule to show cause seeking authorization to sell the Property in order to collect. Ex. S-1; Statement of Facts ("SOF") ¶ 3. The tax information certificate attached to the City's petition reflected that the City had assessed the value of the Property at $76,400. Ex. S-1. On or about July 28, 2014, the State Court issued a rule returnable granting the City's petition to show cause why a decree should not be entered permitting the sale of the Property ("Rule"). Ex. S-2; SOF ¶ 4. Less than six months later, the State Court issued a decree permitting the Property to be sold ("Decree") without holding a hearing ("Hearing"), as required by § 7283(a) of the MCTLA. Ex. S-3, S-4; SOF ¶¶ 6, 7.
On or about February 18, 2015, the City sold the Property at a sheriff's sale to Abdoun, the winning bidder, for $29,000. SOF ¶¶ 8, 9. Around the time of the sale, the Debtor's liabilities totaled between $70,000 and $80,000 and, besides the Property, the rest of her assets constituted $5,000 worth of personal property.
In March 2015, prior to the acknowledgment of the sheriff's deed, Abdoun went to the Property with his friend and a few police officers when Debtor was not home. SOF ¶ 14; Tr. 36:17-19, 65:23-25, 66:17-21, 79:6-10. When the Debtor's minor son, Demetrius Marshall ("Son"), let the officers and Abdoun in, the officers gave the Son "a piece of paper to give to [his] mother" which reflected that the Property had been sold at a sheriffs sale. Tr. 36:10-24, 66:17-21. The officers left shortly thereafter. Id. at 67:17-18. Meanwhile, Abdoun gave the Son his business card, told him that the Property had been sold, and that he and his mother would have to leave. Id. at 36:10-21, 79:6-14.
After the Son called the Debtor and told her what had happened, she came home and ordered Abdoun and his friend, who were still standing outside, to leave because she was unaware that the Property had been sold. SOF ¶ 15; Tr. 36:8-25. Having her Son call her and tell her that a stranger was claiming to own her home made the Debtor feel physically ill and brought back the anxiety and fear she used to experience when her abusive Husband still lived at the Property. Tr. 47:2-16.
Shortly after Abdoun's first visit, the Debtor went to the Philadelphia Sheriff's Office and learned that her Property had been sold. Id. at 36:22-24. She subsequently started working with Philadelphia Legal Assistance, a federally-funded legal services program providing free legal services to low-income individuals in Philadelphia, to protect her interest in the Property. Id. at 36:24-25, 58:17-23; Philadelphia Legal Assistance: Providing Free Civil Legal Services to Low-Income Residents of Philadelphia Since 1996, https://www.philalegal.org/.
On or about March 27, 2015, Jewell Williams, the Sheriff of Philadelphia County, acknowledged a deed for the Property to Abdoun. Ex. S-6; SOF ¶ 11. On April 8,
On April 9, 2015, Abdoun sent the Debtor two identical letters demanding rent even though the Debtor had never entered into a lease with Abdoun and had never agreed to pay him rent.
In June or July of 2015, Abdoun returned to the Property and called the police when he saw the Son and his friend sitting on the front step. Id. at 67:24-68:3, 79:17-21; SOF ¶ 16. It appears that Abdoun suggested to the three or four police officers who arrived at the Property that the Debtor and her Son were squatters in the Property. SOF ¶ 17; Tr. 48:19-49:7, 68:1-18, 79:22-80:2. When the police came to the front door to speak to the Debtor, they became hostile, accused the Debtor of breaking into the Property, and ordered her to leave. SOF ¶ 19; Tr. 48:15-25, 68:10-15. In order to prove that she was not a squatter, the Debtor showed the police photo identification and several bills. Tr. 49:1-7. After demonstrating that she resided at the Property, the police left. Id. at 49:5-11.
The encounter between the Debtor and the police took place outdoors on the front step of the Property where her neighbors, bystanders in the community park across the street, and patrons of a nearby bar could see and hear. Id. at 49:12-21, 50:15-17. Having the police at her Property humiliated the Debtor, reminding her of the many humiliating public encounters she previously experienced with the police due to her abusive Husband's behavior in prior years. Id. at 49:22-50:14.
For approximately six months after the police encounter, the Debtor experienced intense fear that Abdoun would return with the police and force her to leave. Id. at 53:13-21, 56:8-14. In fact, she rarely left the Property for fear that the police would lock her out when she was not home. Id. at 53:22-54:7. Due to her fear and anxiety, she became impatient, constantly felt "overanxious," struggled to concentrate and sleep, and cried frequently. Id. at 54:14-55:23. Her Son observed that she had "a weight on he [sic] back" since she spent many nights after the police encounter crying on the phone to her friends. Id. at 71:21-25, 72:10-15.
On December 14, 2015, the Debtor, through counsel, filed a voluntary petition under chapter 13 of the Bankruptcy Code. Case No. 15-18921 ECF No. ("ECF") 1. On January 5, 2016, the Debtor filed her schedules, which identified Abdoun as a secured creditor. Id. at ECF 10 Sch. D. On January 14, 2016, the Debtor filed her chapter 13 plan, which provided that, over a five-year period, "[t]he debtor will pay 100% of the allowed secured Claim 2 claim [sic] directly to Mr. Abdoun." Id. at ECF 18.
On April 3, 2016, Abdoun filed a proof of claim in the amount of $45,552.11 as a secured claim on the basis that "Debtor lives in Claiments [sic] property" ("Original Proof of Claim"). POC 5-1. The $45,552.11 amount consisted of the $29,000 purchase price, $2,900 in interest, $11,200 of "rent" from February 17, 2015-January
On June 14, 2016, Abdoun sent the Debtor another letter demanding $800 "for June 2016 rent." Ex. P-1; Tr. 43:3-5. After receiving the letter, the Debtor "cried and prayed and cried and prayed," and believed that she would become homeless because she could not afford the rent demanded by Abdoun. Tr. 43:10-19. She thought that the bankruptcy would protect her from Abdoun's rent demands. Id. at 43:3-9. She became even more emotional and upset when her Son dropped out of school, after she received the letter, in order to get a job so that they would not become homeless. Id. at 43:10-19.
On March 27, 2017, the Debtor initiated the instant adversary proceeding by filing a complaint against Abdoun seeking to avoid the transfer of the Property in its entirety as a constructively fraudulent transfer pursuant to 11 U.S.C. § 548(a)(1)(B)(i)-(ii)(I) and to recover the Property pursuant to 11 U.S.C. § 550(a)(1). Case No. 17-88 ECF 1; Compl. ¶ 1. Additionally, the Debtor sought to recover damages for alleged violations of the FCEUA as enforced through the UTPCPL. Id.
Alternatively, the Debtor sought to have the Court disallow Abdoun's claim in its entirety on the basis that his Original Proof of Claim contained "no support for an allowed secured claim in any amount" pursuant to Fed. R. Bankr. P. 3001(e)(2)(D)(i). Compl. ¶¶ 62, 63. In the event Abdoun's claim was not disallowed in its entirety, the Debtor sought to have the Court set the redemption amount at $19,000, the alleged value of the Property, according to the Debtor, as of the petition date, and reclassify any excess amount of Abdoun's claim as a general unsecured claim pursuant to 11 U.S.C. § 506(a). Id. at ¶ 64.
On April 16, 2019, the day before the trial in this adversary proceeding, Abdoun filed an amended proof of claim in the same amount as the Original Proof of Claim but clarified that his claim was based on the "sheriff's sale" ("Amended Proof of Claim"). POC 5-2. In the Amended Proof of Claim, Abdoun averred that his claim was secured and perfected by the "sheriff's deed" and that the value of the Property was $29,000. Id. The Amended Proof of Claim did not include any attachments evidencing Abdoun's ownership interest or the sale of the Property.
At trial on the next day, the Debtor raised an unpleaded claim against Abdoun based upon his alleged willful violation of the automatic stay pursuant to 11 U.S.C. § 362(k)(1) by demanding postpetition rent for June 2016. Tr. 6:19-7:10. Although Abdoun argued that his demand for June rent did not violate the automatic stay, he did not specifically object to the Debtor trying this claim nor did he object to evidence offered in support of such claim. See id. at 10:11-23. Abdoun later clarified that "we're only today saying we're only entitled on the — on the proof of claim $29,000" and clarified that he had no objection to capping his entire prepetition claim at $29,000. Id. at 27:9-20. Accordingly, the Court determined that Abdoun's "pre-petition secured claim is at most the $29,000 he paid at the — at the tax sale" because the parties agreed that any amount reflected in the Amended Proof of Claim in excess of
Finally, the Debtor testified that, as a result of Abdoun's visits to the Property, she incurred costs taking public transportation to go to the Philadelphia Sheriff's Office to obtain proof of the sale and to meet with her counsel from Philadelphia Legal Assistance after both of Abdoun's visits. Id. at 56:16-24, 57:12-15. She also paid to obtain a copy of her original deed and incurred travel costs associated with ordering and picking up her deed. Id. at 56:24-57:9. She further testified that, after receiving the rent letters from Abdoun in April 2015 and June 2016, she had to pay to take public transportation to meet with her counsel from Philadelphia Legal Assistance to discuss the letters. Id. at 57:10-12. In total, the Debtor testified that these costs totaled approximately $200. Id. at 58:4-16.
At the conclusion of the trial, the Court set a post-trial briefing schedule for the parties to submit proposed findings of fact and conclusions of law. Case No. 17-88 ECF 17. After seeking and obtaining multiple extensions of the briefing schedule, the Debtor finally submitted her proposed conclusions of law on June 10, 2019 and her proposed findings of fact on June 11, 2019.
On August 21, 2019, the Court requested supplemental post-trial briefing on:
The parties subsequently agreed to extend their briefing schedule with the Court's permission, and the Debtor filed her brief on October 7, 2019. Id. at ECF 31, 32, 34. Abdoun filed his supplemental brief on October 30, 2019. Id. at ECF 35. The Debtor did not file a reply brief, which was due November 14, 2019, as of the date of this Opinion.
The Court has reviewed all post-trial briefing and the matter is ripe for disposition. Both parties have consented to this Court entering final judgment in this matter. Pre-Trial. St. 1.
The Debtor argues that the presumption established under BFP v. Resolution Trust Corp., 511 U.S. 531, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994) — that the sale price of property sold at a sheriff's sale constitutes a property's reasonably equivalent value — does not apply, because the Hearing
In response, Abdoun argues that the Property was transferred for a reasonably equivalent value, because a hearing occurred "by operation of law," the Decree permitting the sheriff's sale "was valid on it's [sic] face," and, even in the absence of a hearing, Abdoun later amended his Original Proof of Claim to reflect his belief that the Property was only worth $29,000, which was the amount that he paid for the Property at the sheriff's sale. Tr. 4:22-5:1; Def. Proposed Concl. of Law ¶¶ 3, 4.
The Debtor also argues that, by: (1) demanding rent when Abdoun had no legal claim to rent; (2) unlawfully seeking to have the Debtor removed from the Property prior to the expiration of the redemption period set forth in 53 P.S. § 7293(a); and (3) filing an inflated proof of claim seeking rent that he was not owed, Abdoun violated the FCEUA, 73 P.S. § 2270.4(b), entitling the Debtor to damages under the UTPCPL, 73 P.S. § 201-9.2. Debtor Proposed Concl. of Law ¶¶38(a)-(c), 39, 45. In response, Abdoun argues that, "[w]hen Debtor filed her voluntary chapter 13 bankruptcy the provisions of the automatic stay went into effect pursuant to 11 U.S.C. § 362(a)," presumably suggesting that the postpetition FCEUA claims are preempted by 11 U.S.C. § 362(a). Def. Proposed Concl. of Law ¶ 12.
Finally, the Debtor argues that Abdoun's attempt to collect the June 2016 postpetition rent ("Postpetition Rent"), which was not authorized under state law and was done with full knowledge of the Debtor's bankruptcy, constituted a willful violation of the automatic stay. Debtor Proposed Concl. of Law 41-42. Abdoun responds that his demand for Postpetition Rent was merely an attempt to collect postpetition insurance and taxes. Tr. 10:11-21.
The Court concludes that, with regard to the § 548 claim, the transfer of the Property was not constructively fraudulent, because the Debtor failed to demonstrate that the purchase price was not reasonably equivalent to "the price that would have been received if the foreclosure sale had proceeded according to law." BFP, 511 U.S. at 546, 114 S.Ct. 1757. However, the Court also finds that, by attempting to collect rent and taking nonjudicial action to try to remove the Debtor from the Property prior to the expiration of the redemption period while the Debtor had the right to exclusive possession of the Property, Abdoun violated the FCEUA and is liable for damages under the UTPCPL. However, because the UTPCPL does not allow plaintiffs to recover damages for emotional distress, the Debtor's damages will be limited to her actual pecuniary losses resulting from such violations, which total $200, and one-and-a-half times the actual damages, which will bring Debtor's total recovery on account of Abdoun's FCEUA violations to $300.
The Court also concludes that Abdoun's demand for Postpetition Rent did not constitute a willful violation of the automatic stay under § 362(k)(l), because Abdoun's attempt to collect a postpetition claim does not violate the automatic stay. Finally, the
The Debtor contends that the sale of the Property constitutes a constructively fraudulent transfer pursuant to 11 U.S.C. § 548(a)(l)(B)(i)-(ii)(I), which provides that:
In order to demonstrate that the transfer of the Property to Abdoun was constructively fraudulent, the Debtor must prove, by a preponderance of the evidence, that (1) she had an interest in the Property; (2) her interest was transferred within two years of the petition date; (3) she was insolvent when the transfer occurred or was made insolvent as a result of the transfer; and (4) she received less than the Property's reasonably equivalent value in exchange for the transfer. Fid. Bond and Mortg. Co. v. Brand, 371 B.R. 708, 720 (E.D. Pa. 2007); Walsh v. Kennelly (In re Kennelly), Bankr. No. 08-70348 BM, Adv. No. 08-7032 BM, 2009 WL 8556814, at *2 (Bankr. W.D. Pa. June 4, 2009).
The Debtor has proven, and Abdoun does not contest, that she had a prepetition interest in the Property, that her interest was transferred within two years of the petition date, and that she was either insolvent prior to the transfer or rendered insolvent by the transfer.
In BFP v. Resolution Trust Corp., the Supreme Court considered whether a non-collusive, real estate mortgage foreclosure sale conducted in conformance with applicable state law could be set aside as a constructively fraudulent transfer under
The BFP court then went on to describe the development of foreclosure law in Anglo-American jurisprudence, noting that:
Ultimately, in light of the foregoing and in deference to "long-established traditions of state regulation" of mortgage foreclosure proceedings, the Supreme Court held that:
The BFP court went on to further explain that:
Based upon the foregoing, if there were no irregularities during a foreclosure sale process which would permit invalidation of such sale under state law, a movant seeking to avoid the foreclosure sale as a constructively fraudulent transfer under § 548(a)(1)(B) will be bound by the presumption in BFP that the sale price received at the foreclosure sale is the reasonably equivalent value of such property. If there were any irregularities during the foreclosure sale process, however, this presumption will not apply.
Instead, the movant must prove, by a preponderance of the evidence, that the foreclosure sale price was not reasonably equivalent to "the price that would have been received if the foreclosure sale had proceeded according to law." Id. Essentially, the movant must demonstrate that, if the state law irregularities had not occurred, the foreclosure sale would have yielded a higher sale price. In other words, the irregularity in the conduct of the foreclosure sale must be "of such a magnitude that it chilled competitive bidding" and, therefore, "undermined the fundamental purpose of foreclosure sales." In re Ryker, 301 B.R. at 166, 168 (court found that defective sale notice which listed foreclosure debt as $220,000, when the actual debt on such property was only $50,000, thwarted competitive bidding and allowed mortgagee, who was the only party who knew what the amount of the actual debt was, to purchase the property for only $50,000, and held that the $50,000 foreclosure sale price was not reasonably equivalent to the price that would have been received if the sale notice had accurately identified the actual foreclosure debt.).
Furthermore, although the Supreme Court only addressed mortgage foreclosure sales in BFP, numerous courts have since held that BFP also applies to real estate tax foreclosure sales which must be conducted in accordance with state laws that require that tax sales take place publicly under a competitive bidding procedure and afford protections to delinquent taxpayers similar to those afforded delinquent borrowers in mortgage foreclosure proceedings, such as notice, a reasonable opportunity to cure, and strict adherence to statutory requirements. BFP, 511 U.S. at 537 n.3, 114 S.Ct. 1757. E.g., Crespo v. Abijah Tafari Immanuel (In re Crespo), 557 B.R. 353, 360-62 (Bankr. E.D. Pa. 2016) (citing several cases applying BFP to tax sales in Pennsylvania and other jurisdictions); Balaber-Strauss v. Town of Harrison (In re Murphy), 331 B.R. 107, 117 (Bankr. S.D. N.Y. 2005); Hemstreet v. Brostmeyer (In re Hemstreet), 258 B.R. 134, 138-39 (Bankr. W.D. Pa. 2001); Golden v. Mercer Cnty. Tax Claim Bureau (In re Golden), 190 B.R. 52, 58 (Bankr. W.D. Pa. 1995); Lord v. Neumann (In re Lord), 179 B.R. 429, 434-36 (Bankr. E.D. Pa. 1995). The Debtor acknowledges that BFP applies to real estate tax sales conducted pursuant to Pennsylvania's MCTLA, 53 P.S. §§ 7101-7505, the law under which the sale of the Property was conducted.
The Court finds that the tax sale failed to comply with § 7283(a) of the MCTLA, because the State Court failed to hold the required Hearing before it issued the Decree permitting the Property to be sold. Based upon this irregularity during the tax sale process, the presumption established under BFP and related cases, that the sale price raceived at a tax sale is the reasonably equivalent value of the Property, does not apply. However, in order to prove that the transfer of the Property should be avoided as constructively fraudulent under § 548(a)(1)(B), the Debtor
At trial, the Debtor failed to produce any evidence that would support a finding that the tax sale price would have been higher if the State Court had held the Hearing before it issued the Decree permitting the Property to be sold. See In re Ankrah, 602 B.R. at 291; In re Thorian, 387 B.R. at 65. Instead, the Debtor based her case on mere speculation that, had the Hearing occurred prior to the issuance of the Decree, no sale would have occurred. The Debtor provided no basis for this speculation, nor does this speculation have any impact on the issue which the Debtor has the burden to demonstrate — whether the Property would have been sold for a higher price if the Hearing had been held prior to the issuance of the Decree.
Furthermore, the Debtor failed to provide any evidence that, if the Hearing had occurred prior to the issuance of the Decree, (i) the Debtor could, and would, have bid a higher amount than Abdoun at the tax sale; or (ii) there were other buyers who would have bid more for the Property. See In re Ankrah, 602 B.R. at 291 ("the debtor acknowledges that a third party purchased the property, thus there was some competitive bidding ... She does not allege that, had she had notice, she would have bid more than the LLC did. Rather, she alleges that she would have attempted to further adjourn the sale ..."); In re Thorian, 387 B.R. at 65. In fact, it is entirely unclear what effect, if any, the Hearing would have had on the sale price of the Property. Unlike the facts in Ryker, the failure to hold a Hearing did not have any effect on competitive bidding. In the absence of any evidence from the Debtor that she or someone else could, or would, have been able to bid a higher amount, the Debtor has failed to satisfy the test set forth by the Supreme Court in BFP for measuring reasonably equivalent value of defective foreclosure sales. See In re Ankrah, 602 B.R. at 291; In re Thorian, 387 B.R. at 65.
Based upon Debtor's failure to demonstrate that she did not receive reasonably equivalent value in exchange for the Property, the Court will not avoid the transfer of the Property as a constructively fraudulent transfer.
The Court now turns to whether Abdoun's conduct following his purchase of the Property violated the FCEUA, entitling the Debtor to damages under the UTPCPL.
The FCEUA does not provide consumers with an independent private cause of action. Rather, pursuant to 73 P.S. § 2270.5(a), "[i]f a debt collector or creditor engages in an unfair or deceptive debt collection act or practice under this act, it shall constitute a violation of the ... Unfair Trade Practices and Consumer Protection Law." Thus, consumers must enforce violations of the FCEUA using the remedial
Because FCEUA claims are enforced through the UTPCPL, in order to recover on account of an FCEUA violation, plaintiffs must not only prove that an FCEUA violation occurred, but also the elements necessary to satisfy a UTPCPL claim. Kaymark, 783 F.3d at 182; Salvati v. Deutsche Bank Nat'l Trust Co., N.A. 575 Fed. Appx. 49, 57 (3d Cir. 2014) ("Salvati's FCEUA claim is premised on the viability of his claim under the remedial provision of the UTPCPL."); Baldwin, 2017 WL 4767696, at *4.
To maintain an action under the UTPCPL, plaintiffs must prove that they suffered an ascertainable loss of money or property as a result of conduct prohibited under the UTPCPL, which, pursuant to 73 P.S. § 2270.5(a), includes conduct prohibited under the FCEUA. Hemphill v. Nationstar Mortg. LLC, No. 18-2451, 2018 WL 4929864, at *5 (E.D. Pa. Oct. 10, 2018); Baldwin, 2017 WL 4767696, at *5; Levy-Tatum, 2016 WL 75231, at *9; Benner, 917 F. Supp. 2d at 359-60. Only an actual, non-speculative, identifiable loss constitutes an ascertainable loss for purposes of the UTPCPL.
The Debtor has satisfied all elements necessary for maintaining an FCEUA claim brought under the UTPCPL in connection with Abdoun's prepetition misconduct. First, the Debtor has proven that prepetition, Abdoun committed several unfair or deceptive acts as defined by the FCEUA, 73 P.S. § 2270.4(b), by demanding rent he had no entitlement to, by asserting a right to possession of the Property he did not have, and by attempting to intimidate the Debtor into vacating the Property.
Here, the redemption period spanned from March 27, 2015, the date of acknowledgment of the sheriff's deed, through December 27, 2015. Abdoun's prepetition actions to obtain possession of the Property and rent occurred prior to the expiration of the redemption period while Debtor retained the exclusive right to possess the Property. Therefore, by falsely claiming that he was entitled to possession and rent on multiple occasions, Abdoun misrepresented the character and legal status of the debt in violation of 73 P.S. § 2270.4(b)(5)(ii).
Additionally, by threatening to collect rent that he was not owed, Abdoun threatened to take action that he would not have been legally entitled to take, in violation of 73 P.S. § 2270.4(b)(5)(v). Furthermore, by enlisting the police to facilitate the ejectment of the Debtor from the Property, Abdoun took "nonjudicial action to effect dispossession ... of property" when there was "no present right to possession of the property claimed as collateral through an enforceable security interest" in violation of 73 P.S. § 2270.4(b)(6)(vi)(A). Abdoun's use of the police to attempt to have Debtor removed from the Property also violated 73 P.S. § 2270.4(b)(5)(vii), because it falsely implied that the Debtor had committed a crime by remaining in the Property when she had not. Based upon the foregoing, Abdoun clearly committed numerous prepetition acts prohibited by the FCEUA.
Second, as required to recover under the UTPCPL in connection with FCEUA violations, the Debtor has shown that she suffered "an ascertainable loss" of money as a result of Abdoun's wrongful prepetition conduct. As a result of Abdoun's first visit to the Property, the Debtor incurred costs associated with taking public transportation to the Philadelphia Sheriff's Office to obtain information about the sale, taking public transportation to meet with the legal aid attorney she had retained to help protect her interest in the Property, and obtaining a copy of the original deed to the Property. Additionally, the April 2015 rent demand caused her to incur public transportation costs meeting with her legal aid attorney regarding the letter. Finally, the police attempting to remove the Debtor from the Property caused her to incur public transportation costs visiting her legal aid attorney about the incident. These costs amounted to approximately
The Debtor also seeks to recover under the FCEUA through the UTPCPL on account of Abdoun wrongfully filing an inaccurate proof of claim, which included rent he was never entitled to collect, and continuing to demand rent postpetition. Ultimately, the Debtor's FCEUA claim based on Abdoun's inflated proof of claim is not cognizable under the UTPCPL because she has offered no evidence that she incurred an ascertainable loss of money or property as a result of Abdoun filing an inflated proof of claim. While the Court recognizes that it is possible, and even likely, that the Debtor incurred out-of-pocket costs related to challenging the inflated proof of claim, she never articulated what those costs were. As a result, she has failed to meet her burden to establish an element necessary for recovering under the UTPCPL. Therefore, the Court concludes the FCEUA claim based on Abdoun's inaccurate proof of claim is non-actionable on that basis.
However, the Debtor has satisfied all elements necessary to recover under the FCEUA through the UTPCPL on account of Abdoun's Postpetition Rent demand. Contrary to Abdoun's position, this claim is not preempted by 11 U.S.C. § 362. In general,
Ultimately, "[t]he vast majority of courts that have addressed the issue of the Bankruptcy Code's effect on a plaintiff's state law claims have held that the Bankruptcy Code preempts state law claims that are based upon allegations that the defendant violated the Bankruptcy Code." Abramson v. Federman & Phelan, LLP (In re Abramson), 313 B.R. 195, 197 (Bankr. W.D. Pa. 2004). See also Dougherty v. Wells Fargo Home Loans, Inc., 425 F.Supp.2d 599, 609 (E.D. Pa. 2006). Thus, state law claims which are based entirely on a violation of the Bankruptcy Code generally are preempted. Nuel v. Capital One, N.A., No. 11-2024, 2012 WL 246255, at *1 (E.D. Pa. Jan. 25, 2012); Guenot v. Candica LLC, No. 11-37501, Adv. No. 12-1748, 2014 WL 67320, at *2 (Bankr. D. N.J. Jan. 2, 2014); Linsenbach v. Wells Fargo Bank (In re Linsenbach), 482 B.R. 522, 529 (Bankr. M.D. Pa. 2012); Abramson, 313 B.R. at 197. However, "normally,
With these principles in mind, it is clear that the FCEUA claim stemming from Abdoun's Postpetition Rent demand is not preempted by 11 U.S.C. § 362(a) of the Bankruptcy Code as Abdoun appears to argue. The FCEUA claim is not based or dependent upon a violation of the automatic stay at all. See Dougherty, 425 F. Supp. 2d at 609 ("merely because a Plaintiff brings a state law claim in the context of a bankruptcy matter does not justify preemption of those claims, particularly where the underlying facts of the state law claim are not based on a violation of the Code.").
In particular, the Debtor does not argue that Aboun's postpetition attempt to collect rent constituted an unfair or deceptive act under the FCEUA because the automatic stay prohibited Abdoun from undertaking collection activity. See Holloway v. Household Auto. Fin. Corp., 227 B.R. 501, 507-08 (N.D. Ill. 1998). Rather, the Debtor argues that Abdoun's Postpetition Rent demand constituted an unfair or deceptive act under the FCEUA because Abdoun had no entitlement to rent at that time since the Debtor had properly exercised her right to redeem the Property and, as a result, Abdoun had not obtained absolute title by June 2016. Thus, the viability of this FCEUA claim does not depend on the Debtor establishing a violation of the automatic stay. It merely depends on the Debtor establishing that she properly exercised her redemption right and that Abdoun was not entitled to collect rent since he did not have absolute title to the Property. Furthermore, there is no basis to conclude that Aboun could not have complied with both the FCEUA and 11 U.S.C. § 362(a) in this case. Therefore, this FCEUA claim is not preempted by 11 U.S.C. § 362(a) of the Bankruptcy Code.
Turning to the merits of the FCEUA claim based upon the June 2016 rent demand, the Court concludes that Abdoun's attempt to collect rent that he was not owed in June 2016 constituted an unfair and deceptive act under the FCEUA, 73 P.S. § 2270.4, and that the Debtor suffered an ascertainable loss of money as a result of Abdoun's rent demand, entitling the Debtor to recover damages under the UTPCPL.
Ultimately, purchasers of properties at tax sales under the MCTLA only obtain absolute title to the purchased property when the redemption period expires and the owner has taken no action to exercise the redemption right. See In re Pittman, 549 B.R. at 624-25; In re Terry, 505 B.R. 660, 663-65 (Bankr. E.D. Pa. 2014); Hammond v. Allegheny Cnty. Treasurer (In re Hammond), 420 B.R. 633, 636 (Bankr. W.D. Pa. 2009). As of the petition date, December 14, 2015, the redemption period had not yet expired. Filing the bankruptcy petition extended the deadline for the Debtor to exercise her right of redemption by at least 60 days pursuant to 11 U.S.C. § 108(b).
In light of the foregoing, by sending Debtor a letter to collect rent that she did not owe, Abdoun made false representations of the character, amount, or legal status of the debt and threatened to take action that cannot legally be taken in violation of 73 P.S. § 2270.4(b)(5)(ii), (v). As a result of Abdoun's wrongful conduct, Debtor sustained an ascertainable loss of money when she paid for public transportation to visit her Philadelphia Legal Assistance attorney regarding the unlawful letter. Accordingly, the Debtor has satisfied all elements required to recover damages resulting from the June 2016 demand letter pursuant to the UTPCPL.
Having determined that the Debtor may recover damages pursuant to the UTPCPL, 73 P.S. § 201-9.2, on account of Abdoun's unfair and deceptive acts which violated the FCEUA, the Court will now consider the appropriate amount of damages. In total, Debtor seeks $15,300 in actual and punitive damages, including $10,000 on account of emotional distress damages, as well as attorneys' fees. The Court concludes, however, that the Debtor is not entitled to any recovery for her emotional distress damages and may only recover damages attributable to her actual pecuniary loss from Abdoun's prohibited conduct. Additionally, the Court may also award reasonable attorneys' fees for enforcing the FCEUA through the UTPCPL.
District courts and bankruptcy courts in this circuit have almost uniformly found that emotional distress damages are not included in the term "actual damages," for purposes of the UTPCPL,
Nevertheless, the Debtor may recover any out-of-pocket monetary costs attributable to Abdoun's FCEUA violations. The Debtor credibly testified that she incurred approximately $200 in out-of-pocket expenses as a result of Abdoun's conduct. Therefore, the Court will award her actual damages in this amount. Additionally, 73 P.S. § 201-92 permits the Court to "in its discretion, award up to three times the actual damages sustained..." The Pennsylvania Supreme Court has advised that "as a matter of statutory construction ... the courts' discretion to treble damages under the UTPCPL should not be closely constrained by the common-law requirements associated with the award of punitive damages." Schwartz v. Rockey, 593 Pa. 536, 557, 932 A.2d 885 (2007). Ultimately, in exercising their discretion, "courts of original jurisdiction should focus on the presence of intentional or reckless, wrongful conduct, as to which an award of treble damages would be consistent with, and in furtherance of, the remedial purposes of the UTPCPL." Id.
In light of the Pennsylvania Supreme Court's guidance and Abdoun's misconduct, the Court finds it appropriate to award one-and-a-half times the actual damages sustained. Abdoun's multiple attempts to have the Debtor vacate the Property were clearly intentional and wrongful. In fact, Abdoun made it appear
Finally, 73 P.S. § 201-92 provides that "the court may award to the plaintiff, in addition to other relief provided in this section, costs and reasonable attorney fees." The award of counsel fees is within the trial court's discretion. In re Partners Group Fin., LLC, 394 B.R. 68, 89 (Bankr. E.D. Pa. 2008). Pursuant to 73 P.S. § 201-9.2, courts have awarded legal aid attorneys employed by organizations which provide free legal assistance fees equal to those awarded to private members of the bar having similar expertise and experience. In re Bryant, 111 B.R. at 480-81. Therefore, the Court will permit a reasonable award of attorneys' fees for litigating and prosecuting the FCEUA claims in an amount to be determined, if not otherwise agreed to by the parties, upon motion filed by the Debtor with an opportunity for Abdoun to object.
The Court next considers Debtor's claim that Abdoun willfully violated the automatic stay under 11 U.S.C. § 362(k) by demanding that the Debtor pay Postpetition Rent.
Both sections 362(a)(1) and (a)(6) prohibit certain postpetition actions taken by a creditor in connection with "a claim that arose before the commencement of the case under this title," which means a prepetition claim. Here, Abdoun's demand for the Postpetition Rent was taken in connection with a postpetition, claim. As a result, Abdoun's Postpetition Rent demand did not violate either § 362(a)(1) or § 362(a)(6).
In addition, although § 362(a)(3) is not restricted to prepetition claims, it only addresses acts to obtain possession of, or control over, property of the estate. See e.g., Denby-Peterson v. Nu2u Auto World (In re Denby-Peterson), 595 B.R. 184, 191 (D. N.J. 2018) (noting a creditor who improperly sells estate property commits an act to exercise control over property of the estate); In re Johnson, 601 B.R. 365, 377-78 (Bankr. E.D. Pa. 2019) (finding that creditor who forced debtor to vacate his residence and disposed of all debtor's personal belongings wrongfully took possession of and exercised control over property of the estate); Valez v. EZ Rent a Car Inc., (In re Valez), 601 B.R. 351, 363-64 (Bankr. M.D. Pa. 2019) (finding that creditor improperly exercised control over and obtained possession of property of the estate by disabling and repossessing debtor's vehicle); Vu v. Lin (In re Vu), 591 B.R. 596, 603 (Bankr. E.D. Pa. 2018) (finding creditor unlawfully acted to obtain possession of and exercise control over property of the estate by prematurely locking debtor out of his restaurant and preventing him from retrieving his personal property contained therein); Bohm v. Howard (In re Howard), 422 B.R. 568, 581 (Bankr. W.D. Pa. 2009) (creditor acted to obtain possession of and exercise control over property of the estate by executing, accepting delivery of, and recording a quitclaim deed granting herself title and interest in the debtor's mineral rights in certain land).
Clearly, the Postpetition Rent demand made by Abdoun does not constitute an act to obtain possession of, or control over, property of the estate because Abdoun did not actually take possession of any property of the estate through the Postpetition Rent demand nor exercise control over it merely by sending a collection letter. Furthermore, the Debtor has failed to cite any cases in support of her argument that collection of postpetition claims is prohibited
Finally, the Court will determine the allowed amount and status of Abdoun's claim. Although the Original Proof of Claim and Amended Proof of Claim failed to attach the writings upon which Abdoun's claim is based and other writings required by Fed. R. Bankr. P. 3001(c)(1)-(2) ("Rule 3001"),
Under Rule 3001(f), only a proof of claim executed and filed in accordance with Rule 3001 constitutes prima facie evidence of the validity and amount of the claim. In the context of claim objections, the claimant bears the initial burden of establishing the basis for the claim's validity and amount. See Faulkner v. M&T Bank (In re Faulkner), 593 B.R. 263, 275 n.4 (Bankr. E.D. Pa. 2018); In re Henry, 546 B.R. 633, 634 (Bankr. E.D. Pa. 2016). Once the claimant meets this initial burden,
Although the Original Proof of Claim and Amended Proof of Claim may not have constituted prima facie evidence of Abdoun's claim since they did not comply with Rule 3001(c)(1)-(2), Abdoun testified at trial that his claim is based upon his purchase of the Property for $29,000 at the sheriff's sale. Tr. 23:4-8. Additionally, Abdoun and the Debtor stipulated to the admission of the writings upon which the claim is based, including the Decree, the State Court docket reflecting the sale, and the sheriff's deed. Ex. S-3, S-4, S-6. Accordingly, Abdoun has satisfied his initial burden of establishing the validity and maximum amount of his prepetition claim through his testimony and these exhibits. The Debtor offered no evidence negating the validity or maximum amount of this claim, aside from evidence offered in support of the avoidance claim, which the Court rejected.
Satisfied that Abdoun has established the validity and maximum amount of the prepetition claim, the Court now considers whether Abdoun's claim exceeds the Property's value, which the complaint alleged is $19,000, rendering unsecured any portion of the claim in excess of $19,000 pursuant to 11 U.S.C. § 506(a)(1), which provides that:
This means that "[i]n general, secured claims can be bifurcated into allowed secured and unsecured components, with the secured claim limited by the value of the collateral." Mahmud v. JTH Inv. Group, LLC (In re Mahmud), Bankr. No. 08-10855bf, Adv. No. 08-0175, 2008 WL 8099115, at *3 (Bankr. E.D. Pa. Dec. 4, 2008). In the context of a valuation under § 506(a) where the creditor has satisfactorily established the validity and amount of the claim, as is the case here, the party attempting to modify the secured claim, in this instance, the Debtor, bears the initial burden of proof with regard to valuation. In re Heritage Highgate, Inc., 679 F.3d 132, 140 (3d Cir. 2012). If the challenging party establishes with sufficient evidence that the creditor overvalues the secured claim because the collateral is of insufficient value, the burden then shifts and the creditor bears the burden of persuasion to demonstrate by a preponderance of the evidence the value of the collateral securing its claim. Id. at 139-140 ("We now hold
Ultimately, the Debtor offered no evidence at trial that the Debtor's interest in the Property is worth less than the $29,000 purchase price.
Based upon the foregoing, the Court concludes that Abdoun holds a secured pre-petition claim in the amount of $28,700 which Debtor must pay in order to redeem the Property through her chapter 13 plan.
AND NOW, this 11th day of February 2020, for the reasons stated in the accompanying Opinion, it is hereby ORDERED that:
1. Judgment is entered in favor of the defendant, Yasir Abdoun ("Abdoun"), in connection with the plaintiff, Kathylene Marshall's ("Debtor"), avoidance claim brought under 11 U.S.C. § 548(a)(l)(B)(i)-(ii)(I).
2. Judgment is entered in favor of Abdoun in connection with the Debtor's claim brought under 11 U.S.C. § 362(k)(l).
3. Judgment is entered in favor of Debtor in connection with her claims brought under 73 P.S. § 201-9.2 in the total amount of $300, which includes:
4. The above listed damages shall be applied to reduce Abdoun's claim, Claim Number 5.
5. Abdoun's claim, Claim Number 5, is reduced to $28,700 and is properly classified as a wholly secured, nonpriority claim.
6. The amount necessary for the Debtor to redeem the property located at 715 Cobbs Creek Parkway, Philadelphia, PA ("Property") is $28,700.
7. The Debtor is entitled to exclusive possession of the Property.
8. Abdoun is not entitled to collect rent from the Debtor and is hereby enjoined from attempting to collect rent or otherwise evict or eject the Debtor from the Property.
9. The Court shall award reasonable attorneys' fees and costs attributable to remedying Abdoun's violations of 73 P.S. § 201-9.2 in an amount to be determined, if not otherwise agreed to by the parties, upon motion filed by the Debtor with an opportunity for Abdoun to object.
Upon the issuance of a decree permitting the sale, 53 P.S. § 7193.2(c) requires the petitioning city to follow certain rules for serving notice of the decree upon interested parties and to file an affidavit of service evidencing compliance prior to the sale. Additionally, 53 P.S. § 7283(a) provides that the sale date must be published in at least one newspaper of general circulation in the county and a corresponding legal periodical. Furthermore, 53 P.S. § 7279 sets a minimum bid at the amount of taxes and municipal claims due and potential buyers must offer higher bids up to the total price they are willing to pay for the property. Ultimately, 53 P.S. § 7283(a) provides that the property be sold to the highest bidder at the tax sale. Finally, 53 P.S. § 7281 allows any interested person to pay the entirety of the city's claim at any time prior to the sheriff's sale in order to stop the sale.
Mortgage borrowers receive similar protections under Pennsylvania law in cities of the first class.
Thus, the protections, rights and remedies afforded a delinquent taxpayer under the MCTLA are substantially similar to those afforded a mortgagor under Pennsylvania's mortgage foreclosure law. See id.
In light of the foregoing, because the rules governing tax foreclosure sales in Philadelphia under the MCTLA provide for competitive bidding and protections to delinquent taxpayers like notice, an opportunity to cure, and strict adherence to statutory requirements, similar to those afforded mortgage borrowers, BFP applies to tax sales conducted in accordance with Pennsylvania's MCTLA.
In determining that emotional distress damages are recoverable as actual damages under § 362(k)(1), the Lansaw court reasoned that the legislative history of 11 U.S.C. § 362(a) reflected Congress' intent that the automatic stay protect against non-pecuniary emotional harm, such as harassment and pressure from creditor collection efforts. Id. at 667-68. In light of Congress' intent that the stay protect against emotional harm, the Third Circuit found it logical that Congress would intend to include damages resulting from that harm in its definition of "actual damages" when it later introduced 11 U.S.C. § 362(k) as the enforcement mechanism for 11 U.S.C. § 362(a). Id. Therefore, cases finding actual damages include emotional distress damages for purposes of § 362(k)(1) are simply inapposite to the question of whether "actual damages" include emotional distress damages for purposes of the UTPCPL.
The Court concludes that the § 362(k)(1) claim was tried by implied consent of the parties. First, Abdoun would have recognized that an unpleaded issue entered the case at trial when prior to the start of trial, the Debtor informed the Court she intended to try a claim for a willful violation of the automatic stay which she had not previously pleaded. See Tr. 6:19-7:10. Second, evidence supporting the unpleaded claim was introduced at trial without objection by Abdoun. Third, Abdoun's opportunity to respond to the claim was not prejudiced by allowing trial on the unpleaded claim to proceed. At trial, Abdoun responded to the additional claim with argument defending against it. See id. at 10:8-23. Furthermore, Abdoun had the opportunity to further respond to the unpleaded claim through his proposed findings of fact and conclusions of law. Therefore, the Court finds Abdoun impliedly consented to Debtor pursuing her § 362(k)(1) claim. Accordingly, the Court considers the complaint amended to conform to the evidence presented at trial in that regard.
