Cal. Coast Univ. v. Aleckna (In re Aleckna)

• Court: U.S. Bankruptcy Court — Middle District of Pennsylvania
• Writing for the Court: Robert N. Opel, II, Bankruptcy Judge
• Citation: Cal. Coast Univ. v. Aleckna (In re Aleckna), 543 B.R. 717 (Bankr. M.D. Pa. 2016)
• Decision Date: 14 January 2016
• Docket Number: ADVERSARY NO. 5–12–ap–00247 RNO,CASE NO. 5–12–bk–03367 RNO
• Parties: In re: Steven Richard Aleckna, Jaime Sue Aleckna, Debtors California Coast University, Plaintiff and Counterclaim Defendant v. Jaime Sue Aleckna, Defendant and Counterclaim Plaintiff

543 B.R. 717

In re: Steven Richard Aleckna, Jaime Sue Aleckna, Debtors

California Coast University, Plaintiff and Counterclaim Defendant

v.Jaime Sue Aleckna, Defendant and Counterclaim Plaintiff

CASE NO. 5–12–bk–03367 RNO

ADVERSARY NO. 5–12–ap–00247 RNO

United States Bankruptcy Court, M.D. Pennsylvania.

Signed January 14, 2016

Robert P. Sheils, III, Robert P. Sheils, Jr., Sheils Law Associates, PC, Clarks Summit, PA, for Plaintiff and Counterclaim Defendant.

Brett Freeman, Carlo Sabatini, Sabatini Law Firm, LLC, Dunmore, PA, for Defendant and Counterclaim Plaintiff.

OPINION¹

Robert N. Opel, II, Bankruptcy Judge

In this Adversary Proceeding, the only outstanding claim is the Debtor's counterclaim alleging that the Plaintiff/creditor, a university, violated the automatic stay when it did not release her graduation transcripts. For the reasons stated herein, I find that the automatic stay was violated and will award appropriate damages to the Debtor.

I. Jurisdiction

The Court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334(b). This matter is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (G), and (O).

As discussed below, the Debtor's counterclaim against the subject creditor is grounded on 11 U.S.C. § 362(k).² A proceeding concerning a violation of the automatic stay is a core proceeding. In re D'Alfonso, 211 B.R. 508, 512 (Bankr.E.D.Pa.1997). A claim arising from an alleged willful violation of § 362(k) is within the exclusive jurisdiction of the Bankruptcy Court. In re Roman–Perez, 527 B.R. 844, 852 (Bankr.D.P.R.2015).

II. Facts and Procedural History

I offer a truncated procedural history in this matter. Jaime Sue Aleckna ("Aleckna") and Steven Richard Aleckna filed a voluntary Chapter 13 bankruptcy petition on June 1, 2012. The scheduled creditors include California Coast University ("Coast") with a disputed claim in the amount of $6,300.00. On September 4, 2012, Coast filed a Complaint against Aleckna commencing this Adversary Proceeding. The initial pleadings requested that Coast's claim against Aleckna be determined to be a non-dischargeable educational loan or benefit pursuant to § 523(a)(8).

Aleckna raised defenses to Coast's claim and also filed a Counterclaim pursuant to Federal Rule of Bankruptcy Procedure 7013, alleging violations of the automatic stay and the entitlement to an award of damages. Both the original Complaint and original Counterclaim were subsequently amended. Coast then sought to dismiss the Adversary Proceeding which it had originated. It later moved to dismiss the Counterclaim, alleging the failure to state a claim upon which relief can be granted. The Motion to Dismiss was denied by In re Aleckna, 494 B.R. 647 (Bankr.M.D.Pa.2013). On April 10, 2014, Aleckna was granted leave to file an amended Answer and Counterclaim. The Amended Counterclaim was filed and responded to. On September 5, 2013, Coast's Amended Complaint was dismissed with prejudice. The dismissal Order stated that Aleckna's Counterclaim remained pending and subject to adjudication by the Court.

Thereafter, Coast moved for summary judgment on the Amended Counterclaim against it. The Motion for Summary Judgment was denied by In re Aleckna, 2014 WL 4100702 (Bankr.M.D.Pa., Aug. 19, 2014).

The Amended Counterclaim proceeded to trial on October 9, 2015. Post trial briefing has been completed and the matter is ripe for decision.

III. Discussion

A. Alleged Automatic Stay Violation

One of the fundamental protections provided to debtors under the Bankruptcy Code is the automatic stay. Under § 362(a)(6), "any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case" is stayed by the filing of the petition. When a creditor violates the automatic stay, § 362(k) provides a cause of action for an award of damages to an individual injured by a "willful violation of a stay." 11 U.S.C. § 362(k)(1).

An automatic stay violation is "willful" when the debtor shows:

(1) a violation of the stay occurred;

(2) the creditor had knowledge of the bankruptcy case when acting; and,

(3) the violation caused actual damages.

Linsenbach v. Wells Fargo Bank (In re Linsenbach), 482 B.R. 522, 526 (Bankr.M.D.Pa.2012) ; Wingard v. Altoona Reg'l Health Sys. (In re Wingard), 382 B.R. 892, 900 (Bankr.W.D.Pa.2008). A debtor must prove the required elements by a preponderance of the evidence. Wingard, 382 B.R. at 900, n.6 (citing Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) ).

Essentially, Aleckna alleges that she began a course of study at Coast in 2008. She was pursuing a Bachelor of Science in Psychology. She testified that she completed the required course work in 2009. Trial Tr. 126–28.

Aleckna's uncontradicted testimony is that before filing for bankruptcy, she made telephone requests for transcripts from Coast. She testified that she was advised that no transcripts would be released because there was a "financial hold" on her account with Coast.

The crux of the first stay violation alleged in the Amended Counterclaim is that, after the Chapter 13 petition was filed on June 1, 2012, Coast continued to refuse to release transcripts to Aleckna. The second basis for the alleged stay violation is that when Coast did release a transcript to Aleckna, it failed to show that she had graduated, notwithstanding the fact that she had completed all the course requirements for the B.S. in Psychology.

B. Is Failure to Issue a Transcript a Violation of the Automatic Stay?

Aleckna testified that after the bankruptcy filing, she telephoned Coast and again requested transcripts. At that time, she advised Coast that she had filed bankruptcy. She testified that an unidentified woman told her that her transcripts could not be released because of the financial hold. Trial Tr. 129–30. Coast presented three witnesses at trial: Shelly Marquardt—Executive Vice President; Angela Cenina—Registrar; and, Sonya Martinez—Accounting Coordinator. After a review of the record, I find that these employees had no training concerning how to handle communications from students who had filed for bankruptcy protection. I also find that the Coast employees did not know how to search to confirm a bankruptcy filing, either on PACER or by other means.

There is no real contest that Coast did not promptly release any transcripts to Aleckna after she advised them by telephone of her bankruptcy filing. This joins the issue of whether the refusal to release a student/debtor's transcript is a violation of the automatic stay imposed by § 362(a).

Bankruptcy Judge Frank considered a university's failure to release a transcript in the case of In re Mu'min, 374 B.R. 149 (Bankr.E.D.Pa.2007). The stipulated facts in Mu'min are quite similar to the case at bar. The debtor in that case owed a sum in excess of $33,000.00 to the university and it was stipulated that her transcript was placed on "official hold" after she stopped making payments on her loan obligation. Mu'min, 374 B.R. at 153. After a second Chapter 13 bankruptcy filing, the debtor in Mu'min requested a certified copy of her transcript so that she could apply to a master's program in Clinical Psychology. Id. Further, the debtor's counsel corresponded with the university's attorney in an attempt to obtain transcripts. The university refused to release the transcripts citing its policy to put a transcript hold on delinquent accounts.

In Mu'min, Judge Frank noted the breadth of the automatic stay contained in § 362(a)(6). Judge Frank's opinion includes:

The majority view, occasionally with some qualification, is that a university's refusal to release a debtor's transcript due to the existence of a default on an nondischargeable student loan owed to the university violates 11 U.S.C. § 362(a)(6).

Id. at 155. The Mu'min decision includes a learned discussion of two bankruptcy decisions in the Third Circuit which deviated from the majority view and found that refusal to release a transcript due to an unpaid, nondischargeable student loan is not a violation of the automatic stay. See In re Billingsley, 276 B.R. 48 (Bankr.D.N.J.2002) and In re Najafi, 154 B.R. 185 (Bankr.E.D.Pa.1993). Judge Frank concluded that those cases were inapposite in that they were largely based upon the Third Circuit's decision of Johnson v. Edinboro State College, 728 F.2d 163 (3d Cir.1984). Judge Frank's analysis explains that Johnson was decided under § 525, the so called anti-discrimination provisions of the Bankruptcy Code, and not under the automatic stay provisions contained in § 362(a) and (k). I concur in and adopt Judge Frank's excellent analysis, including the distinguishability of Billingsley and Najafi.³

I also join Judge Frank, and other courts, in concluding that a university's refusal to provide a transcript based upon a financial hold is an action designed to collect the unpaid debt. Mu'min, 374 B.R. at 160 ; In re Merchant, 958 F.2d 738, 741 (6th Cir.1992) (internal citations omitted) ("We follow the reasoning of these decisions and hold a violation of 11 U.S.C. § 362(a) arises when a prepetition creditor withholds a student-debtor's transcript"); In re Parker, 334 B.R. 529, 536 (Bankr.D.Mass.2005) (not allowing a student/debtor to register for a class was done to compel payment of the debt); In re Hernandez, 2005 WL 1000059 at *1 (Bankr.S.D.Tex. Apr. 27, 2005).

I readily infer that Coast's requiring Aleckna to meet her financial obligations, as a precondition to the release of her transcript, demonstrates an underlying purpose to collect on its prepetition claim. Many other courts have reached a similar conclusion. In re Scroggins, 209 B.R. 727, 730 (Bankr.D.Ariz.1997) ; In re Lanford, 10 B.R. 132, 134 (Bankr.D.Minn.1981) ; In re Ware, 9 B.R. 24, 25 (Bankr.W.D.Mo.1981).

At trial, Aleckna admitted into evidence a letter from her to Coast dated July 10, 2012. The letter includes the following:

Enclosed is a money order in the amount of $30.00. This money order is payment in full for 3 certified

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