Edwards v. B&E Transp., LLC (In re Edwards)

CourtUnited States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Virginia
Citation607 B.R. 530
Decision Date24 October 2019
Docket NumberCase No. 18-62164,Adv. P. No. 19-06026
Parties IN RE: Jenny Lynn EDWARDS, Debtor. Jenny Lynn Edwards, Plaintiff, v. B & E Transport, LLC, Defendant.

Marshall Moore Slayton, Esq., Slayton Law, PLC, Charlottesville, VA, for Plaintiff.

B & E Transport, LLC, pro se.

CORRECTED MEMORANDUM OPINION

Rebecca B. Connelly, UNITED STATES BANKRUPTCY JUDGE

The Court must decide whether it is appropriate to award actual and punitive damages, as well as attorneys' fees, for violations of the automatic stay. The Court concludes that it is.

Findings of Fact

Jenny Lynn Edwards filed a voluntary chapter 13 bankruptcy petition on October 31, 2018.1 Ms. Edwards, by counsel, filed a complaint initiating this adversary proceeding on April 16, 2019. ECF Doc. No. 1. In her complaint, Ms. Edwards alleges that the defendant, B & E Transport, LLC ("B & E"), violated the automatic stay by repossessing her 2003 Harley Davidson FLSTCI on November 2, 2018, two days after she filed her bankruptcy petition. See id. Ms. Edwards seeks return of the motorcycle, actual damages for violation of the automatic stay, punitive damages, and recovery of all reasonable legal fees and expenses.

B & E did not file an answer. Ms. Edwards filed a motion for default judgment on June 18, 2019. See ECF Doc. No. 11. On July 15, 2019, the Court held a hearing on entry of a default judgment.2 At the hearing, both Ms. Edwards and her husband testified. See ECF Doc. No. 12. The Court took the matter under advisement. See ECF Doc. No. 13.

Ms. Edwards is a debtor in bankruptcy. When Ms. Edwards filed her bankruptcy petition, with limited exceptions not applicable here,3 everything she owned or had an interest in became property of her estate.4 B & E is a creditor of Ms. Edwards. Ms. Edwards purchased a motorcycle from B & E in May 2018 for $10,000.5 She paid $2,500 at the time of sale and financed $7,500 directly through B & E.6 She disclosed B & E on her petition and mailing matrix. The Bankruptcy Noticing Center provided a copy of the Notice of Bankruptcy to B & E. After she filed her petition, Ms. Edwards provided actual notice to B & E of the bankruptcy.7

When she filed her bankruptcy petition, she was current on her payments to B & E.8 Two days after she filed her petition, B & E repossessed the motorcycle. After repossession, B & E accelerated the note and demanded full payment.9

At no time did B & E seek relief from the automatic stay.

Counsel for Ms. Edwards notified B & E that repossession and retention of the motorcycle is a violation of the automatic stay.10 Ms. Edwards's husband communicated directly with B & E regarding the violation of the stay, requesting return of the motorcycle.11 Ms. Edwards proposed, and the Court confirmed, a chapter 13 plan that provides for the remaining balance of the debt to B & E to be paid in full plus interest.12 None of these efforts made a difference: B & E refused to return the motorcycle.

After B & E failed to respond to or comply with letters, direct communication, and the chapter 13 plan, counsel for Ms. Edwards filed an adversary proceeding seeking damages for violation of the automatic stay. Despite receipt of service of the complaint, B & E ignored it. B & E failed to respond or answer the complaint, and it continued to hold the motorcycle.

After entry of default, counsel for the debtor came before the Court at a hearing and provided the Court with support for his request for damages. At the hearing, both Ms. Edwards and Mr. Edwards testified.13 Ms. Edwards testified that the motorcycle was her only mode of transportation to and from employment.14 She testified about amounts paid for insurance after the repossession.15 Ms. Edwards acknowledged a notice of repossession from B & E, dated and received after the bankruptcy, and her counsel submitted it as an exhibit. In the notice of repossession, B & E demands Ms. Edwards pay the full indebtedness within ten days, plus repossession costs.16 Mr. Edwards then corroborated her testimony, adding details regarding the amount of the purchase, the amount of the debt, renewal of the registration, and the exchange with B & E after she filed bankruptcy.17

Ms. Edwards requests compensatory damages, emotional distress damages, attorneys' fees, and punitive damages.18

Jurisdiction

The Court has jurisdiction over this bankruptcy case by virtue of the provisions of 28 U.S.C. §§ 1334(a) and 157(a), the delegation made to this Court by Order of Reference from the District Court entered on December 6, 1994, and Rule 3 of the Local Rules of the United States District Court for the Western District of Virginia. The case involves a violation of Bankruptcy Code section 362 (the "automatic stay") and how much and to what extent the Court should award damages to the debtor for the violation. As the question involves an application of Bankruptcy Code section 362, the Court determines the proceeding to be core. 28 U.S.C. § 157(b)(1) ; see 28 U.S.C. § 157(b)(3).

Analysis
The Automatic Stay

Section 362 of the Bankruptcy Code provides that the filing of a bankruptcy petition "operates as a stay, applicable to all entities, of" many collection actions including:

(3) 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;
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title; [and]
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title; ....

11 U.S.C. § 362(a). Stated differently, once a debtor files her bankruptcy petition, the Bankruptcy Code imposes a stay of any and all proceedings against the debtor, property of the debtor, and property of the estate. Budget Serv. Co. v. Better Homes , 804 F.2d 289, 292 (4th Cir. 1986).

The automatic stay is not a suggestion. The stay is a command. Simultaneous with the creation of the bankruptcy estate, an automatic stay engages to protect the property included therein from acts to obtain possession or exercise control over it. See Sexton v. Dep't of Treasury (In re Sexton), 508 B.R. 646, 657 (Bankr. W.D. Va. 2014).

The Automatic Stay Prohibits Post-Petition Repossession of Collateral

Absent relief from the automatic stay, a creditor may not repossess, threaten to repossess, or in any other way, exercise control of property of the debtor or property of the estate. See Brodgen v. Holmes Motors, Inc. (In re Brodgen), 588 B.R. 625, 629 (Bankr. M.D. Ala. 2018) (finding post-petition vehicle repossession, and collection demands for payment, were prohibited acts to exercise control over property of the estate and to collect or recover a claim); Smith v. Homes Today, Inc. (In re Smith), 296 B.R. 46 (Bankr. M.D. Ala. 2003) (post-petition repossession of mobile home where debtor resided violated automatic stay). Absent relief from the stay, a creditor may not collect or demand payment on a pre-petition debt.

In this case, when Ms. Edwards filed her chapter 13 petition, the motorcycle became property of her bankruptcy estate. After that, without leave from this Court, B & E took possession of the motorcycle and demanded payment from the debtor. B & E's actions were plainly acts "to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate," or were acts to enforce a lien against property of the estate or property of the debtor, or were simply acts to collect a debt that arose before the commencement of the case. This is not a close call: B & E's actions are unquestionably prohibited by statute.

The Automatic Stay Prohibits Retention of Property Repossessed Post-Petition

Section 362 prohibits acts to exercise control over property of the estate. By refusing to return the motorcycle to Ms. Edwards (or the bankruptcy trustee), after unlawfully repossessing it post-petition, B & E is exercising control over property of the estate.19 By refusing to return the motorcycle, B & E simply made a bad situation worse.

The Violation of the Stay Was Willful

A violation of the automatic stay is willful when a party proceeds to act in violation of the stay despite knowledge of the bankruptcy case. See Budget Serv. Co. , 804 F.2d at 292-93 (holding that "ample evidence in the record" of a creditor's intentional attempt of repossession despite knowledge a bankruptcy petition was pending supported sanctions). A creditor does not need to act with "specific intent but must only commit an intentional act with knowledge of the automatic stay." Morgan v. Bank of the West (In re Morgan), 547 B.R. 185, 188-89 (Bankr. W.D. Va. 2016) (quoting In re Thorne, No. 08-80022, 2008 WL 2385991, at *1 (Bankr. M.D.N.C. June 11, 2008) ). "Willfulness describes the intentional nature of action taken in violation of the stay, rather than the specific intent to violate the stay." In re Banks, 577 B.R. 659, 667 (Bankr. E.D. Va. 2017) (citing In re Highsmith, 542 B.R. 738, 748 (Bankr. M.D.N.C. 2015) ).

B & E did not accidently repossess the motorcycle. It deliberately repossessed the motorcycle. B & E intended to repossess the motorcycle, and it accomplished its intended objective. Once it had notice of the bankruptcy, it knew it was violating the automatic stay. And there is no question in this case that B & E had notice of the bankruptcy.

The debtor's evidence, all of which is uncontroverted, shows at least three ways in which B & E knew it was violating the stay. Both Mr. and Ms. Edwards testified that Mr. Edwards told the repossessing party about the bankruptcy.20 Mr. Edwards met with representatives of B & E and personally advised them of the bankruptcy.21 In addition, B & E received the...

To continue reading

Request your trial
5 cases
  • In re Corotoman Inc.
    • United States
    • U.S. Bankruptcy Court — Southern District of West Virginia
    • March 31, 2021
    ...the property included therein from acts to obtain possession or exercise control over it." Edwards v. B&E Transp., LLC (In re Edwards), 607 B.R. 530, 534 (Bankr. W.D. Va. 2019) (citing Sexton v. Dep't of Treasury, IRS (In re Sexton), 508 B.R. 646, 657 (Bankr. W.D. Va. 2014)). The provisions......
  • Houck v. Substitute Tr. Servs., Inc. (In re Houck)
    • United States
    • U.S. Bankruptcy Court — Western District of North Carolina
    • October 6, 2020
    ...v. Timmark (In re Weatherford), 413 B.R. 273, 284 (Bankr. D.S.C. 2009)); see also Edwards v. B & E Transp., LLC (In re Edwards), 607 B.R. 530, 536 (Bankr. W.D. Va. 2019) ("To award damages under section 362(k), a court must find that (1) 'a violation occurred,' (2) 'the violation was commit......
  • Wright v. Abdelmessih (In re Wright), CASE NO. 19-71163
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Virginia
    • December 3, 2019
    ...200 (4th Cir. 1988) ). "The automatic stay is not a suggestion. The stay is a command." Edwards v. B & E Transport, LLC (In re Edwards) , 607 B.R. 530, 534 (Bankr. W.D. Va. 2019). A party seeking damages for violation of the automatic stay under Section 362(k)(1) must establish three elemen......
  • In re Nocek
    • United States
    • U.S. Bankruptcy Court — Eastern District of North Carolina
    • April 7, 2020
    ...goes beyond mere willfulness and resemble a specific intent to violate the automatic stay." Edwards v. B&E Transp., LLC (In re Edwards), 607 B.R. 530, 538 (Bankr. W.D. Va. 2019); see also Warren v. Dill (In re Warren), 532 B.R. 655, 666 (Bankr. D.S.C. 2015) (holding punitive damages appropr......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT