Fleet Mortgage Group Inc. v. Kaneb

• Decision Date: 05 August 1999
• Docket Number: 98-9014,Nos. 98-9012,98-9017,s. 98-9012
• Parties: (1st Cir. 1999) FLEET MORTGAGE GROUP, INC., Defendant, Appellant, v. KENNETH A. KANEB, Plaintiff, Appellee. FLEET MORTGAGE GROUP, INC., Defendant, Appellant, v. KENNETH A. KANEB, Plaintiff, Appellee. KENNETH A. KANEB, Plaintiff, Appellant, v. FLEET MORTGAGE GROUP, INC., Defendant, Appellee. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 265

196 F.3d 265 (1st Cir. 1999)

FLEET MORTGAGE GROUP, INC., Defendant, Appellant, v. KENNETH A. KANEB, Plaintiff, Appellee.

FLEET MORTGAGE GROUP, INC., Defendant, Appellant, v. KENNETH A. KANEB, Plaintiff, Appellee.

KENNETH A. KANEB, Plaintiff, Appellant, v. FLEET MORTGAGE GROUP, INC., Defendant, Appellee.

Nos. 98-9012, 98-9014, 98-9017

United States Court of Appeals for the First Circuit

Heard August 5, 1999

Decided November 8, 1999

Kirk J. Cedja, with whom Lawson Williams and Shapiro & Kreisman were on brief for Fleet Mortgage Group, Inc.

Carl D. Aframe, Aframe & Barnhill, for Kenneth A. Kaneb.

Before Torruella, Chief Judge, Lipez, Circuit Judge, and Fuste, District Judge.^*

LIPEZ, Circuit Judge.

Fleet Mortgage, Inc. ("Fleet"), appeals from the order of the Bankruptcy Appellate Panel for the First Circuit affirming an award of damages and attorneys' fees by the bankruptcy court to Kenneth A. Kaneb pursuant to 11 U.S.C. §362(h).¹ We review directly the bankruptcy court's findings of fact and conclusions of law. See Brandt v. Repco Printers & Lithographics, Inc. (In re Healthco Intl'l, Inc.), 132 F.3d 104, 107 (1st Cir. 1997). The bankruptcy court found that Fleet willfully violated the automatic stay provision of the Bankruptcy Code and awarded Kaneb $25,000 for emotional distress and $18,220.68 for attorneys' fees and costs on appeal. Fleet contests the finding that the violation of the automatic stay was willful and challenges the award of damages for emotional distress. Fleet also seeks relief from its pretrial stipulation relating to a violation of the stay. We affirm the decision of the Bankruptcy Appellate Panel ("BAP").²

I.

In 1993, Kaneb filed a voluntary petition for bankruptcy under Chapter 13 of the Bankruptcy Code. An eighty-five year old retiree and widower, Kaneb spent the cold-weather months in Florida and the balance of the year in Massachusetts.³ After the sale of his Massachusetts residence to pay secured creditors, he converted to Chapter 7 bankruptcy. Shawmut Bank, N.A. ("Shawmut"), was the original mortgagee of Kaneb's second residence, a Florida condominium.

Shawmut sought relief from the automatic stay in order to initiate foreclosure proceedings. The bankruptcy court denied Shawmut's petition. Kaneb and Shawmut entered into settlement negotiations without success. After the failed negotiations, Shawmut forwarded Kaneb's file to the Florida law firm of Shapiro & Fishman ("Fleet's counsel") to initiate foreclosure proceedings. Shawmut and Fleet merged on November 15, 1995.

The file forwarded from Shawmut contained the order of discharge, dated January 31, 1996, which relieved Kaneb from personal liability for all debts dischargeable under 11 U.S.C. § 523. The file also contained an unsigned order granting relief from the automatic stay. The attorney from Shapiro & Fishman testified that she knew Kaneb was in bankruptcy but she thought that the unsigned order for relief from the automatic stay meant that the bankruptcy judge had granted relief. Further, she erroneously believed that Fleet could initiate foreclosure proceedings lawfully because the bankruptcy court had issued an order of discharge.⁴ On behalf of Fleet, Shapiro & Fishman filed a complaint for foreclosure in Florida state court on June 4, 1996.

Shortly after the initiation of the foreclosure, Kaneb's attorney informed Fleet's counsel of the automatic stay and faxed documents confirming this information. Fleet's counsel placed Kaneb's file on "hold" status. Six weeks later, in response to a letter from Kaneb strenuously protesting the violation of the automatic stay, Fleet's counsel dismissed the foreclosure suit.

During the six weeks that Fleet allowed the foreclosure suit to languish on "hold" status, Kaneb's neighbors learned of the foreclosure proceeding. As a result of a foreclosure notice published in a local Florida newspaper, Kaneb received a barrage of colorful mail offering legal and investment services. These solicitations, known as "dayglow mail," accumulated in Kaneb's Florida mailbox. Neighbors who regularly held his mail for him when he was in Massachusetts learned of the foreclosure action. In addition, one of Kaneb's neighbors erroneously received a solicitation addressed to Kaneb.

Once Kaneb's neighbors learned of the foreclosure suit, they began to avoid him. The condominium where Kaneb lived is a "gated community" populated by affluent retirees. Prior to the initiation of the foreclosure, he socialized frequently with his neighbors. As a widower and retiree, Kaneb's life in Florida revolved around recreational activities within the condominium complex. After his neighbors became aware of the legal proceedings, they stopped inviting him to social outings.

Kaneb brought suit for compensatory and punitive damages for willful violation of the automatic stay in the District of Massachusetts Bankruptcy Court. The court awarded him damages for emotional distress and attorneys' fees, and the Bankruptcy Appellate Panel affirmed. On appeal, Fleet argues for the first time that there was no violation of the automatic stay despite its pretrial stipulation to the contrary. Fleet seeks relief from its pretrial stipulation and contests the sufficiency of the evidence of Kaneb's emotional suffering.

II.

In examining Fleet's pretrial stipulation, we find that Fleet stipulated to a set of uncontested facts from which the bankruptcy judge found a violation of the automatic stay. However, the stipulation merely recites historical facts. Nowhere in the agreement does Fleet concede that, as a legal matter, it violated the automatic stay.⁵ Fleet's request for relief from its supposed stipulation to a violation is, in reality, a request for permission to argue a legal issue that it failed to raise below. That is, Fleet raises on appeal Judge Votolato's sua sponte argument in his dissent to the decision of the Bankruptcy Appellate Panel that there was no violation because the foreclosure occurred after Kaneb's discharge from bankruptcy and the automatic stay does not apply because Kaneb excluded the Florida property from the bankruptcy estate by claiming it as exempt. We will not address issues raised for the first time on appeal.⁶ See Teamsters Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992) ("If any principle is settled in this circuit, it is that, absent the most extraordinary circumstances, legal theories not raised squarely in the lower court cannot be broached for the first time on appeal."). We decline to address Fleet's "no violation" argument.

Instead, we accept the conclusion that there was a violation of the automatic stay and review the trial court's determination that this violation was willful. The trial court found that, "Despite knowing that the stay was still in force, on April 26, 1996 Shawmut forwarded its file to the law firm of Shapiro & Fishman . . . for the purpose of initiating foreclosure on the property." Fleet argues that this action was simply an innocent mistake. Further, Fleet contends that its actions were not willful because they were not taken with "flagrant or reckless disregard" for its legal obligations.

Fleet cites no authority for its "flagrant or reckless disregard" standard and our research discloses none. We decline to create a new standard for willfulness. We similarly reject Fleet's argument that it is immune from sanctions because it made a mistake. A good faith belief in a right to the property is not relevant to a determination of whether the violation was willful. See Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478, 483 (9th Cir. 1989), (quoting INSLAW, Inc. v. United States (In re INSLAW, Inc.), 83 B.R. 89, 165 (Bankr. D.D.C. 1988)). A willful violation does not require a specific intent to violate the automatic stay. The standard for a willful violation of the automatic stay under § 362(h) is met if there is knowledge of the stay and the defendant intended the actions which constituted the violation. See Goichman v. Bloom (In re Bloom), 875 F.2d 224, 227 (9th Cir. 1989); see also Crysen/Montenay Energy Co. v. Esselen Assocs., Inc. (In re Crysen/Montenay Energy Co.), 902 F.2d 1098, 1105 (2d Cir. 1990); Cuffee v. Atlantic Bus. and Community Dev. Corp. (In re Atlantic Business and Community Corp.), 901 F.2d 325, 329 (3d Cir. 1990). In cases where the creditor received actual notice of the automatic stay, courts must presume that the violation was deliberate. See Homer Nat'l Bank v. Namie, 96 B.R. 652, 654 (W.D. La. 1989). The debtor has the burden of providing the creditor with actual notice. Once the creditor receives actual notice, the burden shifts to the creditor to prevent violations of the automatic stay. See Mitchell Constr. Co., Inc. v. Smith (In re Smith), 180 B.R. 311, 319 (Bankr. N.D. Ga. 1995).

The parties do not contest that Shawmut received actual notice of the automatic stay. Indeed, the record reveals that Shawmut unsuccessfully filed a motion for relief from the stay. After the bankruptcy court's denial of the motion for relief, Shawmut retained the law firm of Shapiro & Fishman to initiate foreclosure proceedings. Although Fleet received notice of a violation when Kaneb's attorney informed Shapiro & Fishman of the stay, Fleet's counsel failed to dismiss the suit for six weeks. Under the applicable standard, Fleet's actions constitute a willful violation of the automatic stay.

III.

Fleet challenges generally the...