Green Tree Servicing, LLC v. Taylor

• Decision Date: 30 March 2007
• Docket Number: Civil Action No. 2:06-0156.,Bankruptcy No. 03-21982.,Civil Action No. 2:06-0086.
• Court: U.S. District Court — Southern District of West Virginia
• Parties: Desiree Anna Marie Taylor, Debtor, GREEN TREE SERVICING, LLC, Appellant, v. Desiree Anna Marie TAYLOR, Appellee, and Desiree Anna Marie Taylor, Appellant, v. Green Tree Servicing, LLC, Appellee.

369 B.R. 282

Desiree Anna Marie Taylor, Debtor, GREEN TREE SERVICING, LLC, Appellant, v. Desiree Anna Marie TAYLOR, Appellee, and Desiree Anna Marie Taylor, Appellant, v. Green Tree Servicing, LLC, Appellee.

Civil Action No. 2:06-0086.

Civil Action No. 2:06-0156.

Bankruptcy No. 03-21982.

United States District Court, S.D. West Virginia, at Charleston.

March 30, 2007.

COPYRIGHT MATERIAL OMITTED

Mitchell Lee Klein, Schiller Klein & McElroy, Chicago, IL, for Debtor.

MEMORANDUM OPINION AND ORDER

COPENHAVER, District Judge.

Green Tree Servicing, LLC ("Green Tree") and Desiree Anna Marie Taylor ("Taylor") filed cross-appeals of the September 13, 2005 order of the bankruptcy court.¹

In that order, the bankruptcy court found that Green Tree violated the automatic stay by entering Taylor's residence on two separate occasions. (Bankr.Ct. Order at ¶ 6). It further found that those violations "give rise to damages under 11 U.S.C. § 362(h)." (Id.). Section § 362(h), recently recodified as § 362(k),² prescribes as follows:

An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages.

Inasmuch as the bankruptcy court must necessarily have concluded that the violations were willful in order to merit an award of damages, the court construes the finding as one of willful violations. The bankruptcy court awarded compensatory damages of $2,000.00 for the first violation and $3,000.00 for the second violation, along with reasonable attorney's fees and costs. (Id. at ¶ 7). No award of punitive damages was made or discussed by the bankruptcy court.

I.

According to the bankruptcy court order, the Circuit Court of Kanawha County awarded Green Tree a writ of possession to Taylor's mobile home on August 18, 2003. (Id. at ¶ 2; Green Tree Br. at 3). The writ of possession was not acted upon by the sheriff. (Bankr.Ct. Order at ¶ 2).

On August 22, 2003, debtor Desiree Taylor filed Chapter 13 bankruptcy. (Id. at ¶ 1). Earlier that day on August 22, 2003, Taylor's lawyer faxed a letter to Brad Sorrells, counsel for Green Tree in the state proceeding that resulted in the writ of possession, advising that the bankruptcy petition would be filed later that same day. (Id. at ¶ 4; 08-22-03 faxed letter, Ex. 13 at 9-7-04 hrg.). This notice was the first attempt by the debtor to inform Green Tree of the bankruptcy filing.

On September 5, 2003, Green Tree dispatched an agent to the debtor's residence who, while Taylor was absent from the residence, forced his way into the home with a device used to disable door locks. (Bankr.Ct. Order at ¶ 3). The agent placed a "for sale" sign in the window inside the residence and left a note on the outside of the front door notifying Taylor that she was obligated to vacate the premises. (Id.). Taylor suffers from psychogenic seizures, and upon returning to the residence and "seeing the `for sale' sign and realizing her home had been entered," she had one of those attacks.³ (Id.). Later that day on September 5, 2003, an employee of counsel for the debtor telephoned Mr. Sorrells, reminding him of the bankruptcy filing. (Id. at ¶ 4).

On September 13, 2003, Green Tree's agent returned to the debtor's residence for a second time. (Id. at 115). This time the debtor was home. (Id.). The agent informed Taylor that if she failed to leave he would bring the sheriff to remove her. (Id.). The debtor handed the agent a business card of her bankruptcy attorney and told him of the bankruptcy filing. (Id.). The Green Tree agent left the premises. (Id.).

The bankruptcy court found that damages be awarded for "the time and effort of the Debtor in defending her rights in court and for her actual damages of being placed in fear and subjected to emotional trauma." (Id. at ¶ 7). The court added that the "psychological evidence" indicated that Taylor suffered "genuine fear" and "real emotional injury" as a result of the two violations of the automatic stay. (Id.).

II.

A. The Standard of Review

The court is vested with jurisdiction pursuant to 28 U.S.C. § 158. The bankruptcy court's factual findings set forth above are entitled to deference and consequently are reviewed only for clear error. Bankruptcy Rule 8013; In re Ekenasi, 325 F.3d 541, 544 (4th Cir.2003). Under the "clearly erroneous" standard, "findings of fact will be affirmed unless [the appellate court's] review of the entire record leaves [it] with the definite and firm conviction that a mistake has been committed." Harman v. Levin, 772 F.2d 1150, 1153 (4th Cir.1985). Although the court is to apply the "clearly erroneous" standard of review for the bankruptcy court's findings of fact, the bankruptcy court must have sufficiently delineated the evidentiary basis for its decision. In re Excalibur Automobile Corp. v. Robinson, 859 F.2d 454, 458-59 (7th Cir.1988); In re HSSI, Inc., 193 B.R. 851, 854 (N.D.Ill.1996). The bankruptcy court's conclusions of law are reviewed de novo. In re Ekenasi, 325 F.3d at 544.

B. 11 U.S.C. § 362(k)

This appeal implicates the application of 11 U.S.C. § 362(k). "11 U.S.C. § 362 provides generally for the automatic stay of any and all proceedings against a debtor once a bankruptcy petition is filed." Budget Service Co. v. Better Homes of Virginia, Inc., 804 F.2d 289, 292 (4th Cir.1986) "Green Tree does not contest the fact that visits to the debtor's mobile home [violated the automatic stay and] were prohibited by [§ ] 362(a)." (Green Tree Br. at 9). Green Tree focuses on the language of § 362(k) and argues that it should knot be held liable because the visits were "technical" rather than "willful" violations, and furthermore, Taylor did not prove she suffered "actual damages." (Id. at 6-13). In contrast, Taylor appealed arguing that the bankruptcy court erred in granting only $5,000.00 in emotional distress damages and in not granting punitive damages.⁴ (Taylor Br. at 15-20; Taylor Desig. of Rec. and Statement of Issue on App. at 2-3).

The debtor, as the party seeking damages for willful stay violations, has the burden of proving by a preponderance of the evidence that a willful stay violation occurred, that damages were suffered, and that the amount of relief requested is appropriate. See Heghmann v. Indorf (In re Heghmann,) 316 B.R. 395, 404-405 (1st Cir.BAP2004); Ball v. A.O. Smith Corp., 321 B.R. 100, 110 (N.D.N.Y.2005), aff'd, 451 F.3d 66 (2d Cir.2006); In re McCarthy, 350 B.R. 820, 826 (Bankr.N.D.Ind. 2006); In re Clayton, 235 B.R. 801, 806-807 (Bankr.M.D.N.C.1998).

1. Whether the Violation was Willful

The relevant statute does not define "willful." 11 U.S.C. § 362(k). Our court of appeals has explained its conception of "willful" in this context when, in the course of finding a § 362(k) willful violation, it stated, "Budget Services knew of the pending petition and intentionally attempted to repossess the vehicles in spite of it." Budget Service Co., 804 F.2d at 293. In short, an act is "willful" under § 362(k) if it is done intentionally and with knowledge of the bankruptcy filing. See id.; In re McMullen, 386 F.3d 320, 330 (1st Cir.2004); In re Atlantic Business and Community Corp., 901 F.2d 325, 329 (3d Cir.1990); In re Bloom, 875 F.2d 224, 227 (9th Cir.1989).

Green Tree acknowledges that

[t]o prove a willful violation of the stay, the Debtor does not have to demonstrate that the creditor had the specific intent to violate the stay. In re Sharon, 200 B.R. 181, 200 (Bankr.S.D.Ohio 1996). Showing that the Creditor knew of the bankruptcy case and that the creditor's actions were intentional is enough. Id.

(Green Tree Br. at 10); see also Fleet Mortg. Group, Inc. v. Kaneb, 196 F.3d 265, 268-269 (1st Cir.1999); In re Lansdale Family Restaurants, Inc., 977 F.2d 826, 829 (3d Cir.1992); In re Atlantic Business and Community Corp., 901 F.2d at 329; In re Bloom, 875 F.2d at 227. Moreover, whether the party believes in good faith that it had a right to the property is not relevant to whether the act was willful or whether compensation must be awarded. Lansdale Family Restaurants, Inc., 977 F.2d at 829; Atlantic Business and Community Corp., 901 F.2d at 329; Bloom, 875 F.2d at 227.

In asserting that its actions were not "willful," Green Tree contends that it neither received formal notice or received actual notice of the bankruptcy filing prior to the agent's visits to Taylor's residence. However, notice of the bankruptcy filing need not be formal or official to put the creditor on notice. Haile v. New York State Higher Educ. Servs. Corp., 90 B.R. 51, 55 (W.D.N.Y.1988); Mercer v. D.E.F., Inc., 48 B.R. 562, 564-565 (Bankr.D.Minn. 1985); In re Perviz, 302 B.R. 357, 367-368 (Bankr.N.D.Ohio 2003); In re Flack, 239 B.R. 155, 163-164 (Bankr.S.D.Ohio 1999); In re Bragg, 56 B.R. 46, 49 (Bankr M.D.Ala.1985). The statute is silent on what notice is required, but in finding "willful" conduct sufficient for § 362(k) violations, courts have routinely found that knowledge can be imputed to the creditor through informal means, even by a mere telephone call. 11 U.S.C. § 362; see e.g. In re Flack, 239 B.R. 155, 163 (Bankr. S.D.Ohio 1999) (internal citation omitted) (noting that, "knowledge does not have to come through formal means, and even if not scheduled, a willful violation may be established where the creditor has sufficient facts to cause,`... a reasonably prudent person to make further inquiry.'"); In re Clayton, 235 B.R. 801, 808 (Bankr. M.D.N.C.1998) (concluding "knowledge of the existence of an active bankruptcy case need not be communicated through formal notification of the filing of a petition"); Bragg, 56 B.R. 46, 49 (Bankr.M.D.Ala. 1985) (stating "the rule in this jurisdiction [is] that notice of the filing of a petition need not be a formal notice of the commencement of a case where the creditor has sufficient facts which would cause a reasonably prudent person to make...