In re Melendez Colon, BAP No. PR 00-092.
| Decision Date | 21 August 2001 |
| Docket Number | BAP No. PR 00-092. |
| Citation | 265 BR 639 |
| Parties | Jesus MELENDEZ COLON, Debtor. Jesus Melendez Colon, Appellant, v. Maria Castellanos Rivera and Esperanza Esteban Rodriguez, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, First Circuit |
Lyssette Morales Vidal, Caguas, PR, on brief, for appellant.
Roberto Roman Valentin, Bayamon, PR, for appellees.
Before HAINES, HILLMAN and FEENEY, U.S. Bankruptcy Judges.
Jesus Melendez Colon appeals the bankruptcy court's order denying his § 362(h)1 motion seeking damages for automatic stay violations committed by his ex-wife, Maria L. Castellanos Rivera, and her state court divorce attorney, Esperanza Esteban Rodriguez. He also appeals the bankruptcy court's sua sponte action granting Rivera retroactive relief from stay for her post-petition pursuit and collection of divorce created support obligations. For the reasons set forth below, we reverse the bankruptcy court's decision denying Colon § 362(h) relief, remand for a determination of damages, and vacate the order granting Rivera retroactive stay relief.
Jesus Melendez Colon filed for relief under chapter 13 of the Bankruptcy Code on May 29, 1997. The following day he appeared at a previously scheduled hearing regarding interlocutory support issues in Puerto Rico Superior Court (the "divorce court"), where a divorce action with Rivera was pending. He informed Rivera and the divorce court of his bankruptcy filing. That court's May 30, 1997, minutes indicate that further proceedings in the divorce action were to be stayed.2
Nevertheless, just three weeks later Rivera filed a contempt motion in the divorce court, alleging Colon's failure to pay certain divorce-related debts. Not content, she filed a second contempt motion on June 27, 1997, and a motion asking for a show cause hearing on July 7, 1997. The record is not precise, but, pursuant to Rivera's requests, multiple divorce court hearings ensued. On at least some occasions Colon insisted that Rivera was required to seek relief from stay in the bankruptcy court in order to continue her collection efforts. It appears that Colon delivered $6,678.41 in cash, obtained from liquidation of a retirement account, to Rivera during a divorce court hearing on July 16, 1997.
In response to the continuing divorce court litigation, Colon filed a motion in the bankruptcy court seeking enforcement of the automatic stay on October 22, 1997.3 Colon amended his motion the next day.4 Colon alleged that Rivera continued to pursue alleged child support arrears and attorney fee awards in the divorce court in violation of the automatic stay.5
The bankruptcy court immediately issued an order directing Rivera to show cause within ten days why the contempt motion should not be granted. On December 31, 1997, after receiving an extension, Rivera replied. She admitted most of the contempt motion's factual allegations, but argued that her post-petition collection efforts were excepted from the automatic stay by § 362(b)(2)(B).6
After extended pretrial proceedings, the bankruptcy court scheduled trial for March 22, 1999. The parties' joint pretrial report, filed March 3, 1999, set forth five issues in controversy, as follows:
Trial was rescheduled for May 6, 1999, but did not convene. Instead, the bankruptcy court entered the following order:
The parties will submit simultaneous motions supporting their positions for the court to make a final determination on the violation of stay issue by September 1, 1999 by 5:00 PM; if needed, the Court will schedule a hearing to determine damages at a later date; the clerk will follow up and refer the documents and file to chambers; debtor\'s objection as to the relevancy of the documents that defendants will produce is Denied; the Court will give the documents the weight that may be necessary.
On September 1, 1999, Rivera filed her "Motion for Judgment by Pleadings." On November 22, 1999, following two extensions of time, Colon filed his "Request for Judgment on Pleadings, or Summary Judgment & Brief in Support Thereof."
Without further hearings, the bankruptcy court issued its written ruling on August 30, 2000. Treating the parties' submissions as motions for summary judgment, the bankruptcy court concluded that, under § 541 and Puerto Rico law, when a spouse files for bankruptcy under chapter 13 of the Code, all of that spouse's property, including community property, becomes property of the estate. The court determined that Rivera was informed of Colon's petition as of May 30, 1997, and that her post-petition divorce court filings and collection efforts were clear violations of the automatic stay. The bankruptcy court specifically rejected Rivera's contention that her actions fell within the exception of § 362(b)(2)(B).
Having determined that Rivera's actions violated the automatic stay and were therefore void, see Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 976 (1st Cir.1997), the bankruptcy court proceeded to ascertain whether, in light of the limiting principles of Soares, Rivera's actions should be retroactively blessed — even though Rivera had never requested such relief. It determined that Colon's liquidated retirement account proceeds, the bulk of which were turned over to Rivera during a contempt hearing on July 16, 1997, had not been listed as an asset on his bankruptcy schedules, nor were they the subject of any turnover action by the chapter 13 trustee or any creditor. The bankruptcy court also considered that because Colon's debt to Rivera was both priority and nondischargeable she was entitled to full payment in any event, and under Colon's Chapter 13 Plan, which called for paying Rivera 100% of any valid support arrears, no creditor was prejudiced as a result of the proceeds having been paid to Rivera. Finally, the court concluded that if Rivera were ordered to return the funds she had collected post-petition, she would also be liable for penalties and attorney fees, to her detriment and the detriment of Colon's family.
Concluding that forcing Rivera to return the funds she had collected would lead to an "unjust and absurd result," the bankruptcy court granted relief from stay to Rivera retroactively to May 29, 1997, the date Colon filed his chapter 13 petition, and prospectively for the purpose of collecting unpaid child support. This appeal ensued.
Pursuant to 28 U.S.C. §§ 158(a) and (c), we may hear appeals from "final judgments, orders, and decrees," 28 U.S.C. § 158(a)(1), or "with leave of the court, from interlocutory orders and decrees." 28 U.S.C. § 158(a)(3). A party takes an appeal of a 28 U.S.C. § 158(a)(1) final order "as of right" by filing a timely notice of appeal. Fed.R.Bankr.P. 8001(a).
The bankruptcy court's order granting Rivera retroactive relief from stay (and denying Colon's § 362(h) motion) is a final order appealable "as of right." Tringali v. Hathaway Mach. Co., Inc., 796 F.2d 553, 557-58 (1st Cir.1986). See Caterpillar Fin. Servs. Corp. v. Braunstein (In re Henriquez), 261 B.R. 67, 70 (1st Cir. BAP 2001).
The bankruptcy court's grant of retroactive relief from stay was a discretionary ruling, which requires us to determine whether the court abused its discretion. In re Soares, 107 F.3d at 973 n. 4. A panel of this court has recently described the abuse of discretion standard as follows:
Judicial discretion is necessarily broad — but it is not absolute. Abuse occurs when a material factor deserving significant weight is ignored, when an improper factor is relied upon, or when all proper and no improper factors are assessed, but the court makes a serious mistake in weighing them.
Perry v. Warner (In re Warner), 247 B.R. 24, 25 (1st Cir. BAP 2000) (quoting Indep. Oil & Chem. Workers of Quincy, Inc. v. Procter & Gamble Mfg., Co., 864 F.2d 927, 929 (1st Cir.1988)). We are thus charged with reviewing the appropriateness of the factors considered (or ignored), as well as the court's weighing of those factors.7
The bankruptcy court properly rejected Rivera's argument that her repeated post-petition efforts to collect divorce-related obligations were excepted from the automatic stay by § 362(b)(2)(B). The record was uncontroverted on the point. Rivera's (sometimes successful) actions to collect the obligations from Colon's liquidated retirement funds and his post-petition earnings necessarily involved pursuit of estate property since the Chapter 13 estate includes not only pre-petition assets, but the property and earnings acquired and earned post-petition as well. Moreover, it is undeniable that Colon's stay violations were "willful" within the meaning of § 362(h) under our circuit's precedent. See Fleet Mortg. Group, Inc. v. Kaneb, 196 F.3d 265, 269 (1st Cir.1999) ( ).
Having concluded that Rivera's actions violated the automatic stay, the court was obliged to consider Colon's damages claims. 11 U.S.C. § 362(h)(individual injured by willful stay violation "shall recover" damages). In contradiction of its May 6, 1999, order, the court instead decided sua sponte that the stay would be modified retroactively to validate Rivera's otherwise unlawful (and void) post-petition actions — a conclusion it reached without informing the parties it was even considering the issue and without a pending motion from Rivera seeking relief from stay.8
We have scrutinized the...
To continue reading
Request your trial