BankBoston v. Sokolowski, Docket Nos. 99-5048

• Decision Date: 01 August 1999
• Docket Number: Docket Nos. 99-5048
• Parties: (2nd Cir. 2000) IN RE SOKOLOWSKI Debtor, BANKBOSTON, N.A., Appellant-Cross-Appellee, v. CYNTHIA L. SOKOLOWSKI, Appellee-Cross-Appellant. (L), 99-5054(XAP)
• Court: U.S. Court of Appeals — Second Circuit

Page 532

205 F.3d 532 (2nd Cir. 2000)

IN RE SOKOLOWSKI Debtor,

BANKBOSTON, N.A., Appellant-Cross-Appellee, v. CYNTHIA L. SOKOLOWSKI, Appellee-Cross-Appellant.

Docket Nos. 99-5048(L), 99-5054(XAP)

August Term, 1999

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: February 4, 2000

Decided: March 06, 2000

Appeal from a judgment of the United States District Court for the District of Connecticut (Alfred V. Covello, Chief Judge) affirming the order of the Bankruptcy Court (Robert L. Krechevsky, Judge) enjoining creditor from enforcing a default-upon-filing clause and repossessing debtor's vehicle after she had filed a petition in bankruptcy.

Affirmed.

MATTHEW J. MCGOWAN, Providence, R.I., for Appellant-Cross-Appellee,

DAVID FLAVEY, Groton, CT., for Appellee-Cross-Appellant.

Before: CABRANES and SACK, Circuit Judges.^*

PER CURIAM:

BankBoston, N.A., ("BankBoston") appeals from the April 26, 1999 judgment of the United States District Court for the District of Connecticut (Alfred V. Covello, Chief Judge) affirming the June 29, 1998 order of the United States Bankruptcy Court (Robert L. Krechevsky, Judge), which enjoined BankBoston from repossessing the motor-vehicle of debtor-appellee Cynthia L. Sokolowski ("Sokolowski") after she had filed a petition in bankruptcy.

I.

On March 19, 1996, Sokolowski executed an auto loan contract with BankBoston. Pursuant to the contract, Sokolowski was to begin making loan payments on May 3, 1996. The loan, totaling $13,192.20, was payable over five years. Paragraph ten of the contract included a "default upon filing" clause specifying that Sokolowski would be considered in default if she declared or was forced into bankruptcy. On May 1, 1997, Sokolowski filed a Chapter 7 bankruptcy (liquidation) petition. Although she was, and remained, current on her loan payments, Sokolowski still owed BankBoston $7,900 at the time she filed the petition. To renew her payment obligations with BankBoston, she executed a reaffirmation agreement on September 15, 1997. Within the statutory rescission period, however, Sokolowski rescinded the reaffirmation agreement.¹ The Chapter 7 case was closed on September 29, 1997, and, on December 2, 1997, BankBoston notified Sokolowski of its intention to repossess the car. In response, she reopened her bankruptcy action in order to seek a declaratory judgment against BankBoston and an order enjoining the bank from repossessing the car. The Bankruptcy Court concluded that BankBoston could not enforce the default-upon-filing clause of the loan contract solely because Sokolowski had filed a bankruptcy petition and, accordingly, entered an order enjoining the bank from repossessing the vehicle. See Sokolowski v. BankBoston (In re Sokolowski), 227 B.R. 16 (Bankr. D. Conn. 1998). Relying on our decision in Capital Communications Federal Credit Union v. Boodrow (In re Boodrow), 126 F.3d 43 (2d Cir. 1997), where we held that 11 U.S.C. 521(2)² permits a debtor who is current on loan obligations to retain the collateral and keep making payments under the original loan agreement, the District Court affirmed the decision of the Bankruptcy Court. See BankBoston v. Sokolowski, No. 3-98 Civ.1535 (D.Conn. April 26, 1999). BankBoston now appeals, challenging the soundness of our reasoning in Boodrow, and asking us to overturn the rule enunciated in that case. Sokolowski cross-appeals from the District Court's denial of attorney's fees.

II.

A. Mootness

Sokolowski argues that the appeal in the instant case is moot because she no longer has possession of the vehicle and, having paid BankBoston the outstanding amount on the debt just prior to this appeal, no longer has any obligations to the bank. We conclude, however, that Sokolowski has failed to proffer competent evidence to support her claim that this particular appeal has been rendered moot. Specifically, she has not pointed to any evidence in the record of her satisfaction of the BankBoston loan or of her disposal of the vehicle in question. Accordingly, we address the merits of BankBoston's appeal.

B. Merits

BankBoston requests that we reconsider our decision in Boodrow. It asks us to find that the case was wrongly decided, and thus to reverse the District Court's decision in the instant case which relied on Boodrow. As we have explained, "[t]his court is bound by a decision of a prior panel unless and until its rationale is overruled, implicitly or expressly, by the Supreme Court or this court en banc." United States v. Allah, 130 F.3d 33, 38 (2d Cir. 1997) (quoting United States v. Ianniello, 808 F.2d 184, 190 (2d Cir. 1986)). Accordingly, the relief BankBoston seeks is unavailable. Because the District Court's decision was consistent with our prior precedent, we hold that it correctly affirmed the order of the Bankruptcy Court that enjoined BankBoston from enforcing the default-upon-filing clause in the loan agreement with Sokolowski.

C. Attorney's Fees and Costs

In her cross-appeal, Sokolowski claims that the District Court erred in denying her application for attorney's fees under CONN. GEN. STAT. 42-150bb.³ While there is no general right to attorney's fees in bankruptcy actions, a party may be entitled to them in accordance with state law. See Collingwood Grain, Inc., v. Coast Trading Co. (In re Coast Trading Co.), 744 F.2d 686, 693 (9th Cir. 1984); cf. Alyeska Pipeline Serv. Co., v. Wilderness Soc'y, 421 U.S. 240, 247 (1975) ("[T]he prevailing litigant [in federal court] is ordinarily not entitled to collect a reasonable attorneys' fee from the loser.") "However, where the litigated issues involve not basic contract enforcement questions, but issues peculiar to federal bankruptcy law, attorney's fees will not be awarded absent bad faith or harassment by the losing party." Fobian v. Western Farm Credit Bank (In re Fobian), 951 F.2d 1149, 1153 (9th Cir. 1991); see also Johnson v. Righetti (In re Johnson), 756 F.2d 738, 741 (9th Cir. 1985) ("When ... federal and not state law governed the substantive issues involved . . . the bankruptcy court should not have awarded attorney's fees pursuant to a state statute."); NORTON BANKRUPTCY LAW AND PRACTICE 2d 142:7 (1997) ("If the court is determining a state law issue, the court will look to state law to determine if it is appropriate to award attorneys' fees. If the proceeding involves solely an issue of bankruptcy law, bankruptcy law, rather than state law will determine the propriety of awarding attorneys' fees."); 3 DANIEL R. COWANS, BANKRUPTCY LAW AND PRACTICE 17.4(c) (6th ed. 1994) ("In proceedings in the bankruptcy court where state law rather than bankruptcy law provides the rule, fees may be awarded if state law allows it.").

In our view, "the question of the applicability of the bankruptcy laws to particular contacts is not a question of the enforceability of a contract but rather involves a unique, separate area of federal law." Coast Trading, 744 F.2d at 693. While the present case concerned the enforceability of a default-upon-filing provision in a loan contract, it turned solely issues of federal bankruptcy law-namely, whether 521(2) and the "fresh start" policy behind the Bankruptcy Code allows a debtor who is (and continues to be) current on his loan payments to retain the loan-secured property after a discharge in bankruptcy. We therefore conclude that the state statute is inapplicable in this case, and accordingly deny the request for attorney's fees.

However, in light of the fact that BankBoston seeks a remedy that we have made clear this Court cannot provide, and because we have entertained and denied this...