In re Chambers

• Decision Date: 11 February 2005
• Docket Number: No. 04-3173.,04-3173.
• Citation: In re Chambers, 324 B.R. 326 (Bankr. N.D. Ohio 2005)
• Parties: In re Brian CHAMBERS Debtor. Brian Chambers, Plaintiff, v. Greenpoint Credit, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Ohio

324 B.R. 326

In re Brian CHAMBERS Debtor Brian Chambers, Plaintiff, v. Greenpoint Credit, Defendant.

No. 04-3173.

United States Bankruptcy Court, N.D.Ohio.

February 11, 2005.

Melan M Forcht, Law Office of Melan M. Forcht, Toledo, OH.

David J Demers, Demers and Cohen, LLC, New Albany, OH.

DECISION AND ORDER

RICHARD L. SPEER, Bankruptcy Judge.

This cause comes before the Court after a Trial on the Plaintiff/Debtor's Complaint for Violation of the Discharge Injunction as set forth in 11 U.S.C. § 524(a). At the conclusion of the Trial, the Court took the matter under advisement. The Court has now had the opportunity to review the applicable law, the evidence presented, as well as the arguments made by the Parties' respective legal counsel. Based upon this review, the Court finds that the Defendant violated the Discharge Injunction, and thus, to the extent set forth herein, sanctions are appropriate.

The Debtor, Brian Chambers, voluntarily sought the protections of this Court through the filing of a petition under Chapter 7 of the United Bankruptcy Code. The Defendant, Green Point Credit, is the holder of a prepetition consensual lien against a home which the Debtor, at the time he sought relief in this Court, maintained both a possessory and a fee interest. In his bankruptcy petition, the Debtor set forth the Defendant as the holder of a secured claim, along with his intention to reaffirm on this debt. As a creditor listed in the Debtor's bankruptcy petition, the Defendant received timely notice of this bankruptcy case.

While the Debtor's bankruptcy case was being administered, the Defendant contacted both the Debtor and his wife on numerous occasions regarding both the payment of its claim and the Debtor's intention to reaffirm on the debt. Such contact included representatives of the Defendant initiating phone calls and, on at least two occasions, making short personal visits to the property secured by its lien. Once their bankruptcy case was filed, neither the Debtor nor his wife made any payments to the Defendant, with the Debtor eventually informing the Defendant that, in contrast to his original intention, they would be vacating the property in July, which they did.

On June 12, 2003, this Court, pursuant to § 727(a) of the United States Bankruptcy Code, entered an order granting to the Debtor a discharge of all his dischargeable debts. Approximately one month later, the Defendant filed an action in state court for both the replevin of its property and seeking a judgment against the Defendant, personally, for any deficiency that may result once the property sold. During this same period of time, the Defendant also sent notices to the Debtor respecting his personal liability for any deficiency judgment that may be obtained against him. Based upon this course of conduct, the attorney which the Debtor had originally retained for his bankruptcy case sent a letter to the Defendant reminding it of the Debtor's discharge in bankruptcy and demanding that they discontinue their contacts with the Debtor. For reasons, however, not fully explained, the Defendant thereafter filed a motion for default judgment against the Debtor in his personal capacity, asking that it be awarded $36,748.60 in deficiency damages.

At the end of 2003, with the Defendant continuing to pursue its action against him, the Debtor retained new legal counsel, who was subsequently successful in having the Defendant dismiss its action against him; but not until January 26, of the following year, did the Defendant formally withdraw its motion for default judgment. On January 24, 2004, and continuing through the early part of 2004, Debtor's new legal counsel sent letters to the Defendant regarding its actions, and offering a monetary settlement of the matter. In response, the Defendant, although ostensibly accepting overall liability, declined those settlement offers made by Debtor's legal counsel. Debtor's legal counsel, however, did not formerly initiate formal legal action, through the commencement of the instant adversary proceeding, until May 31, 2004, opting instead to continue its settlement negotiations with the Defendant.

LEGAL DISCUSSION

The instant complaint is brought for a violation of the discharge injunction, and the recovery of damages incurred as the result of the breach. The adjudication of this matter is deemed a core proceeding for which this Court has been conferred by Congress with the jurisdictional authority to enter final orders. 28 U.S.C. § 157(b)(1); In re Latanowich, 207 B.R. 326, 332-33 (Bankr.D.Mass.1997).

Once a debtor is granted a discharge, § 524(a) gives rise to an injunction. In general terms, this injunction prevents a creditor from attempting to collect on any prepetition debt owed by a debtor, in so far as it involves the debtor's personal liability, unless such debt is included in one of the limited category of debts excepted from discharge. In an action against a creditor for a violation of the injunction, the Sixth Circuit Court of Appeals has held that, in contrast to a violation of the automatic stay of § 362(a), a debtor has no private cause of action. Pertuso v. Ford Motor Credit, 233 F.3d 417, 421 (6th Cir.2000). Instead, when a violation of the discharge injunction does occur, a debtor's sole avenue of recourse — and the one for which is the traditional remedy for a violation of an injunction — is to bring an action against the creditor for contempt. Id.; In re Perviz, 302 B.R. 357, 370 (Bankr.N.D.Ohio 2003).

In this particular matter, whether a contemptible violation of the discharge injunction occurred is not at issue. The Defendant acknowledged, correctly, that by attempting to collect on a deficiency balance arising from the sale of its collateral — both through the employment of legal process and then by sending letters — that an intentional violation of the discharge injunction occurred. Instead, at issue in this matter is the extent to which the Debtor and his legal counsel are entitled to be compensated for the Defendant's breach of the discharge injunction.

Compensatory damages operate and are meant to "make whole," as far as possible, a party injured as the proximate result of the actions of another. Accord Eau Claire County v. Loken (In re Loken), 32 B.R. 205, 207 (Bankr.D.Wis.1983). By contrast, when a party is in contempt, the imposition of sanctions, not an award of damages, is the appropriate remedy as, by knowingly violating a court order, the contemptor's actions transgressed the court's authority — any damage to an individual party, no matter the seriousness of the transgression, is merely incidental.

As a transgression against the court, broad discretion is invested in the court in selecting an appropriate sanction. In re Tubbs, 302 B.R. 290, 291 (Bankr.W.D.Ark.2003). Although a variety of sanctions are available, — e.g., a fine paid into the court — it is recognized that, when faced with a contemptible violation of the discharge injunction, the contemptor's conduct is likely to have caused the debtor to incur damages. As such, courts generally permit, as a sanction, an award of damages to the debtor including attorney fees. See In re Goodfellow, 298 B.R. 358 (Bankr.N.D.Iowa 2003); Walker v. M & M Dodge, Inc. (In re Walker), 180 B.R. 834 (Bankr.W.D.La.1995).

In the case of Miller v. Chateau Communities, Inc. (In re Miller), this practice was recognized by the Sixth Circuit Court of Appeals wherein it upheld an award of damages stemming from a discharge injunction violation that occurred on account of a lessor's repeated attempts to collect postpetition rent. 282 F.3d 874, 875 (6th Cir.2002). In like fashion, this Court has traditionally awarded actual damages plus attorney fees to a debtor injured by a contemptible violation of the discharge injunction. In re Perviz, 302 B.R. 357 (Bankr.N.D.Ohio 2003); Mayer v. Huntington Nat'l Bank (In re Mayer), 254 B.R. 396, 397-98 (Bankr.N.D.Ohio 2000). In this particular matter, considering the Defendant's clear breach of the discharge injunction, the Court can see no reason to deviate from this practice. Hence, the structure of this Court's sanction against the Defendant will take the form of an award of monetary damages in the Debtor's favor.

As taken from his complaint, the Debtor seeks three types of monetary damages: (1) direct damages in the amount of $3,000.00; (2) attorney fees totaling $2,212.50; and (3) punitive damages of an unspecified amount. It is the Debtor's burden to establish his entitlement to each of these types of damages. And, as applied here, the Court finds that, while overall the Debtor is entitled to an award of damages, the Debtor has not fully sustained his burden with respect to the total damages sought. Beginning with the issue of direct damages, the reasons for this decision are now explained.

The Debtor bases his entitlement to direct damages on a combination of three things: (1) legal fees already paid; (2) having missed 12-15 days of work to address the Defendant's misconduct; and (3) emotional distress. While each of these grounds, if established, is compensable, the extent to which the Debtor relies on these grounds is, in varying degrees, not fully supported. In re Perviz, 302 B.R. 357 (Bankr.N.D.Ohio 2003).

First, from an overall perspective, all three grounds to some extent rely on the Defendant having caused its representatives, in the time period immediately following his bankruptcy filing, to both visit the Debtor's property and then to make repeated contacts with his household regarding the repayment of its debt. However, this conduct, while not exactly advisable and fraught with risks, is not sanctionable in this particular matter. The key here is that the events occurred predischarge, thus implicating the automatic stay of § 362(a), not the discharge injunction of § 524(a) as raised in the Debtor's complaint; which although not fatal from a procedural standpoint, raises a viable...