In re Banks, 00-44464-R.
| Decision Date | 13 September 2000 |
| Docket Number | No. 00-44464-R.,00-44464-R. |
| Parties | In re Denise M. BANKS, Debtor. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan |
William Orlow, Pleasant Ridge, MI, for debtor.
Louis P. Rochkind, Detroit, MI, for creditor.
The debtor, Denise Banks, filed a motion for damages for violation of the automatic stay. In response, the creditor asserted that the stay violation was not willful. The Court conducted an evidentiary hearing to determine the issue.
Previously, the creditor had properly obtained an order granting relief from the stay. However, the creditor was unaware that under Bankruptcy Rule 4001(a)(3), as amended effective December 1, 1999, the order granting relief from the stay was itself stayed for ten days. As a result, the creditor caused a writ of restitution to be issued and executed during that ten day period. Then, making matters worse, even after the creditor was advised that the automatic stay remained in effect for ten days despite the order granting relief from the stay, the creditor failed to act to vacate the writ. In these circumstances, the Court finds that the creditor did willfully violate the automatic stay.
On August 13, 1999, Denise Banks' home was sold at a sheriff's sale following a mortgage default. On February 14, 2000, following the expiration of the period of redemption, MV Services, the purchaser at the foreclosure sale, filed suit in state court to obtain possession of the property. On February 25, 2000, MV Services quit claimed the property to Ralph Roberts Realty.1 (Debtor's Ex. 1.) Ralph Roberts Realty then sold the property to a third party, conditioned upon Ralph Roberts Realty obtaining possession of the property.
On March 15, 2000, the state court entered a default judgment. On March 23, 2000, Banks filed her chapter 7 petition. On March 24, 2000, the state court entered an order for administrative closing due to the bankruptcy stay. (Debtor's Ex. 3.)
On April 18, 2000, MV Services filed a motion to lift the automatic stay as to the property.2 On the morning of May 11, 2000, the Court granted the motion. That same day, Jay Kalish, the attorney who had filed and argued the motion, faxed a copy of the order terminating the automatic stay to the offices of Ralph Roberts Realty. (Debtor's Ex. 12.) Charles Ferarolis, the attorney handling the state court case for Ralph Roberts Realty, was at the office of Ralph Roberts Realty and was given the order lifting the automatic stay. A writ of restitution was prepared by someone at the office of Ralph Roberts Realty and signed by Charles Ferarolis. The order terminating the automatic stay and the writ of restitution were then faxed to the state court, which then entered the writ of restitution the same day. (Debtor's Ex. 5.)
On Friday, May 12, 2000, court officers attempted to execute the writ of restitution and evict Banks from the home. Banks called her attorney, William Orlow, who called Jay Kalish and informed him that, pursuant to Bankruptcy Rule 4001(a)(3), the order granting relief from the automatic stay was stayed for ten days. Kalish spoke by phone to one of the officers present at Banks' home and told him that the eviction should be stopped. The court officers left the home.
However, the officers returned later that day. Banks refused to let them in and they informed her that if she did not get the matter straightened out, they would be back on Monday. Banks testified that she informed Orlow that the officers had stated that they would be back on Monday. Orlow testified that he called Kalish's office Friday afternoon and left a message for him regarding the threat by the officers to return on Monday. Kalish testified that he never received that message.
On Monday, May 15, at approximately 3:30 p.m., court officers returned to Banks' home to evict her. She refused to let them in and called her attorney. The officers forcibly entered the home, grabbed the phone out of her hand while she was talking to Orlow, and began removing her possessions. Orlow then called Kalish, who testified that he could not believe the eviction was proceeding because he thought he had taken care of the matter by phone the previous Friday. At approximately 4:15 p.m., Ralph Roberts came to Banks' home and, after observing the proceedings for approximately 20 minutes while conferring on his mobile phone (with whom is unknown), instructed the officers to stop the eviction. By that time, much of Banks' property had been removed from the home and Banks had been arrested for assaulting an officer.
It is reasonably clear that the court officers returned on Monday to execute the writ simply because it was still in effect and no action had been taken by any party to vacate it.
The debtor argues that the respondent's conduct in obtaining the writ of restitution on May 11, 2000, and then not taking any action to vacate the writ after officers attempted to execute the writ in violation of Rule 4001(a)(3), constituted a willful violation of the automatic stay. Therefore, the debtor contends that even if the respondents did not know that the officers were going to return on May 15, 2000 to evict her, they are responsible for the continuing stay violation.
Ralph Roberts Realty contends that it did not willfully violate the automatic stay because on May 12, 2000, when the officers were attempting to evict Banks, Jay Kalish instructed the officers that the stay termination order was not in effect for ten days and that they must leave immediately. Ralph Roberts Realty contends that it did not instruct the officers to return on May 15 and that it cannot be responsible for their independent, unauthorized acts. Ralph Roberts Realty further argues that if the debtor and her attorney knew that the officers intended to return on Monday, they should have taken some action to prevent that.
As an initial matter, the Court concludes that although the motion was filed against MV Services, Ralph Roberts Realty is the proper party. No one disputes that MV Services had no real connection to this property after it transferred the property to Ralph Roberts Realty. Further, as noted, the pleadings that were filed on behalf of MV Services by Jay Kalish were done so based on his mistaken belief that he represented MV Services instead of Ralph Roberts Realty. In any event, no evidence was introduced to show a violation of the automatic stay by MV Services and Ralph Roberts Realty agrees that it is the proper party.
FED.R.BANKR.P. 4001(a)(3), as amended December 31, 1999, provides:
This section was added to give debtors an opportunity to request a stay pending appeal of an order lifting the automatic stay before the order is enforced or implemented. See FED.R.BANKR.P. 4001(a) advisory committee's notes. "While the enforcement and implementation of an order granting relief from the automatic stay is temporarily stayed under paragraph (a)(3), the automatic stay continues to protect the debtor and the moving party may not foreclose on collateral or take any other steps that would violate the automatic stay." Id. The order terminating the automatic stay was entered by the Court on May 11, 2000. It is undisputed that the automatic stay was still in effect on the dates involved here — May 11, 12 and 15, 2000.
The automatic stay prohibits all proceedings against a debtor following the filing of a bankruptcy petition. Legislative history reflects Congress' intent to provide broad protection to debtors:
The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 340-42 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 54-55 (1978); reprinted in 1978 U.S.C.C.A.N. 5787, 5840, 6296-97.
Section 362(h) provides:
An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorney\'s fees, and, in appropriate circumstances, may recover punitive damages.
11 U.S.C. § 362(h).
A party acts willfully by taking any action prohibited by § 362(a) after the party receives notice of the bankruptcy filing. In re Briggs, 143 B.R. 438, 462 (Bankr. E.D.Mich.1992). An intent to violate the stay is not necessary. Expeditors Int'l of Wash., Inc. v. Colortran, Inc. (In re Colortran, Inc.), 210 B.R. 823, 826 (9th Cir. BAP 1997) aff'd in part, vacated in part, 165 F.3d 35, 1998 WL 792307 (9th Cir. 1998) (unpublished table decision).
"Willful" is a word "of many meanings, its construction often influenced by its context." There is no legislative history on what Congress intended "willful" to mean in the context of § 362(h). The courts have generally interpreted it to require "intentional or deliberate" conduct.
In re Shealy, 90 B.R. 176, 179 (Bankr. W.D.N.C.1988) ().
A creditor's good faith belief that it had a right to the property is not relevant to whether the act was willful or whether damages should be imposed. Id. See also Cuffee v. Atlantic Bus. & Community Dev. Corp. (In re Atlantic Bus. & Community Dev. Corp.), 901 F.2d 325, 327 (3d Cir.1990) (). Further, whether the...
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